International Capital: A Threat to Human Dignity and Life on Planet Earth
|By Róbinson Rojas
President George W. Bush’s spokesman said:
“He has been unequivocal. He does not support the Kyoto protocol. It is not in the United States’ economic best interest.”
Notes on globalisation and its effects on developing societies as explained by structuralism and dependency theory
1.- Increasing globalisation, which appears as if it was the only way societies can develop in modern times, points to the continuing relevance of structuralist theory as posed by ECLAC since the 1950s, and dependency theory as developed from the early 1960s, in Chile. Both theories view the problems of underdevelopment and development within a global context, as interconnected economic, political and social processes. Dependency theory forecasted that the world system will tend to concentrate production in the hands of relatively few transnational corporations, making of the world market an oligopoly market. From this, the theory also forecasted a long trend to slow down production and to speed up income polarisation.
World trade and output, 1948-1998
(average annual change)
Source: WTO, with historic data from IMF, UN, World Bank and GATT
2.-A fundamental approach by structuralism has been its conceptualisation of the international system as being constituted by asymmetric center-periphery relations. Later, dependency theory developed this conceptualisation even further stating that the international system being a capitalist market system has an internal dynamics which reproduce those asymmetric center-periphery relations as a component part of economic efficiency of the world system.
3.- The economic divide and income gap between industrialised countries and developing countries has widened continually, especially during the debt adjustment decade of the 1990s, which vindicate the predictions of structuralist and dependency theories as opposed to the neo-classical and neo-liberal approaches which foresee convergence. That widening of the income gap is, of course, the aggregate effect, at the world system level, of what is happening at the level of individual economies in the industrialised countries where it is apparent that economy efficiency is in contradiction with social efficiency. (See my notes on Basic Economics. Robinson Rojas)
GDP as percentage of aggregate GDP for 156 market economies
Source: World Development Indicators and World Development Report, several years
Poverty in developing countries and transition economies, 1987-98 ( millions)
Source: World Development Indicators 2000
Widening income gap between regions (GDP per capita)
Source: Human Development Report 2001
Income per person. Data for the world population
(in 1987 US$)
Source: Human Development Report 1997. Data processed by Robinson Rojas
4.- East Asian development has confirmed the position of structuralists and dependentists who pointed to the importance of the state in promoting economic growth. And that this economic growth will generate a “dependent capitalist model of economic growth”.
5.-The Latin American debt crisis of the 1980s, which also affected Africa and many Asian countries, can be seen as an illustration of the contemporary relevance of dependency theory. With the vast increase in capital mobility, the economies of developing countries have become more and more dependent on foreign capital. This greatly increased their exposure and vulnerability to changes in world capital markets and substantially reduced their room for independent economic policies. Thus, the international financial institutions are by and large able to dictate economic and social policies to the indebted countries, especially the weaker and smaller economies, through structural adjustment programmes, with negative consequences for the poor as unemployment soared and wages and social welfare were drastically reduced.
6.- Dependency writers put particular emphasis on technological dependence. Despite the increasing presence of TNCs in Latin America, for instance, there has been little technological diffusion, which has confirmed dependency theory’s critique of transnational corporations as modern colonisers, this time not with the might of military state terrorism but the even stronger might of the gigantic international capital.
7.- Through the remittances of royalties, profits and interest payments (factor payments to abroad) the developing countries continue to transfer a significant net economic surplus to the industrialised economies. Such surplus transfers arising from foreign investment and unequal exchange in foreign trade means a significant reduction in funds which should have been used for domestic investment in the less developed countries themselves. Poor societies finance rich societies, in a word.
LATIN AMERICA AND THE CARIBBEAN: INVESTMENT FINANCING
(Coefficients as a percentage of GDP.- 1980 dollars)
Source: ECLAC, “Postwar transfer of resources abroad by Latin America”, UN, 1992, and CEPAL, “Panorama Económico de América Latina 1999”, UN,1999
LATIN AMERICA: Gross domestic product growth rates
Summary for free market economies with negative
net factor income from abroad (US$ million – 1992 prices)
NOTE: Six industrialized countries received more than 95% of the above flows: United States, Switzerland, Japan, Germany, France and Luxembourg.
8.- Globalisation forces have reduced further the room for maneuver in developing countries whose national development policies must abide by the principle of “one recipe fits all” imposed by the IMF and the World Bank. During the import substitution industrialisation period, during the 1950s to early 1970s national development policies had a wider range to experiment with. The process unleashed now has proved right one of the key tenets of dependency theory.
9.- The deterioration of the periphery’s terms of trade in relation to those of the center, confirms another central tenet of structuralism and dependency theory notion of unequal exchange.
World Bank commodity price index (1960 = 100)
* From 1970 to 1998
10.- It could be argued that developing nation-states must increasingly pursue national goals and objectives within globally-defined parameters and structures by the central economies’ dominant capital. This situation of being more fully inserted into the global economy increasingly makes of developing countries new colonies serving the needs of the central economies.-
Structural integration with the global economy makes weak economies vulnerable to the transnational corporations needs. The World Bank produce a main indicator of relative integration with the world economy. The indicator is trade in goods as a % of GDP. The bank defines this variable as ”trade in goods as a share of goods GDP is the sum of merchandise exports and imports divided by the value of GDP after subtracting value added in services, all in current U.S. dollars” (World Development Indicators 2000, in definitions for table 6.1). The United Nations Conference for Trade and Development (UNCTAD), produce inward foreign direct investment as a percentage of gross fixed capital formation as a variable to measure relative structural domination by transnational corporations.
Trade in goods as a percentage of GDP
Source: World Development Indicators 2000
Inward FDI flows as % of Gross Fixed Capital Formation
Source: World Investment Report 2000, United Nations)
Share of the final price of goods produced in less developed countries for consumption in industrialised countries.
Structural dependency from international capital is stronger in developing countries than in developed countries. The latter are dominated by transnational corporations; therefore developing countries are even more dominated forcing their economies to adopt a style of development which is suitable for the economic activities of international capital and political needs of its home countries and not the civil societies in developing countries.
The style of development imposed on Latin America is an illustrative case study. Drawing from R. Rojas, “15 years of monetarism in Latin America. Time to scream”, the following appears:
Nonetheless, the region's average growth rate for the 1990s has been no more than moderate: respectable but below its traditional level of performance and unsatisfactory from the dual standpoint of technical progress and the elimination of social asymmetries.
The new production patterns have not generated
By and large, the Latin American economies are in a serious position
The outcome of the above is dramatic:
Parallel to the above, structural effects are very marked:
1.- the structural heterogeinity which is characteristic of the Latin
From the above, two main outcomes:
--- greater social inequality by increasing domestic productivity
--- impairs the economy's growth potential by limiting the expansion
By and large, the framework of extreme inequality among the economic agents involved:
This strenghtening of the links with international capital shaping
--severely regressive distribution of income,
ECLAC gives the following range of figures on URBAN POVERTY for the period 1980-1994: (% of households)
Of course, there is a coexistence of a rapid modernisation process and an expansion of informal activities, a greater concentration of production activity in companies belonging to large national or transnational conglomerates. In a word, the creation, yet again, as has been happening since XIX century in Latin America, or the reinforcement of a two-tier social formation: one tier extremely rich, the other tier extremely poor.
Is convenient not to forget a basic law of the capitalist market:
Or, as World Development Report 1997, page 26 put it: "competitive markets may distribute income in socially unacceptable ways".
Also, competitive markets can make a "miracle" unsustainable because of the destruction of the environment as a sequel to maximisation of profits. Some Chilean people are fighting back. One of them is Sara Larrain. Please read her message. It is important for all of us [Sara Larrain, Chilean Ecological Action Network, RRojas Databank (http: rrojasdatabank.org)]