Rethinking the Development of Latin America and the Caribbean for the
James Petras – July/August 2007
Latin America and the Caribbean [LAC] are passing through a deep process of devolution during the last quarter century of the 20th century. LAC experienced the restoration of pre-national forms of property ownership, the reversal of social relations of production [capital-labor]. Forms of primitive accumulation, characterized by forcible seizure of urban and rural land and massive population displacement by the state and in some cases by paramilitary elites have been re-introduced.
Modern information systems, expanding world markets, large-scale, long-term mergers and acquisition leading to unprecedented levels of centralization and concentration of capital are combined, articulated and facilitated by the restoration of pre-national policies and structures.
The socio-economic and political consequences of this combined and uneven development are the deepening of class inequalities, a growing mass of uprooted, semi-urbanized peasants and workers, and the integration of a new super-rich LAC bourgeoisie into US-EU-Asian imperial circuits. The emergence of pre-national and externally controlled capitalism throughout Latin America has led to a massive increase in class and national conflicts, at a variety of socio-economic sites, involving a broad array of social strata, utilizing unorthodox strategies.
The social struggles reflect efforts to counter the socio-economic reverses and pre-national, primitive forms of exploitation as well as the modern forms of technological exploitation. Vague exhortations by the Left and Right to resist or defend ‘globalization’ or ‘neo-liberalism’ overlook the historical merger of the past, present and emerging forms of capitalist organizations. To ‘re-think the development’ of LAC for the 21st century requires that we understand the process and structures which configure the region.
Restoration and Reversals:
The last 25 years have witnessed the dismantling of the entire economic structure, which characterized the construction of the LAC nation-state and the reversion to a pre-national economy. From the end of the nineteenth century, but especially 1930-1975, LAC created a national economy and state: large-scale mostly public investments in national industries, infrastructure, higher education, literacy, public health, local markets, and credit and financial institutions created the material basis for the modern nation-state. The state in different moments and places nationalized strategic sectors, like natural resources, petroleum, iron, copper, tin, land and maritime transport and public utilities [telecommunications, water, power and light]. Foreign capital was not absent – but in most cases was regulated to complement, not displace, national capital – as was the case with the normal development pattern of the US, Europe and Japan. Large-scale foreign capital was denied majority share ownership in many sectors; assembly plants were obligated to fulfill ‘national content’ rules; land ownership was restricted or denied in some countries. Profit remittances were regulated as was borrowing from local banks. In other words, Latin America moved from being a ‘pre-national’ praetorian state linked to foreign-dominated export enclaves to a nation-state capable of funding and developing the social infrastructures of a modern society.
Beginning with a series of historical political defeats in the mid 1970’s and continuing to the present day , the entire social-economic architecture of the modern national economy and state was demolished and the pre-national political economy was restored.
Under the slogans of privatization, free markets and de-regulation, the restorationist regimes reconverted their economies to foreign-owned export-oriented enclaves. The process of devolution usually involved a two step process: privatized state enterprises were sold to local private elites with political ties to the regime, who either re-sold the productive facilities to foreign investors and conglomerates [acquisitions] or became lesser partners [mergers with multinational corporations].
Privatizations were accompanied by the pillage of natural resources and the violent seizure of rural and urban land – either through state policies, bogus land claims, utilizing ‘market mechanisms’ enforced by the military, or via counter-insurgency and paramilitary death squads which dispossessed millions of small farmers and peasants [Colombia]. Counter-insurgency programs while supposedly motivated by political claims served to re-concentrate land-ownership in the hands of big agro-export elites linked to the pre-national regime and model.
The re-introduction of pre-national structures and policies took place in the context of relatively defined urban-industrial class structure with publicly-funded social programs [unlike the 19th century version]. The re-introduction of the colonial model caused immense damage to the entire fabric of society – converting modern workers into contingent workers, forcing skilled workers to flee the country to modern nations or imperial states overseas. Rural to urban migration was not accompanied by industrialization but by de-industrialization. In other words, what is called ‘neo-liberalism’ is the forcible political restoration of earlier forms of capitalist exploitation [uprooting local economic networks, undermining the national markets and the formation of skilled wage workers and a professional class].
The clearest expression of the pre-national restorationist nature of contemporary regimes is the expansion of private education and health services creating enclaves of privilege, which ensures the reproduction of a rigid class structure characteristic of earlier agro-mineral export societies.
Moreover, the general assault on public sector employees, their salaries, employment and pensions is an essential part of substituting pre-national private paternalistic ‘charity’ and ‘voluntarism’ for professional public services.
The reversion to private services dependent on the ‘good will’ of wealthy benefactors in place of public obligations in meeting basic citizen needs is accompanied by the public usurpation of private space for a new predatory sector of capitalism. The most lucrative, dynamic sector of capital is found among real estate capitalists, intimately linked to financial institutions, construction companies and the state. Real estate investment is the most profitable sector on a world scale; drawing on the support of the state via easy credit, low interest, high liquidity and favorable land use regulations. A study of the new rich multi-billionaires in Latin America, Russia, China and India demonstrate that real estate profits were a key factor converting millionaires into billionaires.
The Role of the State in the Restoration of the Pre-National Economy
As under earlier pre-national capitalism, contemporary real estate capitalism relies on property and land rents and speculative valuations, not profits based on production of goods and services. The state plays a key role in the expansion of real estate capital, by seizing high value rural and urban property owned by poor rural and city dwellers and transferring it to wealthy elites. In other words, political force, the methods of early capitalism [‘primitive accumulation’] displaces masses and allows real estate and other forms of capital – such as agro-business – to exploit the land.
The rentier state provides export subsidies and tax abatements, as well as large-scale investments in infrastructure, which links the new business, commercial, apartment complexes to domestic and overseas markets and employment.
The rentier, pre-national state does not ‘de-regulate-, ‘shrink’ or ‘withdraw’. It established new regulations giving primacy to foreign investors and eliminates regulations promoting national public enterprises and social programs. The state expands its police and repressive apparatus and its intervention in civil society and reduces the number and quality of social services. The state actively intervenes to co-opt civil associations and non-governmental organizations [sic] [NGOs], while eliminating agencies protecting the environment, health and occupational safety, indigenous populations and children.
New Class Structure: The Four Tiers
The massive large-scale re-entry of foreign capital into strategic sectors of the national economy epitomizes the reversion to a pre-national economy or more precisely a colonial entity – albeit with vastly different economic, class and political institutions and organizations. Unlike the earlier colonial period, based exclusively on agro-mineral exports, contemporary re-colonization penetrates all sectors, primary, secondary and tertiary. Large-scale multinational corporations rely on advanced information technology and a variety of new financial instruments to extract rents, profits, royalties and speculative windfalls and to transfer wealth to several thousand billionaires in the imperial centers and colonized capitals of the world.
The imperial system has four inter-related levels of exploitation. On the bottom tier the new imperial architecture rests on foundations of labor power, productive resources exploited and extracted from Latin America, Asia and Africa. At the next level, manufacturers and agro-mineral capitalists extract profits from the exploitation of labor and natural resources. At the third tier, real estate, commercial, banking and IT capitalists extract interests, rents and royalties. At the top of the imperial pyramid are the investment, pension, hedge and derivative funds, which profit from buying and selling, merging and acquiring multinational corporations and speculate in the speculators paper value. The four-tiered hierarchy defines the architecture of contemporary Latin American development in the 21st century.
At each level the value produced at the lower levels is transferred to a higher level leading to an inverted pyramid of wealth: the top .01% of the super rich own more assets than the bottom 50%. To speak of the ‘capitalist class’ without clarifying its location in the imperial architecture is to obfuscate the new configuration of imperial power. The links between the different levels of the class structure are powerful because of inter-sectoral investment and their common interest in the exploitation labor and natural resources. There are no progressive bourgeois even as conflicts exist between the latter and the more powerful sectors of capitalists above them.
Latin America, in its current pre-national devolution, rests on highly predatory practices of capital accumulation based on political and economic mechanisms. The new relationships between the state and economy, began with the destructions of the national state and the restoration of colonial structures, grafted upon modern labor force, national institutions and social consciousness. The construction and expansion of the new financial-real estate-extractive centered economy highly depends on political control. The new economies are not self-sustaining via purely market mechanisms and they face numerous powerful class adversaries who have been profoundly alienated.
Contradictions and Transformation of the Pre-national State
Reversion and restoration to a pre-national regime and economic structure has created a multiplicity of enemies and vulnerabilities which can lead to profound transformations.
The changes are recent, brutal and swift, but the ideology justifying them has failed to gain hegemony among the great majority, even as most changes of electoral regimes have failed to undertake a new project. Secondly the deepening inequalities, the concentration and centralization of capital evidenced by the massive growth of mergers and acquisitions [M&A] and the multi-billion dollar income of the super-rich has created highly polarized societies. Thirdly, M&As have integrated the economies and socialized production, even as private profits have grown, deepening the contradictions between private ownership and social production. Fourthly, the concentration of wealth into the financial, insurance and real estate, speculative sectors, adds to the vulnerability of the entire imperial edifice. Finance and real estate, collecting rents and interest without producing value, is the most parasitical sector, divorced from the direct production of goods and services is subject to the greatest volatility and risk of economic crisis.
Fifthly, the long-term, large-scale boom in manufacturing in China, East and Southwest Asia has led to record breaking international prices for base