THE BLOCKING OF TRANSITION
The transition to peripheral capitalism already reveals this asymmetry, reflecting the fact that the source of the initiative is the center.
The process of development of peripheral capitalism goes forward within a framework of competition (in the broadest sense of the word) from the center, which is responsible for the distinctive structure assumed by the periphery, as something complementary and dominated. It is this competition that determines three types of distortion in the development of peripheral capitalism as compared with capitalism at the center of the system: (1) a crucial distortion toward export activities, which absorb the major part of the capital arriving from the center; (2) a distortion toward tertiary activities, which arises both from the special contradictions of peripheral capitalism and from the original structures of the peripheral formations; and (3) a distortion in the choice of branches of industry, toward light branches, together with the utilization of modern techniques in these branches. This threefold distortion reflects the asymmetrical way in which the periphery is integrated in the world market. It means, in ecoπomistic terms, the transfer from the periphery to the center of the multiplier mechanisms, which cause accumulation at the center to be a cumulative process. From this transfer results the conspicuous disarticulation of the underdeveloped economy, the dualism of this economy, and, in the end, the blocking of the economy’s growth.It is the distortion toward export activities that constitutes the main reason for the blocking of a dependent and limited form of development. The fact is that the center’s needs for primary products (agricultural and mineral) from the periphery follow, broadly speaking, the average rate of growth of the center.
The countries of the periphery have to pay for their increasing imports with exports that need to increase at a faster rate so as to ensure that the profits exported by foreign capital are covered. The rate of growth of the center thus dictates that of the periphery; This blocking is, of course, only relative. Theoretically, it is not insurÂmountable. There are no vicious circles of poverty rendering impossible any genuine autocentric development, breaking with the orientaÂtion that is biased toward export activities. Large-scale organized investment would create its own market, by expanding the domestic market. But that would imply breaking with the rule of profitability.Economists want to stay within the setting of respect for proι.. ability, as they decline to reject the requirements for investment of foreign capital. For this capital, local investment directed toward the domestic market aggravates the external disequilibrium if it does not enable the volume of exports to be increased (or the volume of imports to be reduced) by the amount needed in order to export the profits made. Since a transformation of the economy based on large-scale imports of foreign capital entails substantial secondary waves of induced imports, direct and indirect, the requirement of external equilibrium gravely restricts the possibilities of aufocentric development financed from without.
Experience shows that the development of underdevelopment is neither regular nor cumulative, in contrast to the development of capitalism at the center. On the contrary, it is jerky and made up of phases of extremely rapid growth, followed by sudden blockages. These are manifested in a double crisis, of external payments and of public finances.
Let us assume a growth rate of 7 percent per annum in a peripheral economy. For a capital-output ratio of about 3 (a modest estimate), investments should represent 20 percent, approxiÂmately, of the gross domestic product. Let us assume that half of these investments are financed by foreign capital rewarded at rates of 15 percent (again, a modest estimate).
If imports increase at the same rate as the product, it will be possible for the balance of external payments to be kept level only if exports can grow at a rate much greater than 12 percent per annum. The following table shows the factors in this dynamic of growth.
Furthermore, if the tax burden is at its maximum and is constant (say, 22 percent, of distributed income, assumed to be spent wholly on consumer goods), allowing for the needs of financing public investments (the other half of investments), equilibrium in public finance would require that the advance of current public consumption should grow at a lower rate (4 or 5 percent only), that is, that current public expenditure should make up a decreasing proportion of the gross domestic product, as shown in the following table:
It is clear that things cannot go on like this. While the exports of a particular product or of a particular country may increase at a very high rate for a certain period, for the periphery as a whole. exports that are destined for the center cannot grow faster thu. demand at the center — that is, approximately at the rate of growth of the center: it is impossible for a country to catch up on its historical handicap while sticking to the basis of international specialization. But, above all, on this basis the imports into the periphery must increase faster than the gross domestic product. This tendency, observed historically, is easy to explain by two fundamental causes. First, international specialization means for a country of the periphery a relative narrowing of its range of productive activities, whereas the increased income that reflects growth means an expansion in the range of demand.
Second, the disarticulation that is characteristic of international specialization implies a more rapid growth of intermediate imports. Added to this is the very high import-content, both direct and indirect, of capital formation and public expenditure.From a different aspect, current public expenditure must grow faster than income. There are several reasons, too, for this requireÂment. The public investments in the infrastructure called for by international specialization involve recurrent operational expendÂitures that will increase like the accumulated investments, namely, much faster than the product. The balance available to ensure the social services essential to growth (education, health, not to mention the classical administrative needs) cannot be reduced, in relative terms, in such a drastic way: the spontaneous tendency is here, on the contrary, for the share taken by this kind of expenditure to increase. And the burden of taxation has its limits.
The twofold crisis of public and external finances is thus inevitable, and thenceforth growth will be blocked. The mechanism of this dynamic will not be able to function unless a start is made from a low level of international integration, unless a resource of interest to the center is suddenly opened up (making possible a big increase in exports), unless the prosperity that results from this attracts a large influx of foreign capital, and unless the tax burden, low to begin with, can be increasingly lightened. Growth will then necessarily be very strong: there will be a “miracle.” But this eventually comes to an end: there is no “take-off,” whatever the level of income per head that may have been attained. This is why no underdeveloped country has so far taken off, either from among those whose income per head is of the order of $200 or from among those where it is higher than $1,000 or $2,000. Autocentric and autodynamic development never becomes possible there, whereas at the center it was possible from the start, even with very low income levels.
None of the features that define the structure of the periphery is thus weakened as economic growth proceeds: on the contrary, these features are accentuated. Whereas at the center growth means development, making the economy more integral, in the periphery growth does not mean development, for it disarticulates the economy — it is only a “development of underdevelopment.”
We see how mistaken it is to identify underdevelopment with a Jow level of product per head. After all, in Kuwait the product per head in 1960 ($3,290) was greater than in the United States ($3,020), and in Venezuela it was higher than in Romania or Japan ($780, against $710 and $660, respectively), while in Portugal it was hardly bigger than in several African countries ($349, as against $230 for Ghana). As for Gabon, its product per head is today approximately the same as that of the France of 1900.