| Home |
Economic Life and a History Introduction Our objective in this chapter is to address a fundamental human problem from a Barthian perspective. Why are so many people poor, and what can governments or nations do to relieve their sufferings? We wish to address this question, and specifically, we wish to concern ourselves with a specific instance of economic deprivation as occurring in the world today. How can we address this issue? Our fundamental thesis is that economic life has its basis in social history (2.3). The social history by which we interpret a given economic circumstance is the history of the covenant as the inner sphere, surrounded by the general history that relates to that given economic circumstance, (4.3) and (4.9). Once we have chosen a given economic situation, we must relate the general history pertaining to that economic situation to the history of the covenant as we have discerned it in Barth. Or, if we wish to hear a Word of grace pertinent to a specific instance of economic suffering, that Word is always historically concrete, and its revelatory knowledge always includes a knowledge of that economic circumstance as gained through observation and reflection (2.17).(1) Therefore, our next step is to specify the economic condition we wish to address, and describe how we shall relate the general history and data pertinent to its existence to the history of the covenant and the theological knowledge given to us in faith. We shall investigate the economic plight of what is commonly called the Third World, specifically Latin America and Chile, and they in relation to the wealthy industrialized countries of the West, especially the United States. In order to analyze this economic circumstance, we must present a social historical analysis of this given economic situation in relation to our results as derived from Barth. We have chosen to use a Marxist account for the general history and empirical data which will be related to the covenant and its theological content.(2) We have chosen a Marxist account for a number of reasons, but one factor in particular makes it a compelling choice. We located economic life in a social historical context (2.3), and therefore we need a social historical analysis of economic life. Contemporary Marxist economists, in contrast to non-Marxists economists, emphasize the historical and social context of economic affairs and therefore we may make use of their studies. Furthermore, although we cannot accept aspects of their view of history, we shall show that central Marxist concepts can be interpreted and related to our Barthian categories and conclusions, and further, that their historical data interpreted through these concepts is congruent with our Barthian perspective.(3) Consequently, our approach will be to demonstrate a congruence between certain Marxist and Barthian categories. Then we shall present the data and social history pertinent to our chosen economic situation in Marxist terms, and summarize its chief points through a use of Barthian categories. In this way, we shall understand an aspect of contemporary social history in terms of covenant by interpreting historical data through the use of Marxist concepts as explicated by Barthian categories. Our next step is to describe the Marxist concepts that we shall employ, and their relation to our theological categories and results. Before we do this, however, we wish to pause briefly to indicate the nature of the conclusions we shall derive from this historical investigation. We shall address the issue of why certain peoples are poor and how nations may act responsibly to relieve their suffering. Nations and classes belong to the outer sphere of general history, (4.3) and (4.9). They are ruled by ideologies, and subject to confusion, chaos, and sin (4.8). Furthermore, by (2.7), poverty and economic misery are the result of sin, sin understood as broken social relations between classes, nations, and persons. Therefore, we will need to describe historically events of social encounter between peoples, and show how these interactions have created economic deprivation. Since nations and classes belong to the outer sinful sphere of the nations, and since we shall focus on their sinful behavior as its creates economic suffering, our social historical analysis will lay bare the nature of sin as the social basis of economic misery. By (3.4) and (3.5) we would expect this sin to take certain forms. It manifests itself as the desire to accumulate, the lust for bodily ease, the drive to exploit the labor of others, and the failure to protect the poor and weak through law. It results in starvation, dispossession, and murder. Our social history will document these conclusions, and we shall discover which nations and classes have sinned against their neighbors. Finally, we shall suggest ways in which nations may act politically to alleviate these miserable economic and social conditions. Economic life can only be relieved through actions that transforms its social base (3.2), and the direction of social transformation is an exchange, in which the strong and powerful are weakened for the sake of the weak and dispossessed. In the church this exchange is effected by the gospel through repentance and forgiveness, in the outer sphere of the nations it is effected through social changes whose direction remotely reflects the direction of Jesus' reconciling actions (4.5). This implies political changes in behalf of the weaker classes and nations, and therefore we shall recommend that the weaker classes and nations increase their political power vis-a-vis the stronger nations, and that they act in ways that increase their economic advantage. Our next step is to explicate our key Marxist concepts in relation to our Barthian categories, and from there to present the history pertinent to our interests. We do not intend to compare Marx and Barth in terms of theory, and we are not engaged in historical research to determine a precise historical account. We shall choose representative Marxist texts, orient their central categories in relation to our Barthian results, and by means of these categories focus upon the prominent features of their historical narration. Although these texts vary in their areas of historical concern, and even at times of fact, they converge with respect to their primary categories and they agree on the essential features of their historical narrative. We are interested in these essential features, and their narration will form the heart of this chapter. We may now advance by explicating our key categories in terms of our Barthian results. By (2.3) and (2.4), economic life has its basis in social history. In terms of societies, we will narrow our field of vision to the capitalist countries, or to the non-communist countries, and also to recent history beginning with the rise of capitalism. Within that context our aim is to address the issue of economic suffering, commonly called "underdevelopment." We shall focus on Latin America, primarily Chile, especially in its relations with the United States, as a test case by which to analyze capitalist development in general.(4) Since economic life has its basis in social life, we must now specify the relevant social groupings within this social historical context. What social classes, or distinctive national groupings, should be singled out as the key to understanding this history, especially in its economic aspects? We are especially concerned with the behavior of nations. With respect to international politics and history, we shall, in light of (2.16), give first priority to national differences over class differences. Within a given nation, when language and history are held in common, we shall emphasize class differences. Grounds for doing so follow from the fact that economic motives are strong determinants of political action (2.5), (3.4), and (3.5). We are generalizing at this point. In actual practice class differences cut across nations, and national groupings are divided by differing languages and over-lapping classes. As a generalization we shall adopt the view that internationally, encounters among nations are of primary significance, and within nations, class groupings powerfully influence political affairs. Having said this, we may now divide the nations we wish to consider into two groups. Here we are influenced in part by Marxist writers, and, perhaps more forcefully, by common knowledge. Our major international division will be between the European countries, their colonial offspring in colonized territories such as the United States, Canada, South Africa, and Australia, and the remainder of the world that fell under European domination, such as Africa, portions of Asia, and Latin America. We make this distinction on the premise that the paramount international event of recent centuries shaping the nations within the Western orbit has been Europe's subjugation of the world, its exploitation, and resultant division into Europe and nations that continue Europe's political ascendancy, and those nations that have been dominated by the European nations. We must now relate these ideas to specific Marxist concepts. We begin with our requirement that economic relations be placed in a social and historical context. According to Marxist economists, the fundamental distinction between themselves and bourgeois economists is that Marxist economists locate economic relations in the context of historically formed social relationships while their opponents do not.(5) The starting point for Marx's political and economic thought was that economic life occurred in the context of social historical relations. He began his introduction to his Critique of Political Economy (of which the four volumes on capital were to be the first part) with the statement that "The subject of our discussion is first of all material production by individuals as determined by society, which naturally constitutes the starting point."(6) From this beginning, Marx goes on to present the view that while economic categories possess characteristics which are general and applicable to common types of human activity in all historical epochs, they also have characteristics which are historically specific and socially conditioned. From the point of view of a theory of development, it is these characteristics that provide the key to the operation of the economic mechanism in an historically given social formation.(7)By contrast, and here we may quote David Horowitz on Marx, the error committed by orthodox economists, according to Marx, lies in their not being aware of the socially conditioned characteristics of general economic categories and relationships, and hence in taking the given social arrangement as natural, harmonious, and eternal . . . they abstract from the historically specific character of economic categories and relationships and treat only their universal characteristics.(8)Contemporary Marxist economists have continued Marx's distinction, and maintain that it is the chief distinction between themselves and orthodox economists. Paul Sweezy begins his Marxist analysis of capitalism by saying that it "would seem to be a legitimate conclusion that economics studies the social (inter-personal) relations of productions and distribution."(9) He goes on to say that although capitalist economists give lip- service to social reality, their "conceptual apparatus is intended to be so constructed as to transcend any particular set of social relations."(10) Samir Amin, in a similar vein, notes that these social formations must be studied historically: "Marx transcended economistic 'science,' subjecting it to a fundamental critique, and showed what must be the foundations of the only possible science, that of history."(11) Given this starting point, Marxist economists give an historical analysis of economic conditions, and secondly, they show the relevance of the historical formation and relationships among distinct political and social classes as constituting an essential element of economic life. Apart from social history, economic life appears as a phenomenon in a non-personal realm as governed by non-historical eternal harmonies, usually mathematically described. This, according to the Marxists, is the essence of capitalist economics: This "pure" economic science must necessarily be ahistorical, since the laws it seeks to discover have to be true whatever the economic and social system may be. Abandoning the universal outlook introduced by Marxism, breaking down the bridges that the latter had laid between the various branches of social science in its attempt to explain history, neoclassical economics was led to become, first and foremost, an algebra of logical deductions from a certain number of axioms based on a sketchy psychology of "eternal man."(12)From our point of view, economic life can be transformed and renewed only by transforming its social base (2.3). An economic analysis that transcends social history denies the possibility of change, change understood here as the rerouting of the flow of the earth's products as transactions between classes and nations. A non-social analysis will doubtless include economic changes, as, for example, describing expansions and contractions in the economy; but it will not envision social actions whose objective is to reroute the flow of goods in behalf of certain nations and classes at the expense of others (3.2). It cannot envision such an alteration of the economic system since the flow of goods is not perceived as being related to national and class differences. Consequently, the capitalist analysis, at least from the Marxist point of view, is an ideology whose purpose is to maintain the privilege of certain classes and nations.(13) From our perspective, we would expect the development of an ideology of this type. Given the remoteness of the nations from their center, (4.8) and (4.9), and given the power of chaos and sin in this realm, (4.10), we would expect that the economic violence of nations, their accumulation of goods and their dispossession of others (3.4), their exploitation and lawlessness (3.5), would be concealed in an ideology which abstracts from social and historical relations (4.10). In this way sin as broken social relations among peoples is concealed, and the possibility of effecting repentance by altering the economic system on behalf of the dispossessed and exploited is denied. We have said that our major international division will be between the European nations and their offspring, and those nations dominated and exploited by the European expansion which began in the sixteenth century. In actual practice, this is the perspective presented by Marxist writers. The nerve of their historical analysis of international capitalism concerns itself with relations among nations, primarily the European nations and their descendants in relation to the world's other nations. On a world scale, the initial decisive event was the world conquest by the European nations beginning in the sixteenth century. As Europe overran the world, two things, roughly speaking, occurred.(14) The Europeans either entered countries with little population or social structure, primarily North America, Australia, and South Africa, or they encountered complex civilizations with extensive populations. In the former case they settled these new territories, and established socioeconomic formations that were, in the main, an extension of their European origins.(15) In the case of extensive populations or complex social structures, socioeconomic formations evolved which differed from those of Europe and its extensions. We will designate the former socioeconomic formations, Western Europe, North America, Australia, and the exception Japan,(16) by the term "center." The latter group, South America, most of Africa, and portions of Asia, will be termed the "periphery." The socioeconomic formations in the periphery differ from those of the center in that they arose through differing historical processes. The difference arose, in part, from at least two factors. First, it is the tendency of all nations to overwhelm and exploit their neighbors, (2.15), (3.4), (3.5), (3.9), and (4.10). Secondly, this tendency toward economic exploitation can be implemented only through encounters among nations, classes, and persons, (2.3), and the center, until only very recently, possessed the military power to do just that. As a result, the formations in the center arose in part through internal developments and the exploitation of the periphery, while those in the periphery emerged through local conditions and the fact of exploitation. The nature of the exploitation differed with distinctive historical periods of capitalist development, but the fact of exploitation remained constant.(17) If these historical and social differences are ignored, then the belief may easily arise that progress in the periphery, or in the underdeveloped nations, can be achieved by following the recipes for success given in the developed nations. We cannot expect the periphery to duplicate the historical experience of the center, unless the periphery in turn dominate the center, for the crucial difference between center and periphery is that one suffered domination, the other dominated.(18) In other words, the key to their distinctiveness, is the social historical relation between center and periphery, and not a non-social process of historical development. We may now inquire as to the basic economic motives that animate nations and classes. In light of previous results, we may say that the fundamental economic motive is the desire to accumulate (2.15), (3.4), (3.9), and (4.10). It operates through dispossession (3.4), the exploitation of the labor of others, (2.11) and (3.5), and it is carried out in ways that lead to death (3.4), and deny the weak the protection of law, (3.5) and (4.10).(19) In light of the empirical aspects of a Marxist analysis, the desire to accumulate has close affinities with their term "primitive accumulation." "Primitive accumulation" is a fundamental category for understanding the essential character of the capitalist system, and we shall directly relate it to the exploitation, deprivation, and death that normally follow from the unbridled drive to accumulate. In exploring the meaning of this term we shall relate it to two other terms, "surplus" and "surplus value." All three of these terms have inter-related meanings, and they are useful in describing how certain nations and classes are able to accumulate at the expense of others. We shall examine each of them in turn, beginning with the concept of "surplus." With respect to accumulation, economic holdings may be divided into two quantities. First, the economic production that meets basic human needs, or the needs of society, and then the remainder. We will designate the remainder by the term "surplus," so that surplus refers to accumulation beyond one's basic needs, or beyond a society's basic needs for consumption. Virtually all societies accumulate surplus, and the surplus takes differing forms depending upon the socioeconomic nature of the society itself. In a primitive society it might simply mean the surplus of grain available at the end of the year, or in a Latin American country, it might take the form of the mineral and agricultural wealth created beyond consumption after a given period of time. In capitalist societies, an important characteristic form of surplus is the profits made by a given firm in the course of a year. In general, with respect to industrial societies, Paul Baran defines the surplus as the difference between society's actual current output and its actual current consumption. It is thus identical with current saving or accumulation, and finds its embodiment in assets of various kinds added to society's wealth during the period in question: productive facilities and equipment, inventories, foreign balances, and gold hoards.(20)When one considers a society's surplus, two questions arise: Who controls the surplus, and what is done with it? How a society uses its surplus is an expression of its fundamental values, and the power to use its surplus means that it has the option of directing its economic destiny. The surplus may be invested in the economic system, spent on war, or education, or expended for festivals, and each of these alternatives would represent a particular social value. The size of the surplus is an index of productivity and wealth, of how much freedom a society has to accomplish whatever goals it may set for itself. The composition of the surplus shows how it uses that freedom: how much it invests in expanding its productive capacity, how much it consumes in various forms, how much its wastes and in what ways.(21)The fact that Jesus commanded his followers to give their goods away to the poor indicates his fundamental value of service, and his apparent belief that God's supply was inexhaustible was an index of his freedom. As a society uses its surplus, it determines its economic future. For example, if a society decides to enhance the material existence of its citizens, then it must devote a portion of its surplus to expanded production. If a society has no surplus, or if its surplus is captured by others, then it cannot direct its future since it has nothing left beyond consumption. In this way surplus functions as the key to understanding a society's primary values and the direction of its economic life, and its power to use its surplus indicates its degree of freedom. We have accepted accumulation as the driving force of economic systems. Therefore, the primary drive between nations and classes, is to appropriate the surplus of others. This accumulation at the expense of others can occur in varying forms. We shall distinguish two forms. Each of them, like all economic relations, has its basis in social history (2.3). First, once a given socioeconomic system has been established through social historical events, the appropriation of a major portion of the surplus by a given class or nation can occur through strictly economic means--simply as a function of the economic system itself. Marx described this type of accumulation in the case of capitalism, and his key concept was surplus value. Secondly, accumulation at the expense of others can occur outside the market, so to speak, and be the direct result of political historical factors. Plunder, for example, is a form of accumulation that is not determined by economic laws encompassing two social groupings, but by the decision of one group to rob another. This form of accumulation is termed "primitive accumulation." We shall briefly describe "surplus value" and then speak of "primitive accumulation." In light of (2.14) and (3.7), the primary concern of economic life is the productiveness of the earth, the transformation of its products by labor, and their consumption with the aim of maintaining bodily existence as the necessary external basis of covenant. The result of labor is a flow of goods garnered from the earth, their transformation by labor, and then distributed among nations, classes, and individuals. By (2.11), this flow of goods represents a network of service between workers and consumers, in which differing parties contribute reciprocally in varying degrees to the economic welfare of others. Marx began with the fact that this flow occurs through commodity exchanges, and that commodities embody work, and this work is a form of service and or slavery in behalf of those who consume or control the manufactured commodities.(22) Virtually all, if not all, societies carry out commodity exchanges, and the nature of the exchange depends upon the social nature of the society itself. Socially, capitalism can be characterized as possessing two classes. There are those who begin with money. They use it to buy materials, machinery, and labor, and from these ingredients they produce goods which are then sold for money. This class begins and ends with money. There is another class who sell their labor. The necessary prerequisites of capitalism are free capital and labor for sale.(23) The laborer is normally paid in cash, which in turn is used to buy products that embody labor as well. The source of the capitalist's profits is that the wages, or the value of the products the workers can buy with their wages, is less than the value of the products produced by the labor itself. That is, the material wealth consumed by the workers with their wages is less than the material wealth they have created by their work. The difference between these two amounts of wealth is "surplus value" and it is monetarily represented as profits. Profit is the difference in costs between the initial investment plus wages and the final selling prices of the produced goods. The capitalist owns these profits, and spends a portion of them on luxury, (3.4), and thereby, in comparison to the workers, is able to capture a disproportionate share of the total flow of goods as routed by labor. In this way the upper classes are served by the lower (2.11), and they are able to accumulate the wealth created by the whole of society through strictly economic processes as institutionally grounded. Furthermore, the capitalist class directs the use of the surplus itself, and its direction reflects its fundamental value which is greater profits. This can be achieved in various ways, but one important way is to hold down wages in relation to final selling costs. This approach reaches a limit, however, when production so increases against buying power that a recession or down-turn occurs. This, of course, lowers profits. A pattern of erratic booms and recessions is the result, and Marx was the first to discern this pattern. Recessions can be avoided, however, by finding foreign markets for excess production, and profits can be increased by importing cheap or scarce materials or products, or by using cheap foreign labor through overseas investments. In this way the dynamics of the system inevitably drive the system beyond itself. In Amin's words: "It is the contradiction between the capacity to produce and the capacity to consume, constantly arising and constantly being overcome--the essential law of capitalist accumulation--which accounts both for the inherent tendency for the extension of markets and for the international movement of capital."(24) Our task will be to describe the impact of capitalism on periphery nations. One element will be the inherent lawlessness, (3.5) and (4.10), of capitalism itself. Although the surplus is produced socially, its outlet is not socially determined by law. The system uses its surplus in terms of its primary value, more profits. In the main, profits must be invested in the drive for more profits, and this unchecked drive has had tremendous effects upon other nations. We shall investigate those effects historically. The term "primitive accumulation" is of fundamental importance for our study. Its basis is the belief that during the major historical periods of capitalism the center has appropriated the surplus of the periphery and that the result has been the underdevelopment of the periphery. "Underdevelopment" is a polite word for what we have described as the consequence of sin (2.7). Underdevelopment is the result of the primary sin, the lust to accumulate, and its results are dispossession, hunger, and death (3.4), the exploitation of others, (2.11) and (3.5), and the failure to protect the weak and poor through law, (3.5) and (4.10). Amin links underdevelopment and primitive accumulation as follows: The phenomenon of underdevelopment is thus merely the result of the persistence of the order of primitive accumulation for the benefit of the center, and our problem consists of studying the successive forms of these phenomena in relation to the transformations taking place at the center. Primitive accumulation is not something that belongs to the prehistory of capital, it is something permanent, contemporary.(25)We will not, at this point, describe the term "primitive accumulation" in any depth; its meaning will become evident as we portray its reality. We will, however, make two observations. First, the term "primitive" indicates that the phenomenon in question is the result of historical and social conditions, and not the result of strictly economic factors. In describing surplus value, we noted that one class was able to control the surplus through economic factors, through the workings of the capitalist system itself as historically and socially institutionalized. "Primitive accumulation" refers to accumulation that cannot be understood in strictly economic terms, but must be historically described as emerging through social relations. In the earliest phases of European advance, primitive accumulation occurred through such events as plunder and slavery; in later phases the periphery served as a market, and its minerals and agricultural products were exploited at a fraction of their social worth; and still later, the appropriation occurred through unequal exchanges in which products produced in the center increased in value against those produced in the periphery. In each of these cases, political factors were decisive. Slavery and plunder, for example, depended upon military conquest, and unequal exchange is partially the result of the fact that labor cannot freely cross international boundaries. In short, the term "primitive accumulation" refers to the fact, (2.3), that economic life has its basis in social history, and it is used to describe economic relations among differing societies, or differing socioeconomic formations. "Here, then, is the problem of accumulation on a world scale, where relations between different formations are concerned, politics is dominant, and this is why we have to look at these relations as bound up with the analysis of primitive accumulation, and not with that of expanded production."(26) Secondly, we shall note in passing that capitalism in the center has been mitigated by law. By contrast, and this is due in part to the center's repressive policies, capitalism in the periphery has not been so restrained by social legislation. Consequently, in light of (3.4) and (3.5), we would expect that the lawless drive for profits would result in the periphery's underdevelopment, in dispossession, poverty, starvation, and exploitation. We shall show that this is the case. Finally, as we describe the interactions between and within center and periphery we shall do so historically. But this brings us to a question: What view of history shall we adopt as we present historical material? We cannot adopt the Marxist view of historical materialism as if the outer history of the nations were advancing toward a goal within history itself (4.8). Certain elements of the Marxist analysis, however, are helpful to us, and reflect what we have already learned from Barth. Above all, we have seen that economic and social life are inextricably related, and Marxist economic historians relate economic and political life in a dynamic fashion. By (2.5) and (3.5) we would expect economic motives to be strong determinants of political action, and Marxists take the view that a primary aim of nations and classes is to strengthen their economic position within the productive process. At any given moment, various classes and nations exist in relation to the productive process, and given that relation, classes and power blocks arise as shaped by a common interest or relation to productive forms. Those that benefit from the given economic conditions seek to perpetuate them, those that do not, seek to change them, and therefore competing social factions arise. The various social factions interact politically with one another and with the productive system itself as they seek to change it to their advantage. Because of this competition and shifting alliances, the productive system is transformed through political action, and this in turn gives rise to new classes and differing political alliances which again reshape the economic system. At each stage of this process, distinct social units are conscious of the fact that their existence depends upon an advantageous relation to the productive process. Classes cannot emerge or endure if they have little relation to the productive system, and therefore the productive system "sets the limits" of social life, or, in our terminology, economic life is an indispensable basis for a viable social life (2.5).(27) In this way social and economic factors mutually condition each other and are dynamically related. Cardoso and Faletto express the matter as follows: An economic class or group tries to establish through the political process a system of social relations that permits it to impose on the entire society a social form of production akin to its own interests; or at least it tries to establish alliances or to control the other groups or classes in order to develop an economic order consistent with its interests and objectives. The modes of economic relations, in turn, set the limits of political action.(28)This perspective differs from the stereotypical view which holds that Marxism reduces social life to economic affairs. Criticizing this reductionistic view, Amin comments: This "theory" confuses the mode of production with social formations and so fails to analyze the connections between the different instances (economic, political, ideological, etc.), that characterize the differing modes of production, and the various ways in which they are combined in the social formations known to history. It sets up as dogma the ultimate determination of everything else by the economic factors, and gives the same content to this factor in all the differing modes of production.(29)In general, contemporary Marxist historians take the view that the "truth is the whole" and various factors, economic, political, and ideological, are given varying weights depending upon concrete historical circumstances, although economic and social factors are the most significant.(30) We shall follow Marxist historians in that they dynamically relate social and economic affairs, but we cannot conclude that this dynamic interaction will lead to long-lasting economic and social solutions, or that history is moving inevitably toward the victory of socialism within history itself.(31) We are now ready to present our historical description. The history of capitalism can roughly be divided into three periods.(32) The earliest period began with the Discoveries and lasted until the Industrial Revolution and approximately spanned the years from 1500 to the eighteenth century. This earliest phase has been called the pre-history of capitalism, or the mercantilist phase. The second period is dated by the emerging Industrial Revolution in the eighteenth century, and lasts until the formation of the large corporate monopolies in the 1880's. This second period has been called the classical period of capitalist growth. The final phase, the monopolistic period, lasts from the late nineteenth century until the present. This final stage, may be divided into two periods, from 1880 until the depression and World War II, and from the war until the present. We shall begin our study with the final stages of the middle period as it evolved into monopoly capitalism. Our study will break down into five sections: a brief introduction to early and middle capitalism, aspects of the middle period and its evolution into monopoly capitalism, monopoly capitalism until the Depression and World War II, the Depression and World War II, and from the War until 1970. Our study will emphasize Chile as a concrete example of general developments, and will conclude with the election of Allende in 1970. Early in the sixteenth century, the Western European nations began to conquer and exploit major portions of the globe. Through plunder, trade, and mercantilist operations, the surplus of the conquered and occupied territories began to find its way into western Europe. The social basis of this wealth was European expansion and conquest. This wealth, in the words of Paul Baran, "had the usual tendency to snowball."(33) These amassed fortunes, in conjunction with technological advance, new institutional formations, and a mobile work force released through the breakup of the feudal estates, led to the development of an incipient capitalism which grew in magnitude and complexity until it assumed the proportions of the Industrial Revolution and the middle or classical period of capitalist development. Throughout the mercantilist period Latin America was, of course, dominated by Spain. As the mercantilist phase gave way to the classical period of European capitalism, Spain's power, both at home and abroad, was weakened with the result that in the early nineteenth century her Latin American colonies successfully revolted. The revolt of the colonies made direct trade with Europe, especially Britain, a reality and thereby set the stage for a new form of economic development, that of growing economic ties with Britain as she developed into a manufacturing economy.(34) By 1850, the chaos and uncertainty surrounding the wars of independence in Latin America and the formation of new nation states, had, in the main subsided. After 1850 there was a period of rapid economic growth throughout most of Latin America. In this period the center was developing and her need for raw materials rose correspondingly. Latin American economies were integrated into the international economy, with exports centering in minerals and agricultural products.(35) Chile expanded rapidly as well, exports being the driving force of her expansion. "As was natural and until then necessary, external commerce became the driving force of the domestic economic system, linking, with intimate bonds, the course and future of our development to the fluctuations of the world economy, or, more concretely, to the dominant countries, above all England"(36) Chile's exports were mainly, copper, silver, and agricultural products, and the mining and agricultural sectors each expanded by a multiple of five or six times between the years 1844 and 1860.(37) Internationally, the world economy was transformed from its mercantilist form of supplying the center with precious minerals or exotic agricultural products, to one of supplying raw materials and agricultural products in exchange for manufactured goods, especially textiles. These developments could take place only in the context of political developments that profoundly affected the world. Western Europe's imperial expansion was proceeding apace, and this had profound repercussions for the countries of Asia and Africa. Portions of Asia and Africa were being conquered and colonized, and these peripheral countries, together with Latin America, were integrated into the international market in a variety of ways, depending upon local conditions and the particular needs of the center.(38) With respect to Chile, these political transformations were not as drastic as those occurring in other areas. In Pinto's view, the decisive post-independence regime of Diego Portales (1830-37) "established republican forms of government for the economic-social structure of the 'ancien regime,' which in essence did not change one whit with the coming of Independence, except for the expulsion of a few Spaniards."(39) As these developments were taking place throughout the nineteenth century, the center made the transition from classical to monopoly capitalism, reaching the latter form near the end of the century. We shall now describe that transformation and its world-wide impact. We shall observe that the drive for new territories which began with Europe's expansion received a new economic impetus resulting from the inherent lawlessness of capitalist development, and that the results were dispossession, hunger, and mass murder. Classical capitalism was characterized by many small capitalist firms competing with one another through prices. In the late nineteenth century this form of capitalist development gave way to the formation of giant oligopolistic firms which do not generally compete through competitive pricing. There are doubtless many factors leading to this development. A primary reason was the fact that technological innovations often required large-scale operations to enable their cost-cutting capabilities to be fully realized. Furthermore, large scale operations are generally more competitive than smaller ones, having the capability not only to produce more cheaply, but to withstand a protracted economic decline or price war. The smaller firms dropped out of the market leaving the larger firms to dominate the field. Initially, these firms engaged in some degree of economic warfare through price cutting. Nevertheless, it soon became apparent that "live and let live" was more profitable than all-out price competition. This tended to mitigate against a lowering of prices, and after 1880 prices and then wages began to rise all over the industrial world.(40) Although the big firms continued to compete in other areas, through advertising, styling, and new markets, the general end of price competition led to a narrowing of a firm's investment possibilities. Under a competitive system, a firm is forced to innovate if a new technology makes production cheaper, since a competitor will drive down prices with the new technology. Under monopoly, this is not inevitably the case. Since prices will remain about the same or rise, the issue here is whether or not the new equipment will pay for itself to the degree that it compensates for the value of the replaced equipment. It is often best to let the old equipment amortize before investing in a new technology. Furthermore, for the system as a whole, the lessening of competition led to fewer bankruptcies and a consequent saving of invested capital. The result is a net capital gain. "What this means, however, is that under conditions of monopoly outlays on technological improvements as well as capital losses-- both important forms of the utilization of the economic surplus under capitalism--are significantly reduced."(41) Furthermore, given the competition of competitive capitalism, a firm should produce to capacity if its price is competitive, since no one firm's production can saturate the market. Under monopoly, a firm's vast size implies limits on production at the point where it is calculated that increased production will exceed demand relative to a given price for the product. The combined result of all these factors is that firms are faced with growing capital surpluses which must find outlets beyond the firms themselves. Firms expanded horizontally and vertically, and in the late nineteenth century and into this century a growing percentage of capitalist businesses became owned or controlled by a few major corporations which tended to dominate the entire productive system. It is apparent . . . that there has been a more or less steady upward trend in the concentration of control exercised by the corporate giants. Thus, the 200 largest non-financial corporations increased their relative importance from ownership of one-third of the assets in 1909 to 48 percent in 1929 and to 55 percent in the early thirties.(42)The reorganization of the corporate system through concentrations in giant firms does not, however, solve the problem of surpluses for the system as a whole. As the system as a whole expanded into its monopoly phase, the need for raw materials and new markets, which began with classical capitalistic development, expanded as well. The formation of monopolies, however, created huge surpluses of investment-seeking capital which could not be accommodated by the center itself. The crux of the matter was that the working population created significantly greater wealth than it consumed, and this wealth, in the form of capital from profits, was forced to go abroad, and it did so. First, export of capital from the oldest centers of capitalism became really substantial only after about 1880. Great Britain's capital exports increased from 100 million pounds in 1825-30 to 210 million pounds in 1854 and 1.3 billion pounds in 1880 and then rose to 3.763 billion pounds in 1913 . . . and for the United States from 500 million dollars in 1896 to 1. 5 billion dollars in 1914, 18.583 billion dollars in 1922 and 25.202 billion dollars in 1933.(43)The penetration of the world by capital led to the incorporation of indigenous commercial systems into the expanding capitalist system. This could not, however, take place without a political context in which the commercial exchange could occur. The conquest and domination of the world which began with the Discoveries reached its zenith at the close of the nineteenth century. Lenin, quoting from Hobson's classic work on imperialism comments as follows: Hobson, in his work on imperialism, marks the years 1884-1900 as being those of the greatest colonial 'expansion' of the chief European States. According to his estimate, Britain acquired during these years, 3,700,000 square miles of territory with a population of 57,000,000 inhabitants; France acquired 3,600,000 square miles with a population of 36,000,000; Germany, 1,000,000 square miles with 14,700,000 inhabitants; Belgium, 800,000 square miles with 9,000,000 inhabitants; Portugal, 800,000 square miles with 9,000,000 inhabitants. The hunt of all the capitalist States for colonies at the end of the 19th century is a fact well-known in the history of diplomacy and foreign affairs.(44)The political, and then economic, domination of the world did not take place without struggle and conflict. As the big cartels and their national backers carved up the world in their ceaseless quest for markets, investments, and raw materials, a blood bath exploded throughout the world as the capitalist powers crushed indigenous rebellions and eventually plunged the globe into the first of two world wars. A frantic armaments race [after 1880] among the Great Powers began absorbing growing parts of their national output and became the most important single factor in determining the level of their economic activity. In quick succession the Sino-Japanese War, the Spanish- American War, the Boer War, the bloody suppression of the Boxer rebellion, the Russo-Japanese War, the Russian Revolution of 1905, the Chinese Revolution in 1911-1912, and finally the First Word War ushered in the present epoch of the development of capitalism--the epoch of imperialism, wars, national and social revolutions.(45)Certainly war has been an enduring fact of human existence, but the characteristic fact of these wars is that they had their roots in the imperialism of the major powers, made inevitable in part, by the needs of capital--raw materials, capital outlets, and markets.(46) That the needs of capital should so dominate human decisions and actions flowed from the structure of the capitalist system itself. Although the wealth was produced socially, even globally, in that it arose through the labor of workers enmeshed in supportive social and economic structures, the surplus was appropriated and directed by only a few, that is, the major corporations and investment institutions. Within its socioeconomic context, capital's choices were limited. Profits had to be invested in expanded production, not only at home, but abroad as well. The need to expand abroad naturally allied itself with an imperial political policy, which led to political conquest and economic integration. In this way Mammon came to direct and dominate human affairs, and conquest and killing, (3.4), was and is the inevitable result. Had there been options other than expanded production, had the surplus been subject to law in behalf of weaker nations and classes, the imperial expansion may not have taken its peculiarly vicious form. But capitalism was limited in its use of the surplus, and, in spite of a larger state role, it has not essentially changed in this respect. With respect to relations between Latin America and the center, the formation of monopolies coincided with what Donghi calls the "maturation of the neocolonial order."(47) The Spanish colonial order, defeated early in the century, was replaced by a new form of colonialism, with its center first in Britain, and then increasingly, the United States. "In 1880--a few years more or less--the advance in almost all of Hispanic America of an economy based on exports and primary products signified the final replacement of the colonial pact imposed by the Iberian metropolis for a new colonial order."(48) As a result of the formation of monopolies with large surpluses, there were large flows of British and American capital into Latin America. North Americans came to own portions of Latin America, its lands, mines, banks, ports, and railroads. In 1902 the United States proclaimed the Roosevelt corollary to the Monroe doctrine. According to this corollary, any Latin American nation becoming amiss in its debts could be subject to foreign action only by the United States, even if the debt was owed to a country other than the United States. This corollary was accompanied by a sudden increase in North American military interventions. "There were further interventions: Panama in 1917, 1918, and 1925; Haiti, occupied by marines from 1915 to 1934; the Dominican Republic, occupied from 1916 to 1924; Nicaragua, occupied by the marines from 1912 to 1925; and in Mexico, the disembarcation in Veracruz of 1914 and the Pershing Expedition of 1916."(49) These interventions have continued throughout this century, and are only the more visible manifestation of numerous coercive actions, each indicating the power of the oligopolies to use the state as an extension of their commercial policy. In Paul Baran's words: "As a consequence in all of its operations in the international arena a large enterprise in an advanced capitalist country can throw upon the scales not merely its own prodigious financial power but also the enormous resources of its country's national government."(50) Our next step is to describe the effect on the periphery, politically and economically, of the center's expansion in the late nineteenth century and into this century. The primary effect was that the economies and political systems of the periphery became integrated around the center. We will describe the economic consequences of this integration--economic chaos, unemployment, hunger, and exploitation (3.4 and 3.5). Furthermore, we shall note that the failure to provide the external basis of a secure economic environment results in social chaos (2.5) as well. Roughly speaking, the time period for this discussion will span from the latter part of the nineteenth century until the Depression and World War II. Several typical features characterize the integration of national economies into the global capitalist economy as it developed in the late nineteenth century and into this century. First, the exposure to cheap foreign imports, especially textiles, destroyed indigenous manufacture. Secondly, agriculture was integrated into the world system. It become progressively oriented toward export crops, and this was often hastened by the consolidation of agricultural lands into large holdings. Thirdly, the mineral resources of a given country were used for export to the center. At one time these may have been nationally owned, but with the expansion of capital and/or military conquest in the late nineteenth century, these often fell, as did the productive facilities in general, into the hands of Europeans or North Americans. This was the case with Chile. All of these developments became intensified in the monopoly phase of capitalist development, and have continued, with some modifications, into the present. We need to examine these matters in greater detail, beginning with the destruction of local manufacture. Mass production rapidly decreased the cost of manufactured goods produced by the center in the nineteenth century. Given the center's need for markets, these goods were shipped abroad where they competed with locally produced goods. These local goods, usually hand-crafted, could not compete in price with the center's mass-produced products, and the foreign products eliminated the crafts as a local industry with any significant output. The result was substantial unemployment, as well as the further stifling of any indigenous manufacture of a capitalist type that may have occurred. This took place throughout the periphery in the nineteenth century.(51) In this respect the history of the center is markedly different. The crux of the difference is that there was employment in the center since it produced for both center and periphery, but widespread unemployment in the periphery, since it no longer created its own manufacture. Contrasting the development of center and periphery in this respect, Samir Amin comments: Whereas at the start of the development of European capitalism there was investment of indigenous capital, and the creation of manufactures that put on the market products that till then had been supplied by the crafts, we find that, at the start, in the economies that were to become underdeveloped there was penetration by products of foreign industry. Here we perceive a process of capitalist development that is very different from the other one. The ruined craftsmen are not absorbed by local industrial development. In the European schema, the new-type industry recruited its labor force from among the ruined craftsmen. In the colonial schema, overall demand was sharply reduced by the introduction of manufactured goods. The ruined craftsmen were doomed to unemployment.(52)Paul Baran describes the same phenomenon as characteristic of the periphery as a whole, and gives an especially devastating account of the ruin of India, drawing upon a variety of historical sources.(53) With respect to Latin America, Cardoso and Faletto point out that local merchants were eliminated by the advent of foreign competition, since they "had no means of defending themselves against their European competitors."(54) In the case of Chile, it is Pinto's view that a policy of "free trade," which was certainly appropriate for Britain with its powerful industry, was nothing but suicide for the development of Chilean industry. As it was, however, the ideology and policy of free trade "was applied as a revealed truth, with ominous consequences for our economic development."(55) Chile adopted a policy of free trade since its dominant political parties were not connected with manufacture, but rather, consisted of the landowners and the commercial/financial class associated with foreign trade. The fact that foreign imports were allowed to replace local crafts was a political decision. In some cases the decision was simply forced upon the peripheral country by the colonial power. In other cases, as in Chile, the decision was made by a combination of local and foreign interests and justified by the laissez-faire ideology. The decision worked to the advantage of those sectors oriented toward export, but in Pinto's view, it did not help the mass of the population. The virtual destruction of the crafts, and the squelching of incipient industries, led to the creation of an unemployed, or underemployed work force. Where could they go for work? Their choices were three-fold, agriculture, mining, or services. We will consider each of these in order. Prior to the advent of foreign goods, local craftsmen had been agriculture's principle market. With the destruction of domestic manufacture, manufactured products could be obtained only from the center in exchange for products useful to the center itself. To a growing degree agriculture became oriented toward exports which led to a transformation in agriculture itself.(56) In some areas, notably those occupied by imperial conquest, primarily Africa and Southeast Asia, large agricultural units were formed and directed by emigres from the center who used local labor. In certain cases, higher profits could be realized by leaving the peasants on the land and buying their products. It was, however, frequently profitable to expropriate peasant holdings and use them in large commercial holdings oriented toward export. In the second half of the nineteenth century, Church and Indian lands in Latin America were expropriated and consolidated into large estates. The reasons were two-fold, an awareness of the money to be made in exports, and also, the recognition of rising demand in towns and cities.(57) This process occurred in Chile as well. By 1929, as few as 249 proprietors owned 16 million hectares of land, while as many as 74,000 small farmers owned 865,000 hectares.(58) This represents an extraordinary concentration of agricultural lands, and as of 1965, this level of concentration has been maintained.(59) Amin reports similar processes at work in Africa.(60) The process of concentration took place simultaneously with an increase in rural population. This is due to the fact that displaced craftsmen, especially those who may own some land, are, in part, reduced to agricultural laborers or small farmers. With the passage of time the density in the rural areas of these small farmers or agricultural laborers on the land increased, as their increased population could not find adequate employment in manufacture as a result of foreign competition. The result is an impoverished rural mass in conjunction with a small class of wealthy landowners.(61) At a time when the center was experiencing an increase in the percentage of people employed by industry and a decrease in the agricultural population, the periphery, on the whole, was experiencing a decline in the percentage of people employed in manufacture and an increase in rural population, since local manufacture was in the process of disintegration as rural population intensified.(62) Furthermore, the existence of a large rural mass owning a small percentage of the land, and a small landowning class owning a large percentage of the land, tends to limit the modernization of agriculture. Because of their large holdings and abundant labor, landowners could secure a goodly income without the risk of capital investment for modernization. Capital investment in agriculture was precarious because of such factors as slow returns of capital investments in agriculture, high interest rates in peripheral countries, large fluctuations in international commodity prices, and an abundance of cheap labor.(63) These conditions held in Chile as well. When the landowners did borrow money, it was not to improve production, but rather for consumption, or to buy more land.(64) In addition to the factors just mentioned, inflation plagued Chile's economy and land was used as a hedge against inflation.(65) Land as security would be threatened if it was used for highly-productive farming entailing capital investment. As a result much of Chile's agricultural land is scarcely or poorly used. As of 1965 only 36.6 percent of the arable land was in production, only 25.1 percent of the pasture land, and there was irrigation of only 40 percent of the land that could be irrigated.(66) Most of Chile's actual production occurred in the smaller landholdings; the large fincaspossessing 72 percent of arable land in 1965 had less land under cultivation than the small landowners who occupied about one-sixth of the arable land.(67) Several results follow from the foregoing. First, and here Pinto contrasts Chile's development with that of the United States,(68) agriculture did not generate an economic surplus that could be channeled back into increased agricultural production. In the United States, farms were normally family owned, and worked for the benefit of the owners who used the surplus to expand their own production and as a market for a growing internal industry. By contrast, Chilean agriculture produced little surplus, and that surplus was frequently spent on luxury imports rather than expanded agricultural production. Nor could the agricultural surplus initiate manufacture, since its relatively small amounts could not compete with the price-cutting potential of foreign manufacture. One alternative would have been a land tax. This would have forced production, and the taxes could have been used to generate industry if sufficiently protected. But the landowners in Chile came to possess formidable political power, and they have been able to circumvent attempts to tax their extensive holdings and income.(69) Consequently, the agricultural surplus is consumed and wasted by the wealthy land-owning class itself. They cater to the external market as consumers of its luxury items in exchange for their agricultural products, and therefore they advocate a policy of free trade. This holds for the periphery in general.(70) The result is inadequate agricultural production and rural impoverishment. In the case of Chile, for example, agricultural products composed approximately 45 percent of Chile's exports in the middle of the nineteenth century. By the twentieth century agricultural production in Chile was increasingly unable to meet Chile's food requirements, including a number of foods she was capable of producing.(71) By the 1960's, agricultural imports were amounting to some 200 million dollars worth per year.(72) In light of the foregoing, the consequence for the periphery of capitalist aggression from the outside was the destruction of local manufacture, the stifling of industry, and the creation of a large, mainly rural, impoverished mass. Samir Amin, speaking for the periphery as a whole comments: The only possible outcome of this situation is a general increase in unemployment in the rural areas (owing to the steady increase in population which cannot find outlets in industry) and in the towns (where displaced craftsmen are only partly re-employed, in trade and personal services, since there are no industries). An equilibrium of retrogression, marked by substantial and growing unemployment, both rural and urban, is thus the consequence of this mode of transition engendered by the aggression of capitalism from without.(73)In short, the drive for profits from abroad, in coordination with the greed of a wealthy land-owning class, has had the expected results--dispossession and hunger (3.4). This condition of economic deprivation can be overcome only by a significant change in the social relations among those classes that relate to the land. The direction of this change would need to be in favor of the dispossessed, (3.4) and (2.15). The consolidation of land into the hands of a few families in Chile, however, has led to the emergence of a very powerful landowning class. This class, together with the commercial/financial class oriented toward exports, has dominated Chilean political life. With the advent of the depression and World War II the landowners have been partially challenged by an emerging urban proletariat, but even then, they have been able to exercise formidable political power. Their primary political aim has been to resist any efforts that undermined their hegemony in the rural areas, such as land reform, and they have always advocated a policy of free trade as this gave them access to foreign manufacture and luxury goods. With respect to land reform, Pinto believes that Chile could significantly increase agricultural production by parceling out the large land-holdings in sizes large enough to support families or cooperatives, but not so large that they can support their owners without making good use of their productive potential.(74) Real efforts in this direction were carried out for the first time by Eduardo Frei (1964-70). After three years of intense resistance he made some headway, and the process was accelerated under Salvador Allende, but internal and external pressure precipitated the collapse of the Allende government. We have been discussing developments in the period from the middle to late period of capitalist development up until the Depression and World War II. We have noted that foreign manufacture destroyed the indigenous crafts and indicated the effect on agriculture. In this section, we will describe developments in mining and exports, and make a few additional comments on agriculture. We will focus more directly on the United States in its relation to Latin America, specifically Chile, and indicate similarities with the periphery as a whole as the discussion proceeds. In this period the United States began to overtake Britain as the world's major industrial power, and eventually, subsequent to World War II, became the dominant trading partner with Latin America. Our point of departure for this section will be the formation of the monopolies in the late nineteenth century and their need for capital outlets. The capital flows that entered the periphery in greater amounts after 1880 took two basic forms.(75) In certain cases, those areas where indigenous agriculture was the dominant economic activity, the foreign capital scarcely appeared at all, except in the commercial/financial sector concerned with the exchange of foreign manufacture for locally produced agricultural products. In other cases, those areas exporting commodities from mines or large plantations, large amounts of capital were invested in the export of these commodities with the result that peripheral economies became oriented toward exports and thereby dependent upon the foreign market.(76) Furthermore, the export sectors of these countries came to be controlled from abroad. The result for a number of Latin America countries was the loss of local control of their export sectors, as well as portions of their national productive systems.(77) Subsequent to independence, Latin American export sectors had, for the most part, been locally owned. After 1880, major portions of Latin American mines, plantations, transportation systems, shipping, and ports came to be owned by foreign interests. These interests were primarily British, though a growing percentage was North American.(78) Chile lost control of her export sector as well. By virtue of being the victor in the War of the Pacific (1879-82), Chile had taken possession of the Peruvian nitrate mines. Shortly after the war, a large number of nitrate shares were purchased at ten to twenty percent of their value by a foreigner who used money borrowed from a Valparaiso bank. At the time the nitrates were taken from Peru, foreign capital represented only about 13 percent of the shares, the rest belonged to Chile and Peru, and a small fraction was economically nationalized foreign capital. By 1910, however, Chile owned only 15 percent, the remainder being owned by foreigners, primarily British and American.(79) As a result, Chile received virtually no benefit from the exploitation of this valuable resource, netting about one-half of one percent on the value of her nitrate exports. This was an enormous loss, about two million pounds per year as of 1900.(80) In Pinto's view, this loss could have been avoided had Chileans not grown accustomed to passivity in the face of foreign enterprise. "In other words, the impotence of the 'active forces' of society in this period implied that for every 100 pesos produced by the nitrates, there remained only about 40 to 50 centavos for the use of the country."(81) In this same period Chile lost her merchant marine in its entirety. In the space of ten years, from 1861-1870, the Chilean merchant marine totally disappeared, going from 267 ships to zero.(82) The primary result of these developments for Chile, and for the periphery as a whole, was a great loss of her surplus. This surplus, in the form of mineral and agricultural wealth, flowed out of the periphery and contributed materially to the productive capacity and living standard of the center. Reciprocally, there was a return flow of luxury items and manufacture, but this flow did not significantly benefit major portions of the population. Had the surplus remained within the country, it could have contributed to the formation of industry (if sufficiently protected) and increased consumption, and thereby generated real economic growth. There was, of course, the building up of an infrastructure whose purpose was to help relieve the country of its wealth. We shall see in a future section, however, that the value of the removed assets far exceeded the value of the infrastructure created for their removal, and further, when the point was reached when those assets were exhausted or no longer of value, the foreign company simply left, leaving an infrastructure which may or may not have little value for the country as a whole.(83) Finally, the surplus, or its equivalent, may have remained in the country if the peripheral country could significantly tax the proceeds from foreign investment and use them to develop the local economy. This possibility entails a degree of autonomous political power. Chile tried to do this on several occasions, and we will discuss this possibility shortly. One result of the penetration of foreign capital was the formation of what Cardoso and Faletto call "enclave economies."(84) An enclave economy is comprised of two or more sectors, each of which scarcely interpenetrates the other. Chile's extractive industries are an example, first with nitrates, and then more recently with copper. The mining sector is an extension of the foreign economy, and the remainder of the country exists with little economic relation to the foreign extension. An enclave economy is a particular case of a more general economic characteristic, that of being disarticulate. An economy is disarticulate if its various sectors carry on only marginal economic exchanges with one another, the primary exchanges of each sector being with the outside world. A prominent feature of peripheral economies is their disarticulate structure,(85) and one consequence of a disarticulate economy is that progress in one sector does not lead to the expansion and development of other sectors.(86) In a diverse and articulate economy the exploitation of a mineral resource, for example, would enhance the development of the economy as a whole. Industries would be created to provide mining equipment, smelters erected to process the ore, and wages would be paid to consume goods produced, for the most part, by the country itself. Even when the mines run out, the associated industrial complex remains in place and ore can be imported. In a disarticulate economy, like that of Chile, there may be a minor boom induced by the building of the infrastructure to export the ore, but the mining equipment is purchased abroad, the ore is refined abroad, and the wages paid to the workers is, for the most part, spent on imported products. When the mines run out, or the needs of the center change, the mine falls into desuetude, and the only significant change, from the periphery's view, is that a valuable resource has been wasted. The example of Chile's nitrates is a case in point.(87) Finally, the invasion of foreign capital oriented toward export commodities did not solve the problem of unemployment and poverty which were due to the destruction of local manufacture. In the period we are considering, 1880 until World War II, the export of capital established very little local manufacture. When the exported capital developed mining it gave some temporary employment while an infrastructure was being built. Modern mining, however, is capital intensive and provides employment for only a few. On the whole, extractive industries provide very little income to peripheral countries unless they are locally owned or locally taxed. That, in general, did not happen, they were owned and exploited by the center, and therefore they contributed little to growth outside the mining sector itself.(88) Plantation economies, though they may employ many workers, are not obliged to pay high wages, since there is an abundance of labor resulting from the exclusion of peasants from their lands, the destruction of the crafts, as well as the fact that employment may exist only on a seasonal basis. The consolidation and/or commercialization of agriculture, the destruction of the crafts through the competition of foreign manufacture, the establishment of a mining enclave employing few people, and plantations of forced or poorly paid labor, all of these create a situation where a great mass of the population is either unemployed or poorly employed. Where can these people find work? Three possibilities remain, but only one is viable: the commercial/financial sector, the state, and the services. In general, the commercial/financial sector exists in proportion to the size of a country's economic activity, and does not represent a sizable portion of the population in countries lacking significant industrial production. Secondly, the state must have considerable power vis-a-vis the agricultural, commercial/financial, and foreign interests, to appropriate a sizable portion of their surplus for public employment. In general, the state directly represents or is the foreign power, or, as in the case of Chile, the state represents the agricultural and commercial interests who are opposed to taxing their own incomes. This leaves only one other alternative, the service sector. A study of the center from the nineteenth century until World War II reveals that the number of people in agriculture has declined markedly, and that the corresponding growth in industry and services has occurred in roughly equal proportions. By contrast, the periphery in this period did not witness a significant decrease in rural population, and the growth in the service sector was much greater than in industry.(89) This historical development results, in Amin's view, from three basic causes: the lack of industry in comparison to the center, the higher rates of unemployment in the periphery which appears in a disguised form in the service sector, and a much stronger landowning class in the periphery whose surpluses are spent on imported luxury goods and local services.(90) These conclusions hold, in the main, for Chile as well. In Pinto's view the distortion of the economy toward the service sector is due to two primary causes. First, local capital is strong enough for only the small outlays required by service enterprises, and secondly, the very unequal distribution of income in favor of a small wealthy class implies that the remainder of the population naturally gravitates toward serving this class, for it is only there that money can be earned.(91) After World War II, the center also experienced a growth in the service sector. But there is a difference in the nature of this growth from its growth in the periphery. The growth of services in the center occurred after the basic human needs of the bulk of the population had been met. In this case the growth in services represents "the refined demands of people who were able to raise their incomes above the level of subsistence (more education, training, health, . . . "(92) In the periphery, however, the service sector represents unemployment, a parasitic attachment to the wealthy, and the displacement of the population from activities that provide the basic necessities of life. "The situation in the underdeveloped countries is very different. They are far removed from a condition of satisfying the basic necessities of their peoples. It does not signify an improvement of the efficiency of producing basic goods to permit the displacement of workers into the service sector."(93) Finally, we must point out that wages for many services, with the exception of the professions, are very low; this is due, in part, to abundant labor. Overall, the service sector does not really overcome the problem of unemployment and poverty. It represents the failure to effectively use a country's assets to the benefit of its people, a major portion of the population remains impoverished. Even during a time, 1940-53, when Chile's industry was expanding, the percentage of people employed in the services was growing more rapidly (65 percent) than those employed in the production of goods (18 percent).(94) We may now discuss some of the political aspects of the period under consideration. In light of the foregoing, peripheral economies were oriented toward the exterior in that mineral and agricultural products were exchanged for manufactured goods and food. Since there was little autonomous economic activity, the political parties that emerged had their economic basis in foreign exchange. These indigenous classes helped provide the political and economic link between the foreign power and the local economy. In certain cases, colonial rule for example, local governments were directly administered by colonial representatives, and local officials were a subservient part of a governmental apparatus directed from abroad. In other circumstances, as in Chile, the foreign power was less conspicuously a factor, though the political classes that emerged were oriented toward the outside. In general, these classes were composed of the "landowners, who dominated without opposition in the first period of life after independence, to which were added other groups, among which stand out the mineral impresarios and those of the commercial and financial sectors."(95) Although the interests of these classes did not always coincide, they were united in preserving their economic position through a common economic policy. But, we insist, there were no fundamental antagonisms in the economic sphere. As groups, all were producers of primary products or of associated or subordinated services, all were more or less advocates of free trade for the same reason, their principle markets were outside the country, and further, from the outside could be found those goods which satisfied their normally refined tastes; they were not protectionistic for the simple reason that they had very little to protect.(96)The policy of free trade in Chile, with a few exceptions, went virtually unchallenged. One notable exception was Jose Balmaceda (president 1886-91) who advocated taking control of the nitrates and national enterprises and using the surplus to foster autonomous industrial development.(97) In his words, "We must invest the surplus in productive works so that when the nitrate deposits are exhausted or lose their importance because of discoveries of new deposits or scientific progress, we shall have established a national industry and created with it and the state railways, the basis for new investment."(98) Balmaceda's program was not unlike that proposed by Allende in 1970, and met with a similar fate. He was overthrown in a brief civil war in which the opposition was financially assisted by the British nitrate owners. The existence of an economy oriented toward the exterior and politically maintained through a conjunction of foreign and local interests implies that a peripheral economy lives or dies according to its fortunes in the international market. In many peripheral countries, and Chile is no exception, the foreign economic relation depends upon the export of a few primary mineral or agricultural products.(99) In the late nineteenth and early twentieth century much of Chile's export income was gained from nitrates, and copper has served in that role for much of this century. Since imports, manufacture, and even food, as well as state revenues, may well depend upon exports, decreases in the demand and price of these commodities can have drastic economic and political effects. Recessions in the center, new sources for the center's imports, technical developments that make certain commodities superfluous or new ones essential, are reflected in the erratic economic and political careers of Third World countries. The history of Chile since the mid-nineteenth century is one long chronicle of rapid spurts of economic recovery and growth punctuated by slowdowns or sudden collapses which were due to the waxing and waning of her mineral exports. Shortly after her integration into the world economy, Chile experienced the first of many external shocks. In 1857-61 and again 1878 there were economic crises. These were due to a combination of many factors, including declines in the prices of metal Chile exported (silver, copper, gold), and loss of revenues from wheat brought on by the opening up of lands in the North American midwest, Canada, and Australia.(100) The crisis of 1878 was the more severe. The effect of the milder 1857-61 crises was as follows: At the end of August 1857, the contraction of money and credit had become so intense that commercial transactions were completely paralyzed in Valparaiso. The commercial crises had fatal repercussions for agriculture, mining, industry . . . it was necessary to reduce labor, abandon or postpone major construction or improvements that had been planned. There were many noisy bankruptcies. The price of rural property fell by 40 percent.(101)Following the more severe crisis of 1878, the economy remained stagnant until Chile took possession of the Peruvian nitrate mines in 1882. Nitrate production expanded and generated some governmental income as well as related commercial activities. Throughout this period Chile's export base narrowed, becoming more and more dependent upon nitrates.(102) The ratio of exports to imports increased dramatically at the start of World War I, and then suddenly returned to prewar levels in 1918. At that time a process was discovered for synthesizing nitrates from the air, and the bottom fell out of the nitrate market. Funds from nitrates dropped from 110 million in 1918 to 40 million in the years 1921 and 1922.(103) The collapse of nitrates was followed by the rediscovery of copper. This resource fell at once into foreign hands, this time North American; but the development of this resource could scarcely take effect before the Great Depression delivered the coup de grace to the economy. Chile felt the impending crisis as early as 1925. In that year her exports decreased by almost 90 percent.(104) Within a brief period, the number of people working in the mines was reduced by 65 percent, the amount of capital flowing into the country as investment virtually disappeared, and imports diminished, including imports of capital goods.(105) Chile, cut off from the center by the depression and the war was forced to industrialize, and did so, At war's end manufacture, and then capital, flowed once more into Chile. We will investigate these new developments, but the fact of dependence and economic vulnerability was restored, and to this day Chile is at the mercy of an external market. Furthermore, her economic dependence and instability is coupled with political dependence and instability (2.5). The power of the rural oligarchy and lack of industry meant that state revenues were collected from exports. In 1895, for example, exports comprised 95.1 percent of state revenues, in 1929 it was 67 percent, and in 1954 it was 52 percent.(106) The collapse of nitrate prices in 1918 implied a sudden decrease in state revenues, and ushered in a period of political instability which continued until the depression. Even subsequent to World War II, when the development of industry lessened Chile's dependence upon export revenues, government programs and the economic development would at times hit the wall of a drop in copper prices. The price of economic integration around a few basic commodities is periodic chaos, economic uncertainty, and political instability. Pinto sums it up as follows: In sum, the entire economic body is integrated and dependent to a high degree on the establishment of these primary materials. Well then, recognizing this orientation, we must consider that a normal economic process is threatened by fluctuations as pronounced as those cited in a report by the United Nations, that export prices change about 23 percent from one year to the next. It would be as if an employee or worker found himself exposed from one night to the following morning and continually to declines in his wages of this magnitude . . . ups and downs of this degree are profoundly disturbing and conspire against one of the primordial prerequisites of progressive economic evolution: a certain level of stability.(107)Given that a stable economic basis is a prerequisite for a viable social life (2.5), the erratic fortunes of peripheral countries on the world market has not only played havoc with their economic life, but has also made social and political life problematical at best. We shall investigate this in succeeding sections. The depression and war years, 1930-45, brought significant changes to Chile's economy and for the whole of the Third World. The center's preoccupation with the war effort was a factor in the independence of many colonial nations, and in the case of Chile, it meant that Chile no longer could import capital, manufactured goods, food, and capital goods at previous levels. As a result Chile, as did other Latin American nations, was forced to industrialize, and did so.(108) Between 1930 and 1945 industrial production grew by 125 percent.(109) The composition of the economy changed. The percentages devoted to agriculture and mineral exports dropped, while services and industry gained. Between 1929 and 1950, national income from minerals dropped from 32.5 to 11.9 percent, agriculture from 19.2 to 16.7 percent, while industry grew from 13.8 percent to 21.7 percent, and the services from 39.6 to 49.2 percent.(110) As a result of these changes the composition of the body politic was transformed as well. An urban proletariat emerged, along with a middle class whose basis was in the services as well as state financed jobs. Leftist political parties, socialist and communist, were strengthened, and the political process became much more complicated. Since the late nineteenth century a limited democracy had emerged in Chile, although the landowners and the commercial liberal party dominated Chile's political landscape. The drop in the price of nitrates after World War One occasioned a period of political instability which lasted until the depression. Following periods of dictatorial rule in the twenties, the economy and government floundered through 1930-32 with numerous juntas and short term presidents. In 1932 political stability was restored, a president was elected, and governments were democratically elected until the fall of Allende in 1973. The emergence of new social classes greatly complicated the democratic process. Complex struggles issued in shifting coalitions in which no political faction could conclusively gain the upper hand, although the power of the old regime, the landowners and the commercial class, was never really broken.(111) As a result, no clear economic policy emerged. On the whole, however, economic developments can be separated into two stages. First, a period of inward development, 1930-1955, followed by a time of transition, and then a period of reintegration into the world capitalist market.(112) We will begin with the economic developments that occurred with the depression and war, and conclude by characterizing aspects of the final period. During the depression and war, the state became a significant force promoting economic growth in Chile. Partly by necessity, and party by design, industry emerged and was strengthened by state intervention. Tariffs were erected to protect fledgling industries, and the government itself operated many of these industries and limited the flow of imports so that import substitution would occur.(113) Even after the war and into the sixties the state continued to play a prominent role in economic development.(114) Chile was also able to obtain a larger share of the revenues flowing from the export sector. Copper became a very important export item during the war. National participation in copper revenues increased from 22 percent in 1928 to 84 percent in 1952.(115) The funds from exports were then channeled by the state into investment and internal development. A growing class of people became dependent upon state funds for their livelihood. The size of the economic pie increased, and efforts were made by all the contending parties to increase their share. The large landowners were able to defeat any measure designed to tax their properties or distribute their holdings for greater productive use. Agricultural production actually declined, more foodstuffs were imported, including foods that could be grown in Chile.(116) The poor use of agricultural lands continued after the war as well. In the sixties Chile was having to import around 200 million dollars worth of food products annually, much of it products that could be grown locally.(117) The result was an increase in the price of basic foodstuffs. This penalized the poorer classes and workers, whose position was further undermined by tax policies that favored the wealthy.(118) Given an increase in internal production, real wages rose from 1940 to 1953 by 40 percent. This increase was not, however, equally distributed among the population. The workers and those in the poorest services increased their wages by seven percent, white collar wages increased by 46 percent, while the wealthy sector, those who lived off their property and investments, increased their real revenues by 60 percent.(119) Furthermore, the minor increase in real wages for the poorer sectors was offset by disproportionate increases in food and housing prices, with the result that the great mass of the population did not benefit in any substantial way from the nation's economic progress. In Pinto's words: The great mass of the population has their standard of living determined by the availability of certain basic goods, especially food and housing. Neither the one nor the other has become more available; on the contrary, these necessities have fallen behind other goods in their being accessible for public use. . . . In the failure to expand the availability of basic goods is to be found the great flaw, not only of economic policy, but social as well.(120)The result of the foregoing was increased political conflict. The left pushed for land reform and the socialization of industry in order to channel greater sums into wages and investment rather than into consumption by the wealthy. Excess consumption by the wealthy had come to represent a sizable portion of the country's surplus.(121) The middle class found itself particularly vulnerable. Its economic base lay primarily in the services or state jobs, and these were dependent upon the vagaries of the external market. Any fall in copper prices decreased state revenues, and since an important segment of the population was dependent upon state wages, the government was forced either to print money, or tax the wealthy, and the former inflationary course was frequently adopted.(122) By the middle sixties Chile came to have one of the highest inflation rates in the world.(123) One consequence of uncontrolled inflation was political instability as wages fell against prices. In 1952, Carlos Ibanez was elected president on a populist program, but "was forced out of his populist stance by the arrival of hyper-inflation: the cost of living level rose by 71 percent in 1954 and 84 percent in 1955. The chief cause was probably the decline in Chilean copper revenues following the end of the Korean War."(124) Ibanez brought the situation under control through austerity measures entailing a cut in wages by the salaried classes which in turn intensified popular resistance. Ibanez's term ended in 1958, and he was succeeded by a president on the right, Jorge Alessandri, who adopted a policy of free enterprise, less state intervention, and an open door policy with respect to foreign capital and manufactured goods. His policy was continued, with some modifications, by Eduardo Frei, 1964-70. As a result Chile, together with Latin America as a whole, was reintegrated into the expanding post-war capitalist market, and we shall conclude our economic discussion by characterizing this integration. By the end of the war the United States had emerged as the capitalist world's foremost economic and political power. Since expenditures on armaments no longer drained off the center's surplus, vast sums accumulated and found a partial outlet in peripheral economies. North American investments in Latin America went from 4.6 billion dollars in 1950 to 13 billion dollars in 1968, and as of that date represented 59 percent of all foreign investment in Latin America.(125) In Chile, foreign investments for a similar period, 1950-67, amounted to 257 million dollars in direct investments, and 1.718 billion dollars in loans, most of which, about 80 percent in the late sixties, was used by foreign companies operating in Chile.(126) Partly because of the development of industry in Latin America during the War, together with an increased demand for manufactured goods within Latin American countries, as well as tariffs limiting certain types of manufacturing imports, these new capital flows took a form that differed from the form taken prior to the war. In general, a significant percentage of the capital was invested by multinational corporations who purchased or created manufacturing industries within the periphery itself. In Latin America, these local industries were directed toward the local market.(127) In Chile, most of the capital flowed once again into the export enclave, although the fastest growing form of foreign investment was in manufacturing and commercial activities. In the sixties, for example, mining investment in Chile remained roughly constant, while commercial and manufacturing investment tripled.(128) In Latin America as a whole, the growth of investment in manufacturing was about double what it was in other sectors.(129) Furthermore, most of the investment in Latin America was carried out by a relatively few big North American firms.(130) As a result of these investments, Latin American industry became in part, and in certain sectors totally, dominated by foreign capital.(131) Consequently, Chile lost control of her mineral production, with North American firms holding most of the foreign owned shares.(132) Furthermore, foreign capital, being stronger, invaded and consolidated a number of Chilean firms, which led to the centralization and concentration of Chile's economy under monopolistic control from abroad. For example, the Chilean car industry, which consisted of 24 companies in 1962 was reduced to 12 by 1969, of which seven were controlled from abroad, four being subsidiaries of large foreign companies.(133) Similar results occurred in other sectors of the economy, such as petrochemicals, electronics, textiles, and the food industry. A major result of the foregoing capital penetration is that Chile lost a significant portion of her economic surplus. During the depression and war the profits from Chile's industrial growth, and this is true of Latin America's industry, were reinvested in the native countries themselves. The result was industrial growth throughout the region. After the war, this surplus was shipped abroad in the form of profits, service on the debt, and royalties. The corporations that invested in Latin America did so only under agreements that provided the means of remitting their profits. And these profits were large in comparison to the profits obtained in the center itself. For the periphery as a whole, Amin estimates that profits have averaged around 20-25 percent per year.(134) United State's investments in Latin America returned substantial dividends as well. In the five year period from 1961-1965, for example, United States firms invested 149 million dollars in Latin America, and received in return 978 million dollars, for a net gain of 829 million dollars.(135) This large differential is due to the fact that profits abroad were made on investment that came from a number of sources: new investment from parent companies in the United States (this composes the 149 million), old profits made in the periphery and reinvested on the spot, capital borrowed locally, and royalties on technologies. In the years 1963-65, only nine percent of North American investment in Latin America actually came from the United States; the remainder, 93 percent, was local capital and profits already captured and utilized locally by North American firms.(136) In Chile, in the years 1950-67, there was a net inflow of 257 million dollars in direct investment, and from this, 1.056 billion dollars was returned to the center in profits and dividends. With respect to foreign loans in the same period, Chile had received 1.718 billion dollars in loans, had paid back 1.406 billion dollars in amortizations and interests, and still owed 2.1 billion dollars on the debt itself.(137) Within a very short time, the original investment is returned, and then far more. For example, if the rate of profit varies between 15 and 20 percent, in four to five years the original investment is returned, and subsequently, the host country ends up exporting capital. The fact that foreign capital can use local capital to increase profits only speeds up the process. Furthermore, in Chile, the state enhanced the profitability of foreign firms by paying for the development of the nation's infrastructure, and leaving it to private capital to invest in the most profitable enterprises.(138) There is however, a limit to this process, and it is reached rather quickly. The limit is set by the balance of payments. North American banks and corporations invest in and lend to Latin American countries with the aim of making profits, and these profits are remitted in dollars under agreements worked out with the host country. The net result of capital investment in Lain America was a return capital flow that quickly exceeded the original investment. In the years 1950-69, the profits returned to North American firms was 6.7 billion dollars more than their direct investments.(139) Since the amount of dollars flowing out exceeds the flow coming in, dollars must flow into Latin America from other sources. In general, the industries established in Latin America were to meet local needs, and therefore the dollars must come from a host country's traditional exports, her mineral and agricultural wealth, rather than from new exported manufacture.(140) . . . what interests us to emphasize here is that the income transferred (or capable of transfer) because of service on foreign capital does not have a counterweight of foreign earnings created by the effect of these investments, precisely because the bulk of those investments are principally or exclusively directed toward activities linked to the internal market. Because of that, additional pressures arise on the balance of payments which we will discuss shortly.(141)As the outflow of profits increased, foreign exchange became progressively scarce. From 1952 to 1967, service on foreign capital grew from 18.5 percent of Latin American exports to 37 percent.(142) With respect to Chile, in 1950 capital exports from profits and loans amounted to only 7.6 percent of foreign earnings, by 1963 it had grown to 47.8, and by 1965 it exceeded 50 percent of foreign earnings.(143) Furthermore, it is to be remembered that Chile's principle export earnings were given by the mining enclave; in the mid-sixties the mining enclave supplied 84.5 percent of Chile's foreign earnings.(144) The result of the foregoing was that Latin America began to suffer a balance of payments crisis, exacerbated by the usual vulnerability of her exports to swings in commodity prices. In order to gain foreign currency, it is necessary to increase exports versus imports. This is often accomplished by a devaluation of the currency, which makes imports more expensive and exports cheaper. State salaries are frozen with respect to inflation; crucial imports, such as food and gasoline, receive lower state subsidies and thereby increase in price. The terms of these measures are often determined in large part by the center's lending institutions. The population suffers. Furthermore, the economy begins to stagnate as demand decreases through lower wages, and crucial imports, such as industrial machinery, become scarce. Given its economic integration with the outside, reduced imports means reduced economic activity, and this affects the whole of the economy. In this sense, the availability of foreign exchange sets the outer limit of industrial growth, with the result that growth can occur only if exports can outrun the need for foreign capital, which in turn depends upon the needs of the center for a country's primary products. The power of exports, however, to drive the economy forward becomes increasingly limited in a time of capital outflow, since service on foreign capital demands increased percentages of export earnings. The resultant blind alley has been expressed as follows: Here exists the known aggravation of being supported by exports based upon a single primary product under the conditions of a highly monopolized market in which, under this modality, one can attempt only slightly to adjust the "strait jacket." . . . In a few words, it does not appear possible for the functioning of the internal capitalistic structure to escape, except occasionally, the limit fixed for it by the availability of foreign earnings.(145)In short, the post-war penetration of foreign capital robbed the periphery of a portion of the surplus which had been contributing to its internal growth. The surplus left the country through profits and service on the foreign debt, and tangibly, the lost surplus appeared as an outward flow of agricultural and mineral products without an equal flow of material goods from the center. Further, the reintegration into the international market, once again subjected Latin American countries to the variations of the external market. These conditions still hold in Latin America.(146) It is difficult to discover with any precision the effect on living standards of Latin America's post war reintegration into the center's economy. Frank claims that real income and food consumption for Latin Americans has declined throughout the twentieth century.(147) Cardoso and Faletto report that the living standards of the marginal masses and workers suffer under the economic conditions created by foreign capital.(148) With respect to Chile, industry became progressively capital intensive, and although industrial wages rose slightly in the sixties,(149) the overall effect was that the "immense majority of the workers and those of middle income had very few opportunities for productive work, and received a reduced proportion of low incomes which created and did not find solutions to their fundamental problems."(150) With respect to Latin America as a whole, United Nations statistics reveal that gross internal production more than doubled, 2.4, on a per capita basis between 1950 and 1969, and this compares with 6.4 for the socialist countries, and 3.5 for the central capitalist countries.(151) It is difficult to see how significant this is for Latin America, since increased production may not translate into increased distribution of essential goods and services for the bulk of the population. What does seem clear, is that Latin America has progressively fallen behind the center and the socialist countries, and that major portions of its population live in poverty. We will have to leave this matter of living standards for the moment, and return to it later when we consider the matter from a wider perspective. Finally, we will conclude this section with two observations on the reintegration of Latin America into the world capitalist economy. In short, Latin America's reintegration brought increased political and economic dependence upon and domination by the center, particularly the United States.(152) There was also a shift in the internal political structure of Latin American countries as well. In general, the period of independent development occasioned by the depression has been characterized by Cardoso and Faletto as being a period of nationalist and populist development. During this period various political groupings, landowners, urban middle and industrial sectors, national bourgeoisie, workers, and rural and urban masses gained influences and political significance.(153) The penetration of capital and economic integration into the center shifted the structures of political alliances and possibilities. Significant economic decisions came to be dictated by the external world market or international lending institutions, and an international bourgeoisie emerged that associated itself with the local industrial bourgeoisie. The increased expectations brought about by internal development were frustrated by post war stagnations, and pressure from below forced countries to adopt more authoritarian measures to hold their populations in check. As a result there emerged a fusion of several sectors--the national bourgeoisie and the state, the multinational corporation, and the army. The democratic-representative regime, which in one form or another survived under the developmentalist state and under the populist policy of the initial phase of industrial expansion, is converted into the authoritarian-corporative regime through rebellions in which large national organizations like the army and the public bureaucracy (rather than the national and internationalized bourgeoisie) take action and reorganize. Of course, because the structural system that limits the possible action of these groups has not changed, the internationalized bourgeoisie continues to be the basis of the system of domination.(154)The increased significance of the military was fortified by United States policy of military training and assistance. Cardoso and Faletto describe the success of this policy as follows: It must be recognized that, considering its goals and without passing judgment on the means employed ("destabilization," "dirty conspiracy" support of regressive governments, etc.), the main objectives of American policy in the region have been obtained. The cost of this success may be measured by the fact that there were few situations in Latin America in which regimes guaranteeing some public freedom survived, and even fewer regimes that constantly tried to support development policies beneficial to the welfare of the majority.(155)Secondly, there is the fact of increased economic dependence. Although local manufacture was contributing a greater share of public consumption, much of the economy was dependent upon foreign imports. Manufacturing firms, as well as the mining sector, became dependent upon the center for such things as their heavy machinery, spare parts, advanced technology, and management. The increasing debt meant that countries could not function without new loans, and local financial institutions were integrated into the center's lending institutions. Finally, in the case of Chile as well as other Latin American countries, the center even supplied a number of important foodstuffs. As a result, Latin America finds it difficult to follow an independent economic course without inviting economic chaos. Both of these forms of dependence can be seen in the case of Chile. Governments were democratically elected in Chile from the mid 1930's until the election of Salvador Allende in 1970. Much of Allende's electoral success was based upon the failure of his predecessors to solve the country's economic problems. The preceding two governments had welcomed foreign investment, and after initial upswings, the economy had stagnated while wages fell against inflation.(156) Allende's party was elected with a program of "putting an end to the power of national and foreign monopolistic capital and of latifundism in order to begin the construction of socialism."(157) Allende nationalized the mines, began to nationalize foreign industry, and started to carry out a vigorous agrarian reform. The hope had been to make a peaceful transition to socialism. Allende's attempt toward autonomous development resulted in an American blockade, the freezing of credit from major lending institutions, lobbying on the part of the mining interests to prevent sales of Chilean copper to Europe, and efforts--the CIA, foreign firms, the U.S. trained military, and the national bourgeoisie--to bring down the government in a military coup.(158) The blockade virtually strangled the economy, copper prices happened to drop, chaos reigned, Allende's program was pronounced a shambles, the government was dispersed, and Allende murdered. Chile returned to the reign of laissez-faire economics and this policy held sway until the recent recession (1980-83), which, together with a further drop in copper prices, led to the abandonment of this policy. Since the fall of Allende, 1973, Chile has been governed by a military dictatorship. Forty years of democratic government came to an end; Chile has suffered the longest period of one-man dictatorship since the mid-nineteenth century. In short, Chile could economically reward only a small segment of the population, and these economic conditions were eventually incompatible with democratic political freedom. Democracy allowed the election of candidates who attempted to widen the economic base, and this led to the development of the dictatorship as the only means of slamming the lid on popular pressure from below while enabling local and foreign interests to appropriate the surplus. Given the center's overwhelming military superiority, and in light of (2.15), (3.4), (3.5), and (4.10), we would expect the center's relations with the periphery to involve substantial transfers of wealth from periphery to center. Amin calls this phenomenon "primitive accumulation," and an analysis of this phenomenon lies at the heart of the Marxist critique of relations between center and periphery.(159) In essence, the center, in every epoch of its relations with the periphery, has appropriated a significant portion of the periphery's surplus. The forms in which the surplus has been accumulated have changed, but the phenomenon itself has remained constant. In the mercantilist period, the era of initial European expansion, the periphery's surplus was captured through such means as plunder, trading companies, and mines and plantations using slave or enforced labor.(160) This period evolved into the middle or classical period of capitalist development. Between the initial mercantilist and classical phases there was what Amin calls a pause in the center's relations with the periphery as the center developed internally making the transition into a finished industrial form.(161) In the middle period of classical capitalism, the workers consumed a fraction of what they produced, and part of the excess was shipped abroad where it aided in the destruction of local manufacture and the capture of the agricultural and mineral outputs of peripheral nations. The fact that the center's manufacture supplied the periphery, meant that the periphery's surplus appeared as mineral or agricultural wealth. The periphery was capitalized, integrated into the world capitalist market, and its surplus, the agricultural and mineral output, was shipped abroad. This surplus was virtually expropriated without recompense, mined or produced by forced or poorly paid labor, and only a fraction of the value remained in the country. Chile's nitrates are a case in point. This form of primitive accumulation was established through events of a social historical nature. The center's imperialism and willing or unwilling acquiescence by peripheral nations provided the basis for the economic exploitation. As the monopoly period emerged, a new form of primitive appropriation developed, and this form has remained in force until the present day. This form is termed "unequal exchange" and stems from the fact that the rewards of labor are less in the periphery than in the center. After 1880, wages throughout the center rose, in part because competition among companies diminished, and in part, from political factors such as the legalization of unions (not without a struggle), minimum wage, and social legislation.(162) By contrast, workers in the periphery have lacked the political power to better their economic lot. That is, workers in the periphery, miners, rural laborers, and of late, industrial workers, earn far less than their counterparts in the center. As a result, the goods they produce for export to the center tend to become cheaper in relation to the center's goods as shipped to the periphery. The net effect is that the flow of goods rewards the center over against the periphery, since work in the center captures a greater portion of the total flow. This can be seen in the terms of trade. With some variations, there has been, from 1880 until the present, a worsening of the terms of trade between center and periphery.(163) In Chile, for example, the terms of trade worsened by 40 percent between 1870 and 1946,(164) and after the war, the terms of trade for Latin America as a whole deteriorated by 23 percent.(165) This implies that doubling Latin American exports since the war would only increase her imports by 54 percent. It has been estimated that the loss to Latin America, because of the worsening of the terms of trade between 1953 and 1968, reached approximately 3.4 billion dollars annually.(166) Although it is difficult to estimate, the decrease in terms of trade for Latin America would indicate that her exports today must be between two or three times their volume of 1880 to obtain the same amount of imports. The same phenomenon can be approached in another fashion by asking w |