The limits of industrialization | by Raúl Prebisch


From The Economic Development of Latin America.

Raúl Prebisch, 1950. Translated by ECLA.

 


It is obvious that the economic growth of Latin America depends on the increase of the average income per inhabitant (which in most countries is extremely low) and on an increase in population.

An increase in the average income per inhabitant could be achieved in only two ways: first, through an increase in productivity; and second, assuming a certain level of productivity, through an increase in income per man engaged in primary production, in relation to the income of the industrial countries which import part of that production. This readjustment, as already explained, tends to correct the disparity in income brought about by the way in which the benefits of technical progress are distributed between the centres and the periphery. We shall now consider the increase in productivity in relation to the existing population. There are two aspects of the question.

On the one hand, the adoption of modern technique will allow production per man to increase, making labour available to increase production in the same activities in which it was already employed, or directing it to others. On the other, the index of productivity will also be raised by the diversion of persons ill-employed in activities where the very low productivity cannot be increased to any notable extent, to others where technical progress makes such improvement possible.

Agriculture offers a typical example of the influence of technical progress. In some of its important branches, technical development has made possible a steady increase in production with a proportionally lower increase in employment. In other words, agriculture absorbs a decreasing proportion of the increase in the population of working age, with the result that industry and other activities have been able to increase their employment more. This is not a case of diverting, to other work, people already employed, but of offering a different form of employment to people reaching working age. There have, however, been instances in which the rapid growth of industry during recent years has brought about an actual transference of workers, with unfavourable consequences for agriculture.

Furthermore, the increase in foreign demand for agricultural products after the great depression was, in general, relatively slow, by comparison with the rate in previous years. Taking this fact in conjunction with the consequences mentioned above, it would be difficult to say what productive activities, other than industry, could have absorbed the increase in population of the Latin-American countries which export such products.

It is quite possible that technical progress in other activities will bring consequences similar to those just pointed out. That, too, will mean an important source of man-power for industrial development.

This is not the only possible source. The low-level of productivity in industry itself represents a wastage of man-power which, given the proper use of modern technique, can be employed to great general advantage in expanding existing industries or in developing new ones.

Finally, there is another possibility which the recent experience of some countries has shown to be worthy of consideration. The low-income level prevailing among the masses has made it possible for the higher income groups to enjoy hand-made goods and certain types of personal services at comparatively low prices. This is due to what we have termed ill-employed man-power. As productivity in industry increases and real income, per capita, rises, there is a natural tendency for the ill-employed to move towards industry. However disturbing this trend may be to some sectors of society, it is the usual way in which the benefits of technical progress are passed on to all social groups within a country, as the experience of the great industrial countries has shown. The solution does not lie wholly in an increase in productivity, however. The social aim of industrialization might well be jeopardized if too large a part of the increase were to be devoted to increasing consumption or to a premature slackening of productive effort.

It has been emphasized that, to achieve this increase in productivity, capital, per capita, must be considerably increased and the technique for its effective use acquired. The need is progressive. In fact, a general increase in wages resulting from greater productivity in industry gradually spreads to other activities, which are thereby obliged to use more capital, per capita, in order to achieve the increase in productivity without which they would be unable to pay higher wages. Thus many activities in which human labour is now more profitable, because it is cheaper, will tend to become mechanized; the same will happen to a certain degree in household economy.

It is not possible to estimate, even approximately, the extent of these potential capital requirements and thus of the resources that will be needed to satisfy them, since even present capital, per capita, employed in the principal Latin-American countries cannot be determined with any satisfactory degree of accuracy. However, to judge from the needs which have already arisen during the initial stage of the industrialization process, the resources made available by exports—at least by dollar exports—do not appear adequate to meet those requirements after other imports and foreign payments have been met.

As already explained, the possibility must be faced that a reduction in the import coefficient may be necessary. This may apply to either the general coefficient or the dollar coefficient and may be brought about by decreasing or eliminating non-essential goods, in order to allow increased imports of capital goods. A change in the composition of imports would in any case appear essential to the development of industrialization.

It should be clearly understood what this means. It is merely the adaptation of imports to the resources made available by exports. If the latter were to rise sufficiently, it would not be necessary to restrict imports, except as a further means of intensifying industrialization. Exports from Latin America, however, are largely dependent on fluctuations in income in the United States and Europe and on their respective import coefficients for Latin-American products. Consequently they cannot be controlled directly by Latin America, and the situation can be changed only by the decision of the other countries.

It would be a different matter if Latin America intended to carry industrialization to the point of directing certain factors away from primary production to industry in order to increase the output of the latter to the detriment of the former: in other words, if Latin America, being in a position to maintain exports and imports at a specified level, were deliberately to lower it, sacrificing part of its exports in order to increase industrial production as a substitute for imports.

Would there in that case be an increase in productivity? At this point the question would be defined in classical terms. It would be a matter of discovering whether the increase in industrial production brought about by the factors diverted from primary production was or was not greater than the amount of goods formerly obtained in exchange for the exports. Only if it were greater, could it be said that there was an increase in productivity, from the standpoint of the community; if it were not, there would be a loss of real income.

This then is one of the most important limits of industrialization, one of a dynamic nature which might become less restrictive as the economy developed but which should be constantly borne in mind, however, if the primary objective is to increase the real welfare of the masses. There is no sign that Latin America is approaching this limit. It is in the initial stage of the industrialization process and in most cases the man-power available as a result of increased productivity is still amply sufficient for industrial growth. Moreover, it does not seem that the countries in which this process of industrialization has reached a more advanced stage have yet been driven to choose between an actual increase in exports and industrial development.

Nevertheless, exports can be sacrificed to an illusory increase in real income long before the possibilities of intensifying productivity or of utilizing all the man-power available have been exhausted.

An increase in productivity requires a considerable increase in capital, and before this can be achieved, a long time will elapse and new techniques will appear which may call for further increases in capital, in addition to that necessitated by the growth of population. At the same time, savings are scarce. It is necessary, therefore, to use them in such a way as to obtain the maximum increase in output. However, a mistaken policy could cause deficient use of these savings, as can be easily demonstrated.

It has been said that technical progress in agriculture and the comparatively slow foreign demand for its products have, in many cases, allowed industry to absorb a larger part of the increase in population of working age than agriculture. Let us assume that year after year this increase in hands is required in agriculture in order to meet rising foreign demands in addition to the increase in domestic consumption, but that, as a result of various measures, industrial development is expanded to such an extent that agriculture is deprived of the hands it needs in order to continue increasing exports.

The reasons why the substitution of industrial production for exports may represent a loss of real income have already been explained. There would, however, be also another loss. Land is a very valuable factor of production, which costs nothing. By comparison with industry, the amount of capital that must be added to it is relatively small. Consequently, the men who could have worked efficiently in agriculture occasion a demand for more capital when employed in industry. That increased capital could, however, have been put to more productive use if, instead of being diluted in the total annual increase in population, it had been confined to a part of that increase: the higher capital per man would have resulted in greater productivity. Hence, the dilution of capital would not have allowed the increase in productivity that otherwise might have been obtained. Thus to the direct loss would be added another, which, although less tangible, would be nonetheless real.

Furthermore, if productivity did not increase, there would be less incentive for ill-employed persons to go into industry, with the result that, instead of man-power being used to the best advantage, it would be disadvantageous^ diverted away from highly productive occupations. This is not a remote possibility, but a danger to which Latin America is continually exposed and into which it may sometimes have fallen for lack of economic development programmes with specific aims and clearly defined means to achieve them. Capital is scarce and it would indeed be deplorable to invest it where it would lessen total productivity rather than where it could increase it.

It should therefore not be forgotten that the greater the exports from Latin America the greater may be the rate of its economic development. We should not, however, lose sight of the possibility that a recrudescence of protectionist policy in countries that import from Latin America might lead to the replacement of those imports with goods produced locally.

Such a turn of events would be highly regrettable, but should it occur, the only solution would appear to lie in limiting the growth of imports or even reducing them in absolute terms, in order to adjust them to exports. In such a contingency, the increase in real per capita income would be less than it might have been, and it is conceivable that it might decline if the phenomenon became acute.

In this connexion it is necessary to take into consideration one elementary fact. Europe has lost a large part of its investments in other parts of the world and, from the point of view of the availability of dollars, cannot be expected, even when the process of reconstruction is complete, to be in a position to supply dollars to Latin America. On the contrary, it will need to take great care to balance its own trade. Consequently, even if one individual country were able for a time to reduce its imports to Europe without perceptible loss in its exports to that area, it is obvious that Latin America as a whole could not do so.

In discussing the increase in capital, per capita, we have implicitly assumed that industrial establishments would be able to attain a satisfactory size, for which a minimum of production is required. What is this size in the Latin-American countries? The variety of conditions obtaining in the different countries makes it difficult to generalize in this case, as in others. Moreover, no systematic study of productivity and its relation to the optimum size of the establishment and the industry has yet been made in these countries. Depressive examples are quoted, however, of the sub-division of industry into an excessive number of inefficient undertakings  within one country or of the multiplication of comparatively small enterprises in countries which, by combining their markets for a number of products, could reach a higher degree of productivity. The present division of markets, with its consequent inefficiency, constitutes another limitation of industrial growth, in this case one which could be overcome by the combined efforts of countries which, by reason of their geographical position and economic features, would be able to undertake it to their general advantage.

It was pointed out at the beginning of this section that there are two ways of increasing real income. One is through an increase in productivity and the other through a readjustment of income from primary production so as to lessen the disparity between it and income of the great industrial countries.

The second result can be achieved only in so far as the first is accomplished. As productivity and the average real income from industry increase in the Latin-American countries, wages in agriculture and primary production in general will have to rise, as they have in other countries.

The effect will be gradual and if there is not some relationship between all the respective increases in average income of the principal countries exporting primary products, unavoidable difficulties may arise in readjustments of the kind just mentioned, whether they be internal or international.

The possibility of gaining ground in this sphere depends also on the ability of Latin America to maintain the prices of primary products in the cyclical down-swing, the point at which it has frequently lost all or a part of the share of the benefits of technical progress that the periphery usually receives in the upswing. There is room here for international economic co-operation.

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From here to the past.

From time to time, the hands make use of blood to carve out words, without meaning. But sometimes – when moons collide under God’s breath – blood suddenly craves the word, forgetting both hands, and even the brain.

Of sewer rats, of flesh-eating vultures. The skies remain as blue as they could be, residing over the polluted clouds. However, trees now lay dormant, sleeping and decomposing, on the ground. Floored and demented; flawed and remitted. Sentience of horror which disavows the dis-continuity of terror. Large rats, embedded with their own blood, attack and maul all they can find: no distinction must be made; no selection must be done. Their purpose is to decimate. Through it, vultures survive. Life? No. Friend, the terror is a force, not natural, but unnatural: means to no-end. To freeze the purpose in the sphere of perpetuity, to ossify the flesh on the puddles of blood. Thought distresses under the acting reality. The vultures fly low, waiting and resting their energies for the acts that only rats can be carefully responsible for. Organized terror, if only! In reality, rivers of blood can only flow towards the sea. The blood flows, engulfing all; terror assimilates itself into nothingness over the unknowable. Rivers that have no purpose nor conception, nevertheless remain passively convening the terror under its wings. And the trees are their enemies.

It is in the ground, and not the sea, where the programmed use of terror seeps into existence. Violence that the soil has known to be truthful, by each trunk which resonated with its ground after being felled. Redirected from the soil to the trees; indirected through the seas to the freezing cold of terror. The terror has been maintained and expanded with increasing violence – organized, outside of the mere legal and institutional demeaning – but now overarching the spheres of personality. What was once hidden on the peripheral and limited vision of the trees (Oh, Furtado, the writing on the walls were truthful!) is now brought as an official line of action.

That rats and vultures are careless… Well, carelessness under the skies mean nothing. The black clouds remain exposed, for good or better; soil that seeps into the mind, crushed onto the ground by the feet of yellow birds. Rats and vultures to birds and mammals. How many more carcasses shall be used for the sacrifice they require? Burning fires shall be erected for the cleansing for a corrupted ground. But, not one less disregard. The priests, now, remain untold – unbelieving of the wave that sweeps the terror into this; the priests, then, will remain told – believing the believers who acclaim for salvation. But they will be there; but they will be there.

Ilyich, I write this,

No.

We write this hoping that mind does not fetter under pressure; hoping that action does not hinder under fear; hoping that lie does not triumph over will. Hope persuades the passions – eluding and never refuting.

Please, send news from the past, for the present continues to be the future’s graveyard.

II. Economic aspects of the Cuban Revolution | by Celso Furtado


From Economic Development of Latin America,  1970

Translated by Suzette Macedo


Redistributive stage of the Revolution

The 1959 revolution precipitated the course of events and impelled the country towards the second alternative at a spectacular pace. The reaction of the United States and the subsequent economic blockade of the island imposed by the Washington government, together with the support given to the new Cuban government by the Soviet Union and other socialist countries, caused events to move with incredible speed, changing the very essence of the range of options arising out of the country’s previous evolution. The revolution must be regarded as part of the formative process of the Cuban nation-state, a process that had begun with the country’s struggle for liberation from Spanish power. But the later course of the revolution cannot fully be understood without taking into account the fact that the last act of this liberation process was played out against the United States at the critical time when the balance of nuclear power called for a strict demarcation of the spheres of influence of the two super-powers. Thus, the international circumstances surrounding the Cuban Revolution came to play a decisive role in the course it was to follow.

From an economic point of view, the evolution of post-revolutionary Cuba can be divided into two periods. The first is marked by a policy designed to change the power structure and the distribution of income; the second by a concerted effort to bring about the country’s economic reconstruction.

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The latest triumph over Marxism| by György Lukács


First published on the Kommunismos magazine, n. 05, in 1920.

From «marxists.org». Translated by Conttren. September, 2017.


 

It is difficult for a year to go by without Marx being “triumphed over” by some associate professor or some fashionable philosopher. The deadly struggle that bourgeois society must carry out also developed in its ideological terrain. To the keen observer, these “triumphs” always present the same face. The demonstrated content is changed, the gnosiological or metaphysical arguments appear as new, but the essential character, the starting point and the destination point, are always the same. They find its origin in the petite-bourgeois-parasitic nature of the intellectual’s class situation. As faithful petite-bourgeois, the intellectuals are in no position of correctly observing the reality of class struggle, and therefore even less able to value it. They gravitate to, as Marx has said, the established institutions, such as “not to abolish the two extremes, capital and wage labour, but to mitigate its contradictions and lead them to live together in harmony.” Given that intellectuals are parasitic beings within the capitalist State, the latter is presented to them as an absolute being, or even as the Absolute. They contrast to Marxist theory a utopia that, more or less deprived of seductive phrases, rests over the adulation of the existing State.

This series’ last great representative is the popular philosopher Oswald Spengler, whose work The Decline of the West, though creative but amateurish in nature, recently achieved this success which in reality should have happened with the profound work by Ernst Bloch, The Spirit of Utopia. The new book by Mr. Spengler, Prussianism and Socialism,¹ wishes to “liberate German socialism from Marx.”  It seems Marx dodged a great philosophical problem of the modern epoch—that our philosopher outlines as such: “[T]hree Western Peoples have embodied socialism in this larger sense: Spain, England, and Prussia. Florence and Paris were the sources of the anarchic antithesis to socialism: Italy and France.” Because of this, Marx was in no condition to make the following fundamental discoveries: first, that there was no class struggle in the French Revolution; however “every true Frenchman was then and is today a bourgeois. Every true German is a worker”; there are no real classes in France.

The second discovery is that in England there is no State; that only England knows capitalism in its true sense; that, consequently, class distinction only exists in England. Thus, the superficial Marx, who distinguishes class according to one’s position on the process of production, was strengthened and overcome; class division would arise from the distinct possession of goods, as the antagonism between rich and poor. Poor Marx, to whom all this escaped and could not but fail to understand that socialism had already been realized long ago, in the Kingdom of Prussia. For this reason, Marx was not in position to understand the problem of the State; this follows his “amateurish” compliment to the Commune of 1871; because of this he was not able to cherish the system of councils (Rätesystem) that Baron von Stein had designed years before. Superficial socialism is recovered in this manner, by such philosophically detailed socialism. This socialism is an order of authority, “it is bureaucracy’s principle in technical terms.” Thus, it is only natural that Marx was not able to see the existing socialization “introduced by Frederick William I and incessantly developed until Bismarck.” Corresponding to such profound philosophy, the concept of Imperialism is too renovated: “The true International is Imperialism.” Therefore the Conservative and Socialist parties, who represented this “profound” socialism, belong to the same group “… in which the Conservatives made better officers, the Socialists better troops.” The reconciliation of brother-enemies is the objective of such philosophically rediscovered socialism. Is the critique of such work worth it? Considered as a symptom, it is interesting. The fact that Mr. Spengler’s only citation is from Mr. Lensch does not only show his ignorance regarding Marxism, but also shows where the right-wing socialists’ theory and praxis necessarily lead to. And the rest of this pamphlet differs in nothing from many other “triumphs over” Marxism that have been written since Dühring’s days, who already was the front rank of worship of the Prussian State. What is new is the proof that Revolution can not cure the Germans “of their servile spirit, rooted in national conscience,” as once Engels said.

 


  1. N.T.: SPENGLER, Oswald. Preußentum und Sozialismus, available «here

I. Economic aspects of the Cuban Revolution | by Celso Furtado

From Economic Development of Latin America,  1970

Translated by Suzette Macedo


Singularity of the traditional Cuban economy

Cuba displays a number of peculiarities worth analysing separately in an overall study of the Latin American framework. Along with Puerto Rico, the island remained under Spanish rule until the beginning of this century, the colonial period having lasted almost a century longer in this area than in the rest of Latin America. When the Cuban people’s struggle to win their independence created impediments to US trade, the United States government used the conflict as a pretext for taking over the remnants of Spain’s former Empire in the Americas and Asia. Consequently, the Cuban National State started its independent life under the occupation of United States forces. This occupation has not yet entirely come to an end—the United States government still has a base on Cuban territory—and up to 1934 it could have been extended to the whole island at any time, ‘in the interests of the Cuban people’ as adjudged by the President of the United States, in accordance with the provisions of the famous ‘Platt Amendment’. The delay of almost a century in starting the process of building a nation-state, and the particular circumstances attending its emergence under the tutelage of a powerful neighbour, make the Cuban process unique in the Latin American context. However, Cuba’s singularity lies even deeper and its roots are to be found in the economic evolution of the island within the framework of the Antillean region.

The Spaniards first used the Caribbean islands as defence bases for their lines of communication with the mainland colonies. The indigenous populations, living at a rudimentary cultural level, were practically wiped out and extensive stock farming was established on the larger islands to supply the metropolitan fleets. From the seventeenth century, the smaller islands were occupied by the French and the English, who wanted to secure a foothold for an assault on the mainland. With a view to eventual penetration of the Spanish Empire, they encouraged white colonization of the islands they had occupied, founding settlements of small planters who combined the growing of subsistence crops with the production of tobacco and indigo for the European market. These settlements, which had been of political value to the metropolitan countries because they could provide colonial militiasto be mobilized against the rich Spanish Empire, underwent profound changes during the latter part of the seventeenth century when the cultivation of sugar-cane was introduced into the islands by the Dutch settlers who had been driven out of the Brazilian Northeast. In fact, Dutch interests were responsible for developing sugar production in the Antilles. They financed sugar mills and the importation of slaves, provided technical assistance and guaranteed markets.

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Revolution, the unexorcised ghost | by Florestan Fernandes


Article available at marxists.org.
Translated by Conttren, 2017.

 

 

In a provocative and intelligent book, Hobsbawm sought to demonstrate that the drama of Europe consisted in the combination (or tradition) of revolutionary intellectuals and a society that repels the Revolution. The historian, who lived through the post-Bolshevik period, was felt subtly dealing with internal convictions and justifying the Soviet Union’s intra-party errors, within both its borders and its international policy of concessions, during the “Cold War.”

In Brazil, we were not even able do this. Leftist parties saw themselves forced into tortuous opportunism, compensated with moments of pure theoretical glorification, having only come into practice once with the Aliança Nacional Libertadora [National Liberation Alliance], in 1935. This “subjective revolutionism” began to suffer rectifications exactly during the decadence of the “cold war” by proclaiming the new bourgeois belief of  the “death of socialism.” Intellectuals, in general, prefer to save their own skin when disconnected from practice as a way to not sacrifice their own consciousness… There was an incoherent and veiled shift towards social-democracy, which would not be an evil in itself. Evil proceeds from the disposition of conceding space without any struggle in Social Democracy’s orchestration as the Left-hand of the bourgeoisie. Such process continues and threatens us with the loss of the few partisan alternatives for the establishment of a new society.

I would like to deal with the theme as a sociologist. At PUC [Pontifical Catholic University], for example, where I have lectured in the last quarter of 1977, I was faced with the richness of the courses available. There was one focused on social organization. In an automatic impulse, I questioned why there was no course that dealt not only with social change, but specifically with social revolution. There, the two poles are given: order and its reproduction; order and its radical, or inverted, transformation. My postgraduate colleagues, who were open to critical thinking, soon agreed to this necessary addition.

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Capital formation in Latin America and the inflationary process | by Raúl Prebisch

 


From The Economic Development of Latin America and its principal problems

Raúl Prebisch, 1950. Translated by ECLA.

 


The margin of savings depends ultimately upon the progressive increase of labour productivity. Though the level of productivity achieved by some Latin-American countries is such that, by means of a judicious policy, they would be able to reduce the amount of foreign capital needed to supplement national savings to moderate proportions, in the majority of them this capital is admittedly indispensable.

In actual fact, productivity in these countries is very low owing to lack of capital; and the lack of capital is due to the narrow margin of savings resulting from this low productivity. The temporary help of foreign capital is necessary if this vicious circle is to be broken without unduly restricting the present consumption of the masses, which, generally speaking, is very low. If this capital is effectively used, the increase in productivity will, in time, allow savings to accumulate which could be substituted for foreign capital in the new investments necessitated by new technical processes and the growth of the population.

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