From International Socialism (1st series), No.4, Spring 1961.
Transcribed & marked up by Einde O’Callaghan for the Marxists’ Internet Archive.
Proofread by Anoma Carter (April 2008).
The Diplomacy of Economic Development
Eugene, R. Black Oxford
University Press for Harvard University Press, 1960. 24s.
The Attack on World Poverty
Chatto & Windus, 1960, 21s.
An Essay on Economic Growth and Planning
Routledge & Kegan Paul, 1960, 15s.
Murray D. Bryce
McGraw Hill Book Co., Inc., New York, Toronto, London, 1960, 58s.
Probably the most important current problem on a world scale is that of the spread of capitalism into backward countries. How will capitalism reproduce itself abroad? Will orthodox ‘private enterprise’ serve as the model as Marx supposed it would and as it did in practice when it emigrated to the ‘empty lands’ last century? Or will the process of reproduction in today’s conditions necessarily adopt the new, state capitalist form exemplified most clearly in the Russian-Chinese case?
The outcome of ‘peaceful coexistence’ in backward countries, the prospects of war and peace, hinge on the answer, as do the structure and programs of the labour and socialist movements the world over.
The arguments against the simple transposition of orthodox capitalism as we know it seem overwhelming: contact with developed capitalism in the past has left backward countries with such a narrow industrial base that it would need far greater investment funds than it can generate from within if its expansion is to make any inroads into the fast-growing mass of unemployed (itself the result of international contact). In practice, these extra funds would have to come either from the impoverished agricultural sector or from abroad. The first is dangerous. It would entail a far-reaching agrarian revolution that would rupture the many links between the urban capitalist and the rural landowner-moneylender-trader and, in these days of universal suffrage, wreck the governing coalition of industrialist and rich farmer, overthrowing the former’s hegemony in policy and law making.
To entice extra funds from abroad the economy would have to be kept ‘open’, that is, open for foreign private capital to destroy, if it wish, the protected home market which local capital needs in order to develop at all; open to constantly deteriorating terms of trade; open to the repatriation of profits on foreign capital and of the capital itself; open to pressure from working class consciousness and organization which reflect the environment of workers in the developed world rather than at home; open, too, to a technology unsuited to local conditions and to a drain of scarce skills abroad; and so on. In short foreign private capital would require a quid pro quo of laissez faire on the part of local capital which would make its environment too uncertain to be overcome by spontaneous accumulation and would thus deny it conditions favourable to development.
State capitalism, the argument runs, avoids these dangers. It chooses agrarian revolution and a closed economy rather than the reverse. Above all, it works, while orthodox capitalism has piled up a series of failures stretching from Cambodia through Congo to Columbia.
This is not the place to weigh up the argument, or to judge the significance of relatively new factors, such as the flat refusal of private capital to flow to backward countries no matter what concessions are granted, or the vast flow of politically motivated, that is, Cold War aid now filling the gap. Nor can the other sides’ claim to success in agrarian matters be scrutinized. A reviewer’s task is limited: it is to place some of the recent literature on economic development within the framework of this argument.
It is to be expected from the background of our authors – Black, President of the World Bank; Shonfield, Economic Editor of the Observer; and Dobb, member of the Communist Party – that the first two are committed to a solution on the model of orthodox capitalism, and the last to a state capitalist solution à la Russe.
Black can be dismissed quickly as a mere reference to the political nature of current capital movements: “development diplomacy needs the backing of substantial capital”, he writes (p.38); it also needs “contacts” (ibid.) and, “Finally, development diplomacy must have a status in the national policies of the Western nations” (p.39).
Shonfield is infinitely more rewarding. Firmly committed as he is to some variant of the orthodox Western model, he shows a willingness to deal lightly with its fetishes and argue realistically. His argument is persuasive. If the attack on poverty is to succeed at all it must proceed on a narrow front-India, Mexico and Brazil. They need all the help they can get to plug the gap in their savings, to supply the goods they cannot manufacture themselves, to substitute for the lack of foreign markets for their produce. They alone would need some $3-4 billion a year for a decade.
Nothing like it is on the move. The $5.7 billion of international capital flow in 1958 was half lost in debt servicing, returns on private investments, and political props like Formosa. The rest spread thinly over the entire tract of backwardness, and made threadbare by the futile competition and duplication between UN agencies on the one hand and the political and economic strings attached to bilateral aid on the other.
Shonfield envisages two possible solutions. The first is to “build up the United Nations as the main instrument of technical assistance in the underdeveloped world” (p.222). The second is “that the principle of mutual convenience between giver and recipient ought to be the starting point for any new and enlarged programme of economic aid to the underdeveloped countries” (p.166).
The first can be ignored. Shonfield himself admits, on an earlier page, that “on the 38th floor, right at the top of the skyscraper, where the Secretary-General and his immediate staff hold sway, the lame duck seems to brood over the whole scene like some tribal fetish” (p.211). Surely Congo is sufficient proof of the UN’s paralysis between the two camps, a paralysis that threatens to be total when China eventually joins the throng beneath the lame duck’s wings.
The second is more challenging. It amounts to saying that the problem of agricultural underproduction in backward countries can be wedded to the problem of agricultural overproduction in developed ones to their mutual solution.
Is this possible? It seems hardly likely that Washington will be allowed to dump where other developed countries, some of which depend on their agricultural exports, look for markets; or that orthodox western capitalism will be able to plan internationally and yet not be able to solve their national farm problems; or that economic aid will replace the military aspects of Cold War; or, indeed, that any amount of aid will be able to absorb the population explosion and promote growth without authoritarianism, isolationism and all the other hallmarks of the state capitalism Shonfield rejects.
Dobb does not answer the questions. For reasons adduced in his first chapter, on Planning, he thinks it unlikely that private capitalism will take root in backward countries and, by definition, industrialize them. But he does not deny that it might. His excruciatingly difficult essay is more concerned with demonstrating the greater efficiency of centralized planning in the pursuit of rapid economic growth (and with justifying this view in terms of current economic categories) than with proving its unique ability in this regard. As with most books on this level of abstraction, one can be satisfied with its handling of the matter and yet be disappointed with its scope: we know from experience, if nowhere else, that planning facilitates growth. More useful would be some indication of how necessary the first is to the second, and how much of it is necessary. With this clarified we might begin to answer the crucial questions with which this review opened.
Too late to be considered in the body of this review, Bryce’s book makes one want neither to add to nor subtract from anything that has been said. “The most important thing a government can do to help private industry is to avoid getting in its way” he declares (p.92) in flat contradiction to anything and everything he saw in seven years of service in many parts of the world for the World Bank. Readers will learn little but the complex of prejudice which masquerades as science within the international Establishment.
Last updated on 25 February 2010