DEPENDENT ACCUMULATION and UNDERDEVELOPMENT by the Same Author

DEPENDENT ACCUMULATION AND UNDERDEVELOPMENT By the same author

CAPITALISM AND UNDERDEVELOPMENT IN LATIN AMERICA LATIN AMERICA: UNDERDEVELOPMENT OR REVOLUTION LUMPENBOURGEOISIE: LUMPENDEVELOPMENT SOCIOLOGY OF DEVELOPMENT AND UNDERDEVELOPMENT OF SOCIOLOGY ON CAPITALIST UNDERDEVELOPMENT WORLD ACCUMULATION 1492-1789 DEPENDENCE AND UNDERDEVELOPMENT: LATIN AMERICA'S POLITICAL ECONOMY (with Dale Johnson and James Cockcroft) MEXICAN AGRICULTURE 1521-1630: TRANSFORMATION OF THE MODE OF PRODUCTION REFLEXIONES SOBRE LA CRISIS ECONOMICA ECONOMIC GENOCIDE IN CHILE AMERICA LATINA: FEUDALISMO 0 CAPITALISMO? (with Rodolofo Puiggros and Ernesto Laclau) ASPECTOS DE LA REALIDAD LATINOAMERICANA (with Orlando Caputo, Roberto Pizarro and Anibal Q.uijano) Q.UALE 1984? (with Samir Amin and Hosea Jaffe) CRISIS: THE WORLD ECONOMIC SYSTEM TODAY REFLECTIONS ON THE WORLD ECONOMIC CRISIS DEPENDENT ACCUMULATION AND UNDERDEVELOPMENT

Andre Gunder Frank © Andre Gunder Frank 1978

First edition 1978 Reprinted 1981, 1982

Published by THE MACMILLAN PRESS LTD London and Basingstoke Companies and representatives throughout the world

British Library Cataloguing in Publication Data

Frank, Andre Gunder Dependent Accumulation and Underdevelopment 1. Underdeveloped Areas 2. Underdeveloped areas - Saving and investment 3. Saving and investment I. Title 330.9'172'4 HC59.7 ISBN 978-0-333-23951-3 ISBN 978-1-349-16014-3 (eBook) DOI 10.1007/978-1-349-16014-3

The paperback edition of this book is sold subject to the condition that it shall not, by way of trade or otherwise, be lent, resold, hired out, or otherwise circulated without the publisher's prior consent, in any form of binding or cover other than that in which it is published and without a similar condition including this condition being imposed on the ~ubsequent purchaser To the Memory of nry student, friend and comrade in Chile

DAGOBERTO PEREZ VARGAS who left our theoretical concerns behind to fight and die heroically to end accumulation through dependence, underdevelopment and exploitation Contents

Preface xi Acknowledgements XVIII

I Introductory Questions 1 1. The Question of'Internal' v. 'External' Determination 2 2. The Question of Periodisation 7 3· Questions of Production and Exchange IO

2. World Capital Accumulation, Trade Patterns and Modes of Production, 1500-1770 13 1. Trade Triangles 14 2. Differential Transformation of Modes of Production in Asia, Africa and Latin America 1 7

3 On the Roots of Development and Underdevelopment in the New World: Smith and Marx v. the Weberians 25 I. On the Weber Thesis 25 A. Significance of the Weber Thesis 25 B. The Protestant Ethic and the Spirit of Capitalism 28 C. Unorthodox Weberian Survivals 30 2. On Adam Smith and the New World 33 3· On Karl Marx and Capital Accumulation 38 4· On World Accumulation, International Exchange, and the Diversity of Modes of Production in the New World 43 A. Mining Economies in Mexico and Peru 45 B. Yeoman Farming in the Spanish Possessions 4 7 C. Transformation: The Case of Barbados 50 D. The Plantation System in the Caribbean and Brazil 52 E. The U.S. South: Slave Plantations v. Farming 55 F. The U.S. North-east: Farming v. Foreign Trade 58 G. Epilogue-Delayed by Two Centuries 68 vii Vlll Contents 4 The Industrial Revolution and Pax Britannica, I no- I87o 70 I. Metropolitan Capital Accumulation and Industrial Revolution in Europe 7 I 2. Bourgeois Industrial Policy and the New International Division of Labour 7 5 3· North America 79 4· Latin America 82 5· India 87

5 That the Extent of the Internal Market is Limited by the International Division of Labour and the Relations of Production 92 I. On Trade 93 A. On Classicals and Reformers 93 B. On Comparative Advantage and Free Trade 94 C. On Deteriorated Terms of Trade IOI D. On Unequal Exchange I03 2. On Markets IIO E. On Dualism IIO F. On Staple Theory II2 G. On Linkages Il3 H. On Developing the Internal Market I2I I. On Infant Industry and Import Substitution I28 J. On the Division of Labour and Technological Gaps I30 3· On Production and Accumulation I34 K. On Economic Sectors and Classes I34

6 Imperialism and the Transformation of Modes of Pro- duction in Asia, Africa and Latin America, I870-I930 I40 I. Rosa Luxemburg on Imperialist Struggle against Nat- ural and Peasant Economy I42 2. Imperialism in Asia I46 3· Imperialism and the Arab World I 54 4· Imperialism and Africa I 57 5· Imperialism in Latin America I64

7 Multilateral Merchandise Trade Imbalances and Uneven Economic Development I72 I. Patterns of World Trade Imbalances I73 Contents IX

2. Colonial and Semi-Colonial Capital Contributions to Metropolitan Accumulation and Overseas Investment 189 3· Statistical and Methodological Appendix 199 Bibliography 209 Index 221 Preface

This book is an attempt to approach an explanation of under• development through the analysis of the production and exchange relations of dependence within the world process of capital accumulation. Hence the choice of its title. We distinguish three main stages or periods in this world embracing process of capital accumulation and capitalist develop• ment: mercantilist (I500-I77o), industrial capitalist (I770-I87o), and imperialist (I 870-I 930). Each of these periods is examined in a historical chapter that first sets out important developments in the world process of capital accumulation, concentrating especially on the 'exchange' relations between the metropolis and the periphery, and then goes on to analyse the associated transformation of the dependent 'internal' relations ofproduction and the development of underdevelopment in each of the principal regions of Asia, Africa and the Americas. Each of these 'historical' chapters is followed by a 'theoretical' one which discusses an important problem of socio• economic theory (and of historical fact) that arises out of each of these periods: why different parts of the New World of the Americas -specifically the mining and plantation regions on the one hand and the north-eastern colonies in North America on the other-took different paths of underdevelopment and development during the mercantilist period; why the now underdeveloped countries did not experience the development of an internal market similar to that of Western Europe and the new settler regions in North America and Australia during and since the period of industrial capitalism; and how the international division oflabour• and specifically the mostly neglected merchandise export surplus from the now underdeveloped regions-contributed to uneven world capitalist development and to capital accumulation in Western Europe and to investment by the latter in the United States, Canada and Australia. The bulk ofthe text was written in Chile in I969/70 and most of the remainder was revised there in I972/73· The following xi Xll Preface circumstances influenced its preparation, and the reader should keep them in mind. The author had previously contributed to the development of the 'dependence' approach to underdevelopment with his Capitalism and Underdevelopment in Latin America (written in 1963-65 and published in various editions in 1967-71, hereinafter referred to as Capitalism) and in other writings. In 1968/69, I sought to extend this 'dependence' approach to the study of other areas as well by preparing/editing with Said A. Shah a bulky Reader on Underdevelopment, emphasising dependence in Asia, Africa, the Arab World and Latin America. The first and second drafts of the present text were written in October 1969 and February 1970 and intended as the theoretical introduction to the first- historical• volume of the Reader (while a second volume on contemporary underdevelopment was in preparation). This emphasis on de• pendence and its analysis in the historical experience of each of the major regions of the 'third world' still marks this book as published today. At the same time, the analysis of dependence by the present author and others had become the object of increasing criticism. Critics argued that our approach ( 1) emphasised 'external' ex• change relations to the virtual exclusion of 'internal' modes of production; (2) that it did not take adequate account of the differences in various parts of Latin America and the world or of different stages of development; and (3) that it did not really achieve a dialectical dynamic analysis of the worldwide historical process of capital accumulation in which both metropolitan economic development and dependent peripheral underdevelop• ment should be analysed as part of a single process. The most common criticism was the first one, which was reiterated in a critique of the second draft of the present text itself by Giovanni Arrighi. Samir Amin, who at the time was writing his own Accumulation on a World Scale criticised the second draft as well for failing to differentiate and analyse the major stages of capitalist development adequately (and for 'seeing everything through Latin American eyes'). The third criticism was most particularly the author's own and reflected my conviction, already expressed in the Preface to Capitalism, that it is necessary to study the historical development of the single world capitalist system. These inadequacies and critiques led to the preparation in july 1970 of a third qraft (comprising 160 single-spaced pages that incorporated material from the previous qrafts), in which I Preface Xlll attempted to face all three of the above critiques and challenges simultaneously: ( 1) To analyse dependence through the 'internal' relations if not the modes of production, accounting for their mutual determination of and relations to the 'external' relations of exchange, particularly though not exclusively with the metropolis; (2) to examine the 'internal' determining dynamic of the historical process of capital accumulation or de-accumulation and its distin• guishable stages of development or underdevelopment; and (3) to place all these elements within the single historical process of the development of a single world capitalist system. This meant emphasising the process of capital accumulation but so far as possible examining its different modalities in the various parts of the world simultaneously at each stage of the single world historical process, instead of doing the regional or country histories serially one after the other, each only tangentially related to the process as a whole and not at all related to each other, as I had done in Capitalism, in the Reader and in the first two drafts of the present work. In doing so, of course, the original intention to 'introduce' the Reader was left behind; and the length and scope of the present book was qualitatively changed in its 1970 third draft. This draft, then entitled 'Towards a Theory of Capitalist Underdevelopment', and the resultant present book as well thus represent an attempt to transcend the 'dependence' approach, but without yet abandoning it or the focus on underdevelopment, and to proceed on towards the integration of dependence and under• development within the world process of accumulation. Beginning with the discussion -in part reproduced here in the Introduction• of the theoretical problems posed by this theoretical transition, the third draft sought to proceed historically from one stage of world capitalist development to another and through the analysis of the relationship between production and exchange relations sought to examine on the one hand the differential contributions of each of the major world regions to the world process of capital accumulation during each of its major stages of development, and on the other hand to analyse the underdeveloping consequences of this partici• pation in world accumulation for each of the major regions of the now underdeveloped 'third world'. This attempt necessarily was only very partially if at all successful (although some readers of the manuscript, for instance Erne~.t Mandel writing in a 'postface' to a new edition of his TraU, regarded it as a great advance-perhaps over this author's previous XIV Preface lag). The intention to revise the third draft to render it minimally satisfactory was frustrated by other concerns in Chile after Allende's electoral victory in September I970. Later, partial revisions advan• ced in two different directions. One direction was to expand and deepen the historical analysis by also examining the cycles of accumulation that are apparently identifiable even in pre-industrial times and examining the relations or related simultaneous partici• pation of the various parts of the world at each point in time or at least in each phase of each cycle. This historical work, undertaken mostly in 1973, expanded the twenty-odd pages of the present Chapter 2 into more than 250 pages of new text. This work, which had been intended to reach the present, was cut short by the I973 coup in Chile and then by lack of the author's research materials; and has now become the book entitled World Accumulation 1492- qBg. The other line of revision of the I 970 third draft was to prepare three long articles, ea~h substantially revised in I 972/73 and since, so as to treat certain theoretical problems that had not been satisfactorily resolved in the I 970 manuscript. The first of these, here Chapter 3, 'On the Roots of Development and Underdevelop• ment in the New World: Smith and Marx v. the Weberians' is an attempt to answer why, in colonial times, different New World colonies had already taken off in different directions ofdevelopment and underdevelopment. By examining successively and compara• tively the combinations of 'internal productive relations' and 'external exchange relations' of the mining economies of Mexico and Peru, the yeoman farming areas in the Spanish possessions, the plantation systems in Brazil, the Caribbean and the (later) U.S. South, and New England, the argument emerges that the com• bination of 'colonial' productive and exchange relations made for the beginnings of the development of underdevelopment and that the absence of these through 'benign neglect' was necessary but not sufficient to permit the development experienced by New England but not by other yeoman societies. What further distinguished New England was its particular 'semi-peripheral' intermediate (as per Wallerstein) or 'proto-subimperialist' insertion and participation in the process of world capital accumulation, associated with its particular role in the triangular trade, which permitted an important merchant capital accumulation and its subsequent investment in industrialisation in the New England and Middle Atlantic colonies. The same chapter also offers a reading of Adam Preface xv Smith (as well as of Karl Marx) that supports a major portion of this argument and at the same time rejects or revises the argument, which has been traditional from Smith to the United Nations Commission for Latin America (CEPAL), but including also many historians of the United States, left and right, as well as previous writings of the present author, to the effect that the development of the internal market was related to the relatively equal distribution of income and relative political democracy supposedly existent in yeoman farming societies. The title of the second theoretical essay (here Chapter 5) is a play on the words of Adam Smith's famous dictum: 'That the Extent of the Internal Market is Limited by the International Division of Labour and the Relations of Production. This essay also revises the present author's earlier stand (in Capitalism and earlier drafts of the present work) about the role of the distribution of income in the development of the internal market and poses the following questions: what, if not the distribution of income, does then determine the development of the internal market, and why did it develop at some times and places and not in others? What are the relations between the production and export of raw materials and the development of an internal market and domestic production of manufactures and capital goods? To answer these questions, I first examine critically some unsatisfactory classical, neo-classical and reformist international trade theses on comparative advantage, free trade, and the terms of trade; then, by discussing the extent and formation of the internal market in terms of the 'dualism' thesis, examine the staple theory, linkages, infant industry and import substitution policies, technological gaps; and finally I examine the relation of sectoral divisions and class interests in the process of capitalist production and accumulation. This discussion of the formation of the internal market transcends the historical account of pre-industrial development and refers as well, indeed principally, to development experiences and problems that have arisen during the nineteenth and twentieth centuries. The third long theoretical essay, here Chapter 7, on 'Multilateral Merchandise Trade Imbalances and Uneven Economic Develop• ment', examines the system of international trade developed under classical imperialism from 1870 to 1930 by focusing not so much on the balance of payments, including service payments, as is more orthodox, but on the pattern of real merchandise trade and how its imbalance-that is how the real export surplus of the now XVl Preface underdeveloped regions of the world to its now developed ones - contributed to the development of the latter and the underdevelop• ment of the former. These three long essays or chapters thus treat some of the theoretical problems of capital accumulation, de• pendence and underdevelopment posed in the 1970 manuscript and reproduced in the introductory Chapter 1 that follows. The global historical account and the examination of the transformation of the modes of production in Asia and Africa, and in Latin America since Independence, does not, however, explicitly appear in these three essays/chapters. Therefore, each of the above• mentioned 'theoretical' chapters is preceded by a 'historical' one (re-incorporating the historical material from the 1970 manu• script), which sets out the general historical context for the theoretical analysis and relates it to the transformation of the modes of production in each of the major world regions-including in part the European metropolis and North America-in each of the major stages of world capitalist development: the Mercantilist Period, •soo-18oo (Chapter 2), the Industrial Revolution and Pax Britan• nica (Chapter 4), and the period of Classical Imperialism to 1930 (Chapter 6). These chapters are shorter because part of the historical material is already in the 'theoretical' chapters and because the revision of the remaining historical material expanded so much as to become-as noted above-a separate book covering the first of the above periods alone. I hope that this brief historical review can none the less serve to re-establish the unity of history and theory that informed this entire project from its inception. I gratefully acknowledge the vital contribution of Said Shah to this book and to extend this acknowledgement also to many others who contributed their critiques along the way but who probably would not wish voluntarily to assume or to be saddled with any responsibility for what is written here. Among these I have already named Giovanni Arrighi and Samir Amin, and I must add Ernest Mandel, Paul Sweezy, Harry Magdoff, Urs Miiller-Plantenberg, and particularly my friends and colleagues at the Centro de Estudios Socio Economicos (CESO) ofthe University of Chile, Ruy Mauro Marini, Theotonio dos Santos, Jaime Torres and others, as well as many of my students in Chile-the still living, whom it is better not to name under present circumstances, and the others, particularly my friend Dagoberto Perez, tragically assassinated by the Junta on 16 October 1975 while fighting heroically to end accumulation through dependence, exploitation and under- Preface xvn development. May his cause and his memory live.

The following chapters have previously been published in the same or in a similar version in the following serial publications: Chapter 3 in the International Review of Sociology (Journal of the International Institute of Sociology, Universita degli Studi di Roma) Rome, 11 Series, Vol. x. No. 2-3, August-December 1974, and in a revised form in Theory and Sociery (Elsevier Scientific Publishing Company) Amsterdam, 2, 1975.

Chapter 5 in the Economic and Political Weekry, Bombay, Vol. XI, Nos. 5-7, Annual Number, February 1976. Chapter 7 in the Journal of European Economic History (Banco di Roma) Rome, Vol. 5, No. 2, Fall 1976. The author gratefully acknowledges the institutional and financial support of the Max Planck Institute in Starnberg, Germany and the German Foundation for Peace and Conflict Research (DGFK), who enabled him to revise earlier manuscript drafts and to prepare them for publication as this book.

Frankfurt A.G.F. Acknowledgements

The author and publisher wish to thank the following who have kindly given permission for the use of copyright material: George Allen & Unwin Limited for a table from Forry Years rif Foreign Trade, by Paul Lamartine Yates Augustus M. Kelley Publishers for an extract from Selections from the Economic History rif the United States I76s-I86o, by Guy Steven Callender Liverpool University Press for an extract from Studies in British Overseas Trade I87o-19I4, by S. F. Saul W. W. Norton & Company, Inc., for a diagram from The Commerce of Nations, by J. B. Condliffe Random House, Inc.,. for an extract from The Wealth of Nations: An Inquiry into the Nature and Causes rif the Wealth rif Nations, by Adam Smith Routledge & Kegan Paul Limited and Monthly Review Press for an extract from The Accumulation of Capital, by Rosa Luxemburg Peter Smith Publishers, Inc., for an extract from History rif Agriculture in the Southern States to 186o, by Lewis C. Gray

xviii Epigraph

The discovery of America, the rounding of the Cape, opened up fresh ground for the rising bourgeoisie. The East-Indian and Chinese markets, the colonization of America, trade with the colonies, the increase in the means of exchange and in commodities generally, gave to commerce, to navigation, to industry, an impulse never before known, and thereby to the revolutionary element in the tottering feudal society, a rapid development. ... Modern industry has established the world-market, for which the discovery of America paved the way. This market has given an immense development to commerce, to navigation, to com• munication by land. This development has, in its turn, reacted on the extension of industry; and in the proportion as industry, commerce, navigation, railways extended, in the same proportion the bourgeoisie developed, increased its capital, and pushed into the background every class handed down from the Middle Ages. We see, therefore, how the modern bourgeoisie is itself the product of a long course ofdevelopment, of a series of revolutions in the modes of production and of exchange .... The bourgeoisie, by the rapid improvement of all instruments of production, by the immensely facilitated means of communication, draws all, even the most barbarian, nations into civilization. The cheap prices of its commodities are the heavy artillery with which it batters down all Chinese walls, with which it forces the barbarians' intensely obstinate hatred offoreigners to capitulate. It compels all nations, on pain of extinction, to adopt the bourgeois mode of production; it compels them to introduce what it calls civilization into their midst, i.e., to become bourgeois themselves. In a word, it creates a world after its own image .... The bourgeoisie cannot exist without constantly revolutionizing the instruments of production, and thereby the relations of production, and with them the whole relations of society. Con• servation of the old modes of production in unaltered form was, on XX Epigraph the contrary, the first condition of existence for all earlier industrial classes. Constant revolutionizing of production, uninterrupted disturbance of all social conditions, everlasting uncertainty and agitation distinguish the bourgeois epoch from all earlier ones. All fixed, fast-frozen relations, with their train of ancient and venerable prejudices and opinions, are swept away, all new-formed ones become antiquated before they can ossify. All that is solid melts into air, all that is holy is profaned, and man is at last compelled to face with sober senses his real conditions oflife, and his relations with his kind. The need of a constantly expanding market for its products chases the bourgeoisie over the whole surface of the globe. It must nestle everywhere, settle everywhere, establish connections everywhere ....

Karl Marx & Friedrich Engels The Communist Manifesto 1848