.

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1
5
<cerac-laru
studies on the political economy,
society and culture
of latn america
and the caribbean
volume 1
The Centre for Research on Latin America and the Caribbean (CERLAC)
WaS inaugurated in 1978 under the Faculty of Arts, York University. It repre-
sents the culmnation of several years of team effort by York University faculty
mernbers who first established a vigorous undergraduate programme in Latin
American and Caribbean studies, and then went on to organize an advanced
research prograrnme in the area.
CERLAC's objective is to contribute to knowledge on the social, political
and economic organization and culture of Latin America and the Caribbean.
The Centre also encourages studies of the relations between these regions and
Canada. It sponsors lectures, sernnars and conferences. Furthermore, as an
integral part of its effort, CERLAC promotes the building of academic and
cultural links with Latin America and the Caribbean and with the growing
Latin American and Caribbean cornrnunity in Canada.
The need for an institution such as CERLAC - the rst of its type in
Canada - has long been indicated by a steadily increasing public awareness
of the importance of Latin America and the Caribbean for Canada. Recognizing
this need, and that it could be met at York with the University's demonstra ted
strength in Latin American and Caribbean studies, the Donner Canadian Foun-
dation made possible the establishment of CERLAC with an initial grant.
CERLAC is an interdisciplinary organization. The participating scholars
represent a variety of social science disciplines, and are drawn from various
Canadian and Latin American institutions as well as from York. CERLAC's
offices and other facilities, including a reading room, are located in Founders
College, York Universty, Toronto, Ontario (M3J l P3), Canada.
J'
,
':
Tlie Latin American Research Unit (LARU) is an international and inter-
disciplinary study group of Latin Americans, dedicated to the task of research and
education on the social, cultural, political and economic dimensions of Latin
American reality. As a member of an international network of independent groups
committed to the production of political education materials on Latin Ame rica ,
LARU publishes two series in English: Studies (selections of articles grouped by
thernes) and Working Papers (for limited circulation). Special monographs and
audio-visual materials are also produced by LARU. The mailing address is: LARU,
Box 673, Adelaide S1. Post Office, Toronto, Ontario (M5C 2J8), Canada.
TI

democracy
and development
in latin america
edited and introduced
by louis lefeber and Iiisa 1. north
1980
"--j
ISBN 0-9690553-0-7
Canadian Cataloguing in Publication Data
PREFACE
This volume of essays is the outcome of a conference entitled "Dernocracy
and Development: Latin America and Cariada", which was held at York Univer-
sity in Novernber , 1978. The conference marked the establishment of the Centre
for Research on Latin America and the Caribbean (CERLAC), an interdisciplin-
ary organization in the social sciences.
As the title indicates, the central therne is the relationship between the
political econorny of development and democratic forms of social and political
organization. While no single conference or volume of essays can come near to
covering the enorrnous range of relevant issues, this volume presents papers
which span a broad spectrum of related problerns. Almost all have an interdisci-
plinary tlavour; the problems are so cornplex that no one discipline can properly
deal with them.
Most of the conference presentations are included here. We have omitted
only those that could not be delivered in final form in time for publication.
We regret ths loss because of the uniforrnly high quality of the presentations.
On the page following this Preface is the list of participants, all of whom
earned our gratitude for their contributions as panelists and discussants.
Special thanks are due to DI. Ral Prebisch for his contribution. His state-
ment to the conference, and the round table discussion which followed, pro-
vided immediate stimulus to the opening of the conference. Even though his
teachings have been subject to much controversy over the last three or four
decades, not even his most severe critics would deny that his name is irradicably
linked with the Latin American struggle for development.
We were pleased to have a representative of the Canadian International
Development Agency participate. We also owe a debt of gratitude to the four
participants who represented business, labour, press and church on our Cariada-
Latin American panel. Their candor in stating and defending their respective,
and frequently conl1icting, positions did much to throw light on attitudes
towar ds Latin America in Canada and other advanced industrialized countries.
The introductory chapter benefitted greatly frorn useful suggestions made
by Professors Robert Cox of York University and Miguel Murrnis of the Univer-
sity of Toronto. They are, however, not responsible for the expressed views
and remaining errors,
Last but not least, we are grateful to Heather McArthur Ior her valiant
editorial work, aud to Beverley Brady and Liddy Gomes for their meticulous
typing and preparation of the manuscript.
C80-094839-4 330.98
LARU
Box 673, Adelaide St. Post Office
Toranto, Ontario, M5C 2J8, Canada.
__ .. _...-- ..
t REG. : /J 6 O
CUT. 4-
, mU'JTECf\'
1
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" . . l.
Main entry under tille:
Democracy and Development in Latin America
(CERLAC-LARU Studies on the Political Economy, Society and Culture
of Latin America and the Caribbean; no. 1)
HC125.D45
l. Latin America - Economic conditions - 1945 -
Addrcsses, essays, lectures. 2. Latin America - Foreign econornic relations -
Addresses, essays, lectures. 3. Latin America - Social conditions . 1945 -
Addresses, essays, lectures. I. Lefeber, Louis, 1924 . . II. North, Liisa L., 1940
1/1. York University, Toronto, Ont. Centre for Research on Latn America and
the Caribbean. IV. Latin America Research Unit. V. Series.
CERLAC, 1980
Printed by Weber Repraductions LId.
Typesetting by Toronto Latino Papel.
Lous Lefeber
Liisa North
CERLAC, York University, Toranto
September, 1980.
IV V
j
9. See, for ex ample , Fernando H. Car doso and Enzo Falleto , Dependency and
Development in Latin Arnerica (Ber ke le y : University of California Press, 1979), an d Theo-
to nio dos Santos, "The Struct ure o f De pe nde ncy ." Arnerican Economic Re vie w, Vol. 60,
No.2 (May 1970).
10. See, Rall Prebisch (Chapler 2). See also Ral Prebisch, "Crtica al capitalis-
mo perifrico," Revista de la CEPAL, No. 6 (Primer se rnestr e de 1976), and "Estructura
socio-econmica y crisis del sistema," Revista de la CEPAL, No. 1I (Segundo semestre
de 1978).
11. See footnote 2 for a discussion of this e stirn ate
12. In peripheral capitalism there is a conflict between political and economic
lib er al ism to the ex tent that force is needed to re-establish competition in the labour mar-
kets. Such a conflict, as pointed out by Arturo O'Conne\l (see Discussiori in Chapter 2), may
not be confined to the periphery alone. In any case, Polnyi had already po int ed out that
the establishment of a self'-regulat ing market re quires the application of force.
13. See, for example, Ronald Muller , "The Multinalional Corporation and t he
Underdevelopment of the Third Wor ld ," in The Political Economy of Developrnent and
Underdevelopment, ed. Charles K. Wilb er (New York: Random House, 1973), and Richard
J. Barnet and Ronald E. Muller , Global Reach: The Power ot th e Muttinational Corpora tions
(New York: Si mo n and Sch ust er , 1974). See al so Hopenhayn (Cha pter 3).
14. For a discussion of the pro blem of intertemporal welf'are see, in ter alta,
A.K. Sen, Employment; Tech nology and Developrnent (Oxford: CIaren don Pr ess, 1975).
15. See Ho penhay n (Chapt er 3) and Chossudovsky (Chapter 5).
16. lt is not possible to review here the thought of ECLA and its implications
for social, poltical and economic t heor y and or gan izat io n. Since their first statement by
Ral Prebisch in his El desarrollo econo'mico de America Latina y sus principales problemas,
E/CN. 12(89) (Santiago, Chile: Naciones Unidas, Mayo, 1949), the ideas a nd tea ching o f
the ECLA school have gener ated an enormous flow of r ich , seholarly, and po licy-related
papers and debate both supporting and opposing ts tenets. For eomprehensive reviews see
Cardoso , Pinto, and Sunkel , eds., El pensamiento, and Cardoso , "La originalidad".
17. See eha pter 7 belo w,
18. See Louis Lefe ber , "The Paradig m for Feonomie Development," World
Devcloprnent, Vol.2, No. 1 (January 1974), and "Critique of Planning in Prvate Enterprise
Eco no rnie s," Indian Econornic Review, VoJ.9, No. 2 (Oetober 1974).
19. See the diseussion in Business Week, 14 Sept. 1974, concerning market
opportunities fo r consurner durables in Cuba given th at the problem o f pro vid ing basic
neeessities for the population has been largely resolved there.
20. See Tulio Halperin Donghi, Historia contemporanea de America Latina
(Madrid: Alianza Editorial, 1969), pp , 437-538.
21. Accordng to calculations made for Per u , the benefits fr o m sixty per cen t
of urban. subsidies aeerue to the highest ineome gr o ups and the remander to the lower
ineome urban po pulat io ns. Sour ce : verbal eommunieation by Dr. Julio Cotler of the Ins-
tituto de Estudios Peruanos on the oecasion of t he "Demoeraey and Development" co n-
ferenee refened to in the Preface of this volume.
22. Of course , given t he e xclusionar y sy st e rn , if organized labour did no t
struggle to maintain and improve its pr ese nt share, others with in t he system would ben efit ,
and not those outside of il.
23. The significance of tb is rural mobilization is diseussed by Brian Lo ve man ,
Chile: TI1e Legacy ot Hispanic Capitaltsm (New York: Oxford Unverst y Press, 1979).
24. Celso Furtado, "The Coneept of Externa] Dependeney in the Study of
Underdevelopment," in The Political Economy; Wilber , ed., p. 122.
25. Celso Fur t ado , "The BraziJian 'Model' of Development," in The Political
Economy. Wilber, ed . p. 304.
18
I
l
II
the dynamics
of peripheral capitalism
by ral prebisch
I begin by stating the fundamental idea that I arn going to develop in this
presentatiori.' Peripheral capitalism, particularly in Latin America, is character-
ized by a dynamics which exc1udes the great masses of the people. It is a dy-
namic process, orien ted towards the privileged consumer society. This is because
the process of capital accumulation and the introduction of new tecluiologies
from industrial centres are not motivated by the purpose of progressively incor-
porating new social strata into the development process, but instead, as Pope
John Paul 11 stated, by the frenzy of consumption.
This striking development of the privileged cousumer society that we have
witnessed over the last twenty-five years is incompatible with the social inte-
gration of the great Latin American masses. It is also incompatible with the
process of democratization. And though such a ca tegorical sta temen t may be
unexpected, this is the case in the advanced stages of the development of our
countries.
There comes a moment of crisis of the system, when to restore the regular
workings of the consumer society, force is used. I do not intend to explain in
a few words the interruptions of the democratic process so frequent in our
history; nonetheless, I believe that the thesis I am going to presen t points to a
very important factor in past and present La tin American development. It is
significant that, even though economc liberalism and political liberalism
emerged from the same philosophical source, theyare fundainentally separated
by Latin American developmen t based on the privileged consurner society.
If economic liberalism is brought back by rneans of force, economic neo-
classicism - the supposed regulatory action of the market - destroys democratic
liberalismo
Of course, given the limitatons imposed by the context, my explanation
must be schematic. I would characterize this peripheral capitalism of ours as a
phenornenon arising from irradiation by the technologies of the industrial
centres, and consisting of forms of consumption, institutions, ideas, and ideol-
ogies characteristic of a purely imitative capitalismo In contrast to the innovating
capitalism of the centres, this is withou t its own personality. The irradiation
takes place in a social-economic structure which is fundamentally different from
that in the centres. Accordngly, the old notion which continues to prevail in
many Latin American circles, that we will keep approxirnating the capitalism
of the centres and reproducing its forrns, is totally wrong. Such reproduction is
not possible due to the coutradictions which these phenoruena of propagation
and irradiation bring about in the social structure of the periphery.
Let us begin with the problem of capital accurnulation. The problem of
poverty and basic necessities in Latin Amrica will not be resolved without
resolving this issue. Capital accumulation, in turn, is incompatible with the
spread of the consumer society. What is the reason? To answer I would like to
start with the phenoinenon of the surplus, since rny entire interpretation
revolves around it.
21
[\ :!
Thc techuology of the centres with its growing productivity does penetrate
thc periphe ry ; but subject to the rule 01' market forces, its benefits are primarily
appropriated by the owners of the meaus of prcduction. In acldition, those
mcmbers of the labour force who have the increasing qualifications required
for the propagation of technology in all lines of activity also share tire gains.
Thc phenomenon is ouly partially spontaneous because it is neavily influenced
by social power which allows those who possess it to take advantage of the
oPI',)Jtllllities of education.
Under the rule of market forces, the great masses of thc labour force share
only to a limited extent , aud not proportionally, in the beuefits of higher
prouuctivity . This is because of the grea t heterogenety of the social structure.
Since the grea t mas ses of the people remain in inferior technological strata of
low productivty, they provide regressive competition to members of the labour
force absorbed in higher technological strata. This rcgressive compctition nter-
fcres with the latter's capacity to increase their incomes in proportion to thcir
higher productivity.
Then the surplus - ths rnost importan t phenornenon of the surplus, which
is appropria ted by thc owners of the means of production - is that considerable
part 01' the gains fr0111 tcchnical progress no t transferred to the labour force due
to regrcssive cornpe tition by the great ruasses working in teclmical strata of in-
ferior productivity. Accordingly, the surplus continuously increases at a higher
rate than the rate of growth of the output, wlme the incomes accruing to the
labour force grow at a slower rate tban the rate of growth o{ the output. 1
underline this, because it is very important in the crisis of the system.
Now tben, tbe structural cbanges brought about by the penetration of
technology l11anifest themselves, among other thngs, in the growth of the
middle income strata. Tbe old middle classes expand with the incorporation of
that part of tbe labour force employed primarily in industry. And with major or
minor difficulties, expansion opcns the road to the process of democratiza tion
and, as a consequence, to unon power and to political power by labour. Both
attempt to counteract the influence of the laws of thc ll1arket, and to sbare, in
one forl11 or anotl1er, the gains from tec1mical progress represented by the sur-
plus.
Thus, a process 01' sharing, a distributive struggle, is created wbich is Iimited
by the consumer society's capacity for regular functioning. This distributive
strllggle, this striving for a share of tbe gains from technical progress, does not
cause majar upheavals in tbe evolution of tbe privileged consumer society as
long as it does not impede the continuous growth of the surplus. For its con-
tinuous growth is the essential condition fDI tbe dynamics of the consumer
society.
The division of the gains from technological progress can be l11anaged so as
not to al'feet fundamental1y the growth 01' the surpllls. That is to say, a bigger
or Sll1allel- portian can be distributed from the new productivity increment in
response to tbe union power 01' the labour force. There comes a moment,
however, when tbis sbaring attel11pts to encroacb not on tbe increment of the
surplus, bul on the surplus itself, wbich is accumulated in the process of growth.
In this critica1 moment those who control the system and its dynamies,
and wbo hold the means of production in their hands, will not accept a cbange
in its objective, the growth of privileged consumption. Nor do they tolerate an
interruption in the process 01' accull1ulation on which this Qrowth is founded.
What is tbe first manifestation of the defense?It is the rise in prices. The
upper strata of the social structure, whose power has appeared to dil1\llish as :1
consequence of unin pressurc and the poli tical powcr of the labour force.
demoustrate ths way that they can keep control of the systems dynamics.
However, with its union and political power, lab our defends itself against the
price increases, and the wel1-known inflationary spiral begins, However, it is not
the old type of spiral; instead, it is now a social-political process which canno t
be contained with the policy prescriptions of the International Monetary Fund.
This is a different type of int1ation than those so frequently brought about in
Latn All1criea's past by traditional causes.
11 is well known , ami 1 do not have to diseuss it, that sooner or later the
inflationary spiral leads to economic distortions and to social disintegration. It
is then that the upper strata resort to the use of force to bring about muer aud
to re-establish the stability of the socially deviant dynamics of peripberal capi-
talism.
As 1 mentioned at the outset, this is a very schematie exposition. Th osc
who are interested in understanding further the dynamcs of the system can
look it up in l11Y paper in the Revista de la CEPAL. 2
It is interesting to note that the advances in dCl110cratization givc the
impressicn that the upper strata are losing the ir power. It is an illusio n, becausc
they are at the head 01' the system and control its dyuainics. When they be gin
to fail, they use force to suppress lubour's union and poliricul power. Tha t is
how neo-classical Iiberalism realizes one of its great alllbitions, sinec it eonsidcrs
this uniOll and political power, this interference witb the sacrosanct laws 01' the
market, to be responsiblc for the dislocation of tbe systCl11. However, this
liberalism does not take into account the various pbcnomena of the socbl
strueture, espeeially tbe pbenomenon of the surplus which is tbe point 01'
departure for tbe entire process.
Tt is useful to refer now to tbe relations between tbe periphery and tlle
centres and to remember tbe old centre-peripbery theory which we presented
during tbe eady times 01" ECLA. Tbis theory bas been l110dil"ied and enriched.
particularly witb tIJe subsequent development of dependency tbeor)'. TllC
earlier lllen tioned processes of propagation and irraJiation froll1 tbe centres
are carried out under tbe predamin:1l1t influence of tbe centr.1! industrial powers,
particularly tbat 01' the principal dynamic: centre 01' capitalism.
Frolll tbe point ol' view 01' the peripbery, capitalisl11 represents a centripcta\
process. Tbat its exp3nsion will bring advantages to aH nations al' the periphery
is false, even tbough tbis idea bas prevailed and continues to prevail in IlCW
versions. Tbis is not bow the system works. Tbe eapitalisl11 01" tIJe centres is
closely associated witb tbe privileged consumer society and its interests, and
contributes to tbe accentuation of the social1y exclusive cbaracter 01" peripberal
capitalism. It is tbat way for two basic reasons.
First, by Jinking up l1lore and more witb the consumcr society, the si-
phoning of peripheral incomes by the centres becomes greater and greater.
Capital accumulation, already seriously impaired by thc privilegeJ COIlSlll1lt'r
society, is additionally damaged by the associatioll betweell the transnationals
and tbe consumer society. Wbile one must recogllize the eviJencc of stupenduus
technological progress and organizational capacity in the transnationals, one
must also recognize that tbey do not serve purposes wbicb are conclucive ro a
positive transformation 01" Latin Amcrican socicty.
Second, consider tbe way in which cOl11l11ercial relations function. Thc
process of industriaJization tends to concentrate spontaneously in tbe centres
because of tbeir dynamics, wbich are determined by tbe play of market forces.
22 l 23
We should remember that peripheral iudustr ializat ion was a conscqucncc of
imposing the centres' criscs on the peripherv: lite lirst World War, the Crear
Depressiou, the Second World War, the problcrns of the post-war periodo ln-
dustrialization has been the result of deliberare political and economic action,
which was based initially on import substitu tiou. This has been carr ied to an
excess, but even so, it is unacceptable that people in tlie centres shoulJ say:
"What a shame that Latin Americans should have chosen this err oneou s path
for industrialization! Why have they not exported industrial products from the
beginning? "
Consider, however, tlie chances of a pcriphery's survival without the tcch-
nical capacity for exporting industrial products during tlie First World War and
the Creat Dcpression, when the markets of the centres liad closed down, and ,
worse still, during the Second World War! One must rernember that indus-
trialization was a consequeuce of crcumstances, When people say ECLA's
teaching has becn a disaster for Latin Amrica. they forget that the industries
which are now cxporting were established largcly under the protection accorded
by import substitution. But what is most interesting, and what shows again the
centripe tal charactcr of capitalism, is that these sanie people who have deplored
impor t substitution currently find themselves crnbarrassed. In industries such as
textiles, shoes, iron, steel, and certain branches of electronics, Latin America has
acquired a comnetitive canacitv which manifests itself in exports contributing
to the groWlil Of supplIes 1Il lile centres. While this is significant for us in Latin
America, and not for the centres, they impose import restrictions in the for111 of
customs duties, various adll1inistrative regulations, or they simply exert pressure
to force the periphery to agree to "voluntary" export restrictions.
The developlllent of export trade has been mentioned for several years as
one of the reasons for opening the doors to the transnationals: they would
modernize our countries, facilitate industrial exports, and build a new interna-
tional division of labour, based on trade in Illanufactured goods. But what is
happening in reality?
There has been a vry important liberalization in international trade that
has benefited the centres. The transnationals export manufactured products to
other countries or regions in the periphery, but do not actively export tIlese
goods to the centres - this is what would be needed to resolve the fundamental
problell1s caused by foreign strangulation of the periphery. Why do tIley beIlave
like tha!? For some malicious reason? 1do not beleve so. They behave lke that
because they are guided by their very own dynamics; because this trade is
continuously fed by the teclmical innovations of the same transnationals; and
because it is natural they should produce innovatioIls not only in the centres,
but for the centres. 11 is oll.ly lI1arginally that the periphery participates in this
trade through the production of manufactured goods. Moreover, these goods
have already ceased to be inIlovations in the centres, due to the appearance of
new ways of diversifying produetion. Once again, this del110nstrates the centrip-
etal character of capitalism.
Accordingly, without denying the contribution of the transnationals, I am
far frolll seeing them as the dynamic factor in a new internalional Jivision of
labollr, or in that continuous diversification of production in whieh they have
such an important role to play. Their own Jynamic leaJs them to concentrate
their efforts in the centres and not in the peripIrery; the centres close their
doors to those manufactured goods in which the periphery, through aequireJ
technical and organizatiollal capacity, becomes compe titive.
24
f
Thcreforc, it is surpnsuig that there still are economists in La tin Aiucrica
who bclieve tliat by disrupting their industry - by disrupting the pro tcc tion
wlich has bcen undoubtedly excessive and has to be correctcd - they are
going to open , as if by ruagic, the markets of the centres for exports frorn the
periphery. This is a grave error which takes us to a great contradiction. As is
wel1 known , there is a phase in the penetration by transnationals in which they
contribu te some capital; however, after sorne time the aruount of profit transfers
and debt service exceeds the investment of new capital. The transnationals then
turn from being agents of capital accumulation into agcnts of capital siphoning,
and thereby aggravate the insufficiency 01'accumulation to tlie dctrimen t of the
great masses 01' the people.
These siructural changos - which keep moving the system towar d its
crisis due to the phenornena I have outlined schcrna tically - must complernent
the pcriphery's relationship to the centres. This is not only because of the
conscquences for accumulation I have already discussed , bu t also beca use 01'
internal political phenornena which these structural changes and the growth
01' the middle incorne classes bring with thern. Thcse phcnomena include a dcsire
for iudependence and for changing the relations 01' dependcnce.
By dependence I mean the rclations betwccn centres and the periphery
whereby a country is subjccted to decsions taken in the centres, not only in
economic matters, hut also in lIlatters 01' politics and strategy for dOlllestic anel
foreign policies. The consequence is that due to exterior pressure the country
cannot decide autonolllously what it should Jo or cease doing. The structural
changes bring about an awareness 01' this phenolllenon, anu this awareness,
this desire for autonomy, is one of the integral elements in a critical unJer-
standing 01' the systelll.
The transnationals and foreign capital are part 01' the distributive struggle
which also Iras these psycho-social and political elelllents added to il. When
force is resorted to dOlllestically to re-establish the dynamics of the consumer
society, tIre transnationals naturaUy finJ themselves in a favoured position. This
does not prevent thelll frolll occasionally using their own punitive measures
when the periphery errs anJ interferes with their interests. It is very interesting
to note tIrat in tile centres there is a relllarkable dual response: on the one hand,
there is the complacency 01' the transnationals when order is re-establisheJ - the
doors are opened and the norllls of economic liberaliSlll applied to them; on the
other hand, there is the very encouraging sYlllpathy wluch becollles evident in
the centres when human rights are violated by the use of force, even though
sometimes this sYlllpathy is very selective.
TIrere is a Oagrant contradiction between the two responses, delllonstratng
again that iu the ceutres there is no policy wlrich is inspired by the necessity of
a fundamental transrormation in the periphery, and which woulJ throughJy
resolve the problcllls 01' social and political inequality. This brings to my minu a
notion wluch has cOllle primarily frolll the centres anJ wluch has been spreaJing
in the periphery, particularly in Latin AllIerica. I was talking ayear ago wilh a
prominent economist frolll one 01' the centre countries who works on problems
of poverty and basic neeus. He said to me: "You have to extirpate poverty. You
have to satisfy basic needs in Latin Amerca." What a great discovery for us!
What llave we been doing in ECLA for thirty ycars, ir not cal1ing atlention
to the problelll of poverty and basic lIeeds! In our reports we asserted that
forty pereent 01' the population 01' Latin AlIlerica lives in povcrty, anJ tlrat to
salve tlle problel11 01' poverty a vigorous brake lnust be applieJ on the growth o f
25
Domingos Donida
1 am tremendously il11pressed with the analysis of Dr. Prebisch concerning
the economic anu political situation of Latin America. r think that some time
will be needed to absorb some of his observations abou t the present state of the
Latin American continent.
I would like to discuss further the validity of an issue which we at agencies
for international development cooperation are investigatillg. This problem is the
satisfaction of the populations' basic needs within the national context of the
peripheral nations. We believe that the satisfaction of basic needs cannot be sub
stituted for the creation 01' a nelV international economC order. HOlVever, this
new rhetoric mal' be useful in calling attention to thc poorcst forty pcrcent 01'
lhe population. Even thollgh, as DI. Prebisch pointed out, ECLA has insisled for
years on the satisfaction 01' basic needs, in fact the Latin American governments
have not given this thcir primary attention. Would it not be important to empha-
size this concept so that the countries and the institutions concerned with
international development cooperation will focus on their very great internal
contradictions? It is also important to ca]] attention to the basic problem
affecting forty percent of the population 01' Latn Amcrica, even though we
cannot yet resol ve it.
Razl Prebisch
I agree totally wilh Dr. Donida. I believe that calling attention to poverty,
and to the lack 01' satisfaction of basic needs, can be an important element of
persuasion in the centres as mllch as in the periphery. But, one must not forgel
that the basic problem will not be resolved wilh superficial, paternalistic, or
charitable llleasures, but only through a transfollllation of the system.
Incidentally, ECLA is currently analysing the problems of poverty and
meeting basic needs in Latin America; it feels this study to be an important
step towards understanding these issues.
DlSCUSSJON
~
3';
? ; _ r ~ ' .
t
~
r"" those below tluough intcnsive c.rpitul accumulation, where capital accumulation
meuns not ouly physical , but also human capital. Unfortunately, this is no t
the way it usnally goes.
1 concludc by saying that rhcsc cousiderutious do not makc me pessimistic
about the prospccts for democracy in Latn Amrica. They do, however, warn
that the dernocratic process can become serously jeopardizcd in time bccause
of the socially deviant dynamics uf the cousumer society, lf democracy has a
tcndency to clevour itsclf, it is because in the long run the foundations of thc
systern do not perrnit the play of dcmocratic forces. Thereforc the systeiu's
transformation has to move towards greatcr equity .- through changing the
cxsting type of growth aud composition of product ion - and towards the
establishment and consolidation of dernocratic institutions.
In my judgrnent, the transformation of the system is the direction which
thc process would have to take. Without it let us not have any illusions. There
will be neither social justice, nor a progressive COlme for dernocratic ethics.
I

the COIl,IlIl1Cr Su"cly. This is cspecially truc uf the last report 1 prcseurc.I lo
governmcnts in l:IC rcgi'ln before leaving ECL... in 1963; howevcr , 1 aln uow
frecd tr om rhe cucumspcction I liad to use at that time as international Iunc-
tionary, Stopping the growth of consumerism would augment accumulaton and,
with thc tcchuolopy Ior incrcasing productivity, absorb this greut mas, ot pcuple
who have , particul.uly in agricultllre, vcry low protluctivity aud income , Withuut
disrcgarding thc iuuuediarc necds for rcdistribution, wc maintaincd tuat aug.
menting thc rute uf accumulaton at thc expense of the privilegc.l consumer
society has bcen thc fundamental problern. 1 continuc to bclieve that thcrc is no
othcr solution.
It is a misiake to bclcvc that poverty will bc solved with some charilabJe
contribut ions provided for the purpose frorn the centres. Yet , t he cooperuton 01'
the centres can be extremcly important to the syst em's transformation, which
must be bascd on changing the social and economic structure. This is an cffort
which cannot be avoided.
1 suspect that those economists who believe in that soruewhar pat ernalistic
path cliscuss it with enthusiasm so as not to have to confront a new intcnwTional
ecoriomic order. If thcre is an easy remedy to rcsolve the problem of poverty,
why interfere with the transnationals and the dominant groups in Latin America?
Then why talk nbout a new internationa] econornic arder, and a new domestic
economic order') lt is wen known that for many years 1 have fought in LCLA
and UNCTAD for the basic e]ements of this new intefllational economic order.l
have regarcled thcse as the means not of simply maintaining thc existing order,
but of fundamentally transforming it. Those who have foUowccl the debates in
the United Nations, the General Assel11bly, the Economic and Social Council,
and lhe rcgional Commissions must wonder that the very governments which
insist on the need for a ncw international economic order, forget that this new
order is not for maintaining the existing state of affairs, but for changing it. At
the same time, they attribute to the centres the causes of an the ills 01' the
periphery.
I want to be fair. The centres are responsible to a large degree for the
exclusionist phen omena in the periphery, and for the centripeta] character 01'
capitalismo However, the periphery is also responsible, as demonstrated by the
arbitrary appropriation of the gains frrn technical progress for the upper strata.
Furtherrnore, therc are those in the intermediate strata who acquire political and
llmon power, use Il fur the bettennenl 01' their own situation, and 1'orget those
in the lower strata. They divide with the upper strata the advantages denved
from the system, and remember those below only when it is necessary to mobi-
lize them politically. To teH the truth, that is why all means for social better.
ment - for education, housing, and health - are concentrated in the intermedio
ate strata.
The distributive struggle, the figIlt for sharing the wealth, takes on a differ-
ent form in conntrics where the state can obtain increasing rcvenues through the
exploitation of abundant natural resources. However, even there, those below
are forgotten; ver y little trickles down to them. In these conntnes the struggle
becomes attenuated because the Surpllls of the upper strata can continue to grow
even if there is redistribution, as long as it is undertaken at the expense 01' lhe
resources. Even though it is surprising to many, it is natural that the process of
democratization can be carricd out in good form under such conditions. The
question however is for how long?
The gains from natural resource exploitation can be employed to elevate
,
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26 27
Arturo O' Connell"
First, it is always a pleasure to comment on the ideas of Ral Prebisch. In
contrast to those of many of our economst colleagues, his concepts unite our
special professional focus on the economy with its more important political
implications, This type of discussion is becorning increasingly important. For
historical reasons during the last decades in Latin Ame rica, the economists
seemed to have lost their capacity to participate in such discussions. This has
created a very unfortunate division between our intellectual work and the
work of sociologists and political scientists. Ral Prebisch has had the virtue
over the last years of insisting always on both these aspects of the development
of our countries. He has also declared decisive the relationship between the type
of economic growth and the possibilities for democratic development in Latin
America.
Nonetheless, his presentation motivates me to raise some very tentative
questions, In the first place, to what extent is this type of conflict unique to
peripheral countries? This is not merely a theoretical question: 1 believe that
it relates to the real understanding of the functioning of the systcm. Why is it
tha t in the non-peripheral centre coun tries this consumerism - which after
a11 is not the private property of the middle and upper classes of the perpheral
countries, OJ of Latn Amrica - has supposedly not resulted in the exclusion
of important parts of the population? 1 pose this question and offer the begin-
ning of an answer.
It seems that consumerism is nonexclusionary only in sorne very special
phases in the development of capitalismo 1 do not know how many mllions are
unernployed this very day in the European Economic Community - people who
actua11y live on unemployment insurance and so forth. Apart from the differ-
ences in the living standard and type of society, their case is similar to a dramatic
situation such as the mnimum employment programme instituted in Chile to
compensate the unemployed in the wake of the stabilization policy. Canada
has comrnitted itself to this policy, which is quite characteristic of the resur-
gence of economic liberalismo
We seem to have re-entered what is a normal phase in the workings of
capitalsm at the world leve!. We can expect a much weaker process of accumu-
lation and conditions niuch more prone to crisis and conf1icts. This exclusionary
tendency - which has hit us so dramatically in Latin Arnerica and which is
naturally our own human and political responsibility to resolve in our coun-
tries - is nonetheless a grievous global problem. 1 am in total agreement with
what Ral Prebisch just slated in this respect: there is something in the func-
tioning of the capitalist system which generates this problem everywhere, even
though it can be seen most clearly and dramatically in those countries where the
living standard is very much lower. As a con sequen ce the excluded ones must
cope under markedly more striking conditions of poverty, and need a number
of elemental requirements for life. 1 repeat that just because the problem s a
world phenomenon, it does not absolve us of our own responsibility; it should
lead instead to a much more intense dialogue than what has taken place during
the last decade and involve the economists and the social scientists of the so-
called developed and underdeveloped countries. 1 believe it is important to
underline this because it indicates the need for major joint investigation by the
scientists from our own countries and other countries such as Canada.
28
t
This question calls to mind the problem of whether capitalism is centripetal
or centrifuga!. Ral Prebisch very properly emphasized the tragic irony of the
preaching to which the Latn American countries have been subjected since
practica11y the end of the Second World War. During the fifties this intensified:
"But you have to industrialize and export your manufactured goods; you must
not continue closing your markets. It is a war economy which you have pro-
moted and deviously insist on maintaining."
A few countries, for reasons which we need not discuss now, have decided
to follow this prescription. They found that when their exports, which fre-
quently amounted to less than one percent of the centre econornies' total
supplies, attained a significant mnimum level, restrictions were irnrnediately
imposed. This has been the case with the export of shces, textiles, and a number
of other things. Of course , it is not caused by the ill will of the developed coun-
tries toward the underdeveloped ones; it is simply a new wave of prolectionism
whch comes in response to their own growing problems and to their problems
with each other. Then, a political system which is perhaps more responsive to
pressures by all segments of the population, including the public at large and
the labour unions, atternpts to maintain the level of ernployment by excluding
the products of other countries. 1 totally agree it would be absolutely suicidal
under such conditions to open our economies in the belief that, as Ral Prebisch
said, magically markets of the developed economies would open reciprocally.
Some journalists recently asked a Latn American Minister of Ecouomy why
he preached liberalism for his country , eveu though the developed countries have
adoptcd protectionism. He produced a masterpiece of a fal1acy when he re-
sponded: "1 believe that protecton is abad remedy, a prescription which kills
the patient. Liberalism is the correct prescription, and just because others apply
the wrong prescription, 1 arn not going to recornmcnd this incorrect prescription
to my own country."
To return to my earlier argument, I believe that the problem is rnuch more
general. It has to be identified in terms of the functioning of the entire system
of centre and periphery, and a tendency which is more than centripetal must be
recognized. 1 would say that the international economy , which has been so inter-
woven and tightly constructed during the fifties and the sixties, i.s now tending
to break up or disintegrate.
This new phase of disintegration includes the decay of the supposedly
privileged relationships arnong the centre countries. It would be a total aban-
dorunent of rational sense to respond, as it were, by leaping into the vacuum,
on the assumption that industrial exports from the periphery may have an
expansive effect in the centre countries.
In the emergence of certain raw materials there is another centrifugal
tendency away from the centre countries, which forces us to define a very clear
policy concerning the management of the new revenues. This concerns both
external relatons, and , as was very wel1 said by Ral Prebisch , our internal use
of them.
Undoubtedly, thcn , there is a worldwide problem, consisting of a process
of accumulation which is not capable of absorbing the large masses ether as
workers or as consumers, We in the periphcry get the worst of it. 1 also believe
that the threat to deinocracy, as it is cau tiously referred to in Latn America, is
not one to which the central countries are totally nunune. 1 have been con-
cerned with this situation for some years and have had fairly advanced dis-
cussions about it, mostly in Europe. Some of these countries are vulnerable to
reverses in the progress of democracy attained after the collapse ofNazism in the
29
Dal'id Polluck
5
Dr. Prebisch has stressed the need for a fundamental structuraI transforma-
tion in Latin America, and in turn, also for a new international economic order.
My question would be: is there no contradiction in the efforts of countries, such
as Canada, to move toward a new international economic order when, in fact,
according to Dr. Prebisch's line of argument, the prevailing systern strengthens
the existing order rather than transforms it?
Ral Prebisch
Actually, for the purposes of my argument, 1 have not traced out the line
of separatiou between cen tre and periphery; 1 go into the pheuomena of the ~ .
centres only to explain better the phenomena of the periphery. 1 havc two .
reasons for so doing. t
First, 1 believe that 1 know the Latin American periphery much better than
the centres. 1 have a certain arnount of authoritative knowledge about peripheraI
matters, but not about the centres. f
Second, 1 have another reason which is pragmatic. You must realize that :
my insistence on the fundamental transformation of the system will bring
about acute resstance and violent opposilion from dorninant groups in Latin
America. This wll be in addition to what 1 can expect from neocIassical econo-
mists. 1 do not want to analyse the centres because according to the basic rules
of strategy one should not fight on two fronts; for me the front on the periphery
is enough.
This is a very pertinent cuestion and a perplexing one. I believe that the
centres are increasingly linked up with the privileged consumer society; none-
theless, the policies they fol1ow do not favour its interests. And if they 100k at
the long run perspective, instead 01' the short run, these policies do not favour
lhe centres' own interests either.
Consider the well-known exterior vulnerability of the periphery. The centres
refrain from taking measures which would mitigate it, despite the long struggle
which goes way back, preceding UNCTAD. If a country is forced to contract
its economy because of vulnerability and continuous Ductuations in the external
sector, it is not only the consumer society which gets hurt, bul also the great
masses who work to serve the interests al' that society. The l11asses only consume
on a small scale; instead they serve those who consume. This means that the
conseqllences of adverse changes in the foreign sectors hllrt the great masses of
the population.
Accordingly, given lhe Iogic of the system, olle may hope for measures
that could prevent these periodic contradictions which hurt everyone. However,
even with ample international cooperation - which we are currently far from
First, 1 must say that 1 too am impresseu by Dr. Prebsch's spee ch, which
recaptures the critical tradition of ECLA in the 195 Os. As Dr. Prebisch himself
has said, our great advantage today is that he can now put words into sorue of
his earlier bureaucratic silences. In this respect, I would like to ask h im for more
words concerning the transformations he considers possible. Of course , I know
that generalizations on the issue are difficult, that the tendencies he has pointed
out are reflected in different ways in the d(ferent Latn American countrie s,
and that any global commentary therefore runs the risk of distorting whal one
thnks s reaI1y happening.
Nevertheless, I will pose sorne more or less general questions which were
stimulated by his interesting presentation.
The first refers to liberalism. Dr. Prebisch alluded to the curious separation,
whi.ch is clear today and which may have been intensified in the post World War
II period, between economic liberalsm and politicallberalism in Latin Ame rica.
He then pointed out the dualistic response of the central capitalist countries
which , on the one haud, welcorne the possibility of the transnationaIs operating
in a climate of greater stablity and respect for their interests, and, on the other
hand, deplore the constant violations of human, civil, and poltical rights in
Latin America. In my judgment, we are dealing with the two aspects of a single
problem, and this needs sorne clarification.
It happens that politicaI liberalisrn has always been exclusionary in Latn
America. I find it dfficult to think of a "before and after" of an integrative
political liberalism which rnay now be lost. Strictly speaking, the exclusin and
marginalizatio
n
of the popular sectors have been the preconditions 01' Latn
American liberalismo Furthermore, every time that even a partial integration
has taken place, it has occurred under the auspices of populist and not liberal
movements.
Skipping stages, what rnust be presented at tls time is a theme I consider
relevant to the discussion 01' possible transformations. If one looks at the evol-
ution of the central capitalist countries, to a significant extent the correlation
between economic and politicalliberalism has not been fortuitous. To explain,
Iiberalislll secured for the owners of capital a considerable and necessary quo-
tient of control over the occupants of the public bureaucracies. Variolls factions
of the bourgeoisie have found conditions suclr as freedom of association, free-
dorn of the press, and the periodic changing of authorities to be very valuable
resources for limiting the excessive autonomy of govenunent officials.
Latin American liberalism changed in its own way, while sti1lmaintaining
the exclusive character 1 mentioned earlier. However, it must he pointed out
that the type of regimes of force which noWpredominate in Latin America also
carry a bigh element of risk f01' the bourgeoisie - a risk of escaping from the
control of those who first established these regiJnes. Therefore it does not appear
contradictory to me that the central countrics welcome the good clima te enjoy-
ed by the transnationals, yet at the same time condemn the violation of human
Jos NlIn
6
naving _ we will not resolve the fundamental problem. While the tight for
international cooperation must continue , we of the periphery must at the same
time open a new front for the struggle - that of the nternal struggl
e.
I believe
there is an incrcasingly glaring need to offer a new alternative which would
permit the combining of vigorous growth with social and democratic equity.
tt'
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forties.
To repeat , this conflict seerns to me rnuch more general and global than
wha t is llOW experenced in Latin America in a more drama tic formo 1 believe
that its study should be a joint responsibility of us Latin Americans, who repte-
sent the periphery here , and the scholars and politicians of the centre countries.
Ratil Prebisch
31
30
L
rights; they play with two packs of cards. I believe that the penetration of these
large corporations is fundamentally antagonistic to the dcvelopment of authenti-
cally democratic forms of political organization in our countries. The regressive
patterns of income distribution maintained by their business create the markets
for their products, and the combination of exemptions and privileges demanded
by thern augments their profits. In the long run neither of these is compatible
with parliamentary forms that have genuine popular representation. However,
this again confronts the transnationals with the same problem which I suspect
confronts the local monopoly sectors: how to control the political authorities
they are using. The general who escapes from their hands presents a danger -
a danger which underlies many of the current conflicts faced by regirnes such as
the Argentinean, and perhaps much more, the Brazilian.
I would like to transform these reflections into a question directed to DI.
Prebisch. Do you think that the Latin American economic and political elites
are sufficiently unified to resolve their conflicts, their suspicions, and their
displeasure with the political officials? Will this be possible especially when
insti tu tionalized and stable mechanisms of control (such as those which secure
parliameutary dernocracy in other latitudes) do not exist? Or do you think I am
being too optimistic tliat their internal contradictions will contribute to the
destruction of the present regirnes of force?
A second and briefer question: Is it legitimate to deduce from your speech
that both the working class factions employed in the sectors of greater produc-
tivity and their union rcpresentatives are, let us say, "condemned" to reproduce
a system whch in the short run apparently brings them benefits? In other ,
words, to what extent would you subscribe to Fanon's thesis of twenty years
ago for Latin Amrica? I would very much like to know your opinion on this,
and the reasoning on whch it is based.
My third question is also an invitation for more words. As you know, many
sectors of the Latin American left have been formulating with different styles
and perspectives many of the criticisms contained in your speech-criticisms
which Arturo O'Connell correctly asked you to discuss in terms of capitalism
tout court and not only just peripheral capitalismo This left has al so criticized
the role played in Latin America by international bureaucracies which have
mainly functioned as intellectual mandarins conducive to the reproduction of
the same systern that has to be transformed.
Referring to the process of change advocated by your speech, what role do
you attribute today to these bureaucracies? Are there international organiza-
tions that are willing to subscribe to an analysis such as yours? If they exist,
do you think that they can engage in dialogue and action with the contemporary
Latin American governments, or should they direct themselves frankly to other
sectors of the population? Would that be equivalent to cornmitting suicide, and
if so, are there not sorne suicides that are worth it in the long run?
Rml Prebisch
DI. Nun's questions are very incisive. I will begin with the last one. While
international organizations have an important range of actions, they also have
clear limitations. If they penetrated to the core of the system, as I try to do,
they would bring about very serious reactions which might jeopardize their very
existence.
For example, ECLA has its limits, and I had reached them. While being the
32
,,;(.
functionary who had taken perhaps the greatcst lib crties, there was a moiuent
when I could go no further becausc I would have provoked a fight on two
fronts: one in the centres, and auother in the periphery. We liad a difficult
struggle, particularly with the United States, which in the beginning wanted
ECLA to disappear. Later there was a certain rapprochemcnt, particularly during
the Kennedy period, which exists again now under Carter , What is there to do?
Here lies the importance I attribu te to academic centres which, even though they
may receive some goverrunent support, are characterized by their great intellec-
tual freedom. Centres in Canada, such as CERLAC which brought us together,
and those in the United States and Europe can play an impor tan t role in the
North-South Dialogue without thc fatallimitations cncountcred in the contcxt
of the United Nations.
As to the other questions of DI. Nun, the first one also appears to be very
interesting and intriguing because of its complexity. It is very curious what is
happening in certain cases when force is used in Latin Amrica. In the beginning,
the enterprises approved of the opportunities presented to them because the
regular functioning of the system had been secured. Yet in sorne cases what has
taken place is a phenornenon of capitalist expropriation of enterprises. The
financial sector expropriates enterprises which have been in business in some
cases for many years. This sector is used to reaping the benefits from what is
called economic lberalism, particularly through taking advantage of the spread
in interest rates.
The notion that interest rates have to be raised to their reallevels permits
the proliferation of financial establishmen ts. They make tremendous profits
because even when they pay hgh interests to those called "savers" - which do
not always save - they add a very ample margin on top of these in terests when
providing loans to enterprises for working capital. lt is a way of appropriating
the profits of enterprises and bringing the enterprises to critical situations in
which they must surrender themselves to this new financial power. The unfor-
tunate entrepreneurs, who for better or for worse ha ve struggled for a long time,
realize overnight that bankers, those who have pretended to resolve the problem
of order in the system, are actually exploiting thern so as to provide great
profits to the financial sector.
In sorne cases this policy is even more refined. While the cost of working
capital is raised enormously, custom du ties are lowered. This is an additional
instrument for capitalist expropriation. It is very curious what is happening:
It would merit a sociological investigation that I hope DI. Nun could undertake
because it is unique to Latin America. We have seen the exploitation and transfer
of incomes through traditional inflation, but what we are witnessing now are
different phenornena.
DI. Nun's third point refers to the working class. There is no difficulty as
long as its union and political power permits it to obtain a more or less sizeable
part of the incrernent of the surplus. But when the crisis of the system, the
inf1ationary spiral, and the use of force occur, what breaks is the weakest link
in the chain, What results is a reduction of real wages. This not only facilitates
high income groups maintaining their level of consurnption, but also frequently
pays for public expenditures which have grown beyond measure. This expansion
in public expenditures is in sorne cases due to the extraordinary growth of
military expenditures, particularly when force is being used. Or it is because the
state - reflecting the play of power relations in matters of incorne distribution-
has spuriously absorbed that part of the labour force which the insufficient
growth of the system could not absorb.
33
1 Then , the well-organzed unions, which have managed to share in the
benefits from progress 01' lo defend their wages, liave to pay an exhorbitanl
price when their union and political power is suppressed , In some cases, they
contribute a major part 01' the accumulation because ther real incomes are
so reduced as to permit the system to accuinulate al an increased rateo Accord-
ingly, accumulaton need not take place al the expense 01' consumption by the
few, but al the expense of consumption by the many. These unions which now
exist only nominally , 01' are lotally suppressed, llave to recognize that in the
long run the workings of the system are not in their interest-even though at
certain stages in their development it had given them apparent advantages-and
that they are the enes who have to foot the bill with wage reductions and with
loss 01' political freedom. This 1 expecled to be the case and have verified with
Argentine labour leaders.
Ths leads me to beJieve that in lime it will be possible to reach a poJitical
consensus, allowing the surplus to be used 1'01' social ends. But to use the surplus
socially one need not fall into the lrap referred to by the anecdotal Khrushchev
when he said: "One must not divide the bear skin before getting it." 1 would
respond that we cannol use the surplus 1'01' social ends before having it in our
hands - which means transferring it from other hands, This is a most important
political problern which 1 would not want to discuss now because 1 arn still
working on it.
Louis Lefeber'
Dr. Prebisch has raised issues which are very close lo problerns 1 llave been
concerned with 1'01' quite sorne time. 1 fully agrce that 1'01' development wth
social justice a fundamental social and economc lransformation will be required.
However, it is not al all clear how, and at what rate, a fundamental social and
economic lransformation can be obtained , We do not have a theory 01' social
transforma lion.
In this connecton 1 have two sets 01' questions. First, is it possible to
chango the economic and social structure wthout major econornic and political
shocks lo the systern? Given the current economic structure, urban capital
serves the interests 01' the consumer society, and organized urban labour fits
in with this same capital organizalion. This situation is incompatible with
economic growlh combined with social justice. As Dr. Prebisch pointed out, it
is oriented toward consumerism, ranging from automobile praduction to con-
sumer durables and other things 01' inlerest to the middle and higher income
groups. The enterprises serving these markets have stayed in business because
01' a skewed income distribution, and because subsidies and protection have
made it possible 1'01' lhem to do so. 11' the system were to be changed, the conse-
quences 1'01' the urban econorny would be significant. In the transition to an-
olher economic structure capable of satisfying the needs 01' lower income
groups, there would have to be some unemployment 01' capital, underutilization
01' plants, and unemployrnent 01' urban labour. What is there to cushion the
repercussions 01' lhe required transformation 01' the economic slructure? And
if there is no cushioning, why should organized labour wanl to support any
move to reslruclure the economy?
Dr. Prebisch implied that organized labour will have lo undersland where
its inlerest lies in lhe long runo But, will urban capital also understand where
its long term inlerests lie?
34
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In uur times therc llave bcen sume fundamental trunsformations, funda-
: mental rcstruc turing uf economies, such as the lwo contrasting cases 01' Japan
f and China. In their own and in different ways, they both underwent a revoluton.
t Howevcr, wliat is significunt is that in both cases the revolution was preceded by
. historie events which had fundamentally shaken their respective social struc-
,
. tures. Thc war was a very important factor in this. Would an undefeated Japan
~ have turned from an econorny dominated by an imperialist, feudal military-
l
industrial complex into a market and consumption-oriented nation? And would
~ the Chinese revolution have succeeded without the collapse of the old social and
. econornic order that was caused by the Japanese invasion and the war? What
" is there on the Latin American horizon which can shake up the existing order
so as to make a fundamental transformation possible?
The second set 01' questions refers lo the economics 01' meeting basic needs.
When we talk about it, we frequently forgel that there is a difference between
need and demando In the market economies, needs are satisfied only through
dernand and the basis 01' deruand is purchasing power. How and where wiJl those
. whose basic needs are lo be satisfied gel the purchasing power? By direct income
transfers? We know that the directly transferable margins are relatively small ,
There are ways in which transfers can be effected , but, they woulcl cut critically
into the investible surpluses. 01' could it be through the labour market , with
mnimum wages which guarantee minimurn income earning opportunities 1'01'
employed worker s? We know that the labour market is not able lo elear the
labour surplus, even with the going low wage rates; the more we enforce legis-
lated mnimum wages in the market economies, the lower their capacity to
absorb the unernployed. Therefore, is it not the case that sorne different mecho
anisrn would be needed, a mechanism which , at least within those industrial
market organizations we are acquainted with, does not exist as yet?
Ral Prebisch
I am not in a position to forrnulate a political strategy 1'01' changing the
system. However, 1 have no doubt that to change the systern we must lake the
surplus frorn private hands in order to divide it between accumulation and the
correction of the great income disparities. This is the essential problem. As I
said lhis morning, you cannot solve the problem of equity in the periphery
without this very drastic operation that requires a fundamental change in lile
slructure ol' political power. Polilically, we need a democralic movement for the
lransformation 01' the system. The lransformation would be impossible wilhou t
weakening, lo say lhe least, lhe poJilical power 01' the high income groups. 11'
you like to enter into rhetoric, you may can lhat a revolution. 1 prefer not to
use such terms; bul if somebody uses the term, 1 will not reject it. This is my
position.
Now, how to do this? I don't think thal you can make this transformalion
under nODllal political conditions. As 1 tried to explain this morning, whal may
open lhe way is lhe facl that the system is bound to enler inlo a crisis sooner 01'
later, and crises in general give opportunities to do what is very difficult to do
in normal times. Dr. Lefeber mentioned a moment ago the need for a lheory 01'
transformaliun. I fully agree and I lhink thal we should pursue it. I am in lhe
pracess ol' working on il and hope lo be able to put it to a fertile discussion.ln
the mean time I can anlicipale some 01' the lines 01' my argument.
First ol' aH, there are only t\Vo \Vays 01' dividing lile surplus between accu-
mulation and correction -of social disparities. The firsl is transferring aH the
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37
DI'. Prcbisch has mentioned the necessity of building consensus as a WJY ro
eliminara the worst forrns of poverty and inequality in Latin America. In tlie
logic of capitalist development , conscnsus is built upon growth. Considering
this, is it possible to build such a consensus in Latin Amrica whcn thc possi-
bililies for growth are severely Iimited? Isn't it t rue that the closest we ever gol
lo consensus was stalemate and inflation? In fact, inflation providcd (he basis
for a peculiar type of consensus.
A related point: you mentioned that the model of repression in Latin
America has severe limitations, However , does no1 the logic of the system
itself represent at least some justification for repression? The reprcssion is a
lemporary measure to increase accumulation and, therefore, bring about
growth. Of course, we know that the growth is not trickling down. That leads
me to my question: is it possible to achieve such a consensus without the same
patterns of growth which occurred in Western Europe and North Amrica?
for it opened the field to new ruen froin the saine entcrprises, men who wan ted
to build and who were full of energy. There was a system of uuemploymcnt that
many of us would advocate in which unernploycd people frorn the arrny and
the navy liad to start working for thernselves. Sony started with a group 01'
officers who were familiar with electronics. Through this big transfer of human
capacity from destruction to construction, there was a real revolution in Japan.
I don't think that this type of revolution is accessible to our countries - we
have to look for other ways of transformation. But rernember , you cannot make
anomelette without breaking eggs. .
Jorge Ne/'
Ral Prebiscli
f"
1 was speaking about the need for a social use of the surplus not only Ior
direct redistribution, but primarily for increasing the rate of capital accuruula-
tion. Redistribution would be achieved soLidly and progressively in this way: the
forty percent of the population with very low pro ductivity from semi-capitalistic
; or pre-capitalistic techniques, would be brought gradually into activities of
!l;:, increasing productivity due to capital accumulation.
In my view lhis is the 1l1ain solution uf the problc1l1 01' incol1le clispari(y. By
i,' an immediate redistribulion of the surplus you may improve lhe situation of
lhe masses, but you wil! not fundal11entaily solve lhe problel11 of basic needs.
Considcring the high rate of population increase and other problel11s, the only
is to increase the rate of capital accumulation. That is, we have to
the rate of growth of the economy, but by promoling a different
of production and of the abour force.
These are the dynal11ics I have in mind. Wc should not try (o arrive al the
fisame econol11ic and social constellation which prevails in the big industrial
We should not try to achieve the same resuIts because of the great
l,gsocial defecls of capitalist developl11ent. The type of civilization the cenlres
"s.are devcloping is based too much on material interesls. This is a matler of
,i;-great concern everywhere. We should not have the centres in l11inc! as a para-
Jdigm; instead we should have our own conception of economic, social and
tcuIturai structures. We do not want to imitale bul lo start new types of dcvelop-
ment.
36
rneans 01' production to the state ; the other is reaching a political conseusus in a
dernocratic framework , We know very well that the first means a political regime
which is quite different from one which prometes individual freedorn and polit-
cal freedom-the most important benefits of western civilization. lt may
more expedient to do the dividing tluough a fully controlled cconomy ; however , .
full control of the economy means political control of every individual, and
social control even in many manifestations of literary and artistic life. Naturally,
Ido not syrnpathize with that.
It would also mean the abolition of the ruarket , which I cannot support.
I must underline the importance of the market , not so much for economc as
for political reasons. The political importance of the mark et is enorrnous.
Ecouomically , it may becorne possible to arrive at alternative organizations
with the help of cornputers and public opinion polls. However , in my view
what is more important is the politicai meaning of the market. We could
trunsform the old type of cnterprise , and establish a real independent and
autonOI11OUS one , This new enterprisc could be independent both frorn the
state aud frorn the high income groups which concentrate in their hands a
major proportion of the means of production. Sorne type of self-management
is needed. Once the problerns of accumulation and income distribution are
solved, the marke t ruay function in a rather efficient way.
Let us not attribute to the market the cause of incoine disparity. If the
market does not function with a sense of equity , it is due to the frecdorn of
incorne distribution, and to the fact that the market does not solve the problem
of capital accumulation. I think it is possible to build a systern which combines
essential principIes of socialism relating to capital accumulation and incorne
distribution with the sense of incentive essential for productivity. We can build
this structure by cornbining certain elements of socialism, political liberalism,
and economic Iiberalsm. This will establish on a solid basis the advance of
democratic liberalism.
Consider the options. If you agree that the present syst eru is not working
welI either from the econornc point of view (the lack of distributional justice)
OI from the political point of view (the suppression in the crisis of the system)
we economists and people concerned with development can offer only two
extremes. The first is econoinc Iiberalism, as is the case in some countries of
Latin Amrica. The second is a quite different economic and political system
that rneans the abolition of the market, and the blockage of the type of political
evolution we would like to have. Let us have a third option.
Now, DI'. Lefeber has mentioned the case of Japan. I visited Japan several
times and had the opportunity to talk with many kinds of people. What im-
pressed me was the austerity of the high income groups. Due to their austerity
and to the austerity of the illtennediate income groups, Japan could devote a
third of its gross product to capital accumulation. Accordingly, it is really
ridiculous when Latin Al1lericans claim they are growing like Japan. Nonsense.
They cannot grow like Japan because they don't save and bccause they don't
accumulate as Japan does. FurtherOlore, if you compare Japan today with Japan
before the Second World War you will see that the disparities in income and
consumption have been gradually decreased in a very impressive manner. Japan
before the War had spent seven percent of its product on military expenditures.
The suppression of the army has facilitated capital accumulation. In Japan it
was a foreign arOlY of occupation which solved t!le problem o land tenure.
Furthermore, General MacArthur, for obvious poltical reasons, decided to
elilllinate the leaders of the big enterprises in J apan. This was very imporlanl
l. I a m grut eful to Mr. Adolfo Guerieri. Te chnical Secretary 01' the ECLA
Review, f'or corre ct ing the transcribed version 01' both my presentation and rny answers
to que stions.
2. See Ral Pr eb isch , "Critica al capitalismo periferico," Revista de la CEPAL.
No. 6 (Primer semestre de 1976).
3.At t he time 01' t his presentation, Director, Aid and Development, Po licy
Branch , Canadian International Development Agency (CIDA); currently Director, Latin
American Prograrnrne , International Fund for Agricultural Development (IFAD), Rome.
4. At the time 01' t!lis presentalion, Secretary General 01' the [<'acuitad Lati-
noamericana de Ciencias Sociales (FLACSO).
S. Director. United Nations, ECLA, Washington Office.
6. p1Ofessor, Department 01' Political Economy. University 01' Toronto.
7. I'rofessor 01' Economics, York University.
8. l'1Ofessor 01' Political Seience, University 01' Guelph.
9. Professor of Economics, Pontificia Universidad Catlica, Lima.
veloping countries, mensures t akcu only by developed countries would not have
great econoniic and social imnact in the periphery. International discussicn of
these problems has a limit , and governments 01' developing countries are not
willing to go very far in this discussion, Other means for elaborating ideas and
pursuading people have to be found ,
While 1 was an international public servant I could not speak in words 1
am using today and will use even more strongly in the fu ture , 1 could not present
a report to governments preaching the need for drastic internalmeasures becausc
they would have responded drastically by going after my head instead of ac-
cepting rny ideas. Now that I have no further intellectual or political restrictions,
I am carefully elaborating some new ideas which 1 will try to present very cle arly
in a new vin tage.
NOTES
f
J
i
1
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Ral Prebisclz
It has bccn a pleasure to listen to Dr. Pre bisch: for me it was the first lime.
At the sanie tiinc , as 1 rccall the se past years, 1 believe that we in Latin Ame rica,
even the younger economists, have been looking at Latn Ame rica through the
Prcbisch eycs for so long that wc have very different Prebisch vintages - the
late forties, fifties, early sixties, early seventies - and we still continu to have
them. In our understanding 01' Latin Amrica, our scientific view mixes with a
personal view 01' what Dr. Prebisch thinks. Therefore, my question wiJI not be
purely acaclemic, and I would like you to forgive me for asking publiely sorne-
thing which also has a personal elemen t. r
Your personal views have been , and continue to be, very influential. Cense- i,
quently 1 think that the dependency theory has not been sufficicntly critical 01'
you and 01' your new theories - those that go beyond the basic ambitions 01'
your early writings 01' the late forties and fifties. What 1 find when 1 read the
several vintages 01' Prebisch is that Prebisch has been calling for a new order for
perhaps thirty ycars or more. But the Prebisch expcctations for a new order
have been formed in the international worId rather than in Latin Amrica.
1 want to relate this to another question that Dr. Lefeber and others asked
you. When you are asked what kind 01' transformation, what kind 01' change
should we have for transfonning our econoniies, your answer is insufficient or
at least unfinished. In my reading 01' your works 01' the last twenty or twenty-
five years, am 1 right to think that your expectations have constantly been
greater in the international world than in Latn Amrica? Your calls for trans-
formation in Latin Arncrica seem ruther abstract to me. Who in Latn America
is meant to hear them? You do not seem to believe very much in unions and the
rest 01' the pcople , Is it that you believe in the national bourgcoisie? We interpret
you sometimes that \Vay. Then again, \Ve in Latin America think that when you
are cal!ing for action, and for transfollllation, YOll encourage revolution. The
identity of the economic agents 01' transformation and the social class respon-
sibIl' for transformation in Latin America is ambiguous and insufficiently de-
scribed - and I haven't found clarification in your books. Who is cond ucting
the transformation is related to what kind 01' transformation is going to be made.
Having no elear answers to these qllestions, I have confinned my general and
long-time impression that your expectations are greater in the international
world than in the. national realm of the Latin American world i tself.
Juvicr Iguiii: Q
Well, you are referring to a different vintage, and can expect the new wine
I am currently trying to produce. But you mentioned several other aspects 01'
my intellectual activity, including whether I have been calling for a new world
economic order or a new internal economic order. In my first UNCTAD report
in 1964, there is a ful! chapter discussing the nced for deep ongoing internal
reform in the system. But the governments 01' the centre had a different, nega-
tive attitude to the requirements 01' the developing countries, and the represen-
tatives 01' governments 01' developing countries did not wish to promote a
discussion 01' ther own internal economic and social problems. In my second
report, "A New Strategy for World Development," 1 argued that world develop-
ment must be a combination 01' convergent meaSllres taken by both developed
and developing countries. Without a corresponding series 01' measures by de-
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