Study Notes on economic development in Brazil and other Latin countries

05/23/2019

DEPENDENT CAPITALIST DEVELOPMENT IN LATIN AMERICA

As said by Wallerstein:

“The capitalist system is composed of owners who sell for profit.

The fact that an owner is a group of individuals rather than a single
person makes no essential difference. This has long been recognized for
joint-stock companies. It must now also be recognized for sovereign
states. A state which collectively owns all the means of production is
merely a collective capitalist firm as long as it remains--as all such
states are, in fact, presently compelled to remain--a participant in the
market of the capitalist world economy. No doubt such a "firm" may have
different modalities of internal division of profit, but this does not
change its essential economic role vis-h-vis others operating in the
world market.”

And Bresser- Pereira:

“Exploitation was a normal characteristic of capitalist economies that was heightened in

dependent or peripheral countries and transformed into overexploitation as workers were
subjected not only to the local dependent bourgeoisie but also to the imperial center.
Theotônio dos Santos (1967; 1970; 1973) argued that the only alternatives for Brazil and
Latin America generally were socialism and fascism (the latter identified with the military
coups). His assessment was not limited to this point, and, along with Marini, he provided
an important radical and critical contribution to the understanding of the Latin American
underdeveloped, dependent, and authoritarian state. At the dependency level, he identified
three historical forms: (1) colonial commercial exporting dependency, (2) financial-
industrial dependency, consolidated in the late nineteenth century, and (3) post–World War
II technological-industrial dependency, involving multinationals (Santos, 1970: 55). This
latter type of dependency gave rise to a kind of “unequal and combined” development
marked by deep inequalities arising from the overexploitation of the workforce. “

To compensate for the unequal exchange with the central countries, the bourgeoisie of
dependent economies overloads the workforce and restricts the internal market. Thus, the
periphery exports part of the surplus value it produces, making it necessary for the
peripheral bourgeoisie to further exploit the workforce to compensate for this loss.

Subimperialism:

Sub-imperialism was a process of inclusion of the periphery in the imperialist model

through a relatively autonomous foreign policy, based on semi-peripheral economic
conditions. It had roots on the role of Latin America as an industrial producer of basic
products and a processor of raw materials, a role imposed by first world countries, which
had the most technologically developed means of production.
Or, as defined in 1965 by Ruy Mauro Marini:‘It is not a question of passively
accepting North American power (although the actual correlation of forces often
leads to that result), but rather of collaborating actively with imperialist expansion,
assuming in this expansion the position of a key nation.’
 Decline in the terms of trade:

A decline in the terms of trade means the price of exports falls relative to imports. Imports
become more expensive. Typically a country will have lower living standards and less
ability to import. It occurs when unequal exchange leads to the transfer of income from
peripheral countries to central countries. There is an imbalance when there is an increase
in the supply of primary goods at the same time as their prices in relation to industrial
goods decrease.

Suppose a developing country exports coffee beans and imports manufactured goods.

A decline in the terms of trade will mean a country will see the price of coffee beans fall
relative to the price of imported manufactured goods. This means it has to export relatively
more coffee beans to get the same quantity of manufactured goods.
A prolonged fall in the terms of trade could be seen as a problem because it can lead to
declining living standards and lower GDP.
It could also reduce export revenue and make it harder to pay foreign external debt. This
would be a problem for developing economies with high external debt. TO meet the debt
repayments may require a relatively higher percentage of national income on meeting
repayments in foreign currency.

Many developing countries concentrate on producing primary products, but according to

The Prebisch-Singer hypothesis, there is likely to be a fall in the terms of trade when you
concentrate on primary products. This is because:

Low income elasticity of demand. As incomes rise, demand doesn’t rise so much.
Increased productivity (fertilizers e.t.c.) increases supply and reduces price.