Joseph Stiglitz: In short, Brazil has carved out a path for itself that is not based on ideology or simplistic economics. Successfully charting its own course, Brazil has created a broad consensus behind a balanced and democratic market economy.
--- Robert Biel, "The New Imperialism": Brazil had been relatively favoured by post-war uneven development. Some right-wing economists come close to admitting that the reason for this was racial: countries such as Argentina and Chile, with European identity, were by-passed because they aspired to a European-style collective bargaining, but Brazil was permitted to develop as long as its largely black labour was kept in a third-world state of subjection. An attempt by left-wingers in Brazil in the early 1960s at development by expanded demand from below was crushed by a repressive military coup in 1964. With hindsight the logic of this change becomes clear: a transition to export promotion, whereby growth will be premised on external rather than internal demand, and redistribution of wealth will never need to occur. Eventually the IMF can take over from the old development economics and invent new reasons for holding consumption down, such as the need for resources to be diverted to the export sector to pay the foreign 'debt'. Once such a logic has been strongly enough established, it will be quite possible to introduce democracy on the assumption that whoever wins elections would have to follow the same policy. But this result could not be arrived at directly' Instead, it was necessary to have an intermediate period characterised by an important element in the NIC saga, namely the supposedly nationalistic dictatorship. Authoritarianism, it is said, can provide the conditions for a strong development strategy, because of its strength in channelling accumulation into key projects, in breaking the resistance of conservative social strata, and in embodying a project about which there is an implicit national consensus. Certain authoritarian set-ups can indeed generate consensus for a time because they bring rapid change and it looks as though the conditions are being created to end poverty. In Brazil, where 72 per cent of equity capital in the machinery sector was foreign-owned in the early 1960s, by 1979 this had sunk to only 36.5 per cent; by then the state itself held as much equity in industry as did all foreign capital. At its height in the early 1970s, the public sector generated half of the GDP. The excitement generated by these apparent possibilities spread abroad to produce the idea of the 'end of the third world'. The 'end of the third world' idea raises an issue which is implicit in a lot of the export promotion policy, namely that the North will somehow 'accidentally' develop the South while trying to make a profit out of it. But there is a conceptual flaw: the centre--periphery division has-existed from the earliest days of capitalism, and, predating mature capitalism, it is embedded in the circuits of accumulation without apparently being in any way attenuated by whatever structural changes occur subsequently. It is this which nullifies not only the simplistic ideas of an inherently 'spreading' late capitalism put forward by people such as Bill Warren, but ultimately also the more intelligent attempts of someone such as Palloix to construct a radical critique of imperialism which denies the centre-periphery dimension, presenting capital accumulation as a single process which is always creating uneven development anew. I believe, on the contrary, that the uneven development which is constantly created in ultra-modern forms is the embodiment of a more ancient substratum -- the centre-periphery division or colour line. Alongside this international dominance -- and providing the basis for it -- is another reason why it is not really the end of the third world: extremes of poverty and oppression are still there within the apparently developing countries. This is what makes development 'safe' from the North's point of view. The convergence of interests occurs not between domestic social forces (as one would expect in the case of a unified national development crusade), but rather between domestic elites on the one hand -- who want to maintain existing class differentials and hence to limit consumption -- and foreign capital on the other, which wants cheap manufactured imports in order to reduce the cost of its own labour. By denying the redistribution of wealth, development does not simply preserve the existing distribution, but tends to make it worse: polarisation occurs as part of economic growth, and eventually it turns into marginalisation. Since mass demand is no longer required for growth, those who do not play a role in production are considered to have no economic value, hence no value as people. This underlies the statement of the minister responsible for Brazil's 1970s economic strategy that 'I can only work for 60 per cent of the population; the other 40 per cent are no concern of mine'. It is therefore unlikely that the country will unite behind a 'national' economic strategy. Industrialisation could be a battle-front in the North--South war -- the casualties are certainly there in military proportions, but what is missing is an agreed definition of 'national interest' Ultimately, working people engaged in production for export do not identify with their product as the embodiment of a meaningful collective strategy because the divergence between resource use and consumption is inherently alienating. The assumption of supply-side economics that accumulated wealth will necessarily be translated into growth is simplistic, but even if we take it at face value, there is little to suggest that such growth can be reliably 'fixed' in the South. Much of the accumulated value which arises from past growth is siphoned off directly to the North -- in the form of profits on investments or 'debt' repayments; and, out of the portion which local elites do manage to appropriate, some often ends up fuelling growth in the North by an indirect route. Even in a simplified model of an economy open only to trade, if local capitalists consume imported goods, this leads to 'growth' in the centre. But since the economy is open not just to trade but to the flow of capital, investment too can 'leak' out to the North. When this happens, important segments of the bourgeoisie become detached from the local economy and form part of the globalised one. The World Bank estimated capital flight at 32.3 per cent of developing countries' GDP in l993 and its officials blamed local elites for their 'irresponsibility', refusing to see that their action is only a logical response to the conditions created by the centre-periphery division. In the longer term, this situation could mean that the grassroots could put forward a new rationale for raising local consumption. They could defend their case, not only with reference to the traditional argument of conventional economics (consumption overcomes the constraints on growth at a macro-economic level by increasing demand) but by turning to a new economics which argues that, by linking production and consumption within local communities, it is possible to 'fix' the value which might otherwise be sucked out into the global accumulation process. But for the moment, the situation is safe for the centre, because polarisation within Southern societies makes it practically impossible to implement what seem to be obvious strategies of resistance. The focus of these strategies could be 'debt', since it pinpoints the transfer of value in a very tangible form. In Latin America's case this was massive, and as the global accumulation system is interdependent, developing countries would have leverage for threatening to bring the whole structure crashing down. Certain elements in the Brazilian elite were urging a militant stance on debt around 1986, but it came to nothing for social reasons. Quite simply, polarisation has made it possible to develop the national solidarity needed for such a struggle. And in the last analysis *the elites use the IMF as a convenient scapegoat*: they can implement policies that defend their class position while blaming them on someone else. Though in the short term social dislocation means that the North can safely extract value from the South, this same factor may have the opposite result in the longer term. If a serious social crisis erupts, social marginalisation may become self-reinforcing, in the sense that both central and local investment will tend to flee (local capitalists may even be more volatile than the central ones, since the latter have a firm base within relatively stable Northern economies and can therefore afford to take more risks). Societal cohesion could then collapse to a point where it would be very difficult to reconstitute. It is already clear that it is not possible indefinitely to ignore the 40 per cent, who can quickly become 60 per cent or more. Capital accumulation is becoming unsustainable in a human sense, in that the current pattern of accumulation is undermining the reproduction of the labour which needs to be exploited as a basis for future accumulation. The number of Brazilian 'street children' has been put as high as 12 million. The more far-sighted functionaries of international organisations are conscious that the basis of future profitability is being eroded at a world level, and would like to intervene to make the world safe for future generations of exploiters by rebuilding the 'social' element, but, given the short-term pressures for profitability, there is little chance of this happening. Even a fundamental restructuring of the accumulation system would not solve this problem, which has for many years been embedded within the NIC models, waiting to explode. -- Louis Proyect www.marxmail.org
