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University of Bristol Department of Social Policy & Social Planning MSc course in Development Administration & Planning Code: M21X Name: José-María Taberné Abad Essay Title: Which theory of development do you find most satisfactory? Give reasons. Module Title: Theories and Policies of Development Lecturer: Pervaiz Nazir Autumn Term 1.994

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Among the various theorists of Development, W. Rostow and A.G. Frank have

developed two incompatible paradigms which share common features: powerful

ideological stances; influence in the understanding of the mechanics of development

and underdevelopment; and methodological approaches.

By the time the authors made public their theories, it was widely accepted that

industrialisation was the key to economic development, and that this would not be

promoted by indefinite concentration on expansion of primary exports in exchange for

manufactured imports1 Connecting with this, both scientists presented their theories -of

the Stages of Growth and neo-Marxist Dependency respectively- as something which

had general validity for all countries. Hirschman has suggested that for this reason his

analysis belongs to the category of 'mono-economics': the characteristic feature of all

types of mono-economics being a claimed universality of relevance and applicability2.

Gabriel Palma says that both theories are mechanico-formalistic, leading to conclusions

that are inevitable, static and ahistorical3.

Rostow aimed at providing an alternative to Karl Marx's theory of modern history4

developing his model specifically in order to throw light upon the contemporary

condition and future prospects of the underdeveloped countries5, exploring both the

cultural and institutional preconditions for development6, identifying five 'stages of

growth': the traditional society, the establishment of the preconditions for take-off, the

take-off, the drive to maturity and the age of high mass consumption7. A factor which

serves to lift an economy out of low income stagnation on to a sustained growth path is

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a significant increase in the share of savings and investment in national income. For this

to occur -and inspired from Schumpeter8- a new class of entrepreneurs/ businessmen

must emerge9, usually from outside the society, willing to take risks in pursuit of profit,

notably in commerce. Financial institutions develop and modern manufacturing

enterprise appears, usually in substitution for imports10 Bearing in mind the history of

current developed countries -but denying all history to the underdeveloped ones11-

Rostow proposes specific time lapses for the five stages to occur.

On the other hand, Frank initially follows Paul Baran's -founder of the neo-Marxist

school12- class-based analysis: Central elements of the neo-Marxist analytical method

are the adoption of a historical perspective, and a focus on the class distribution of

control over the surplus in underdeveloped countries13. Baran distinguishes between

actual surplus, which represents the difference between society's actual current

consumption, and potential surplus, which represents the difference between the

output that could be produced in a given natural and technological environment with

the help of employable productive resources, and what might be regarded as essential

for consumption14. Economic development consists in national reinvestment of the

surplus and the consequent expansion of national output15. Economic

underdevelopment is a process16 as well. The economically backward countries have the

worst of two worlds, feudal and capitalist17. Therefore prospects for development in the

periphery based upon an indigenous bourgeoisie are essentially non-existent18

Although relevant dependency model theorists -like Brazil's F.H. Cardoso- think that

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today, faith in universal or ideological solutions has been lost, and that ideologies that

separated or united people have given way to pragmatic endeavors born of common

challenges which require a strong will to co-operate19, I think that the neo-Marxist

theory is the most satisfactory among the paradigms for understanding present-day

development and underdevelopment, successfully explaining the evolution of social and

economic relations, the uneven distribution of wealth and the unableness of the

capitalist system in providing decent conditions of life to a fraction of the world's

population. Given the polarity of this subject, I will focus in the central concepts of both

theories. I will then discuss the elements and empirical evidence of Frank's model with

regard to what Rostow's does not explain and his shortcomings.

Central concepts

Baran's Marxist unorthodoxy is followed by Frank's radical view: Capitalism is implicitly

defined in terms of monopolistic20 exchange relations and not relations of production.

The world capitalist system is a pyramidal structure with, at the base, the rural regions

of the periphery. These satellite regions are linked, through trade -the overriding

method of surplus extraction21-, to small centres of surplus accumulation, their local

'metropolises'. These in turn are satellites, and subject to surplus appropriation by the

world centres of capitalism22; so merchant capital penetrated even the remotest corners

of the periphery. The phase of competitive capitalist development, when capitalism is at

its most dynamic, has been undercut in the periphery by foreign competition23. Thus

the unavailability for investment of 'potential' economic surplus is due to the monopoly

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structure of capitalism24. Feudalism never existed in Latin America25. Indeed, the world

capitalist economy is a single integrated whole26: Underdevelopment in the periphery is

the necessary counterpart of development at the centre27. Therefore there is no Third

World; if the socialist countries have managed to escape from this system, then there

are two worlds, but in no case are there three28.

Frank indirectly defines dependence: a metropolis which is at the same time a satellite

will find that its development is not autonomous; it does not itself generate or maintain

its development; it is a limited or misdirected development; it experiences

underdeveloped development29.

2. Elements

These central concepts have morphological, historical, and moral elements:

Frank assumes Marx's idea that the whole world is one capitalist nation30; Capitalism

could not exist without the contradictions of a structure of exploiter and exploited.

These contradictions are the expropriation of economic surplus from the many and its

appropriation by the few, the polarization of the capitalist system into metropolitan

center and peripheral satellites, and the continuity of the fundamental structure of the

capitalist system throughout the history of its expansion and transformation, due to the

persistence of these contradictions everywhere and at all times31.

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In Lumpenbourgeoisie: Lumpendevelopment for the first time Frank brought the

concept of dependence to his analysis32. Two years after Dos Santos spelled the most

widely quoted33 neo-Marxist definition of dependency, as 'a situation in which

economies of one group of countries are conditioned by the development and

expansion of others', Frank plainly states that the word dependence is no more than an

euphemism that cloaks subjection, oppression, alienation, and imperialist racism, all of

which are internal as well as external34. If dependence were purely external, it could be

argued that conditions exist which would permit the national bourgeoisie to propose an

autonomous solution to the problem of underdevelopment. But in his view, such a

solution does not exist because dependence is indivisible and makes the burgeoisie

itself dependent35. This moral understanding goes further: In Latin America as

elsewhere, the role of promoting historical progress has now fallen to the masses of

people alone; and those who would honestly serve the progress of the people must

support them in achieving progress by themselves. To applaud and to support the

bourgeoisie in its already played-out role on the stage of history is treacherous36.

Frank's initial intellectual schizophrenia37 would lead to a position determinant in the

Theology of Liberation prior to 197238, acquiring theological dimension when the 'sin of

dependency' was placed in the actual reality39.

From the morphological standpoint, Frank examines these determining relationships

between I) economic dependence II) class structure or lumpenbourgeoisie and III)

policy of underdevelopment.

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Within the world capitalist system only those metropolitan centres which are not

subjected to expropriation of part of their surpluses can develop fully40. All other

regions are destined to develop underdevelopment. Each metropolis holds monopoly

power over its satellites; the form of this monopoly varies from one case to another.

Metropolitan monopoly is exerted by foreign investment and technology41. Domestic

industry must not be confused with national industry as long as the former contains a

significant share of foreign companies and therefore control42.

The class structure is important to define underdevelopment, so a dependent region

cannot be understood except as the product of a policy formulated in response to class

interests, which are in turn determined by the dependence of the satellite on the

colonialist metropolis43. This interconnection produces increasing polarization between

the two ends of the metropolis-satellite chain. A symptom of this polarization is the

growing international inequality of incomes. Yet there is even more acute polarization

at the lower end of the chain, between the local metropolises and their poorest rural

and urban satellites whose absolute real income is absolutely declining. This increasing

polarization sharpens political tension between imperialist and national bourgeoisies in

the one hand and their rural and city slum dwellers on the other.

Governmental cabinets spawn policies of economic, social, cultural, and political

underdevelopment for the nations44, which are manifest with regard to the indigenous

peoples of Latin America, whose supposed non-market subsistence economy is often

said -according to the dualist model- to isolate them from national life, find themselves

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fully integrated into this capitalist structure, albeit as super-exploited victims of internal

imperialism. Since they thus are already integral parts of the system, the all-too-

common policy of trying to 'integrate' the Latin American Indians into national life

through community development projects is therefore senseless and condemned to

failure45. Concerning the import substitution issue, now that the source of metropolitan

monopoly no longer lies in industrial production itself as in paricular kinds of industry

and technology, it has been widely hailed by metropolitan economic advisers to the

underdeveloped countries as the major step toward their development. Such policy,

when undertaken within the framework of the capitalist system, cannot afford the

advertised salvation, but must instead be but another step into deeper structural

underdevelopment. The choice of imports to be substituted by domestic production is

based on several criteria: relatively low capital cost and simple technology; goods

whose domestic prices are high and in the production of which there is little or no

competition precisely because their importation is restricted by a protective tariff

against 'non-essential' imports. The further this process is extended and the longer it

continues, the more technically complicated and costly the equipment that must be

imported and the more limited the income range and number of potential domestic

consumers who can buy the final products46. But, above all, import substitution is of

consumer goods for the high income consumer market47.

From the historical standpoint, the model emphasizes its transformation particularly of

the basis of metropolitan monopoly, within the capitalist system. The fundamental

metropolis-satellite structure has remained the same throughout, but the basis of

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metropolitan monopoly has changed over the centuries: Expansion of the system from

Europe until it incorporates the entire planet in one world system and structure;

development of capitalism, at first commercial and later also industrial, on a world scale

as a single system; polarizing tendencies generic to the structure; fluctuations within

the system, like booms and depressions, and substitution of one metropolis by another;

transformations within the system, such as the so-called industrial revolution48. In the

case of Latin America, Frank focuses on: The colonial structure; the agrarian structure;

Independence; the civil wars: nationalism vs. free trade; the liberal Reform;

imperialism; bourgeois nationalism; and contemporary neoimperialism and

neodependence.

From this model we may derive hypothesis about metropolis-satellite relations and their

consequences: the relaxation, weakening or absence of ties between metropolis and

satellite will lead to a turning upon itself on the part of the satellite, an involution which

may take one of two forms: Passive capitalist involution toward a subsistence economy

of apparent isolation and of extreme underdevelopment; here may arise the apparently

feudal features of the 'other' sector of the dualist model, but really reflect the ultra-

incorporation, its strong ties followed by the region's abandonement49. Active capitalist

involution which may lead to a more or less autonomous industrialization of the

satellite; development of the satellites thus appears not as the result of stronger ties

with the metropolis but occurs on the contrary because of the weakening of these

ties50.

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The renewal of stronger metropolis-satellite ties produces the following consequences:

Renewal of underdeveloped development consequent upon the reopening of the market

for the retrenched region's exports; it is just as misadventageous in the long run,

underdevelopment continues to develop. Or, strangulation of the autonomous

development undertaken by the satellite during the period of lesser ties51.

The unequal exchange relations, imposed by force52 must be changed by the only true

development, armed revolution and the construction of socialism. The immediate

tactical enemy of national liberation is the bourgeoisie itself, in spite of the fact that,

strategically, the principal enemy is imperialism53.

3. Empirical evidence

For Frank, it is impossible to find in the world today any country or society which has

the characteristics of Rostow's traditional stage54. This expectation is entirely contrary

to fact and beyond all realistic theoretical possibility55. Thus he proposes several items

to prove his model: Externally financed expansion, debt crisis, international polarization

through foreign trade, domestic polarization, latifundia-minifundia polarization, owner-

worker polarization within minifundia, polarization and industrial underdevelopment,

and consolidation of underdevelopment, among others, while stating his refusal to

accept the supposed empirical foundations and therefore the formulations of the

problem of, and policy for development associated with the principles of analysis of the

UN Economic Commission for Latin America 56. Frank quotes57 what Kuunisen wrote in

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'The Fundamentals of Marxism-Leninism': It is characteristic of capitalism that the

development of some countries takes place at the cost of suffering and disaster for the

peoples of other countries':

The income of the wealthyest billion people in the world is sixty times bigger than that

of the poorest billion people58. The real income has decreased by 20% in Latin America

in the 1980s59. In the developed countries there is one doctor every 400 inhabitants; in

developing countries there is one every 7,00060. The North has one fifth of the world's

population and four fifths of the global income, consumes 70% of the energy, 75% of

the metals and 85% of the timber61. Each year a surface equal to Austria's is

deforested62. 20% of Latin American university graduates have migrated abroad63.

Industrialised countries seriously restrict the import of some commodities like clothing,

textiles, shoes, primary manufactured goods,etc. It is the oppulent North, not the

poorest South, which now refuses to the structural adjustment of its economy64.

The extremely contradictory character of progress under capitalism applies even to

different regions of one and the same country. The comparatively rapid development of

the towns and idustrial centers is, as a rule, accompanied by lagging and decline in the

agricultural districts65: Major unequalities in Brazil are those among the groups of

income. But there are also acute regional differences: the Human Development Index

of its southern region equals that of Portugal, whereas the HDI of the northeast is like

that of El Salvador or Bolivia's66.

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Technology is represented in automation, cybernetics, industrial technology; chemical

technology -the substitution of the satellites' raw materials by metropolitan synthetics-;

agricultural technology -the importation of food by the 'agricultural' satellites from the

industrial metropolis-; and, as always, military technology67: Developing countries arms

purchases increased three times faster than those of industrialised countries between

1960 and 1987 68.

Among Frank's theorisations is the continuity and ubiquity of the structural essentials of

economic development and underdevelopment throughout the expansion of the

capitalist system at all times and places. As Engels suggested, 'there is a contradiction

in a thing remaining the same and yet constantly changing'69: Economic activity in the

industrialised countries slowed further in 1993, to 1,2%, as a result of sluggish growth

in Japan and recession in continental Europe. The rate of growth in the volume of world

merchandise exports slowed to an estimated 2.6% in 199370.The developing countries

grew by an estimated 4,5%, thereby exceeding industrial-country growth by more than

three percentage points for the third straight year. Latin American growth, supported by

large inflows of foreign private capital, rose to 3.5%, up from 2,8% in 199271. The total

external debt of all developing countries was estimated at $1,700 billion at the end of

1993, an increase of 6.5% over the previous year72.

Fank concludes his Lumpenburgeoisie73 with a speech of a Chilean Foreign Minister to

the US President in 1969: for Latin America, private investment has meant, and now

means, that the sums taken out of our countries are several times higher than the

amounts invested. In a word, we know that Latin America gives more than it receives.

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So he said at the beginning of the 1970s, before the emergence of the external debt

crisis, and the neo-fascist military coups in Chile, Argentina and Uruguay, and several

years ahead of the war in Nicaragua, el Salvador and Guatemala.

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ENDNOTES 1. Hunt, D. (1994), p.46 2. Ibid, p.100 3. Ibid, p.219 4. Ibid, p.96 5. Ibid, p.100 6. Ibid, p.63 7. Ibid, p.97 8. Ibid, p.100 9. Ibid, p.97 10. Ibid. 11. Frank, A.G. (1969), p.40 12. Hunt, D. (1994), p.163 13. Ibid. 14. Ibid, p.166 15. Ibid, p.163 16. Ibid. 17. Ibid, p.167 18. Ibid, p.165 19. Cardoso, F.H. (1993), p.8 20. Hunt, D. (1994) p.174 21. Ibid, p.173 22. Ibid, p.174 23. Ibid, p.165 24. Frank, A.G. (1967), p.7 25. Ibid, p.xiii 26. Hunt, D. (1994), p.174 27. Ibid, p.178 28. Frank, A.G. (1967), p.147 29. Ibid, p.148 30. Luxembourg, R. p. 31. Frank, A.G. (1967) p.3 32. Hunt, D. (1994), p.202 33. Ibid, p.200 34. Frank, A.G. (1967), p.9 35. Frank, A.G. (1972), p.4 36. Frank, A.G. (1967), p.xvii 37. Ibid, p.xviii 38. Dussel, E. (1991), p.126 39. Ibid, p.143 40. Hunt, D. (1994), p.174

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41. Frank, A.G. (1967), p.208 42. Ibid. 43. Frank, A.G. (1972), p.1 44. Ibid, p.452 45. Frank, A.g. (1967), p.xii 46. Ibid, p.206 47. Ibid, p.205 48. Ibid, p.148 49. Ibid, p.147 50. Ibid, p.148 51. Ibid, p.149 52. Hunt, D. (1994), p.163 53. Frank, A.G. (1967), p.145 54. Frank, A.G. (1969), p.41 55. Frank, A.G. (1967), p.xvi 56. Ibid, p.5 57. Ibid, p.9 58. UNDP. (1994), p.2 59. Ibid, p.29 60. Ibid, p.32 61. Ibid, p.20 62. Ibid, p.33 63. Ibid, p.73 64. Ibid, p.74 65. Frank, A.G. (1967), p.9 66. UNDP. (1994) p.112 67. Frank, A.G. (1967), p.212 68. UNDP. (1994), p.55 69. Frank, A.G. (1967), p.14 70. World Bank. (1994), p.30 71. Ibid, p.23 72. Ibid, p.25 73. Frank, A.G. (1972), p.94

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BIBLIOGRAPHY 1. Hunt, D. Economic Theories of Development. Hemel Hempstead: Harvester Wheatsheaf. 1989 2. Frank, A.G. Lumpenburgeoisie: Lumpendevelopment. New York: Monthly Review Press. 1972 3. Frank, A.G. Capitalism and Underdevelopment in Latin America. New York: Monthly Review Press. 1967 4. Luxembourg, R. Imperialism and the Accumulation of Capital 5. Dussel, E. Misterium Liberationis: Teología de la Liberación y Marxismo. San Salvador: UCA Editores. 1991 6. Frank, A.G. Latin America: Underdevelopment or Revolution. New York: Monthly Review Press. 1969 7. Cardoso, F.H. Compartir la Prosperidad. Madrid: El País-NPQ. 1994 8. Informe sobre Desarrollo Humano, UNDP. Mexico: Fondo de Cultura Económica. 1994 9. The World Bank Annual Report, The World Bank. Washington DC: World Bank Press. 1994