gurley and griffin-radical approaches

American Economic Association

Radical Analyses of Imperialism, the Third World, and the Transition to Socialism: A SurveyArticleAuthor(s): Keith Griffin and John GurleySource: Journal of Economic Literature, Vol. 23, No. 3 (Sep., 1985), pp. 1089-1143Published by: American Economic AssociationStable URL: http://www.jstor.org/stable/2725460Accessed: 29/10/2008 19:38

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Journal of Economic Literature Vol. XXIII (September 1985), pp. 1089-1143

Radical Analyses of Imperialism,

The Third World, and the Transition To Socialism: A Survey Article

By KEITH GRIFFIN

Magdalen College, Oxford University

and

JOHN GURLEY

Stanford University

We thank Duncan Foley, Arthur MacEwan, an anonymous referee, and Moses Abramovitz for penetrating criticisms of earlier drafts. In particular, we are grateful to Abramovitz for his persistent dis- satisfaction with many portions of the manuscript and for his proposed solutions to our difficulties.

THIS PAPER IS A SURVEY of Marxist and other radical interpretations of inter-

actions among the three "worlds" of advanced capitalism, socialism, and the less developed countries (LDCs). It includes, first, analyses of the causes, aims, and methods of capitalist imperialism. The survey next examines the impact of world capitalism on LDCs, including theories of dependency and unequal exchange and the role of international agencies in the development process of LDCs. The third general topic is that of domestic policies of the LDCs, such as policies of import substitution and export promotion, as well as other social programs aiming for development. The survey, finally, extends to the efforts of some less-advanced countries to achieve socialist societies-that is, to issues

of the transition process from precapitalist or immature capitalist economies to socialist ones. Wherever possible, we ap- praise or raise questions about the radical literature, for the purposes of guiding readers who are unfamiliar with the ter- rain and of stimulating radicals to improve their efforts in these areas.

By radical literature we mean that which is highly critical of capitalism, favors socialism, and often employs Marxian analysis. Marxian analysis contains an economic interpretation of historical changes, which employs the categories of the productive forces, the relations of production, and the superstructure; the view of the primacy of the production process in establishing class structures, other social relations, and noneconomic institutions and

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sets of values; the importance of class relations and methods by which one class ex- ploits another; a dialectical method that finds determinants of change within the processes themselves that are being studied; a revolutionary outlook that involves not only quantitative but also qualitative transformations or "leaps"; and a disposi- tion to treat problems wholly-that is, in the context not only of economics but also of politics, society, and culture. Contem- porary Marxist analysis often, but not always, includes the labor theory of value.

At the turn of this century there was only one world, a capitalist world of wealthy and dominant countries, on the one hand, and of poorer and subordinate ones, on the other. The Bolshevik revolution of 1917 began the breakup of that world and the formation of the second world, that of Marxian socialist countries, which now number a couple of dozen, some of which are economically advanced but most of which are still poor. After World War II, a third world was formed of less-developed countries that gained- or had previously secured-political independence from their former colonial mas- ters. This left the first world more nar- rowly defined as the advanced capitalist countries.

Radicals, however, are usually reluctant to posit a third world, for they see most, perhaps all, of these countries as underdeveloped capitalist ones, tied in subordi- nately to the first world. Thus, the main radical view is that there are only two worlds, one of capitalism and one of Marx- ian socialism. However, in this paper we shall use the more customary framework of three worlds-the third, to repeat, consisting of underdeveloped capitalist countries. We place the Marxian-socialist LDCs in the second world.

Speaking generally, third world countries have made some notable economic advances since World War II. This is particularly true when these gains are com-

pared with those of present-day industrialized countries before World War II. The postwar economic progress of these LDCs, however, has been grossly uneven: the top third (ranked by income per capita) has grown substantially faster than the middle third which, in turn, has far out- paced the bottom third. Moreover, countries of the first and second worlds are pulling away from the bulk of third world countries, certainly in absolute terms and at times relatively. Thus, the entire array of nations is moving like an expanding uni- verse: those farthest advanced from their starting points are travelling the fastest, those at a short distance from their origins are merely creeping along, and those in the middle are moving at more average speeds. Some of the strong exceptions to this generalization are third world countries like South Korea, Taiwan, and Hong- kong, the growth records of which have been remarkably robust.

Despite the general progress of the LDCs, there is continuing large-scale poverty, stark inequalities of incomes and wealth, and much unemployment among their populations. Additionally, the populations themselves are burgeoning in many of these countries, contributing to urban blight, dwindling per-capita food supplies, and other social maladies. Never- theless, more than a few third world countries have avoided, or moved through and beyond, many of these disorders and, if they are not on "easy street," they are advancing briskly on most of these fronts. Heterogeneity is the name of the game in the third world.

Broadly speaking, radicals ascribe many ills of third world countries to the bygone imperialist policies of the colonial powers and to the postwar economic domination of the LDCs by their former political rul- ers. Radicals are concerned less with the actual advance in third world countries than with why their progress has not been faster. In this connection, they are inter-

Griffin and Gurley: Imperialism, the Third World, and Socialism 1091

ested in questions of exploitation and oppression of working classes, which are under the sway of their own ruling classes, and in questions regarding the exploitation of the LDCs themselves by international capital. They see the problems of lagging progress, poverty, inequality, and unemployment as arising from unequal power relations-past and present- among countries and among classes within countries. They believe that current trade relations between advanced capitalist and third world countries often benefit the former much more than the latter, and that international financial agencies, with which many LDCs have to deal, operate primarily in the interests of the leading capitalist nations. They also allege that many domestic policies of third world countries, which appear to be "mistakes" to conventional economists, are in fact purposeful and rational measures from the standpoint of ruling classes.

Radicals do not believe that it is possible to eliminate (or even substantially reduce) the problems of the working classes in third world countries within the framework of capitalist class structures, institutions, and values. In general, they see working-class emancipation arising only after capitalism has been overturned and socialism established. Even then, some radicals are far from sanguine about the short-run impact of this transformation on the welfare of the working classes, for after the successful revolutions many of the most serious problems begin.

In addressing problems of third world countries and their working classes, radicals are concerned with the pernicious legacies of the old colonialism, the continuing baleful influence of neocolonialism, the exploitative policies of ruling classes, the unequal economic and financial relations in international commerce, the biased role of the state in serving principally the interests of ruling classes, and the ultimate salvation through socialism

of the oppressed and exploited-all of these accents give radical work on economic development a different cast from that of standard economics.

I. Meanings and Sources of Imperialism

Radical economists have studied many aspects of imperialism. We shall divide their concerns into: 1) the definitions and stages of imperialism, 2) the causes and aims of imperialist activities, especially the most recent wave, and the methods employed by the capitalist powers to achieve their ends, 3) the extent and nature of the exploitation of the subordinate countries and peoples by the imperialists, and 4) the impact of capitalist imperialism on the economies and societies of the dependent areas. In this part, we shall discuss the first two topics; the last two will be covered in Part II.

A. Definitions and Stages of Imperialism

The term imperialism was introduced into Marxist theory during the first two decades of this century, although it was commonly used in England from the mid- 1870s, and it was also employed to refer to the expansionist policies and personal rule of Louis Napoleon Bonaparte (Napo- leon III) during the 1850s and 1860s (Wolf- gang Mommsen 1980). Friedrich Engels used the term in this latter connection and also to describe the actions of the Euro- pean "civilization-mongers" in China (Marx and Engels 1980, Vol. 15). Imperial- ism was given international currency by the Boer War.

Broadly speaking, imperialism now means the domination by one country or group of people over others, in ways that benefit the former usually at the expense of the latter. Capitalist imperialism, in particular, is the exercise of such domination by leading capitalist nations and their large private corporations, ordinarily over less-developed areas of the world. Most


Marxists and other radicals focus on the economic motives that generate capitalist imperialism, and most seem to mean by "economic domination" that a country can profit unduly in markets largely shaped by its economic and political power.

For V. I. Lenin (1939, originally published: 1917)-as Giovanni Arrighi (1978), Anthony Brewer (1980), Harry Magdoff (1969, 1978), and others point out-the new imperialism began around the turn of this century; it was marked by war-like tendencies among the major capitalist countries, which had already divided most of the world's territory among themselves. Lenin did not use imperialism to mean the scramble for territory, but he did note that imperialism was a reality before the international trusts had decided which countries would "belong" to them. As Bob Sutcliffe wrote, the rush for territory "was a prelude to imperialism which really began partly as a result of the fact that the division of the world was complete (Roger Owen and Sutcliffe 1972, p. 314). Charles W. Lindsey (1982) agrees: "Imperialism might remain important in Lenin's theory for the redivision of the world, but not its division" (p. 7). Lenin stressed some of the main characteristics of the new imperialism: the merger of industrial and bank capital into finance capital, the growth of capital exports, and a rise of military production and militarism. Le- nin's perspective was influenced by J. A. Hobson's treatment of the subject (1965, original publication: 1902) but he especially followed the analysis of Rudolf Hil- ferding (1981, original publication: 1910), which designated the new imperialism as the era of finance capital and of a growing struggle for supremacy among national monopolies supported by their states. This Hilferding-Lenin viewpoint, which was also shared by Nikolai Bukharin (1973, 1979; original publications: 1917, 1919- 1920), is often referred to as the classical

Marxist definition of imperialism, to distin- guish it from more contemporary usages.

Recently, Bill Warren (1980) has defined imperialism as "the penetration and spread of the capitalist system into noncapitalist or primitive capitalist areas of the world" (p. 3). This suggests not only the element of domination but it also emphasizes the imposition of a new mode of production on less-developed areas. Victor G. Kiernan (1978) sees imperialism as "coercion exerted abroad . . . to extort profits above what simple commercial exchange can procure" (p. i). Magdoff (1969, 1978) has argued that the meaning of imperialism should be extended to include the involvement of, say, U.S. capital in Western Europe, because^ the "antago- nism between unevenly developing industrial centers is the hub of the imperialist wheel," and because U.S. capital "skims off part of the cream" of Europe's past and present "exploitation of colonial and neo-colonial countries" (1969, p. 16).

The term imperialism has also been modified as old or new and formal or informal. The first two modifiers generally refer to capitalist imperialism before or after 1870-1900, while the last two refer to exploitative relations with or without direct political control by the dominant country over the subordinate one (Arrighi 1978). Informal imperialism is usually identified either with the "imperialism of free trade," as presumably practiced by Britain during much of the nineteenth century, or with neocolonialism, which developed mainly after World War II, following the breakup of the capitalist empires. As radicals see the issue, neocolonialism focuses on the continuing economic domination by the capitalist powers over less-developed areas, despite their loss of direct political control in these areas. Neocolonialism has been called imperialism without colonies. Eric Hobs- bawm (1969, p. 131) has further refined these concepts.


The old imperialisms were associated with commercial capitalism and the early stages of industrial capitalism. Magdoff (1978) divided these imperialisms into three stages: from the late 1400s to the middle 1600s, from about 1650 to 1770, and from the 1770s to the 1870s. In his treatment, the first stage featured Euro- pean countries plundering the accumu- lated surpluses of non-Europeans and pi- rating from each other. During the second stage, Britain and other colonial powers attempted to refashion economies around the world, using much slave labor, so as to provide themselves with raw materials, food and exclusive markets for their manufactured goods. During the third stage, Britain defeated France and launched a campaign for new markets in Asia and Af- rica; eventually forming a second empire (after losing the American colonies). This stage was shaped by the efforts of Britain and others to break up and transform noncapitalist areas into the conqueror's own mode of production.

The new imperialism began towards the end of the last century and grew out of what is called monopoly or finance capitalism. The prelude to this stage was an increasing number of capitalist powers vying among themselves for territory in Asia, Africa, and the Pacific Islands. A struggle then began over the redivision of the colonies, sparked by the challenges of the emerging capitalist powers (Japan, Germany, Italy) to those already established (Britain and France). In these years Britain lost her pre-eminent position as the leading world power, and a new surge of militarism accompanied rising competition among the imperialists.

Neocolonialism came to full flower after World War II, but it can be traced back to the early 1800s when Latin American countries achieved political independence from Spain and Portugal during and after Napoleon's Spanish and Portuguese invasions. The defeat of Napoleon re-em-

phasized Britain's role as the world power and enabled her, for some time, to dominate much of the world economically, including South America. However, the major waves of decolonization and political independence of new nations occurred in the past four decades.

After 1945, the United States became the defender of the "free world" (defined by radicals as the free-enterprise world, with or without democratic institutions) and greatly aided in the establishment of a system of neocolonialism. Those years also saw the rising importance of multinational corporations, and the "integration of military production with the dominant industrial sectors" (Magdoff 1978, p. 110). Many radical economists believe that neocolonialism is necessarily associated with greater military output, partly because of technical advances in weaponry, partly because of the threat to capitalism from the spread of Marxism around the world, and partly because military power is necessary to maintain the imperialist network of trade and investment in the absence of direct political control (e.g., Magdoff 1978, pp. 242-44; Kiernan 1978, Part Six). Paul Sweezy (1942) has shown the connection between the new imperialism and militarism (pp. 308-10).

Radicals, however, have made insuffi- cient efforts to enrich their definitions by analyzing why, at any moment of time, some capitalist nations are imperialistic while many are not, and why, over time, these patterns have changed so dramatically. Closely associated with these questions are those regarding patterns of military production among capitalist nations and arms sales by them to other countries in the first, second, and third worlds. What accounts for these patterns and why have they changed over time? Moreover, radicals have devoted little space to the extension of definitions of imperialism to the aggressive behavior of some socialist states-for example, the Soviet Union's in-


vasion of Afghanistan, Vietnam's takeover of Cambodia, China's forays against Viet- nam, and so on. A thorough analysis of this "social imperialism"-as the Chinese termed Soviet aggression-would do much to deepen the meaning of capitalist imperialism, neocolonialism, and other references to capitalist domination and aggression.

B. The Causes, Aims, and Methods of Imperialism

Theories about the determinants of imperialism fall into four main categories: economic, political, social, and personal. Although radical economists favor the economic explanations, there has been much disagreement among them regarding the specific economic factors involved. Analysts from other disciplines have tended to stress either the other determinants, usually the political ones, or a complex mixture of several including the economic explanations.

1. The Classical Marxist Explanations and Others. Although Karl Marx and Friedrich Engels did not analyze imperialism as such, they did discuss capitalist expansion around the world. In their view (1947, 1955; original publications: 1932, 1848), modern industry (the stage of capitalism after the "manufacture proper" period) established the world market; it created products in abundance that required for their sale constantly expanding markets; it required raw materials drawn from the farthest corners of the earth; and it created new wants "requiring for their satisfaction the products of distant lands and climes." Marx and Engels saw the bourgeoisie exporting not only their cheap commodities but also their mode of production: the bourgeoisie "creates a world after its own image." These authors considered capitalist expansion around the globe to be brutal but progressive, in the sense of advancing capitalism toward its socialist future.

In his most mature work (1967b, original publication: 1894), Marx wrote of the "innate necessity" of capitalism to seek an ever-expanding market for its money and commodity capital, and of the importance of declining profit rates at home to the expansion of trade and capital exports. Marx argued that capital invested in foreign trade by an advanced country can earn a higher rate of profit because its commodities compete only with those produced in other countries with inferior production facilities. Therefore, the commodities of the less-advanced countries can be undersold, even though prices of the commodities from the advanced countries exceed their values. Moreover, an advanced country's capital invested in colonies is likely to yield higher profit rates owing to the more backward state of these areas (i.e., to a higher ratio of variable to constant capital) and to their more intense exploitation of slave, coolie, and other labor.' In other writings Marx ascribed various motives to the British in their imperialist policies in India: "The aristocracy wanted to conquer it, the moneyocracy to plunder it, and the millocracy to under- sell it" (Marx and Engels 1980, Vol. 12, p. 218). Later, the millocracy desired to profit by developing India. Marx also argued that the motives behind the plans for English colonization in India were to bring English civilization to the natives, to "afford a barrier against Russian inva- sion," and to promote trade with Central

1 For Marx, the value of a commodity is the socially- necessary labor-time used to produce it, counting both present labor-time and the labor-time embod- ied in the depreciation of capital goods and the using up of inventories (the latter two called constant capital, c). The variable capital (v) is the socially-necessary labor-time required to maintain and reproduce labor-power. This labor-power produces not only this amount but more, the extra being surplus value (s), which is captured by the capitalist owners. The sum of c, v, and s is the value of a commodity. The ratio of its price (price of production) to its value may be greater than, less than, or equal to the average of these ratios, depending on the relative amount of constant to variable capital used in its production.


Asia. However, Marx considered colonialism to be a dying system, associated with early capitalism, and giving way to the development of "the world market." De- spite the multiplicity of surface motivations behind imperialism, Marx basically saw such expansionism as grounded within the capitalist mode of production itself, as a necessary consequence of the capital accumulation process, hence, ultimately as a progressive force-that is, as leading to socialism. As Shlomo Avineri (1969) stated: "The need for expanding into the non-European world is, thus, an immanent feature of bourgeois society" (p. 2).

The post-Marxian radical literature generally regards the expansion of the capitalist mode of production and of bourgeois society as inherently harmful to the non- European world, owing both to the vio- lence accompanying the establishment and maintenance of capitalism around the globe and to the exploitative nature and other inherent evils of this mode of production once established. Marx himself saw the global spread of capitalism as both destructive and constructive-the former, in that European capitalism was brutal in dissolving small semibarbarian and semi- civilized communities; the latter, in that capitalism, with all its evils, was a higher economic form and thus enabled mankind "to fulfill its destiny." Marx then added: "Then whatever bitterness the spectacle of the crumbling of an ancient world may have for our personal feelings, we have the right, in point of history, to exclaim with Goethe: 'Should this torture then tor- ment us/ Since it brings us greater plea- sure?/ Were not through the rule of Ti- mur/ Souls devoured without measure?'" (Marx and Engels 1980, Vol. 12, p. 133).

During the early 1890s, after Marx's death, Engels studied the imperialism of his day and concluded that, while such endeavors could temporarily relieve capitalist crises back home, they would only

make the final collapse of capitalism more certain in the long run-for they acceler- ated the processes of capitalist development, including the concentration of capital.

Although J. A. Hobson was not a Marxist he belongs in this narrative owing to his influence on Lenin and other Marxists. In Hobson's major work on imperialism (1965, original publication: 1902), he concluded that imperialism was based on profit-seeking by commercial, industrial, and financial classes, and was made more intense by the maldistribution of wealth and income, domestically, that produced an excess of saving (i.e., a deficiency of consumption demand); and, this imperialism was fostered at home by "masked words" (coverup slogans) and by "playing upon the primitive instincts of the race." Hobson believed that the "animal lust of struggle, once a necessity, survives in the blood -. . ." The cure for imperialism was the transfer of unearned incomes of the wealthy to the working classes or to the national budget. In either case, consumption demand would rise, obviating the need of capital to seek higher profit rates abroad. He thought that this could be achieved if a genuine democracy were established, a "popular government," in place of the existing sham-democracy. Hobson approved of imperialism under certain conditions: a higher race, he said, might forcibly interfere with a lower race if this contributed to "the civilization of the world." However, he could find no such cases.

One of the most important contribu- tions to classical Marxist thought was made in 1910 by Rudolf Hilferding (1981), who argued that imperialism was an inte- gral part of the latest stage of capitalist development, in which "finance capital"- became the product of the fusion of industrial and bank capital. Finance capital is capital supplied to industrial monopolies by financial intermediaries, with the latter


in the dominant position; it is the age of indirect finance through intermediaries, to use a more modern way of saying it, instead of direct finance through stock and bond markets and brokers.

Hilferding argued that the development of capitalism produced monopolies and cartels which found it profitable at home to support high tariffs, the tariffs in turn also contributing to further industrial and bank concentration. The resulting increase in domestic prices (monopoly prices), however, while boosting profits of the monopolies, also stunted their output, denying them the advantages of larger- scale production and lower unit costs. To capture these advantages, the monopolies strove to increase their exports of goods and services. At the same time, they ex- ported capital to less-developed areas so as to establish highly profitable operations abroad, where cheap labor, lower rents, and special privileges abounded. The export of capital ensured that the capital- exporting country would be the supplier of industrial goods. In short, imperialism was the method by which monopoly capital, behind tariff walls, reduced its unit costs and thus enhanced its profits.

Unlike trade in commodities, Hilferding wrote, capital exports require strong State support abroad, especially because "the competition for investment produces further clashes and conflicts among the advanced capitalist states themselves." While there are some tendencies toward cohesion among capitalist powers (e.g., each might have investments in one or more of the others), Hilferding expected rivalry and conflict to set the dominant note. In particular, Germany was rapidly increasing its industrial development but it lacked colonial possessions. "This is a situation which is bound to intensify greatly the conflict between Germany and England and their respective satellites, and to lead towards a solution by force" (1910, p. 331).

Hilferding believed that during this age of finance capital (or imperialism) class an- tagonisms would take a back seat to nationalist fervor, racism would be intensified as a justification for the brutal treatment of "natives"; and liberalism would wither in the face of warring states.

A few radicals have criticized some aspects of Hilferding's analysis. For example, Paul Sweezy (1942, p. 269; 1972) argued, and others agree, that the period of finance capital proved to be a passing phase, because it developed into one that featured internal finance from the growing surpluses of ever-larger corporations. More generally, it is claimed that the role of the banker is less powerful today than it was in Hilferding's time. (Michael Bar- ratt-Brown 1970). Since Lenin relied heavily on this aspect of Hilferding's anal-: ysis, the criticisms are also directed to him. Moreover, the heavy emphasis that Hil- ferding placed on a rising spiral of tariffs and protectionism in accounting for monopolies' high profits and for the fragmen- tation of the world market has not been carried over with any zeal into more recent radical analysis. Further, Hilferding argued that the collapse of capitalism would come through political and social, not economic, factors, and it would come gradually, not through violent revolution-these views, too, run against the grain of mainstream Marxist analysis. Nev- ertheless, the principal thrust of Hilfer- ding's account of monopolies, imperialism, and the resulting conflicts among major capitalist powers set the stage for Lenin and others. Since Lenin's time, however, radicals have not made notable progress in advancing imperialist theory.

Rosa Luxemburg (1951, original publication: 1913) argued that imperialism is caused by the inherent impossibility of capitalism selling all of its production prof- itably within the bounds of capitalist relations of production. If there is to be adequate aggregate demand, capitalists must


sell part of their output (especially that representing reinvestable surplus value) to "outsiders" or precapitalist buyers, who may be within or outside of the nation in question. Ultimately, Luxemburg thought, sales will have to be made abroad-to pre-capitalist areas, which are largely self-sufficient and thus must be forcefully brought into the commercial relations demanded by capitalism. These necessities lead to imperialist activity. The argument, in short, is that capitalism must have a noncapitalist environment in which to grow, whatever the stage of capitalist 'development. Luxemburg believed that imperialism was the historical stage that prolonged the life of capitalism. And it is "the political expression of the accumulation of capital in its competitive struggle for what is still left of the noncapitalist. regions of the world" (p. 446). She also alleged that capitalism's profit re- quirement led it abroad in search of new sources of productive forces, particularly labor power and raw materials. These searches were accompanied by force, fraud, and state power-by a growing militarism.

The flaws in Luxemburg's analysis have been widely recognized in radical circles. She assumed constant consumption demand by workers and, based on this, the folly within a closed capitalist system, of continued capital accumulation by capitalists out of their profits (more properly, surplus value). Hence, her conclusion: use the profits to produce goods that are sold outside of the system. But, if wages and consumption grow in a developing system, further capital accumulation could grow, too, with purpose and profit. Nikolai Bukharin pointed this out in 1924, Sweezy in 1942, as did many others in between and since.

Bukharin (1973, original publication: 1917) was one of the most interesting thinkers on the topic of imperialism. Al- though he borrowed much from Marx and

Hilferding, he consolidated their analyses in instructive ways, extending them and producing some insights into the nature of the imperialist drive. He defined imperialism as the policy of finance capital, the policy being to expand the territory of the state. Imperialism is a policy of conquest- by finance capital, which is characteristic of a definite stage of capitalist development. The basic contradiction, within this stage of capitalism, had become that between expanding productive forces inter- nationally and continued national appropriation of surplus value.

Bukharin was concerned to show that, while the world economy could become better organized and less chaotic, as world productive forces continued to grow, it was not likely to become less conflictive- in fact, it probably would be the reverse. Thus, Karl Kautsky's vision of capital being transformed into a single world organization, a universal world trust, was possible theoretically, but not practically-for such an organization to be stable all elements within it had to be and had to remain equal in all important respects. Be- cause this was quite unlikely, a universal world trust (Kautsky's ultra-imperialism) could not be formed; or, if formed, would quickly be undermined by the national group that considered itself superior to the others in productive forces, state power, or in some other important re- spect.

Lenin also took much from the work of Hilferding, as well as from that of Hob- son. Lenin (1939, original publication: 1917) defined imperialism as the monopoly stage of capitalism, which began in Eu- rope during the early 1900s. He ascribed growing capital exports, a principal mark of the new imperialism, to "the fact that in a few countries capitalism has become 'over-ripe' and (owing to the backward stage of agriculture and the impoverished state of the masses) capital cannot find a field for 'profitable' investment" (p. 63).


He also stated other reasons for capital exports: "In these backward countries profits are usually high, for capital is scarce, the price of land is relatively low, wages are low, raw materials are cheap" (p. 63). He declared that the imperialists desired to gain control of sources of raw materials, or at least to prevent others from gaining such control. Lenin believed that the drive for colonies was abetted by the politics and ideology associated with monopoly capi-tal, as well as by the desire of one imperialist nation to undermine the hegemony of others.

He argued that imperialism speeded up the growth of the backward countries, spreading capitalism with alacrity, but that it tended to retard development in "the countries which are richest in capital (England)" (p. 114). A tendency to decay and stagnation, which is characteristic of monopoly capital, is pronounced once competition is eliminated and monopoly comes onto center-stage.

A number of criticisms of Lenin's treatment of imperialism have appeared. James O'Connor (1971) discusses several of them as does Lindsey (1982), who also advances some critiques of his own. Radi- cal and other critics have challenged Le- nin's link between monopoly capitalism and imperialism, his analysis regarding the timing and importance of capital exports in the imperialist drives, his assertion that there were important qualitative differences between British expansionism in the first and second parts of the 19th century, his German bias (Peter Karl Kresl 1973), and other aspects of this most fa- mous of all theories of imperialism. It has, however, stood up well despite these at- tacks.

Although Joseph Schumpeter did not know of Lenin's essay when he wrote his own work on imperialism (1951, original publication: 1919), it has become one of the most potent challenges to Lenin and, more generally, to all imperialism theories that are based on economic determinants

arising out of capitalism, including those of Hilferding and Otto Bauer against whom Schumpeter's work was written. Al- though not a Marxist himself, Schumpeter drew on his deep knowledge of Marx to present an alternative formulation of imperialism within a historical and analytical framework that could not easily be dis- missed by Marxists.

Schumpeter surveyed many of the imperialisms of past centuries, from the ancient Egyptians, to the Arabs, to Louis XIV, to Catherine II of Russia. He found that commercial and economic interests were generally not the principal motivations for such aggressive behavior (with a few notable exceptions); rather the imperialisms were rooted in the "dark powers of the subconscious," in "powerful drives by virtue of long habit," and in "instincts of war and power." Personal whims and personal interests (e.g., Alexander the Great, Catherine) also were important. Coming to the modern era, Schumpeter argued that capitalism was basically opposed to wars and conquests. This was true of both the capitalists and the workers ("The type of industrial worker created by capitalism is always vigorously anti-imperialistic" p. 94). Consequently, if capitalism developed imperialist tendencies it was owing to alien elements within it that were atavistic, rooted in the past autocratic state. Although these precapitalist elements continued to have great vitality in capitalist societies, "in the end the cli- mate of the modern world must destroy them" (p. 129). Capitalism itself represented a new social order that exhibited tendencies of peaceful compromise, cos- mopolitanism, and non-hostile international exchanges. Monopoly capitalism- a departure from capitalism's true competitive path, arising as it does from political causes-could lead to imperialism, Schumpeter thought, but the advance of democracy and competition would undermine this aberration. And similarly for protectionism: it is true that such policies


raise monopoly profits and invite noneconomic, even military, responses. But pro- tective tariffs do not automatically grow from the competitive system, so that they, too, are destined to disappear.

2. More Recent Economic Explana- tions. In spite of Schumpeter, most radical economists today have continued to find the determinants of imperialism in the necessities of the capitalist mode of production. These "necessities," it appears, are of three general types: those associated with a host of factors causing rates of profit at home to decline or to appear comparatively low, those linked with the advanced capitalist countries' needs for relatively scarce raw materials and natural resources, and those associated with advanced capitalism's urge to fashion and control the economic development of the less-developed countries.

If capitalists were swayed by the first group of factors, they would presumably seek new markets for their goods, additional investment opportunities, cheaper sources of raw materials, and cheaper labor power. These efforts would be stimulated either by poor domestic performance or by attractive foreign opportunities for profitmaking, or both. If capitalists were influenced by the second set of factors, they would attempt, through their state, to gain control over foreign sources of the vital goods, not only to raise rates of profits, but also to enhance the chances for the continuation of capitalism itself. If they responded to the third set of determinants, they would attempt to draw less-developed countries into the global capitalist system and to impose on them a division of labor that would re- dound to the benefit of the center countries. Of course, all three drives may be operating simultaneously, and many of the explanations of capitalist expansion as- sign varying positive weights to all of them.

Taken as a whole, the neo-Marxist view follows the Hilferding-Bukharin-Lenin ap-

proach but places less weight on the role of surplus capital in the center countries and on the role of finance capital, as a stage in capitalism's evolution, in modern- day imperialism. At the same time, more weight is given to the role of multinational corporations in imperialist activities. These multinationals, though, are some- what different from the international cartels that played such an important role in Lenin's analysis. The latter were national monopolies combined into international super-monopolies; the former are national corporations operating in a number of countries. Some analysts emphasize the multinationals rather than the state: "6. . .it is of secondary importance whether the monopolies make use of state power to assert their interest at the periphery, or whether they rely chiefly on the informal but effective weapon of their disproportionate economic superiority" (Mommsen 1977, p. 125). Another neo- Marxist argument is that decolonization has meant a change only in the tactics of capitalism and not in its strategy or principal aims.

Although Harry Magdoff (1969, 1978) has offered a bewildering list of causes of imperialism, he, like almost everyone else, apparently views the most basic determinants as coming from the imperatives of monopoly capitalism-but, at times, as coming from the imperatives of capitalism in general, whatever its stage of development. He wrote that there is an inner drive within the capitalist system leading to imperialism. "The entire mechanism of a market economy-competition, fluctua- tions in consumer demand, uneven development of complementary industries, technological changes, the accumulation of profits-force a restless drive of capital to expand" (1969, p. 24). At other times, the inner drive is associated with the development of monopoly enterprises, of multinational corporations.

In discussing these directives, Magdoff has emphasized particularly the growing


need of capitalism to control scarce and vital raw materials and natural resources. Likewise, Norman Girvan (1976) has looked at imperialism in terms of minerals and raw materials needed by the center capitalist countries. Paul Baran (1957) noted "the drive of monopolistic and oli- gopolistic firms (and the financial groups related to them) to invest abroad. . ." (p. 112). His reference is to the drive for profits, a demand that grows directly out of the commands of the capitalist system. About a decade later, Baran and Sweezy, in a major work, argued that postwar U.S. militarism is based on the aim of containing and eventually wiping socialism off the face of the earth (1966, pp. 187, 191). The reason for this aim is that the spread of socialism reduces the profits of corporations by preventing them "from doing business with and in the newly socialized area" (pp. 192-93). Their conclusion is that an American empire adds to the profits of corporations, that the empire is in danger from the spread of socialism- hence, profits are, also-and that the mili- tarization of America is for the purpose of containing and eventually eliminating socialism in the world. Their analysis suggests that, before the advent of socialism and its global spread, imperialism was on the offensive in its search for profitmaking opportunities. Since then, it has been much more defensive, attempting to contain socialism. However, U.S. imperialism's aim remains the same: to maintain and, if possible, to extend the empire. These authors add that ". . . policing the empire and fighting socialism are rapidly becoming, if they are not already, one and the same" (p. 206). (For a summary of radicals' views regarding U.S. imperialism in Vietnam see Gurley 1980.)

Kiernan (1978) has taken a long view of American imperialism. He has traced this imperialism from the conquest by the United States of native Americans and Mexicans to its military incursions into the

Caribbean, Hawaii, Guam, the Philip- pines, and China; to its domination of Cen- tral America; and to its multiple post-1945 military invasions in Central America, the Near East, Africa, and Asia. Much of this aggression, he concludes, imposed a net cost on the United States but yielded net benefits to particular classes.

Over forty years ago, Sweezy (1942), in what is now at least a minor classic, wrote that monopolies breed tariffs and protec- tion from foreign competition, and they also restrict the field for capital accumulation and so heighten the interest of the monopolies in overseas investment (the Hilferding theses). "Consequently in the matter of colonial and territorial policy monopoly capital is expansionist and an- nexationist" (p. 302). At the same time, a strong ideology of nationalism is necessary for the imperialist struggle. In general, Sweezy argued that capitalism is inherently expansionist, for it is always faced by the threat of declining profit rates and underconsumption tendencies, which "put evergrowing obstacles in the path of accumulation" (p. 304). Imperialism is a solution to these problems.

The new wave of imperialism during the final quarter of the 19th century, Sweezy wrote, was due to the heightened national rivalry, the emergence of monopoly capital, and the maturation of contra- dictions within the accumulation process, such as the tendencies for rates of profit to fall and underconsumption to slow the forward momentum (p. 299). As we previously noted, Sweezy disputed Hilferding's emphasis on finance capital, alleging that he "mistakes a transitional phase of capitalist development for a lasting trend" (p. 267). The dominance of bank capital, Sweezy stated, comes during the transition between competitive and monopoly capital, but it is a passing phase (p. 268).

Samir Amin (1976, 1977), one of the more innovative but obscure writers in the fields of imperialism and dependency


(the analysis of the impact of imperialism on the LDCs as seen by the LDCs), has argued that, during the era of competitive capitalism, up to the 1880s, capitalism's inherent tendency toward declining rates of profit was generally overcome by a rise in the rate of exploitation. However, this led to production outrunning consumption and hence to crises. These in turn were partially overcome by capitalist expansion into the peripheral areas of the world. From the 1880s to World War II, monopoly capital became capable of exporting capital, with the aid of the state, and furthermore was induced to do so by rising real wages and a consequent fall in the rate of exploitation. During the "post- imperialism" phase, after 1945, state monopoly capitalism organized the absorp- tion of surplus capital, which was done partially through militarism and waste and partially through capital exports (which, however, elicited offsetting in- flows of capital) and the unequal exchange existing between center and peripheral countries (below: pp. 1113ff).

Amin has also pointed to class struggles as the basic cause of declining profit rates. Consequently, the roots of imperialism can be traced to the struggle of classes, including the working class, opposed first to commercial and later to industrial capitalists, for these struggles have served to reduce capitalists' profits, compelling them to search for higher returns elsewhere. These searches have led to imperialistic behavior, which Amin defines as the perpetuation and expansion of capitalist relations abroad by force or without the willing consent of the affected people. Thus, according to Amin, capitalism requires imperialism to overcome the adverse effects on profitmaking that the foes of capitalism have imposed on it. The advanced capitalist countries, however, engage voluntarily in the accumulation process, but they impose "extraverted accumulation" on countries in the periph-

ery. The latter countries, accordingly, not having the development process in their own hands, find their economies becoming distorted ("disarticulated") and re- shaped for the benefit of the center countries instead of their own working classes. What is found in these economies is a blockage of capitalism and the enervating co-existence of several modes of production.

One of the most unconstrained critiques of Amin comes from Charles Barone (1982). He reproves Amin for his excessive eclecticism-throwing in every explanation of imperialism, over the various stages of capitalist development, almost indiscriminately and certainly inconsis- tently. Amin's treatment, Barone contends, is based on the thesis that capitalism, over time, has undergone a series of profound transformations, each of which altered its essential nature. This viewpoint, according to Barone, is probably false but undoubtedly accounts for the many different theories of imperialism that Amin has strung together. Moreover, Barone believes that Amin's dependency analysis of the LDCs moves mostly on the surface, that he fails to penetrate the mode of production in the peripheral countries, and so fails to integrate his analysis with the transformation of class structures and the changing nature of the capital accumulation process. For Barone, Amin is, in short, an inconsistent Marxist.

Richard Wolff (1970) attributed the imperialism of modern capitalism to the need of capitalist enterprises or their governments for access to essential imports, markets for their manufactured goods, and spheres for capital investment. Wolff alleged that these demands create anxieties associated with possible changes in market variables. The anxieties can be reduced if corporations or governments gain control over supplies, and imperialism is one way to do this. Elsewhere, Wolff (1974) has discussed the basic aims of Brit-


ain in Kenya, from 1870 to 1930, which were to protect "the existing international economic relations, mainly those with In- dia," and to reduce Britain's dependence on markets, sources of food and raw materials from outside the empire (p. 146). The first factor suggests that 6ne imperialist action can lead to another, if the first has to be protected. That is, the Suez canal was needed to secure safe lines of commu- nications and trade with India. Egypt was required to protect the canal. The Anglo- Egyptian Sudan, British Somaliland, and British East Africa (Kenya) could then be justified as necessary to protect the Red Sea and Indian Ocean approaches to Suez-sort of a rising domino effect.

In this same vein, Hamza Alavi (1964) found that the driving force of modern- day imperialism was not capital exports to exploit cheap labor abroad but rather the capitalists' need to dominate all market outlets and sources of supply of raw materials.

Several scholars, such as James O'Con- nor (1971) and Tom Kemp (1972), place heavy weight on the role of multinational corporations in the imperialist endeavor. O'Connor's thesis is that the continued concentration and centralization of capital have produced giant U.S.-based multinational corporations, capable of seeking control of assets abroad and profiting from them, with the active participation of state capital in international investment. All of this is backed by a global foreign policy in the interest of the multinationals.

3. Noneconomic Explanations. Capi- talist imperialism has been explained by a variety of noneconomic factors, all of them more or less opposed to the neo- Marxist economic approaches, and most of them offered by nonradicals. These alternative theories are principally political, social, or personal; however, they often comprise a mixture of explanations, even reserving a few minor roles for the economic factors.

Political explanations interpret the

functions of imperialism in terms of national or empire security, national pres- tige, national rivalries, or the desire to spread democracy and human rights (Ben- jamin Cohen 1973; E. Badian 1968; Win- fried Baumgart 1982; David K. Fieldhouse 1967 and 1982; John Gallagher and Ron- ald Robinson 1965; and Gallagher, in Roger Owen and Sutcliffe 1972). The social explanations base imperialism on social problems at home that can be overcome by overseas expansionism. The most notable explanation along these lines is that of Hans-Ulrich Wehler (in Owen and Sutcliffe 1972). The personal theories as- sign imperialism to the failings in our- selves, to the whims of one or two national leaders, or to the aggressive drives that arise from the innate characteristics of human beings (Cohen 1973; Lloyd Reynolds 1981; E. Stengers, in Owen and Sutcliffe 1972; and Badian 1968).

C. The Role of Economic Factors in Imperialism

Radicals argue that economic factors either loom large in the foreground or are grey eminences in the background of almost all useful theories of imperialism. The neo-Marxist and other radical approaches clearly place economic factors at center-stage. Even the so-called social theories of Wehler and others believe that economic as well as social and political difficulties at home are responsible for imperialist actions. Moreover, Wehler's analysis begins with the irregularity of economic development in the industrial countries as the basic source of imperialism. Irregu- larities are moderated by the economic gains of overseas activities. Further, even King Leopold, whom Stengers claimed was solely responsible for Belgian imperialism in the late 1800s, had profits from colonialism constantly in mind. It would seem that only if imperialism is explained by our own individual aggressiveness, or by the aggressiveness of certain leaders or atavistic classes-and by that factor


alone-do the economic variables recede. The political explanations of imperial-

ism would appear to be more troublesome for neo-Marxist interpreters. But even in some of these theories economic factors are heavily represented. In the account of Gallagher and Robinson (1965), for instance, Britain's incursions in much of Af- rica were for the purpose of protecting India-presumably a security-political factor. But Britain's possession of India itself involved prospective economic gains in a substantial way, as several radicals have pointed out. Again, in Fieldhouse's analysis (1967, 1982), while problems arising from peripheral insecurity and instability contributed to further imperialist actions, the original acquisitions of colonies may have been encouraged by economic con- siderations, and subsequent difficulties, as Fieldhouse acknowledged, may have grown out of the economic problems created by the imperialists. With regard to nationalism, Sweezy (1942) has noted that a nationalist ideology is necessary for the imperialist struggle and that imperialism fosters nationalism. Thus, as Sweezy and others see it, this political factor must accompany the economic determinants of imperialism.

Imperialism is sometimes seen as a reac- tion to the spread of communism (i.e., Marxism) in the world, hence as politically rather than economically determined. But radicals have noted that the new imperialism far predated the advent of communist nations; the pattern of this imperialism was established in the late nineteenth century and it continued in much the same way after the October 1917 revolution in Russia. In this view, therefore, the spread of communism can be considered, not as the root cause of capitalist aggression in the world, but simply as another-a most important-force threatening the capitalists' economic gains from their global operations. Moreover, as Magdoff and others have noted, the economic forces that lie at the heart of imperialism are underlined

by capitalism's acceptance of military dic- tatorships and other anti-democratic regimes as members of the "free world," provided these nations are open to foreign investment and other capitalist incursions into their economies. As far as radicals are concerned, that observation caps the argument.

However satisfied radicals might be with the present state of their theories of imperialism, there are a number of questions that have not received persuasive answers from them. Is it not true, as Schumpeter alleged, that very often capitalists can gain more by peaceful trade than by war, conquest, and expansion? Why are not all capitalist countries imperialistic? Why are some socialist countries expansionist? Is this not a form of imperialism? Why have many large countries been imperialistic down through the ages, whatever their mode of production? Ap- parently some aggressive nations and even their ruling classes have not gained, on balance, by colonialism and imperialism. Why, then, do they persist? What room should there be in imperialism theories for ineptitude, errors, blunders, chance, personal idiosyncracies? Inas- much as religious fervor, nationalism, and the desire for democratic rights have probably become increasingly stronger than class loyalties during this century (if not before), why do radicals continue to use class analysis so exclusively as the cen- terpiece in their theories? Radicals have addressed these questions, it is true, but we do not believe that the issues have been widely-enough recognized, much less satisfactorily resolved.

II. World Capitalism and Third World Countries

Marx and Engels (in Avineri 1969), paved the way for radical analyses-now called dependency theory-regarding the impact of world capitalism on less developed countries, though most contempo-


rary Marxists depart dramatically from their mentors' views. Marx and Engels saw European colonial expansion, which, they argued, was an inevitable outgrowth of the development of capitalism, as brutaliz- ing and plundering the peoples of the colonized areas and disrupting or destroy- ing their livelihoods. Despite all of this, they believed that colonial expansion was necessary to push many of the backward countries off dead-center so as to implant in them the seeds of capitalist development. That development would bring progress to these lands, but at the same time it would drag masses of people "through blood and dirt, through misery and degradation." Capitalism, like all social processes, developed dialectically.

A century later, Paul Baran (1957) argued that the British, while enriching themselves, "systematically destroyed all the fibres and foundations of Indian society" (p. 149). Supporting Nehru's assertion that the British were responsible for the later "tragic poverty of the people," Baran proposed to demonstrate that these exploitative relationships and their consequence of persistent impoverishment epitomized the entire peripheral structure of world capitalism. This challenged the ideas of Marx and Engels. Along the same lines, Paul Sweezy (1968) claimed that "capitalist development inevitably produces development at one pole and underdevelopment at the other"; a proposition, he emphasized, that applies not only to relations between the advanced capitalist countries and the colonial and semicolonial countries, but also within both these parts.

This thesis, first propounded by Otto Kuusinen (1928, pp. 102-03), was general- ized by Andre Gunder Frank (1966, 1967, 1972), who alleged that capitalism had long ago entered every nook and cranny of the satellite world in such a way as to make global capitalism an integrated structure of metropoles and satellites that

bound nations, regions, and urban-rural areas into dominant-dependent relationships. The millions of peasants and workers at the base of this capitalist structure continually produced economic surpluses that were captured by the exploiters above them, but these exploiters, in turn, were exploited by those still higher in the structure, and so on. The result was development around the top and underdevelopment at the bottom. During wars and depressions, when the higher metropoles were fully engaged, the exploitative ties were temporarily loosened, allowing a type of development to take place in the satellites,. When the ties were later strengthened, underdevelopment was again resumed. Frank (1972) also asserted that "the greater the wealth [that was] available for exploitation [in the past], the poorer and more underdeveloped the region today; and the poorer the region was as a colony, the richer and more developed it is today" (p. 19). His definition of capitalism as production for profits in the market has come under severe attack for being too inclusive and non-Marxian. (See, e.g., Ernesto Laclau 1971.)

Samir Amin (1976) has also endorsed the polarization thesis. Amin believes that all peripheral or satellite countries have four main characteristics: the predominance of agrarian capitalism; a local, mainly merchant, bourgeoisie that is dominated by foreign capital; the growth of a large bureaucracy, which substitutes for the leadership of an urban bourgeoisie; and masses of poor peasants, urban unemployed, and marginal workers who have not developed completely into a proletarian class. As a result, the peripheral countries cannot achieve development out of their own momentum but are, instead, reduced to "an incomplete and extraverted development of local capitalism." The center countries, moreover, impose an "unequal exchange" between themselves and the periphery, in which "exploitation through


trade" occurs (Arghiri Emmanuel 1972). Amin claims that the dominance of foreign capital in the peripheral areas means distorted development toward export activities and excessive development of the tertiary sector and light industry. It also means that the satellite economy develops unevenly, that it is incohesive, that it is unable to develop cumulatively, and that it tends to incur excessive debt to the center countries. (These summaries are based on Gurley, 1979.)

We shall now consider most of these propositions in more depth.

A. Underdevelopment in a Historical Context

Baran, Frank, and others argue that underdevelopment arose from the way the third world was incorporated into an international economic and political system, dominated initially by Europe and later by the United States. This Western hegemony, however, encountered contin- uous resistance, and after decades and even centuries of struggle by local peasants, workers, and other nationalists the old colonial and imperial regimes virtually disappeared. In their place a system of nation states has emerged. The scores of countries which comprise these new nations enjoy at least nominal independence and often a considerable measure of sover- eignty over their internal affairs. Notwith- standing this, it is claimed, relations of dependency and unequal exchange and the network of international institutions established after World War II seriously restrict the room for maneuver of the new states.

It has long been contended by nationalists in the third world and by radical economists and other social scientists in the West that underdevelopment is not an original state of nature but a product of historical forces. Thus, for radicals, Europe did not "discover" the underdeveloped countries; on the contrary she created

them (Griffin 1969; R. C. Dutt 1963; J. S. Furnivall 1967; Malcolm Caldwell 1968; A. Moorehead 1966; Carl Ortwin Sauer 1966; Frank 1966, 1967, 1972). Radical economists almost always mean this in its strongest version: Europe turned some countries that were "developed" for their time into underdeveloped ones. In a weaker version, subscribed to by only a few, it means that Europe, finding underdeveloped countries, created conditions that prevented their later development.

The impact of imperialism took various forms, differing from one place and one time to another, and it is an unfinished task of modern scholarship to write the history of the colonized people, as opposed to the history of the colonizing powers. Britain in India and Africa, France in Indochina and Africa, Holland in In- donesia, Belgium in the Congo, Spain in Latin America, Portugal in Africa and Bra- zil, Japan in Korea, the United States in the Philippines pursued different policies, which had different consequences, and, moreover, these policies and consequences changed over time. But it is part of the radicals' conventional wisdom that, in most parts of the world, ordinary people-farmers and fishermen, artisans and small traders-either gained little or lost much from being conquered. The civiliz- ing missions of Europeans and others, radicals aver, were a myth invented to soothe the consciences of the conquerors, not the wounds of the conquered.

In many regions of the world the expansion of Europe resulted in a sharp decline in population, partly as a result of the im- portation of alien diseases, partly as a result of war, and partly as a consequence of the destruction of the pre-existing social structure (Colin Clark 1967). Notable examples where this occurred are the An- dean region of South America, Mexico and Central America, Australia and the South Pacific (Sauer 1966; Moorehead 1966; Stanley Stein and Barbara Stein 1970; also,


see Kiernan, 1978 for the impact of Amer- ican imperialism on native peoples). In Af- rica, from Guinea to Angola, the capture and trade in slaves did much to depopu- late large regions (Anthony Hopkins 1973; C. R. Boxer 1973; Walter Rodney 1981; Ruth First 1963) and to transform the economy from one based on settled agriculture back to long-fallow agriculture and nomadism. During the colonial period, forced labor was used in many areas, notably in the Belgian, Portuguese, and French colonies, while elsewhere the combination of head taxes and the alienation of African lands resulted in the creation of a large, impoverished labor force that had no alternative but to work on European-owned plantations, farms and mines (Charles Van Onselen 1977; Colin Bundy 1979; Stanley Trapido 1978; Colin Leys 1975; Arrighi 1970; Francis Wilson 1972; J. B. Knight and G. Lenta 1980). Africa is widely regarded in the West as the most "traditional" of underdeveloped regions, yet there is nothing that is truly traditional about rural Africa, if by that term one means pre-imperial and pre-colonial. Land use and land tenure systems, population densities, the organization of labor and the patterns of migration, even many of the crops that are grown-all these things were shown by radical scholars to have been profoundly affected by European penetration into the continent.

Analysts believe that China represents a rather different case because the country was never wholly colonized. Instead, China was incorporated into a nefarious trading arrangement against her will and forced to import opium in exchange for useful products. Indeed, the country was defeated in three successive Opium Wars within the span of twenty years, namely: 1839-1842, 1856, and 1858-1860. The consequence of these disasters, according to Victor Lippit (1980) and many others, was widespread drug addiction, the partial transfer abroad of her economic sur-

plus which could have been used for capital accumulation and growth, partial colonization and conquest, the payment of indemnities and the granting of special privileges to foreigners, the weakening of her indigenous social structure, and, in the three decades before the revolution of 1949, a sharp decline in the standard of living for the masses, including, of course, most of the rural population. Underdevel- opment in China cannot be attributed solely to imperialism; it is more likely that internal and external forces interacted in a process of mutual causation. In the view of radical scholars, however, it would be implausible to claim that the impact of the West (and later Japan) on China was wholly or even on balance beneficial.

Defenders of European, American, and Japanese imperialism point to three sources of economic benefit to third world countries. First, it is argued that colonialism destroyed feudal or precapitalist economic systems and encouraged the creation of a capitalist labor market. Presumably this is thought to have been of benefit to the rural population since the majority of the labor force lived in rural areas. Second, the imposition of free trade in commodities, even if on a restricted basis, permitted the principle of comparative advantage to operate. Since the advocates assumed that the third world had a comparative advantage in agricultural and mineral products, this too should have increased the well-being of the rural population. Third, uninhibited international capital flows, largely in the form of direct investment in plantations, mines, and public utilities, allowed investment and growth to occur in capital-scarce underdeveloped countries which otherwise would have remained stagnant. Thus, as radicals interpret the advocates' case, on balance, imperialism was good for the conquered peoples: it led to a higher level of output because of improved allocative efficiency and to a higher rate of output growth be-


cause of a faster rate of capital accumulation.

The historical record, at least on the surface, provides little support to those who defend the colonial regimes; furthermore, radical economists and historians take issue with each of the three points on which that defense is based. Some radicals argue, first, that labor markets in the third world, during the colonial period, were charac- terized by coercion, monopsony, and various systems of labor control that were designed to reduce the level of re- muneration of local people, ensure an adequate supply of labor to expatriate- controlled enterprises, and prevent both occupational and unregulated geographical mobility. Formal slavery was the ex- ception rather than the rule, but the systems of labor control that were devised were also harsh and far removed from the free labor markets of laissez-faire economics. In Kenya, Southern Rhodesia, North- ern Rhodesia, and Tanganyika, for example, a cheap, regular African labor supply was obtained by sharply reducing the amount of land available to Africans, thereby creating overcrowded reserves; by imposing hut, poll, and other taxes; by threatening to conscript Africans into the army if they were not working for wages; by using tribal headmen to recruit labor; by introducing an all-inclusive internal pass system in combination with policies to encourage immigration from neighbor- ing territories; and by using forced labor where all else failed (Wolff 1974). Many features of these colonial labor markets persist today and constitute one aspect of the neocolonialism or internal colonialism that afflicts so much of the third world (Van Onselen 1976; Bundy 1979; Trapido 1978; Leys 1975; Arrighi 1970; Wilson 1972; Knight and Lenta 1980; Griffin 1981; E. E. Rich and C. H. Wilson 1967).

Second, leaving aside "free trade" in slaves, addictive drugs, and guns, radicals claim it is far from clear that the forcible

insertion of the third world into a trading system dominated by advanced capitalist nations operated to the advantage of third world countries or, more to the point, to the advantage of a majority of the population in third world countries.

The precise effects on the third world of the spread of an integrated international market are the subject of much debate, but one interesting hypothesis is that the imposition of "free trade" and the resulting growth of primary product exports from the underdeveloped countries occurred "at the expense of industrialization of these countries and also at the expense of other crops or products primarily meant for domestic consumption" (Bagchi 1982, p. 119). The case of de-industrialization in India and Bangladesh is quite well established (Bagchi 1976, 1982). The de- industrialization of India, for example, started in the 1800s, under freer trade, when its cotton manufacturers were eliminated. "Other rural or urban manufactures were ruined partly by the rise of alternative sources of supply and by government restrictions." India was opened up to a flood of manufactured imports; in return India supplied agricultural products; and it became dominated by "colonialism, landlordism and usurious money- lending interests" (Bagchi 1982, pp. 82- 88). It is possible that something similar but perhaps of lesser magnitude occurred in China and other parts of the third world. Clearly more research needs to be done on this topic, but enough is known to cast doubt on the proposition that freer trade brought immediate and substantial gains to all parties in every instance. In- deed, a contrary proposition has been advanced: namely, in at least part of the third world the results of trade-induced changes in the commodity composition of output were unemployment, a decline in the supply of some foodgrains, and only marginal gains for most of the population. This entire process of industrial contrac-


tion and unemployment, a shift from food to cash crops, and a decline in living standards of the urban and rural poor is summed up by Bagchi in the phrase "export-led exploitation," as contrasted with export-led growth (Bagchi 1982, p. 119; George Beckford 1972).

Export-led exploitation is the view of imperialism as seen from the periphery. Seen from the center, the purpose of modern imperialism, in the eyes of many radicals-as we stated in the previous sec- tion-reflects the desire of large capitalist enterprises and their governments to secure essential imports on favorable terms (e.g., oil); to obtain protected markets for exports (including exports of arms); and to obtain unchecked access to third world countries for investment. (Wolff 1970; O'Connor 1971; Anthony Clayton and Donald Savage 1974; Van Onselen 1973; R. M. A. Van Zwanenberg 1975; M. Mason 1978; R. G. Thomas 1973.) This quest for economic security and advantage, radicals allege, leads inevitably to attempted control of foreign economies through direct intervention (including covert and overt military intervention) or, indirectly, by obtaining control over local political au- thority. Economic power and political power usually go hand in hand.

Third, a number of writers, radicals among them, have begun to argue that, far from gaining from international capital flows, the growth of third world countries was severely damaged because a large part of their economic surplus was transferred abroad, where it was used to increase the consumption of the richer classes and raise the general level of investment abroad. This does not deny the obvious fact that some investment flowed to the third world and thereby, in the first place, helped to increase its economic surplus. But the net flow of resources, it is claimed, was from the underdeveloped countries to the developed, not the other way round. Orthodox economists may ac-

cept that there were instances of plunder, pillage, unfair bargaining, unequal trea- ties, and the like, but these are regarded as special cases (Reynolds 1983, p. 956) and perverse ones, whereas the radical view is that perverse flows of resources were and are the norm.

Convincing evidence on this matter, however, still remains to be assembled. Nevertheless, modern research has un- earthed some examples in which capital appears to have flowed from the periphery to the center, assuming that a surplus on merchandise account is indicative of a resource transfer abroad. Thus, Spain's exploitation of Latin America's mineral wealth was reflected in an export surplus in Spanish America and higher consumption on the Iberian peninsula-though this was imperialism by merchant capitalists. Britain's possession of most of the West Indies resulted in a capital transfer to the mother country which is equivalent to eight to ten percent of Britain's entire income in the closing years of the 18th century, "and probably a larger percentage in the period preceding the American War of Independence" (Richard Sheridan 1965). The Indonesian export surplus in 1876-1880 was more than six percent of Indonesia's income, and the presumed financial counterpart was profits transferred back to Holland by the Dutch East Indies Company which helped consider- ably to raise living standards in the mother country. The exploitation of Bengal by the British East India Company is, of course, notorious. Famine reduced the population by over a third during 1769-1771: yet, from the mid-18th until well into the 19th century five to six percent of Bengal's income was siphoned off as unrequited exports and locally financed expenditure on wars of conquest incurred by the East In- dia Company (Bagchi 1982; Baran 1957; Sumit 1980; and Damodar Kosambi 1956).

These figures acquire added signifi- cance when set beside Arthur Lewis'


much quoted statement that "the central problem in the theory of economic development is to understand the process by which a community which was previously saving and investing four or five percent of its national income or less, converts itself into an economy where voluntary saving is running at about twelve to fifteen percent" (Lewis 1954). Radicals contend that, in retrospect, it now appears that many third world countries had no diffi- culty reaching and exceeding a savings rate of fifteen percent once they became independent and acquired greater control over their economies. However, such savings rates occurred only in recent decades, and there is no evidence in radical literature that, if these countries had become independent in the mid-1800s or in the mid-1700s, they could have achieved anything close to those rates. After all, few of today's industrial countries had such high savings rates a century ago; none had them two centuries ago; and, the Latin American countries which did achieve political independence in the 19th century were generally unable even to ap- proximate such heights.

Nevertheless, the central problem of underdevelopment, as radicals formulate it, was that during the era of imperialism a high proportion of the economic surplus potentially available for domestic investment was transferred abroad in the form of uncompensated exports or was used locally to pay for the cost of colonial admin- istration, the maintenance of large standing armies and police forces, and the high standard of luxury consumption of the expatriate ruling class. Some of these wasteful expenditures continued in the post-independence, neocolonial regimes. Even so, savings rates at that time did generally rise substantially.

Unrestrained capital flows, as a number of radical economists have pointed out, did little or nothing, on balance, to raise investment and growth in the pre-inde-

pendence period in those countries which account for most of the people in the third world-that is: undivided India, Burma, China, Indonesia, Indochina, Nigeria, and Zaire. On the contrary, the net movement of financial flows was from the third world to the advanced capitalist countries, and thus resource transfers constituted one of the mechanisms of underdevelopment. Even today, some analysts argue, contrary to both neoclassical and orthodox Marxist views, the natural tendency within the world economic system is for savings to flow from capital-scarce poor countries to capital-abundant rich countries, because the real rate of interest and the return on investment (especially in industries based on new technology) are higher in rich countries than in poor ones (Griffin 1978; Amin 1974).

1. Theories of Dependency. As we noted previously, theories of dependency are concerned with the impact of imperialism and neocolonialism on the economies and societies of third world countries, as seen by those countries themselves. Radicals require that such theories should be able to describe the global operation of the capitalist system during the neocolonial era while accounting for the persistence of some colonial features in third world economies and the dependence of these economies for their development on economic impulses origi- nating outside their borders. One analyst stated that dependency arises because "some countries can expand through self- impulsion while others, being in a dependent position, can only expand as a reflec- tion of the dominant countries, which may have positive or negative effects on their immediate development" (Theotonio Dos Santos 1970, pp. 289-90). Dependency theorists inquire into the reasons for such economic dependency when these countries have political independence.

Just as international relations are analyzed by radicals in terms of a hierarchy


of states (center and periphery, first for- mulated carefully by Ratul Prebisch in 1950), between which there is relatively little mobility but much inequality and conflict, so too society, for most dependency theorists, is analyzed in terms of social stratification, class conflict, and exploitative relations. On a national plane, these relations typically give rise to vio- lence and repressive governments. Histor- ically, radicals claim, Central and South America and, more recently, Africa, illus- trate the political consequences of dependency. According to radical thought, these consequences often include a military takeover because the combination of neocolonialism-dependency has retarded and distorted the development of a strong indigenous ruling class, leaving an uneasy and unstable balance of social forces within these societies. One solution to this problem has been military rule.

An early theory which, however, does not meet all the requirements of a dependency theory (nor do its authors meet all the requirements of radicals) was that of structuralism. This school of thought emerged largely and appropriately in Latin America where political independence was achieved early. It was concerned with an explanation for the un- steady, incomplete, and inflation-ridden development in peripheral countries, especially in South America. It found a good part of the explanation in demand and supply rigidities and in certain inappropri- ate institutional arrangements. Economic growth in the periphery was often accompanied by the growth of imports that ex- ceeded the growth of exports; the latter, consisting mainly of primary products, were income inelastic and at the same time subject to a secular deterioration in terms of trade with industrial imports. To continue growth, therefore, many peripheral countries were compelled to practice import substitution, which raised domestic prices and often sparked a general in-

flation. The inflation pain could be eased only by slowing the growth rate of output. But slower growth itself heightened social tensions, threatening class warfare. More- over, structuralists postulated, exports lagged and domestic supplies suffered because of the inelasticity of agricultural production, which responded sluggishly to price and other stimuli owing in part to defective patterns of land tenure. These patterns were survivors of precapitalist relations of production, in which bonded labor, absentee management, autocratic labor relations, and monopoly power aborted sensitive responses to market forces and favored instead the maintenance of the economic and social status quo. Economic growth, therefore, was likely to be accompanied by increases in food prices, which would touch off wage increases and force the monetary authori- ties, if they wished to avoid social up- heaval, to increase the growth rate of the money supply. The result would be inflation. The structuralists contended that monetary policies could not correct these structural weaknesses; hence, they could not be employed successfully in peripheral countries (Prebisch 1959, 1962; Hans Singer 1950; Gunnar Myrdal 1957; Dud- ley Seers 1963; Hollis Chenery 1975; Celso Furtado 1979; Joseph Grunwald 1961; Da- vid Felix 1961). Structuralism has been criticized on the grounds that much empirical data are inconsistent with the postulates of this theory; some of the rigidities are owing to nothing more than government and other interferences with market processes; land tenure systems have been misinterpreted; excessive monetary growth, not structural factors, cause inflation; and that, at best, the model applies only to Chile (Roberto de Oliveira Campos 1984; Alain de Janvry 1981).

The more genuine theories of dependency were developed by Baran (1957), Frank (1966, 1967, 1972), Furtado (1964, 1966, 1970), Fernando Cardoso (1972) and


others (Dos Santos 1973; Stein and Stein 1970; Osvaldo Sunkel 1973; P. O'Brien 1975). The thrust of their argument, which turned Marx on his head, was that capitalism is a powerful engine of growth in the center, but in the peripheral countries it tends inevitably to produce underdevelopment and poverty.

This is partly because of the "uneven development" of capitalism, in three senses. First, capitalist development has occurred, historically, in cycles or long waves. In the downward phase of the cy- cle the countries on the periphery have been disproportionately affected: their terms of trade deteriorate; the volume of exports falls; their capacity to import capital goods and, hence, their overall rate of investment declines; consequently national product falls, often sharply. This clearly happened in the depression of the 1930s and to a lesser but still significant extent in the recent downturn of 1979- 1982. Poor, developing countries that are tied to major boom-and-bust economies are necessarily pulled increasingly into dependent relations.

Second, while initial stimulants to growth sweep through an integrated economy in ever-widening ripples and so benefit capitalist countries in the center, initial stimulants often peter out or are even turned into "backwash effects" (also called backsetting effects) in the peripheral countries. As Gunnar Myrdal (1984) put it:

If left to take its own course, economic development is a process of circular and cumulative causation which tends to award its favours to those who are already well endowed and even to thwart the efforts of those who happen to live in regions that are lagging behind. The backsetting effects of economic expansion in other regions dominate the more powerfully, the poorer a country is [p. 499].

The backsetting effects, which tend to halt growth or even reverse it, emanate from the low levels of social mobility, communi-

cations, and education; the small degree to which values are shared throughout the society; sectors and industries especially vulnerable to general growth in the economy; rigidities in demands, supplies, and markets; population surges that wipe out the per capita benefits of growth; and so on. Harvey Leibenstein (1957), a nonradi- cal writer, also made an early analysis of what he called the income-depressing forces that might offset the income-raising ones in developing economies. Included in his list of depressants were demon- stration effects, during an initial surge of growth, that boosted consumption and luxury imports. Leibenstein postulated that, in many cases, the depressants would overwhelm the stimulants if the stimulants were employed gradually and mod- erately. The depressants could be overcome only with some "critical minimum effort"-or a big push, as P. N. Rosenstein- Rodan (1963) called it. The presence of indivisibilities and complementarities was a key argument supporting the necessity of a major, integrated effort to overcome backwardness. Amin (1976, 1977), Fur- tado (1979), and others have also analyzed the difficulties of growth in the periphery, in the face of the types of characteristics of these societies as outlined by Amin (above, pp. 11OOff).

Third, dependency writers contend that the third world is impoverished because of the appropriation by the center of part of the economic surplus generated in the periphery. This last feature, which we have already discussed, also figures prominently in the analysis of the effects of colonialism; in fact this is one of the points at which the literature on dependency and imperialism merge.

Paul Baran's (1957) central point is that the principal obstacle to rapid economic growth in countries of the third world is the way in which their potential economic surplus is utilized, not so much the size of it. This economic surplus is the differ-


ence between potential output and essential consumption. He argues, first, that much of the potential economic surplus is not realized; second, much of the realized economic surplus is misused by those who appropriate it. A large part of it is dissipated in the form of unemployed labor and excess industrial capacity; in workers employed unproductively; in wasteful expenditure, including consumption of tobacco, alcohol, and other drugs stimulated by consumption patterns, im- ported from the West, often through the activities of transnational corporations; and through luxury expenditures by the landlord and capitalist classes. These include landowners, moneylenders, and merchants-that is, the classes formed during the imperial era which inherited the state at the time of political independence. It also includes the state itself and, among other things, its heavy expenditures on police and military forces-expenditures which, it is argued, are necessary to preserve internal security and maintain control over the mass of the population. In addition, much of the realized surplus is transferred abroad in the form of profit repatriation by foreign capitalists or service payments on the foreign debt, or as capital flight by the local elite, who hold deposits overseas "as hedges against the depreciation of the domestic currency or as nest eggs assuring their owners of suitable retreats in the case of social and political upheavals at home" (Baran 1957, p. 177). Finally, if against all the odds, a third world country tries to overcome its underdevelopment, it is likely to find its efforts are frustrated by the "animosity [of imperialism] towards all genuine initiative at economic development on the part of the underdeveloped countries" (Baran 1957, p. vii). The center tries to keep the periphery firmly in its grip.

Baran's insights have had an enormous influence on radical economists. The focus on the potentially large economic surplus

has encouraged writers to explore the pos- sibility of self-reliant development, to cast doubt on the importance of foreign aid and foreign borrowing, to measure the sizes of the surpluses (Lippit 1974), to in- vestigate ways in which the surplus is siphoned off to the rich countries, and to examine links among the domestic class structure, international dependency, and capital accumulation (Frank 1972; Amin 1976).

The dependency theorists have been criticized, within radical circles, for: defin- ing capitalism in terms of the "circulation sphere" (instead of the more fundamental production sphere) and, hence, in seeing capitalism everywhere, even during its early stages; overemphasizing the role of surplus extraction by the center from the periphery in the underdevelopment of the periphery; posing the conflict between the periphery and the center more in geographic terms than in terms of social classes; and supposing, one-sidedly, that capitalism is incapable of initiating development in the periphery. On this last point, dependency theories, by and large, and Baran's in particular, lead to the conclusion that peripheral countries are doomed to stagnation, so long as they are integrated into world capitalism; and that the center, based on its appropriation of the periphery's surpluses, can generate a growth that stands in dramatic contrast to that of exploited regions. Yet, radical critics have pointed out that, during the 1970s, the evidence seemed to throw doubt on both observations: many of the third world countries were growing rapidly, even within the context of capitalism, while most of the center countries were encountering difficulties with increasing unemployment, declining growth, and rising rates of inflation (de Janvry 1981, pp. 18-22; Robert Brenner 1977; Geoffrey Kay 1975; Charles Bettelheim, in Emman- uel 1972; Ernest Mandel 1975; Warren 1973; Sanjaya Lall 1975; Gabriel Palma


1978; Patrick McGowan 1976; O'Brien 1975). These criticisms, however, do not apply across the board to each and every dependency theorist, but they are fairly directed to the school as a whole.

Even if it is assumed that world capitalism generates wealth and growth in the center and poverty and stagnation in the periphery, the dependency theories can be faulted for not having presented convincing explanations of the market forces (the "plain forces" are clear enough!) that achieve this biformity. More generally, they have failed to specify thoroughly how wealth and poverty are both generated by the same capitalist processes, whether within a given country or between countries. A persuasive explanation of the polarization process should begin with the fundamental mechanism of exploitation of labor by capital. According to Gurley:

the explanation would then include the process that makes the reserve army of labor a necessary element of the capitalist mode of production and an analysis of how the expansion of this mode dispossesses and impoverishes previously self-sufficient producers. The explanation would also include an analysis of how the capitalist mode necessarily builds on efficiency, which is often antithetical to equity; of how it builds on specialization, which increases the vulnerability of people and areas to adverse developments; and of how it transfers wealth from poor areas to wealthy ones, via the price mechanism. It would then go on to discuss the values and behavior patterns, engendered and supported by the capitalist mode, which compel individuals to seek success even at the expense of others' welfare and which encourage and reward cheating and extortion of the poor by the rich. Finally, the explanation would show how poverty, once established, feeds on itself-the poor lack capital, information, education, and so on-and how wealth, once established, also feeds on itself [1979, p. 206-07].

This remains to be accomplished, although, as we shall now see, some progress has been made.

2. Theories of Unequal Exchange. Many radical economists have argued that third world countries, particularly the

smaller and poorer ones, have become incorporated into an international economic system in which they specialize in the production and trade of primary products for which the income elasticity of demand is low. In consequence it is maintained that there is a long-run tendency for the net barter terms of trade to decline and this, in fact, is one of the ways by which the economic surplus is transferred to the advanced capitalist countries.

Neoclassical economists, applying standard trade theory, contend that, if the relative price of primary commodities should fall, countries can be expected to alter the composition of output by shifting resources from primary commodities to other activities enjoying more favorable relative prices. That is, the change in prices would signal a change in comparative advantage and this would lead to a change in the pattern of production, consumption, and trade. Radicals reply that, in small countries with specific natural resource endowments, factors of production may be highly immobile, hence the composition of output cannot adjust quickly and without heavy cost to a country's terms of trade. Moreover, once a particular structure of production has been established, for whatever reason, labor and capital tend to become relatively immobile because they become incorporated into the productive process in the form of du- rable and specific skills and equipment. Adjustment to changes in the terms of trade occurs not by shifting given resources from one sector to another but by investing in those sectors where profit prospects have improved. Thus, it is the rate of capital accumulation and the general pace of development that is crucial in determining the ability of a country to respond to a change in prices. In small, slowly-growing underdeveloped countries a decline in the terms of trade is a serious matter.

The thesis of the declining terms of


trade was first put forward by Raul Pre- bisch (1962) and Hans Singer (1950). The long debate that ensued concentrated on statistical issues: the limitations of the original data, use of the inverse of terms of trade of the United Kingdom as a proxy for terms of trade of primary products, the role of falling transport costs in the c.i.f. value of imports, improvements in the quality of manufactured goods, and the introduction of new manufactured products. These doubts led most economists to believe that the Singer-Prebisch thesis was false or at best not proven. Re- cent work, however, has shown that, over the seventy years down to World War II, there was a deteriorating trend in the relative price of primary commodities but that there was no such trend over the period from 1945 to 1975 (John Spraos 1980). Since 1975, there has been a sharp fall in the terms of trade of most third world countries, apart from oil exporters, as a result of the world depression and other factors.

Meanwhile, the debate's focus shifted to a concern with the distribution of the gains from trade. The relevant concept of the terms of trade in this case is not the net barter terms of trade but the double factoral terms of trade. It has been maintained on theoretical grounds that the double factoral terms of trade of third world countries would tend gradually to decline over time and hence that the distribution of the gains from trade would favor the rich countries. If true, this would tend to increase inequality in the distribution of the world's income between the poorest primary-producing countries and the advanced industrial or recently indus- trializing countries (Albert Berry, Fran- gois Bourguignon, and Christian Morris- son 1983). The reason the double factoral terms of trade tend to decline is that technical advances are concentrated in the center, in the rich industrialized countries, and consequently labor productivity

rises more rapidly there than elsewhere. The argument turns, then, not just on

the natural resource specificity of many third world countries nor even on the low rate of investment in many of the poorest countries, but on the low level of expenditure on research and development in the third world. Radicals assert that, because their expenditure on research is small, third world countries are responsible for very few product and process innovations and, consequently, have few opportunities to reap the quasi-rents which accrue to those on the frontiers of technology.

The concentration of technical change in a few countries, industries and firms constantly re- creates a monopolistic organization of industry and enables innovating enterprises to price their products in such a way as to include a substantial element of rent. The rent element in prices, in turn, ensures that value exchanged through trade will favour the rich countries (where innovation occurs) and prejudice the development of poor countries (whose exports frequently, but not always, are sold on competitive markets) [Griffin 1978, p. 26 and ch. 5].

Empirical evidence to test this proposition has been scarce, but John Spraos (1983) has recently shown that the data available do indeed lend support to the view that the double factoral terms of trade probably have contributed to growing inequality. A very different analysis of unequal exchange based on differences in wage rates is put forward by Arghiri Emmanuel (1972).

Emmanuel's thesis is that "unequal exchange" mainly accounts for the growing inequality among nations-that poor nations trade products containing more for less labor-hours with rich nations. To ar- rive at this conclusion Emmanuel makes two assumptions: first, capital is mobile in- ternationally whereas labor is not; second, the ratio of the wage rate to the marginal product of labor is lower in poor countries than in rich. His first assumption ensures that profit rates (allowing for risk differentials) are equalized throughout the world;


his second assumption ensures that wage rates in the third world, even in sectors which use the most advanced technology, will be lower than in rich countries. As a result, poor countries will receive lower prices for their exports relative to the prices they must pay for imports from rich countries. In Marxist terminology, there is a transfer of surplus value from the poor to the rich nations.

Bettelheim, in an appendix to Emmanu- el's book (1972), criticizes Emmanuel's analysis as largely confined to the sphere of circulation or exchange, which thus ne- glects the more fundamental sphere of production. Bettelheim claims that Em- manuel's error comes from ignoring the fact that wage differentials are grounded in the production sphere-in the uneven development of productive forces across nations-and should not be "given" as an independent variable. That is, differences in wage rates among countries are due to differences in labor productivity and these differences in turn reflect differences in the extent of mechanization and in the skill and training of the labor force throughout the economy. Inequality between two countries arises primarily from the degree to which the forces of production have been developed and it is mis- leading to characterize trade between those two countries as "unequal" or exploitative.

Exploitation arises not so much between one country and another as between classes. According to Bettelheim, Emman- uel's analysis of poor nations versus rich nations ignores the primary contradiction in the third world by covering up the class struggles within each underdeveloped country. It is only through such struggles that radical changes in the relations of production can occur, i.e., in property rights, in ownership of the means of production, and in the organization of work. Yet changes in production relations are necessary to remove the inhibitions preventing

full development of the forces of production. In the nonsocialist countries it is the world domination of capitalism, through colonialism, imperialism and its after- math, which is responsible for the retarded development of the poor countries, hence, for their low wages and living standards. That is, retardation is one consequence of a particular system for orga- nizing production; it is not a consequence of exchange within that system.

Thus, unequal exchange cannot be explained by differential wage rates, Bettel- heim maintains, for these have a more fundamental, objective basis. The dominant countries benefit from the international capitalist system, but that very system helps to retard the development of poor countries. Retardation, of course, is only relative. The great majority of third world countries have experienced an increase in average living standards in the last 35 years and many, particularly the better-off third world countries, have en- joyed growth rates of income per head, at least comparable to those achieved in the advanced capitalist countries. The poorest countries, however, which account for about two-thirds of the population of the third world, have lagged far behind the rest and show no signs of reducing the vast gulf which exists between them and the rich nations of Western Eu- rope and North America. The issues, then, are not whether dependency or unequal exchange prevents growth (clearly they do not) but whether they accentuate international income inequality and, if so, whether for most impoverished third world countries the socialist option would be preferable. Radicals such as Bettelheim argue that most third world countries cannot escape from their subordinate status as long as they remain within the capitalist system. The dominant countries understand this perfectly well, he says, and go to great lengths to entice or compel the third world to stay within the fold.


Emmanuel has been criticized by many radicals, including Krishna Bharadwaj (1984), who claims that he has placed the entire burden of his analysis on exchange relations (surface phenomena), has reduced all differences among countries to the relatively trivial one of rich (high wages) and poor (low wages), and has largely confined himself to a static analysis with too many important variables taken as given. Others have charged that Em- manuel's assumption of unrestricted capital movements leading to equal rates of profit would imply faster rates of growth in the periphery and the elimination of the wage gap between center and periphery. Still other criticisms have been re- corded: de Janvry 1981; de Janvry and Frank Kramer 1979; Mandel 1975. (For a defense of Emmanuel, see Bill Gibson, 1980.)

B. Foreign Aid and International Financial Agencies

Most liberals support foreign aid and the international agencies that purvey it on the grounds that it accelerates development and reduces world poverty. Radicals contest this. They argue, first, that most foreign aid is not used ultimately to increase the rate of capital accumulation and growth; it is used to increase private consumption or recurrent public expenditure, including military expenditure (Mo- hammad Rahman 1967; Rahman 1968; Thomas Weisskopf 1972; Griffin 1978, 1984). Second, much of the additional investment that does occur has a low economic rate of return; its purpose is not so much to increase output as to be a mon- ument to the generosity of the donors (Griffin 1978). Third, as a result of these two effects, the net impact of foreign aid on a country's long-term rate of growth often is negligible and may even be negative (Griffin 1984).

Even if growth does not accelerate, however, poverty may nevertheless de-

cline because of the effects of aid on the distribution of income. However, within some third world countries, inequality appears to be increasing rather than dimin- ishing and radicals argue, fourth, that foreign aid and the policies that accompany it reinforce this tendency. Finally, looking at the third world as a whole, it is clear that aid is distributed highly unequally; in fact, in the majority of bilateral and multilateral aid programs a country's per capita income and the amount of aid received per capita are positively associated (Douglas Dacy 1975; Griffin and Frances Stewart 1973). Thus, as many radicals see it, foreign aid accentuates inequalities in the distribution of per capita income among third world countries-unless, as we must add, the net impact of foreign aid on a country's long-term growth rate is negative.

Aid is given to governments. It does not follow from this that the country concerned benefits from aid, much less that the poorest people in the country benefit. On the contrary, radicals maintain, much foreign aid is used to prop up military regimes and other authoritarian governments which repress the poor (Seers 1983); aid programs in such countries are more likely to harm those at the bottom of the economic ladder than to help them (Michael Scott 1979; Frances Moore Lappe and Joseph Collins 1978; Lappe, Collins, and David Kinley 1980). It is hardly surprising that radicals believe aid is of little benefit to the poor because most bilateral foreign aid programs are in- tended to promote the political, commercial, and industrial interests of the aid-giving countries; they are generally not designed to eradicate poverty in the periphery. Thus, at best, economic development in the third world could only be a by-product of bilateral aid programs.

Turning to the multilateral agencies, radicals consider the IMF, World Bank and their sister institutions to be, essen-


tially, agents of international capital. The ultimate purposes of their policies are to preserve and extend the system of capitalism, to establish a favorable environment for the penetration of international investment and profitmaking by transnational corporations, and to integrate third world countries as closely as possible into the network of world capitalism. This integration, according to radical interpretations, subordinates the less developed countries to the dominant industrial powers within the hierarchical structure of international capitalism and leaves them open to exploitation.

Teresa Hayter (1971) sees foreign aid as a weapon of foreign policy in the hands of the donor countries. Aid is also "a con- cession by the imperialist powers to ena- ble them to continue their exploitation of the semi-colonial countries" (p. 9). It is in- tended to preserve the capitalist system in third world countries. Further, she says that foreign aid is a subsidy for transnational corporations paid for out of general taxes-because it raises the demand for their products, finances overhead capital facilities in the third world, and finances the repatriation of profits and interest from these countries. Aid is used to avert potentially disruptive crises. In fact, Hay- ter claims, stability has often been sought by aid agencies at the expense of development (see also Rosemary Thorp and Law- rence Whitehead 1979). Finally, and most important, aid is employed to exert "le- verage" for the purpose of changing or influencing the policies of third world countries in specific ways. She notes that this is a strategy not only of the U.S. Agency for International Development but also of the World Bank and the IMF.

Cheryl Payer (1974) considers the IMF as an agent of transnational corporations and international capital which, themselves, are enemies of the independence of third world countries. She makes this charge on the basis that an aim of the IMF

is to integrate third world countries into the world capitalist system and such integration makes the poorer countries dependent on the more advanced ones. The specific policies of the IMF are directed toward achieving free markets and equi- librium prices, including exchange rates; control of the money supply and budget deficits; denationalization of industries; control of wage rates; and so ample investment openings, stable economic and financial environments, and profitable prospects for foreign private investment and the later repatriation of profits. The IMF policies favor stability over growth, and by so doing lead to rising unemployment, lower living standards for large numbers of people, and ever-rising foreign indebt- edness. These results, in turn, generate unrest among workers, discontent among the middle class, and the imposition or strengthening of authoritarian regimes (see also Felix 1983). With regard to international debt, Payer argues that the IMF package includes loans from the Fund to the third world countries and, later, loans from others-for the purpose of allowing LDCs to pay interest and principal on past debts and to finance the growth of imports coming from import liberalization policies: ". . . the Fund does not advise nations on how to reduce their imports and stand on their own feet economically, but coaches them on how to qualify for increased quantities of new credit" (p. 46).

Thus, third world countries are led into a "debt trap" in which they must borrow still more in order to meet payments on their previous borrowings. This process, Payer claims, is especially vicious when borrowing coincides with a world capitalist depression (which comes periodically but inevitably) and there is a consequent decline in the export earnings of third world countries that are needed to service the debt. Countries that become en- meshed in this trap are easily manipulated by capitalist powers and their agencies.


Her conclusion is that, if third world countries wish to develop rapidly, they must "withdraw from an exploitative system and suffer the dislocations of readjust- ment," which is nonetheless superior to petitioning "the exploiters for a degree of relief" (p. 214).

In a later study of the World Bank, Payer (1982) charges that it "deliberately and consciously used its financial power to promote the interests of private, international capital in its expansion to every corner of the 'underdeveloped' world" (p. 19). The Bank seeks this aim through a panoply of policies, all leading, however, to the promotion of multinational corporations (especially, for a time, the international oil companies) and to the preven- tion of nationalists and socialists gaining state power. The Bank, she alleges, generally will not loan to revolutionary, anti- capitalist governments-unless as others have added, the loans serve to weaken, even more, the cohesion of world socialism. A theme of Payer's study is that Bank policies result in higher profits and lower wages in the LDCs, hence, in perpetuat- ing poverty. But the real purpose of the Bank is not to eradicate poverty; rather, it is to serve the markets of advanced capitalist countries. "The Bank has been obe- dient to the wishes of the U.S. executive branch ever since it was founded" (p. 42). And, of course, she adds, every president of the Bank has been an American.

Even assuming that an aim of the Bank is to help the poor, its policies and recom- mendations have been criticized as inef- fective. A. J. M. van der Laar (1976, 1979) charges that they are highly unrealistic because they are based on an assumption that technological solutions will suffice and social relations can be ignored. Instead of viewing the poor in terms of "structurally- determined dependent relationship vis-a- vis the rich," the Bank has chosen to regard the poor as "isolated groups of the population which the development pro-

cess has simply passed by" (1976, p. 15). As a result of this approach even those Bank projects ostensibly directed toward the poor have been largely unsuccessful in alleviating poverty.

Studies, by radicals, of the World Bank's operations in specific countries are in- tended to lend support to the general analyses above. For example, Payer includes in her work case studies of several countries and a large number of Bank projects. Hayter also looks at Bank, Fund, and AID projects and policies in four South American countries. Likewise, a study of the World Bank's objectives in the Philippines (Walden Bello et al. 1982) concludes that a paramount (but unstated) goal was political: namely, to defuse urban and rural unrest, even though Bank policies were advertised as economic programs. Another unstated objective was to "thoroughly integrate the Philippine economy into the international capitalist order dominated by the United States" (Bello et al. 1982, p. 15). The latter objective was sought by opening the economy to foreign capital and "liberalizing" the foreign trade sector by engineering a shift from import-substituting industrialization to the promotion of primary commodity and manufactured exports. The Bank itself publicly set out to overcome economic stagnation by fostering growth-inducing measures. There were some initial suc- cesses, "followed by a protracted stale- mate, then spectacular collapse" (p. 41). According to the authors, the basic failure of the Bank's explicit policies arose not from trying to impose a particular composition of output upon the country but from its assumption that the productive forces of the economy could be increased without changes in the social relations of production. For most radicals this really means the mistake was in thinking that growth could occur under capitalism, when in fact it was possible only under socialism.


The authors ask, "how could an agency supposedly devoted to development con- tribute instead to underdevelopment, to the creation of an economic disaster?" (p. 200). The answer they give has three parts. First, the Bank's principal goal is to serve international capital, while the goal to achieve economic development in the third world is only of secondary importance. It would be pure coincidence if the best policies for attaining the principal goal were also the best development policies. Second, they believe that decision- makers in the Bank do not have a realistic view of the world. They avert their gaze from problems of class conflict and exploitation; instead, they see a series of technical problems-inefficiencies and scarci- ties-to be overcome. Finally, officials of the Bank are technocrats who work within an elitist institution. Apparently they believe that the economies of the third world can be managed and directed from above, in the same way that the Bank itself is managed. This is possible, however, only as long as "politics" do not interfere. Thus, the Bank has an interest in keeping politics at bay and this can be transformed easily into a tolerance for repressive regimes and a general advocacy of "firm government."

A fundamental assumption of radicals in these studies of international finance is that the integration of LDCs into the world capitalist system would reduce, perhaps even eliminate, their development possibilities. Another fundamental assumption is that LDCs could achieve development only within a socialist mode of production-and, as many radicals see it, only within a self-sufficient socialism. There are, however, several well-known, striking counter-examples to each of these propositions and, generally speaking, radicals have not faced up to them. Although the Filipino economy is not one of these counter-examples, it is nevertheless true that more progress has been made there

in the past two decades or so than the book title by Bello and his associates (De- velopment Debacle) would indicate, or than the many "failures," "crises," and "spectacular collapses" discussed in the text would suggest. After all, from 1960 to 1982 the Philippines' GNP per capita grew at the annual rate of 2.8 percent; life expectancy at birth, in 1982, rose to 64 years; the crude death rate per 1000 fell from fifteen in 1960 to seven in 1982; and education at all levels became more available to the population (World Devel- opment Report 1984, pp. 218, 256, 266). This is not to deny the many economic and social failures of the Marcos regime; rather, it is to assert that radicals, like everyone else, can be misled by the initial propositions that they take for granted.

We will note in Part III, from the standpoint of the economy as a whole, that some radicals have argued that policy "mistakes" are in fact purposeful and rational when seen from the perspective of ruling-class interests. It is possible, therefore, that when the IMF advises the elimination of such policies, usually involving interference with free markets and prices, it is working either in the interest of the economy or in the interest of international capital and against that of a ruling class. Also, it is possible that some LDCs have, in fact, carried out errant policies from almost anyone's point of view in the economy, the correction of which by the IMF or the World Bank would be a service to the population at large. Lastly it is quite possible that as long as an LDC operates within the capitalist mode of production its economy would "work better" if its leading class were invigorated with prom- ises of higher payoffs for capital formation, risktaking, and the like. Once again, this does not deny that radicals have a strong case against many IMF and World Bank measures (as viewed by the LDCs' working classes); rather, it pleads for a more balanced presentation, the depiction of a


more complex multi-toned canvas which is truer to reality than black and white would be.

III. Domestic Class Structures and the State

Most peasants are scarcely conscious of international forces that impinge upon the third world. They probably know little about how their own society is organized and are unaware of the connections among social organization, political structure, and government policy. On the other hand, the peasantry understands very well the organization and mode of operation of the economy and society where they live and work.

Radicals believe that neoclassical economists mostly ignore the complexities of class societies, and that they simplify their analysis to the point of caricature by con- centrating so single-mindedly on the behavior of individuals in a classless uni- verse. On the contrary, economists of a more radical persuasion often assume that society is divided into identifiable groups or classes which have different and frequently competing interests. This clash of interests occurs not only in the market- place, as when rural trade unions and plantation managers confront one another, but above all in the political arena, where the outcome of the struggle to control state and government policies deter- mines the distribution of income, level of accumulation, rate of production growth, and much else.

A. Class Analysis

Those writing in the Marxist tradition usually identify classes by their relationship to the means of production. In capitalism, for instance, a capitalist class owns the capital goods, controls the production process, acquires the commodities produced by workers and, in the end, appro-

priates part of the value created by labor. This part is distributed as industrial profits, interest, and rent-to industrial, financial, and landed capitalists, respectively. The working class owns its own labor power, and little else, which it sells on labor markets as a commodity, receiving wages in return. Other classes are similarly identified by their roles in this particular mode of production, for example peasants, who may be small rural capitalists, tenants, share-croppers, or landless agricultural workers (Marx and Engels 1947, 1955; Mao Tse-tung 1965).

Class analysis has proved to be a powerful tool to understanding problems ranging from political macro-dynamics to economic micro-issues. Radicals do not find it surprising that they can illuminate areas in which conventional economists founder, inasmuch as the latter are alone in trying to understand human phenomena exclusively in terms of the behavior of isolated individuals. No historian, sociol- ogist, political scientist, or anthropologist would systematically ignore all social for- mations larger than the nuclear house- hold.

The richness of class analysis can be il- lustrated by citing a few studies in which it has been used to enlighten a wide range of issues. Barrington Moore in his 1966 classic has used it to study the origins of the modern political system in England, China, Japan, India, and elsewhere. For example, Moore analyzed the origins of communism in China in terms of peasant- incohesiveness, the weak links between it and the upper classes, and the "margin- alization" of many peasants-a land-short peasantry. The social origins of fascism in Japan and Germany had strong similari- ties:

In both countries, regimes emerged whose main policies were repression at home and expansion abroad. In both cases, the main social basis for this program was a coalition between the commercial-industrial elites (who started


from a weak position) and the traditional ruling classes in the countryside, directed against the peasants and the industrial workers. Finally, in both cases, a form of rightist radicalism emerged out of the plight of the petty bourgeoisie and peasants under advancing capitalism [p. 305].

Some economists working in Latin America have sought to explain sustained rapid inflation in terms of a struggle among groups to increase their shares of the national income, or at least to prevent their shares from declining as a result of strongly pressed demands by others (Ma- rio Simonsen 1964; Tom Davis 1963). In India, Ashok Mitra (1977) has employed class analysis to examine the terms of trade between agriculture and industry. Many radicals have invoked classes to clar- ify particular instances of imperialism when it was otherwise inexplicable in terms of the nation as a whole.

In a remarkable study, Alain de Janvry (1981) has invoked classes to explain the genesis of complicated sets of economic policies in Latin America. He explains that in most Latin American countries today the industrial bourgeoisie has formed an alliance with the "junker landed elites"- semifeudal elites who own capitalist agricultural enterprises that hire wage labor- ers. The junkers provide agricultural exports and industrial raw materials necessary to sustain import-substituting industrialization. The urban capitalists, in turn, protect the junkers' profits by re- stricting imports of competing products, imposing low taxes, and investing heavily in technical agricultural change while en- suring that surplus rural labor helps to keep wages low. The rural labor force, whether employed on junker estates or as peasants in the traditional sector, is more proletarian than agrarian; consequently, for the majority of the rural working population the availability of employment and the wage rate are more important in determining economic wel-

fare than output per hectare on their small plots.

Much debate now centers on the phenomenon of "interlinked factor markets" and the related fact of "market isolation"-which refer to classes and power relations instead of to individual behavior in efficient markets. The former term sig- nifies a situation in which a single transac- tion specifies the prices and quantities of several factors of production. This can occur, for instance, when a landowner simultaneously rents land to his tenant, provides him with credit, and hires the tenant or members of his family part time for wages. In such a situation, factor prices are not necessarily market-clearing prices, nor do they reflect the balance of supply and demand in the normal sense. The price paid for a factor of production varies widely even within a restricted geographical area. This is what is meant by market isolation.

Neoclassical economists have set out to explain interlinked factor markets and market isolation as responses to market imperfections, a desire to spread risk or reduce uncertainty, and the imperfect availability of information. That is, these phenomena are seen as having arisen in order to make markets function more effi- ciently than would otherwise have been possible (Kaushik Basu 1983). Radical approaches to these phenomena, however, place them firmly within a class context and regard changes in contractual arrangements as responses to changes in economic, legal, technological, and political circumstances which affect the bargaining power of contracting parties. A typical case would be a conflict of interest between a landlord and his sharecropping tenant, but the method of analysis is quite general and can be used, for instance, to explain the response of landowners to usury" laws or to legislation prohibiting

share tenancy, the introduction of new technology and the need to have guaran-


teed supplies of labor at particular times of year (Amit Bhaduri 1973; Ajit Ghose and Ashwani Saith 1976; P. K. Bardhan and A. Rudra 1978; P. K. Bardhan 1980; Kalpana Bardhan 1983). The emphasis, then, is not on efficiency of the market in allocating resources but on the ability of those who control resources other than labor and own most of the productive assets to take full advantage of their economic power.

Even for those who are reluctant to employ a conflict model of society in analyzing the major issues of development, class analysis has helped to call attention to the fact that the poor are not a single class but a heterogeneous collection of people, one group differing from another in terms of its geographical location, demographic characteristics, occupation, and so on. The interests of these various poor groups do not necessarily coincide and in many cases policy measures which help some of the poor actually harm others (Griffin and James 1981). The rich, of course, also are heterogeneous and divided. They may be split by language or religion, or among competing regional blocs; they may have differing economic interests based on agriculture, manufacturing, or trade and commerce; they may be divided along clan, tribal, or family lines. Despite this frag- mentation into squabbling factions, radicals insist that, in most countries for most of the time, the commonality of interests among the rich as against the poor is suffi- ciently well perceived to keep them from undermining their control of the state by internecine struggle.

The state, in radical literature, is an instrument in the hands of the governing class. Radicals claim that it is usually used to further the interests and protect the advantages of the ruling class. It may also be used by the governing class as an instrument for all-round development, or to satisfy some demands of an increasingly strong subordinate class that can no longer

be ignored. Often the state has been employed to favor: particular ethnic groups (as with the Sinhalese in Sri Lanka or the Malays in Malaysia), the urban population at the expense of the rural (Ghana), a caste of military officers (Pakistan), an authoritarian monarchy (Morocco), the dominant position of a group of large landowners (Nepal and Guatemala), or the interests of large industrialists (Brazil). The pursuit of class interests may lead to economic growth but in many third world countries, radicals believe, it has also led to growing inequality and sometimes to further impoverishment of significant sections of the population. Radicals point out that this, in turn, is associated with the intense and perhaps rising social and political unrest throughout much of the third world, in Kenya, Chad, Chile, El Salvador, Peru, the Philippines, Bangladesh, and elsewhere.

The problems of poverty, especially rural poverty, and of social unrest underline the necessity for purposeful government intervention. But given the class basis of the state, a question arises about the possi- bility of effective action. It is this question that we consider next.

B. The State and Domestic Policy

Economists seem to agree that domestic policies are one of the basic causes of poverty in the third world, in both urban and rural areas. Orthodox economists, however, assume that the state is essentially an even-handed institution which attempts to maximize a "socail welfare function." If welfare is not in fact maximized, this must be because policy mistakes have been committed, and it is the job of the economist to point out these mistakes to government so that they may be cor- rected. The most commonly used tool in this type of policy analysis is applied welfare economics.

Radical economists, on the other hand, as we have just indicated, have quite a different point of departure, that of class


analysis. (See Bob Jessop 1977; David Gold, D. Lo and Eric Wright 1975 for sur- veys of theories.) In some third world countries (for example, Latin America) the groups who control the state are well entrenched, the class structure is well defined, and the political system (but not necessarily an individual government) is relatively stable, until it is overthrown by a revolution, as in Cuba and Nicaragua. In other countries, the class hierarchy is in flux, as various groups struggle against one another to fill the power vacuum created by departing colonialists. In some cases, notably in Africa, a military and bureaucratic elite has taken power, whereas in other cases, including parts of Asia, political power has accrued to those who dominate the productive sectors of the economy, namely: large landowners and industrialists.

What the orthodox economist regards as a mistake, therefore, the radical economist is likely to regard as a deliberate attempt to improve the position of particular interests. Using class analysis, the radical economist is less inclined to pre- scribe policies to governments than to try to explain why the policies in question were first introduced and to discover who has benefited from them. (The role of the state, in a variety of situations, is demon- strated in: Baran 1957; Eugene Genovese 1965; Eric Williams 1966; Nicos Poulant- zas 1973, 1979; Ralph Miliband 1969, 1977; Suzanne de Brunhoff 1978; Frank 1972; Andreas Papandreou 1972; Kiernan 1978; and G. Kitching 1980.)

The difference in approach is well illus- trated by disequilibrium prices. Conven- tional economists, surveying the "distorted" prices prevalent in the third world, advocate the use of "shadow" prices in selecting investment projects; the shadow prices are determined by esti- mating social costs and benefits, or else they advocate actually changing the errant prices into true market prices. Radi-

cals respond that governments may wish neither to alter actual prices nor to intro- duce an effective system of shadow prices because they know that if they were to do so the class distribution of benefits and burdens would be altered in a way that is unfavorable to the classes in power (Stewart 1975).

For example, in many countries exchange rates are overvalued; the consequent excess demand for foreign exchange, to purchase imports, typically has been contained by introducing import permits and other trade controls. The combination of an overvalued exchange rate and import controls then enables the government to bestow favors upon its sup- porters in the form of import licenses, favors which result in large income gains in the form of scarcity rents. Similarly, the price of finance capital often is less than its opportunity cost, and real interest rates sometimes are negative. Therefore, credit must be rationed and anyone who suc- ceeds in obtaining the rationed credit is assured large profits. It is well known that when credit is allocated by administrative devices those who succeed in obtaining it tend to be the large and well-established enterprises, not small and new borrowers. That is, the system is biased in favor of those who control the major means of production (the "rich") and discriminates against those who do not (the "poor"). If the poor get any credit at all, they must rely on moneylenders and the informal or parallel credit markets. Again, policies may, in any of several ways, deny available land to the peasants, resulting in much unemployment. These measures may appear wrong-headed to the uninitiated, but be perfectly sensible from the standpoint of a rural or urban bourgeoisie that profits from the immediate availability and cheapness of labor, especially during sea- sonal peaks (Edward Boorstein 1968, ch. 1).

It is for these reasons, radicals charge,


that the orthodox prescription of social cost-benefit analysis is fundamentally mis- conceived: it is unwanted by the rich and powerful classes who do well out of a "distorted" system, and it is unhelpful to the poor and powerless classes who are the victims of that system.

Similar problems arise in the realm of social expenditure. Health expenditure in the third world has been concentrated in the major cities, in large capital-intensive hospitals, and on curative medicine. Yet the majority of the population lives in the countryside, needs simple clinics and a network of paramedical personnel, and, above all, would benefit enormously if emphasis were placed on preventive rather than individual curative medicine, including the provision of clean water supplies and adequate sewage disposal, the eradi- cation of malnutrition, and the control of epidemic diseases. Indeed, it is becoming recognized that even in the advanced industrialized countries the major improvements in health were due not to conventional medical interventions but to improvements in the environment and in living conditions (Thomas McKeown 1979; Alastair Gray, Oct. 1983). The potential benefits of such policies in the third world are widely acknowledged and, in fact, the WHO and UNICEF have managed to secure agreements from governments to promote (PHC) "primary health care" (WHO/UNICEF 1978, WHO 1979). Why, then, are medical resources allocated in the way they are? Either governments are inept, which is the implicit answer of the orthodox economist, or else they are not maximizing social welfare in any meaningful sense but, instead, are maximizing the benefits of the urban ruling class, including the urban-based medical profession. As Malcolm Segall makes quite explicit (October 1983):

The reshaping of the health sector in the direc- tion of PHC inevitably encounters opposition from the main beneficiaries of the existing situ-

ation. On the consumer side these comprise . . . the urban rich . . . On the producer side are the health care professionals, especially the doctors, and private capital in the form of the pharmaceutical and medical equipment industries, and those private hospitals and health in- surance companies that are profit-making. This is a formidable enough alliance [p. 32].

The same sort of problem occurs in education. In most third world countries a disproportionate amount of the resources available is allocated to university (more generally, tertiary) education at the expense of primary and secondary education. Moreover, the net private benefits of tertiary education often exceed the net "social" benefits by a wide margin. The reason for this is that the private benefits reflect large government subsidies per student in tertiary education and great education-related wage differentials, often inherited from the social values of the colonial regime, which persist in the face of market pressures. To the orthodox economist, it would seem sensible to reduce the wage differentials, reduce the subsidy to tertiary education, and increase public-sector support for primary and secondary education. The problem is that none of these things is likely to happen because the present "misallocation" of resources strengthens the elites who dominate most third world countries. That is, from the point of view of those who control the government, there is no misallocation of resources.

Radicals claim that the logic of their approach can be applied to questions of macro-economic development strategy. Ap- plied welfare economics declares that third world countries ought to follow a policy of modified iree trade (Ian Little, Tibor Scitovsky, and Maurice Scott 1970). Class analysis suggests that countries follow the policies they do, not because they misunderstand the logic of the principle of comparative advantage but because of the interests of those who control the state. The pro-industry, anti-agriculture,


and anti-free trade policies followed by Pakistan and Bangladesh, for example, highlight the fact that in both countries the ruling class consists of a coalition of industrialists, urban bureaucrats, and the military. In Argentina, the twists and turns of policy are the outcome of a struggle between a rising industrial class and an older, large landowning class that exports primary products and is now in relative decline. If the strategy of import-substituting industrialization were to disappear, it is improbable that it would be replaced by free trade and laissez faire. More likely there would be even greater efforts to form an alliance of third world nationalist and populist forces and greater pressure to institute a (NIEO) New International Economic Order. (The quest for a NIEO was initiated by third world countries in 1974 in an attempt to alter the distribution of wealth and power between the North and the South. A radical assessment of the NIEO is given by Frank 1980; Fur- tado 1979; and an overall analysis by Cline 1979.) Conventional economic analysis usually misses this political dimension of economic policy. Some liberal economists even claim that the enthusiasm of the third world "for some of the New Interna- tional Economic Order items seems scarcely explicable, except in terms of bad advice" (Little 1982, p. 373).

The crucial division between conventional and radical economists would seem to center on distributive issues, but the actual situation is rather complex and even paradoxical. Many radicals do want more equal distributions of income and wealth for their own sake. At the same time, they seemingly agree with Marx that, once the issue of who owns and controls the means of production is settled, income and wealth distributions will fall into place; questions of distribution, for Marx, were secondary. Moreover, radicals frequently affirm that there is no necessary conflict between faster growth and

a more equal distribution of wealth and income. And this seems to be buttressed with evidence from some countries. But many of this persuasion also recognize that, if the capitalist mode of production remains intact, a redistribution of income away from the capitalist class might well slow down the accumulation and growth process. Furthermore, it seems to be widely agreed among radicals that, given capitalist relations of production and the nature of the capitalist state, any significant redistribution of wealth and income toward the dispossessed is out of the question. Consequently, radicals have a long way to go before their position on this issue is sharpened and freed of contradic- tions.

Radicals believe that orthodox economists usually give priority to increasing production first while putting equity on a back burner; orthodoxy postulates a trade-off between growth and equity. While there is much truth in this observation, many orthodox analysts have more sophisticated views on this issue, noting that some third world countries, such as Taiwan and the Republic of Korea, have achieved simultaneously both growth and greater equity. Moreover, as Simon Kuz- nets (1968) has shown, growth may be accompanied in its early stages by rising inequalities but, in its later stages, by the opposite. However, these conclusions have been disputed by Charles Wright (1978).

Nevertheless, in recent years, a considerable body of evidence from a number of countries indicates that the domestic economic and social policies that were followed have resulted in greater inequality; indeed, in some instances, they accentu- ated poverty. Rene Dumont (1966) pointed to former-French West Africa where there are rapidly growing dispari- ties between impoverished peasants and high-living urban elites. He blamed most of these on the colonial legacy without,


however, excusing the African leaders who slavishly followed European values and policies. In some cases (Chad, Zaire, Uganda, Somalia, Madagascar, Niger, Su- dan, Ghana, and Senegal) the incidence of poverty has increased primarily because national income per capita has fallen (World Bank 1984, which covers 1960-1982). In other countries, however, the incidence of poverty failed to decline, and quite possibly rose, despite growth in aggregate output per head. This view was first put forcefully by the ILO in a study which covered rural poverty in the Philip- pines, Indonesia, Malaysia, Sri Lanka, Ban- gladesh, Pakistan, and the Indian states of Tamil Nadu, Bihar, Uttar Pradesh, and the Punjab (ILO 1977; Griffin and Azizur Rahman Khan, March 1978). A later study suggests that in Nepal, too, the rural- poor's standard of living has declined (Riz- wanul Islam, Khan and Eddy Lee 1981). A similar phenomenon seems to have occurred in several African countries, not- withstanding the growth they have experienced, namely: Tanzania, Sierra Leone, Zambia, Malawi, and most likely the Ivory Coast (Dharem Ghai and Lawrence Smith, August 1983).

These findings have been disputed by a number of orthodox economists. Some assert it is not true that poverty has increased or merely: "in a sense, there are no facts" (Little 1982, p. 210). Others believe that the case is not proven, the data being unreliable or not comparable over time (Sudhir Anand 1983). Still others, that the phenomenon affects only a few countries or has occurred only over limited periods. Or, alternatively, that the problem is not serious and can be cor- rected by larger doses of present policies leading to faster growth (Montek Ahluwa- lia 1976, 1978); modified trickle-down approaches are also advocated.

The present evidence is not extensive or solid enough to resolve the issue, to everyone's satisfaction, of whether growth

of income per capita in some third world countries has been accompanied by the further impoverishment of some groups. It is perfectly clear, though, that economic growth in much of the third world has not done a great deal, if anything, to allevi- ate large areas of poverty. Radicals chalk up these dreary results to capitalism. They point out that China, Cuba, and other socialist countries have mopped up the worst forms of destitution, so progress along both the growth and equity fronts is possible. They have been reluctant, however, to face up to the fact that some third world countries, capitalist to the core, have done much the same thing. How can this diversity of results across a number of countries with widely different class structures and social relations be explained? This is another item for the future agenda of radicals.

IV. The Transition to Socialism

In this final part we shall discuss some of the controversy among radical economists regarding problems of countries in transition from pre-capitalist or capitalist to socialist economies. This survey includes issues associated with the question of alternative paths to a socialist society. It also covers some of the literature concerned with whether the Soviet Union, China, and a few other socialist countries are in fact socialist.

A. Background

If the main prediction of Marx and En- gels had come true, socialism would have been built on the high and sturdy foundations of advanced capitalist societies. These foundations would have included a generous supply of productive forces, a large and knowledgeable urban industrial working class, a capitalist class that was mostly without function, and a highly concentrated industrial structure of huge


enterprises and financial firms. Proleta- rian revolutions would have occurred in these societies because of the increasing failure of capitalism to utilize properly its productive forces, including, especially, its army of labor power and because of the continuing exploitation of workers by an increasingly parasitical capitalist class. The victorious working class would have constructed a socialist society by radically transforming capitalist relations of production to socialist forms, establishing a dictatorship of the proletariat over the former ruling classes, and releasing the underutilized and misallocated, but ample, productive forces to meet the rising needs of the people (Marx 1978; Marx and Engels 1947, 1955).

As it turned out, however, socialism arose in the less-developed areas of the world where capitalism was still immature, urban industrial workers were a small proportion of the labor force, standards of living were often abysmally low, and where only an undeveloped (or underdeveloped) structure of economic institutions and practices existed. Socialism had to be constructed on the foundations of poverty. Most radical economists explain this turn of events along Leninist lines: after Marx' day, capitalism became a world system consisting of a global hierarchy of exploiting and exploited nations, with each nation exploiting those below it and being exploited by those above it. Those countries at the bottom, which were most exploited and most oppressed, became the weakest links in the global system, and these links were broken by nationalist and socialist revolutions against the capitalist imperialist nations at the top of the pyramidal edifice (L. S. Stavrianos 1981).

B. Paths to Socialism

This chain of events has raised many problems about the feasible paths to socialism from a precapitalist or immature

capitalist base. An instructive exchange on some of these problems took place fifteen years ago between Sweezy and Charles Bettelheim (1971), which involved the meaning of socialism, the theory and practice of the transition process, and an analysis of backsliding by some erstwhile socialist countries to some form of state capitalism. Much of this discussion was influenced by previous work of Marxist economists on the transition from feudalism to capitalism (Maurice Dobb 1963; Sweezy and Dobb 1967).

Both Sweezy and Bettelheim (1971) came to the more recent debate having been favorably moved by China's experiences under Mao Tse-tung (Mao Zedong) especially by the Cultural Revolution and unfavorably influenced by Soviet experience. Despite this common ground, serious differences developed between the two analysts. The most basic was whether central planning could be identified with socialism and the reliance on markets identified with capitalism. Sweezy at first wrote as though this were so (a position also taken by Nicolaus, 1975), but Bettel- heim denied these associations, claiming that "plan" and "market" were simply surface forms behind which lay the real social relations, the class structure of society. Bettelheim proposed that socialism should be defined as a society in which the immediate producers (i.e., the workers) dominate the conditions and results of their productive activity. The crucial question, therefore, in judging whether a society is on the road to socialism is political: namely, does the working class hold power? It is true, Bettelheim acknowledged, that central planning is conducive to the retention of such working-class power, while the reliance on markets (commodity relations) would tend to undermine it. However, since both the bourgeoisie and the proletariat can engage in planning, and since both will use market processes to some different degree, the


important question is not plan versus market but proletarian power versus bourgeois power.

Sweezy and Bettelheim (1971) raised the question of what constitutes the proletariat "in the kind of underdeveloped countries in which most of the anti-capitalist revolutions of the twentieth century have taken place" (p. 49). Sweezy's own reply to this was that the proletariat was, in effect, a "substitute proletariat," which had arisen "through prolonged revolutionary warfare involving masses of people" (p. 52). This substitute proletariat consisted of people "with essentially proletarian attitudes and values even though [they] may not [have been] the product of a specifically proletarian experience" (p. 52). But their revolutionary experience molded them into a revolutionary force for the overthrow of the old system and the building of the new one.

Bettelheim answered Sweezy's question by proclaiming that:

The proletarian character of a revolution, in fact, depends more on the dominant role of the proletarian ideology and of the party which embodies this ideology, than on the 'numerical' strength of the proletariat. The dominant role of the proletariat in the revolution, therefore, is primarily ideological and political [1971, p. 69].

Thus, according to Bettelheim, anyone can take either the capitalist or the socialist road because class positions are not "rooted in a class situation circumscribed by the process of production" (p. 71)-that is, because "proletariat" and "bourgeois" are not fully formed at the time of the revolution-so, anyone can be transformed by the ideological class struggle. But there must be, in all of this, leadership by a Marxist-Leninist party that incorpo- rates the "theoretical and practical lessons drawn from the struggles of the world proletariat" (p. 72). Such a party must remain the servant of the masses; it must be a power instrument of the workers.

Hence, Sweezy and Bettelheim concluded, a poor country is on the road to socialism if its working class has political power, which is exercised by a Marxist- Leninist party that is an instrument of the workers and which enables them to dominate the conditions and results of their productive activity. This underlying power will be reflected on the surface by the increasing domination of planning over markets. The roles of revolutionary movements and proletarian ideology are crucial in poor countries that largely lack an authentic proletarian class, for a substitute proletariat must be fashioned from such experiences.

With regard to the role of ideology in the transition to socialism, radical economists have been much influenced by the writings of Antonio Gramsci (1957, 1971). He stressed how important it was for the proletariat in a capitalist society to develop its own culture and ideology prior to its assumption of power so as to overcome, after the revolution, bourgeois ideology that was bound to remain strong for some time. Gramsci believed that the proletariat had to become "philosophers," with a critically coherent conception of the world. It should not mouth and act out the philosophy of the dominant class. He reminded the proletariat that correct ideas could have the power of material forces. But these proletarian elements of the superstructure have to be consciously and purposely developed, for they do not appear from "a haphazard and sporadic germination" (1957, p. 187). In this connection, the Communist Party has an important role in the elaboration and propa- gation of proletarian ideology, for most working people do not have "a clear theoretical consciousness of their actions" (1957, p. 66).

Although, in a poor country, after a successful revolution, the working classes may have political power, control over the conditions of their work, and the makings


of a proletarian ideology and culture, important economic problems remain. One is whether the new government should attempt to attain socialism by first empha- sizing gains in production (productive forces), changes in relations of production (institutions and practices most closely associated with work, including class structures), or both. This problem presents itself in an exigent form because of the material poverty from which the country starts. How should it proceed?

These issues have been raised by a number of radicals, including Gurley (1978, 1983, 1984). There are certain advantages to changing the relations of production immediately after the revolution, such as carrying out land reforms, nationalizing some key industries, and beginning a central planning agency. These and other measures would qualify in satisfying the revolutionists' immediate demands for progress toward socialism and in meeting minimum equity standards and the most urgent social needs. (But Bukharin, 1979, insisted that production was bound to fall during the immediate transition period.)

Beyond those early actions, there are several strategies that combine, in varying degrees, the development of a country's productive forces, on the one hand, and the transformation of its relations of production, on the other. A strategy that gives priority for some time to the former, while the latter is changed less quickly, is based on the belief that "socialist institutions and practices are unsustainable if they are not supported by higher levels of production" (Gurley 1983). The opposing view is that such a strategy runs the risk of sooner or later undermining whatever gains have been made toward a socialist society. This is because, in a transition society, capitalist incentives, values, and institutions would be relied on heavily to achieve the production gains. A second strategy gives immediate priority to the radical trans-

formation of the society's relations of production, while productive forces move ahead more slowly. This strategy is founded on the belief that "the immediate establishment of socialist institutions and practices is necessary to eliminate the pre- socialist forms that supported the privi- leged positions of the old ruling classes- thereby getting rid of the old ruling classes themselves-and to release the oppression exerted on the working classes by these feudal and capitalist forms" (Gurley 1983, p. 111). This is the strategy generally favored by Mao Tse-tung, who believed that it would, at the same time, greatly promote production gains, as peasants and others were released from their chains. The opposing view, as previously indicated, is that socialist institutions cannot be sustained in the absence of a highly productive economy-a view that as- sumes, contrary to Mao's belief, that the two tasks are trade-offs, not complements; that the active pursuit of one goal tends to endanger the attainment of the other.

Radicals seem sharply divided on this issue, or at least much puzzled by it. Most would probably agree with Sweezy and Bettelheim (1971) that the paramount consideration during the transition to socialism is to insure that workers possess political power. But whether that power can be retained by pursuing, for some time, primarily production gains (as China is presently doing) is a question unre- solved, indeed hardly discussed, in radical literature. Similarly, there has been little discussion of the other strategy that may employ "leaps" (rapid and coordinated changes in relations of production), the counterpart to the "big pushes" on the production side. Some of these issues have been addressed recently by Victor Lippit in a thoughtful analysis of the dynamics of the transition process (Selden and Lip- pit 1982), and Bettelheim, in all of the works cited, has treated these issues historically and analytically.


C. Backsliding

There has been much discussion and a great deal of disagreement among radicals regarding whether the Soviet Union, the countries of Eastern Europe, and China are socialist societies in the Marxian sense. The debate has necessarily involved the meaning of Marxian socialism, as well as analyses of those societies' conformity, or lack of it, to the Marxian principles. As would be expected, the Soviet Union, Eastern Europe, and China have their defenders, but also their detractors, among the radicals.

An early indictment of the Soviet Union was that of Leon Trotsky (1972, originally published: 1937) who, in the mid-1930s, claimed that the Soviet Union was a "transitional society," not yet a socialist one. Trotsky alleged that socialism requires a substantial buildup of the productive forces and, in an underdeveloped country, international proletarian help, neither of which occurred during the 1920s in the Soviet Union. He believed that Stalin's radical policies at the end of the 1920s and the beginning of the 1930s were introduced too suddenly and without adequate political preparation. Since then, he noted in 1937, the country had made impressive economic gains but at tremendous costs- lagging labor productivity, gross imbalances, poor quality of goods, terrible management, growing inequalities and privileges, and a huge bureaucracy. The last, according to Trotsky, resulted from the isolation and backwardness of the Soviet Union; the bureaucracy arose from the defeats of the European working classes in the 1920s and the decimation of Soviet workers in the civil war of 1918-1920.

Trotsky pointed out that socialism is not automatically attained by public ownership of the means of production, for such juridical forms have different social content at different levels of the productive forces. A "true socialism," he said, re-

quires the spread of democracy, freedom, greater equality, central planning, and revolutionary internationalism in foreign policy. Socialism cannot be slowly built in one country, from a level of impoverishment and surrounded by enemies. Any such socialism will be deformed, distorted, and truncated-a caricature of the society that Marx visualized.

Sweezy analyzed the state of Soviet society forty years later. He believes that the Soviet Union does not come near to living up to the principles of a Marxian-socialist society, but that it is not a capitalist society, either (Nov. 1967, Nov. 1974, Jan. 1975, Mar. 1976, and May 1977a). On the first point, Sweezy writes that the USSR has a ruling stratum composed of political bureaucrats and economic managers, which is steadily hardening into a new ruling class. Consequently, workers are di- vorced from the power centers and, in fact, according to Sweezy, the entire society is depoliticized and nonrevolutionary. This has turned individuals' concerns in- ward toward themselves and their families and away from social problems generally, and it has required increasing use of private-material work incentives rather than collective-moral incentives. Sweezy views Soviet society as containing large dispari- ties in incomes and privileges and as vio- lating socialist principles of equality in its distribution of consumer goods. He specu- lates that the Soviets could have made different decisions during the 1920s, thereby taking a different path to a socialist society, but, once the wrong path was chosen, the future was mostly determined by the past (Oct. 1977). The mistakes were Sta- lin's in subordinating almost everything to rapid economic growth, in fostering inequalities in income and status, in en- couraging the erection of a huge bureaucracy and the creation of a labor aristocracy and a managerial elite, and in failing to rely on the masses in building a socialist society. Sweezy thinks that, without the


continuing participation of the workers in building socialism, the planning system necessarily became inefficient and un- wieldly and work incentives had to take increasingly bourgeois forms.

In Bettelheim's (1976b, 1978) two vol- umes on the USSR, which cover the period 1917-1930, he contends that the Bolshe- vik Party very early succumbed to "economism"-an interpretation of Marxism that subordinates the transformation of social relations to the development of productive forces. Economism shuns class struggles in the belief that the bourgeoisie can be overcome without them. The result, according to Bettelheim, was that social relations of production and distribution were largely unchanged. The reasons for this were that the Bolsheviks had a very narrow-and narrowing-revolutionary base, with hardly any influence in the countryside, they lacked an understanding and the experience to overcome the complex problems facing them (war and civil war, foreign interventions, economic disasters, isolation in the world), and they did not have the resources to replace the bourgeois bureaucracy and the bourgeois industrial managers. Bettel- heim emphasizes that proletarian political power, nationalization, and other new juridical relations do not automatically produce socialism. That requires protracted class struggles, which the Bolsheviks did not carry out. As a consequence, a new ruling class emerged, a state bourgeoisie.

Bettelheim also shows that Stalin's and other Soviet leaders' decisions to replace Lenin's New Economic Policy, begun in 1921, with all-out collectivization of the countryside was based on erroneous rea- soning: that the kulaks were mainly responsible for the slowing of agricultural progress, and that the potentialities of agriculture under existing arrangements were exhausted. Thus, the Soviet leaders failed to carry through the NEP, incor-

rectly blamed elements of the NEP for problems arising in the late 1920s, and mistakenly struck out on a radically different path. The leaders did not adhere to NEP because they did not understand the potential of the peasants and they wanted, through industrialization, to expand an urban proletariat.

Rudolf Bahro (1981) has written a powerful analysis of Eastern Europe, including the Soviet Union, but his policy recom- mendations appear either irrelevant to the analysis or border on utopianism. Bahro contends that this geographical area is following, not a Marxist path to socialism, but a "non-capitalist road" to industrialization. He characterizes the Eastern European societies in still other ways: an "actually-existing socialism," "protosocialism," and "socialism in an em- bryonic stage." It is clear that he does not consider these societies to be genuinely socialist. Because they started out on the noncapitalist road to industrialization from a position of underdevelopment, according to Bahro, a strong bureaucratic state assumed the tasks of development, because no social class was mature enough to lead this march. On top of powerful state bureaucracies, party bureaucracies were erected, the entire structure becoming quasi-theocratic and deadening. More- over, in these societies, workplaces were organized hierarchically, those giving or- ders separated from those obeying them. Consequently, at the workplaces and in government and in the party, the working class did not play, and was incapable of playing, the leading role in these societies.

Bahro claims that bureaucratic rivalry is the only driving force in noncapitalist societies, a counterpart to the profit motive under capitalism. However, while capitalist competition eliminates the "dead wood," bureaucratic rivalries do not. "The laws of bureaucratic behaviour time and again take precedence over economic rationality" (1981, p. 222). At al-


most every level in these societies, it is the people against functionaries.

Bahro examines the policy implications of his analysis by first specifying what he calls the two most crucial problems of the age: alienation (i.e., powerlessness, impo- tence) and the dangers of environmental destruction. He calls for a cultural revolution to alter radically the awareness of people about these problems, and he warns that ever-rising material needs must be stopped. If they continue to grow, he states, society will always be too poor for communism-because there then can be no "leap into freedom," as Marx prom- ised, beyond the realm of work. Socialism is not needed for higher living standards, he concludes, but for the reconciliation of humans to nature and for the full development of human beings. These are the directions in which capitalism is incapable of moving, but the bourgeois societies will not be vanquished, as Marx prophesied, through the continued development of productive forces; instead, they will be overcome through a change in the consciousness of the masses.

While Sweezy and Bettelheim believe that the Soviets departed from the path to genuine socialism as far back as the 1920s, other leftist critics of the Soviet Un- ion claim that the turn onto the wrong path occurred with Khrushchev's rise to power in 1956. This position was taken by the Chinese Communist Party under Mao Tse-tung's leadership, and it was the view adopted by many Marxists around the world who subscribed to the Chinese analysis of the USSR.

The Maoist position was that the Soviet Union's mode of production is state monopoly capitalism, which is led by the bu- reaucrat-monopoly bourgeoisie and is run as a brutal fascist dictatorship. The economy of the USSR, according to the Chi- nese, is on a war footing, and that aggressive country desires to take world hegemony away from the United States.

The Soviet Union, in short, has moved from capitalist restoration to social-imperialist policies-that is, imperialist in deeds but socialist in words.

Maoists admitted that the Bolsheviks had a terribly rough time in their early post-revolutionary years, which compelled them to compromise with capitalism. These compromises, however, became so deeply embedded in the economy that, in attempts to eliminate them, the Bolsheviks adopted such harsh measures as to damage severely socialism's concern for the people's welfare. In addition, the Maoists alleged, later on Sta- lin made many errors, especially in over- stressing the role of the productive forces and ignoring class relations. This led him to promote bourgeois incentives, to toler- ate growing inequalities, and to create serious imbalances in the economy. He ignored the masses and concentrated power at the top.

Nevertheless, the Maoists claimed, Sta- lin did not restore capitalism. This was accomplished when the Khrushchev-Brezh- nev group captured party and state power, changed the nature of the ownership of social wealth, and so began to appropriate much of the surplus value created by the working people of the country (Social Imperialism, reprints from the Pe- king Review, 1977, and Mao Tse-tung 1977).

These themes have been taken up by the radical groups identified with the te- nets of Maoism. The Revolutionary Union (1974), for example, has stated how capitalism was restored by Khrushchev in the Soviet Union and then extended by Brezhnev and Kosygin. The RU's analysis points to an extension of private markets, the undermining of rural collectives, the rising importance of the profit motive in resource allocation and the retention of more profits by the individual enterprises, the introduction of sharper wage hierarchies, the acceptance of growing inequali-


ties and bourgeois culture, and the pursuit of imperialist goals. The Soviet economy is a "planned state capitalist" economy, according to the RU and other radicals. "With the rise to power of Khrushchev, the bourgeoisie managed to seize control of the Communist Party . . . and from this position turn the state into an instrument of bourgeois dictatorship and begin the restoration of capitalism" (1974, p. 53). A new state-financed bourgeoisie, compris- ing high party and state officials, became the ruling class. The Soviet Union has become, as this analysis would have it, an imperialist power, an arms merchant, and counter-revolutionary. These and similar views are also expounded by the editors of The Communist (1983).

Other radicals aligned with Soviet views, such as Jonathan Aurthur (1977), argue that the Soviet Union is still following the socialist path because its industries are state-owned, its farms are collectives, its central planning system is intact, and the workers have political power through their vanguard Party. Others add that the Soviet economy does not generate business cycles, it has no reserve army of labor, it creates no excess surplus value pressing for imperialist activation-in short, it does not act like a capitalist society, as Marx analyzed such a society (Capital, vol. 1, 1867).

David Laibman (1983) states that the Soviet Union is a socialist society, that it has not become either a "state capitalist" or "a bureaucratic mode of production." State capitalism, in itself, does not describe a social formation because the state "derives its social function and power from those of the dominant class." State capitalism makes sense only where there is "an entrenched capitalist social structure complete with all necessary institutional proximate forms and capable of its own reproduction, which then transmits to the state sector the social relations that are part of its own functioning" (p. 15).

Similarly, "bureaucratic-exploitation" is il- lusory, inasmuch as the power of bureaucrats is derivative, depending on the nature of the dominant class. And Laibman claims that a capitalist social structure does not exist in the Soviet Union. He cites as evidence the various sources of workers' power; the absence of a market in labor-power, the lack of unemployment, and an expanding social security system. He also notes the trend toward greater economic and social equality and the lack of evidence that there is a reproducible ruling class or that business cycles have been generated. "The overwhelming weight of the evidence establishes the absence of all the necessary conditions for the existence of a ruling upper class" (p. 29).

Albert Szymanski (1983) has criticized the Maoist view that the Soviet Union is no longer socialist. This view, in his opinion, confuses socialism with communism, and anarchism and syndicalism with socialism. Socialism means workers' power over the economy and state, with income distribution according to work, writes Szy- manski, and these criteria are compatible with material incentives, decentralization of decisionmaking, some economic and social inequalities, and much else usually associated with capitalism. The evidence shows that there is no state bourgeoisie exploiting the working class. Moreover, workers do have ultimate economic and political power, even though they may not exercise it on a day-to-day basis. Labor power is not a commodity, for there is no reserve army of labor and wages are not set on markets. The economic position of the working class has improved mark- edly, with higher incomes, greater equality, and more social consumption. Also the Soviet Union, according to Szymanski, does not act as an imperialist power-that is, there is no pressure to export capital or to invest overseas for profit. In fact, Soviet overseas investments are not only


miniscule but serve largely to facilitate So- viet exports. The Soviets do not benefit disproportionately from trade with or economic assistance to other countries.

Ernest Mandel (1979, 1981, 1982) represents a position between that of the Maoists and that of the radicals taking the Soviets' views. Mandel argues that all "socialist" countries are in fact societies in transition between capitalism and socialism-that is, in the phase of the dictatorship of the proletariat. Beyond socialism, the second phase, lies communism. The transitional society has relations of production specific to it, not to capitalism or socialism. Planning and markets collide in the transitional society. The Soviet Union, Mandel claims, is "a bureaucratically de- generated workers' state," the bureaucracy being "neither a legitimate repre- sentative of the proletariat . . . nor a new class" (p. 38). Nevertheless, the Soviet Un- ion, too, is in the transition or first phase, but its progress is blocked. This bureaucratic barrier can be overcome only by a new political revolution. Mandel's approach to this issue was challenged by Geoffrey Silver and Gregory Tarpinian (1981, 1982) who countered that socialism itself is a transition phase between capitalism and communism (hence the "socialist" countries may, indeed, be socialist), that Mandel's first phase is devoid of class content, and that his notion of socialism is ahistorical and utopian.

The case of the People's Republic of China has also been scrutinized by radicals, especially since 1976 when Mao died and the so-called Gang of Four, his closest associates, were deposed and arrested by less radical groups. The main questions are whether China was on a true socialist path during Mao's reign and whether, since his death, the country has set forth on a capitalist road. The position of the Revolution- ary Union and other like-minded radicals is that Mao's China, in stark contrast to the Soviet Union, was following a Marxian

path to socialism and communism, and that the defeat of the Gang of Four sig- naled the triumph of revisionism and an abrupt turn down the capitalist road. This about-face happened, it is said, because it was difficult for the Maoists to rid the economy of commodity relations left over from the previous society, to weaken the spiritual fetters of Confucianism, and to shake off the legacy of a colonial mentality and a strong nationalist bent. The main evidence for the about-face, according to this view, is the heavy new emphasis on production to the neglect of social transformation and class struggles, and the many bourgeois institutions (e.g., markets and private occupations) and practices (e.g., monetary incentives and profit criteria) that have been extended throughout the system. Central planning and collective activities are giving way to their bourgeois counterparts.

Bettelheim (1978) has written the most powerful indictment of the policies of the post-Mao regime. He claims that, since Mao's death, China has taken a great leap backward from socialism. He supports this conclusion with the observations that production and profits now hold sway, domestic and international markets are increasingly guiding resource allocation, class struggles have been demoted, the masses and the workers in particular no longer have the initiative as everything is decided from above, revolutionary consciousness and the social welfare have been pushed to the background by individual interests, socialist institutions are being dismantled, and educational, social, and economic inequalities have become more pronounced. Although Bettelheim recognizes errors made, both in theory and practice, during the Mao era, he believes that Maoist China was clearly on the right path and that the "new leadership . . . can only suffer defeats, as the entire history of revisionism shows" (p. 115).


Other radicals demur. Joan Robinson (1979a), for example, has questioned most of Bettelheim's interpretations of the new policies, alleging either that the policies are not really new or that they are not incompatible with the pursuit of socialism. Other radicals are highly critical of Mao's great leap forward (1958-1960) and the cultural revolution (1966-1969, with elements continuing to 1976), and they, for the most part, applaud the recent turn toward what they consider to be a more rational set of policies. These analysts believe that China has now returned to the road leading to a more developed socialism. Mark Selden, for instance, states that, during the great leap, Mao pressed the system to the point of rupture, that the cultural revolution "dimmed the prospects for further expansion of the productive forces and peasant incomes and intensified conflicts among state, collective, and individual in ways which strained the cooperative fabric to the breaking point" (Selden and Lippit 1982, pp. 86- 87). He believes that Mao, during the late 1950s, set back the prospects of socialism by divorcing policy from economic reality, exaggerating rural class struggles, weakening the democratic and popular foundations of rural cooperation, unduly increasing state manipulation of the peasants, and in several other ways. Selden approves of the renewed emphasis on production and economic progress, although he is aware of the dangers this might pose to socialism if carried out in a one-sided way-that is, if social transformation receded too far into the background.

Victor Lippit alleges that Mao's China departed from the "pure socialist model" in at least two principal ways: by holding almost constant the living standards of the peasantry and others for too long a time, and by allowing hierarchies and excessive centralization to develop, especially within the state-party structures (Selden and Lippit 1982). Although Lippit appre-

ciates the substantial gains that China made under Mao-in health care, income security, industrialization, social and economic equality, and in other areas-he is convinced that China's lapses seriously limited its realization of socialism. In fact, he asserts that, if Mao's extreme policies had been "allowed to congeal, there is no way China could have effectively carried out the transition to socialism" (p. 154). Consequently, the policy reversals after Mao's death, Lippit believes, were necessary for China's successful pursuit of a socialist society, even though there remains the danger of the new leaders moving to extremes opposite of the previous ones.

Sweezy and Magdoff (1979) have criticized the tendency of some Chinese leaders in recent years to rely on "objective laws of socialist economic development," which China presumably has to obey, come what may. Sweezy and Magdoff argue that there are no such laws; there are, instead, choices or policy decisions to be made at every stage along the way. These critics believe that the doctrine of objective economic laws of socialism is an example of false consciousness, an ideology.

The most vigorous defense of post-Mao policies, coupled with criticisms of Mao's great leap and cultural revolution, has been offered by Xue Muqiao (1981), a Chi- nese economist who has held high positions in government economic bodies. Xue argues that China is in the elemen- tary stage of socialism, definitely on its way toward a mature socialism and eventually will reach communism. He alleges that China's low level of productive forces and the people's inadequate awareness of communist principles (which is itself determined by the level of productive forces) call for compatible low levels of social relations. These relations still bear the mark of China's previous society-a semicolonial and semifeudal one. Differ- ences in the level of productive forces, Xue claims, account for state enterprises


in industry and merely collectives in agriculture; production teams as basic accounting units in some areas and production brigades in more advanced areas; and so on. Xue, in fact, uses China's economic backwardness to justify all sorts of capitalist institutions and practices-free markets, private plots, piece-rate wages, private employment, inequalities, decontrol of decisionmaking, and much more.

It requires a lengthy process to rid the society of feudal and capitalist legacies and to implant fully socialist and ultimately communist relations. Indeed, Xue states, "the period of socialism may last several hundred years"! (p. ix). This transition from feudal-capitalist to communist relations will comprise at least three sub- stages: the transition from individual to collective ownership, from the latter to socialist ownership by all the people, and from the latter to communist ownership by all the people. The attainment of the second sub-stage of mature socialism requires the modernization of all sectors, the transformation of most collectives into production units owned by everyone, economic abundance, higher educational achievements, and widespread socialist democracy (pp. 16-17).

Xue implies that the test of whether the social relations are too advanced lies in the performance of real output. If real output fails to grow, the relations of production are probably too far ahead of the productive forces. If, on the other hand, real output is growing adequately, the social relations are correct or perhaps even too backward.

Finally, Xue cautions against undue concern with class struggles. The bourgeoisie, he writes, no longer has the material basis for its existence. It is a remnant, not a vital, strong force. China's emphasis, therefore, should be on production, even though bourgeois ideology lingers on, foreign bourgeoisie oppose China, and small producers within the country exist and generate petty-bourgeois influence.

A Final Word

It is clear that there is much disagreement and indecisiveness among the radicals regarding whether the Soviet Union, China, or some other country is truly socialist in the Marxian sense. Although most radicals, in testing such a proposition, would properly look first at who has political power (i.e., which class controls the state-the bureaucracy and the military), there is increasing discordance beyond that. How much private enterprise (as opposed to social ownership) can a society allow and still be socialist? How much reliance on markets (as opposed to central planning)? How much income and wealth inequality? How much reliance on the capitalist incentive of individual payment for individual work (as opposed to moral, group, and social motivations, or payment according to need)? How much emphasis on the capitalist values of winning and keeping (rather than participating and sharing)? And how much dedication to nationalist concerns (as opposed to proletarian internationalism)?

Why are there such discordant radical tones on these issues? Under the best of circumstances, these are difficult problems, and one should expect sharp differences of opinion. But the basic reason for the disarray, it seems to us, is that radicals do not have a useful theory of long-term global socialist development that informs them of the characteristics of socialist societies in their early, middle, and later stages of development. Radicals do have such a theory about capitalist development-that it evolved from a commercial- mercantilist to an industrial stage, in the latter from competition to monopoly, from monopoly capitalism to imperialism and a global system, from that to state monopoly capitalism and neocolonialism, and so on. And in each stage of development, capitalism is said to have exhibited certain definite traits in its productive forces, relations of production, as well as political and


cultural superstructure. But when it comes to socialist development, it appears as though many radicals expect newly- formed socialist nations, even in their in- fancy, to display right away all the pure and perfect attributes of an ideal Marxian society. If any does not, it is in effect drummed out of the brotherhood. Proba- bly for most radicals today there is no country in the entire world that they can proudly call socialist.

Now, radicals may be right about that, but an analytical framework is needed before an opinion issuing from personal pref- erences can be replaced by a more scien- tifically-based finding. This task, too, should be high on the agenda of radicals over the next few years.

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