Pessimism of the Intellect, Pessimism of the Will A Respons.docx

Pessimism of the Intellect, Pessimism of the
Will? A Response to Gunder Frank*
Henry Bernstein and Howard Nicholas
The contribution of the work of Andre Cunder Frank to debates
about the nature of Third World ‘underdevelopment’ over the
past
twenty years is well known, and its significance widely acknow-
ledged. The arguments that he has consistently put forward have
been assimilated into the broad mainstream of contemporary
anti-
imperialist ideology. Also well known are a number of
criticisms of
the approach of Frank and other writers of the ‘dependency’
school. The extension of Frank’s influential version of
dependency
theory to the current recession in the world economy and its
effects
for the Third World, provides an opportunity to reconsider his
position, with particular reference to its political and
ideological
implications. This is the principal focus of our response, which
we
begin with a brief resume of Frank’s main theses and of
criticisms
of their theoretical and methodological bases.
FRANK’S THESIS A N D ITS CRITIQUE
The following points summarize the main themes and
conclusions

of Frank’s argument.
1 . Frank’s theory is concerned, above all, with the distribution
of
the surplus product (or ‘economic surplus’, Frank 1975)
between
*A. Gunder Frank: ‘Global Crisis and Transformation’,
Developmen1 ond Change.
Vol. 14. 3 , 3 2 3 - 4 6 .
Developmenr and Change (SAGE. London. Beverly Hills and
New Delhi).
Vol. 14 I 1 983). 609-624
610 Henry Bernsrein and Howard Nicholas
countries or groups of countries. National economies compete to
maximize surplus appropriation, and the extent to which they
are
able t o d o so rests on their possession (or lack of possession)
of
certain types of monopoly power in international economic
relations. Successful surplus appropriation is the key condition
of accumulation and hence development, although other factors
also have a role, for example, adequate levels of effective
demand and technical change.
2. While all countries were originally ‘undeveloped’. the
advanced
capitalist countries (DCs) were able t o achieve a path of
(‘normal’) capitalist development denied to the countries of the
Third World (UDCs). The two categories can be grouped in
terms of ‘metropole’ and ‘satellite’ or ‘centre’ and ‘periphery’.

3. The UDCs were actively underdeveloped as a consequence of
their forced integration with the capitalist world economy,
through which they became exporters of primary products (and
also sources of effective demand for exports from the DCs). The
economies of UDCs are locked into a structural relation of
dependence on those of the DCs, whose reproduction needs they
are compelled to satisfy. This occurs through a variety of
mechanisms - international trade (unequal exchange), invest-
ment, aid, technology transfer, transfer pricing etc. - the result
of which is a ‘drain’ of surplus from UDCs t o DCs, thereby
restricting the accumulation and development of the former.
4. It follows that ‘de-linking’ f r o m the capitalist world
economy is
an indispensable condition of the development of UDCs,
allowing them to retain their surplus for accumulation and to
provide a market to encourage growth and technical change,
free
from international competition dominated by the monopoly
power of DCs.
The following points summarize some of the main criticisms of
Frank’s thesis.
1. In Frank’s work capitalism is understood primarily as a
system
of exchange relations, above all those of international exchange.
This has important implications because the obverse of defining
(capitalist) underdevelopment by integration with the world
market, is to define (socialist) development by de-linking and
autarky.
2. Closely linked to this preoccupation with exchange relations
(as
the means of distribution of the ‘surplus’) is the use of

countries,
or groups of countries, as the units of analysis of international
economy - and indeed, one could say, as its subjects or ‘actors’.
A Response lo Gunder Frank 61 I
3. Within this framework, accumulation is seen as a quantitative
process: the amassing of goods and money. The historical
‘drama’ of accumulation is played o u t between countries on
the
‘stage’ of the international economy.
4. Together w i t h a strongly mechanistic methodology (on
which
more later), Frank’s mode of argument encourages what one
could call a ‘puppet master’ view of imperialism. Not only does
this deny the dynamics of class and popular struggle w i t h i n
UDCs, and the specific contradictions they express, but it also
and necessarily produces a generalized pessimism about the
prospects for socialism. Indeed, as we shall argue, it is the lack
of
any adequate conception of class contradictions and of political
struggle in Frank’s work that has the most dangerous effects.
I n o u r view, these lines o f criticism have been most
effectively
formulated and elaborated w i t h i n an avowedly Marxist
framework
(Brenner 1977, Leys 1977, Bernstein 1979, among ot hers).
However, i t is clear that Frank is not a Marxist nor has he ever
claimed to be one. To criticize his work for this reason, then.
may
seem beside the point. On the other hand, there are several
counter-

arguments to this. First, to propose a theory of the history of
(global) capitalist development, and to argue for socialism as
the
only way ahead for the development of UDCs. is to enter a
terrain
already occupied by several generations of Marxist thinkers and
parties, and is implicitly to contest their contributions.’ Second,
as
Frank’s w o r k is committed to the needs of contemporary anti-
imperialist struggle (similarly a preoccupation of Marxists) i t
can be
assessed from the viewpoint of these needs, to see how
effectively i t
contributes theoretical and ideological resources to the struggle.
I t
may be found wanting in this respect, independently of the
claims
of the Marxist tradition. The latter, however, does have its own
claims. and this leads to the third point. Marxism has long been
concerned with the issucs which Frank addresses, and i t can
claim
that the method of historical materialism is better equipped to
inform struggles for the same goals that Frank believes in.
The perspective and method of historical materialism can be
con-
trasted with that of Frank i n relation to the kinds of criticism
noted
above.
I . Capitalism is a particular mode of production. constituted
through distinctive relations of production which give rise to
distinctive forms of class and popular struggle. The distinctive
contradictions of the history of capitalism include the
mechanisms of uneven and combined development, determined

612 Henry Bermrein and Howard Nicholas
by the fundamental contradiction of the relationship between
capital and labour (which does not have to take in all cases the
immediate form of fully proletarianized ‘free’ wage labour; see
Banaji 1977, Gibbon & Neocosmos 1983).
2. Accordingly, the focus of Marxist analysis is on class and
other
social categories constituted through antagonistic relationships
of exploitation and oppression. These include relations of
domination and subordination in the sphere of gender, and in
the
sphere of the ‘national question’. For Marxists the national
question is generated by the contradictions of capitalism, and
has
to be assessed from the viewpoint of the struggle for socialism.
National economies and states are not the primary units of
analysis and historical subjects that they are for Frank, but
arenas of class struggle with their own specific articulations and
mediations. The latter, of course, are subject to determination
by
the dynamics and contradictions of world capitalist economy,
but this is neither an exclusive nor a one-directional
determination.
3. Accumulation is a social process, marked by struggles
between
capital and non-capitalist producers (‘primitive accumulation’),
and between capital and the working class. Accumulation within
the transitional period of socialist construction is also
necessarily
a process with its own contradictions and struggles (a point we
shall come back to).

4. Class and popular struggles affect accumulation processes
within
national economies and internationally, as well as being
affected
by them. To grasp the significance of these struggles (which is
systematically if unwittingly devalued by Frank’s ‘puppet
master’ view of imperialism, in which the ‘external’ deter-
mination explains everything) requires a dialectical method
lacking in Frank’s work.’ Even more important than its implica-
tions for the analysis of capitalist development/underdevelop-
ment, is its effects for understanding struggles for national
liberation and for socialism, and the criteria used to assess
them.
The ‘all or nothing’ quality of the binary oppositions of Frank’s
‘structuralist’ economics (de-linking and autarky vs world
market integration and dependence) provides no means, and
leaves no space, for getting to grips with the complexities and
contradictions o f socialist construction in particular
conditions.
Major experiences of mass struggle, and the lessons to be
gained
from them, are ‘written off‘ by a view of socialism which
renders
i t synonymous with withdrawal from the capitalist world
A Response 10 Gunder Frank 613
economy. This can only lead to an ever-growing list of
countries
which failed to ‘pass the test’, thus reinforcing defeatism and
pessimism.
This will be pursued further as we consider more closely
Frank’s

analysis of ‘global crisis and transformation’.
FRANK O N GLOBAL CRISIS A N D TRANSFORMATION
It is striking that Frank provides no systematic explanation of
the
cuuses of the present crisis, also a notable omission in his book
on
the crisis of world economy (Frank 1980). The latter contains a
few
vague references to ‘the rising organic composition of capital’
(a
curious appropriation of Marxist vocabulary by a non-Marxist)
and to ‘long waves’ in its first chapter, and thereafter there is
virtually no reference to the causes of crisis. It can be inferred
from
his general argument, however, that capitalist crises are caused
primarily by increased costs of production - what may be
characterized as a neo-Ricardian position (Fine & Harris 1979:
ch.
5). Certainly, rising costs of production and their effects for
rates
of profit and accumulation are the predominant manifestation of
the crisis for Frank. Accordingly, responses by capital to the
crisis
are characterized as various ways of reducing the costs of pro-
duction, including both labour costs and the costs of raw
materials.
In the advanced capitalist countries, the response is seen in
distributional terms: shifting distribution in favour of capital
through cuts in public spending (at least on social consumption,
if
not on military and police forces) and reduction in levels of real
wages, facilitated by a general political shift to the right.

Marxist
criticisms of the limitations of neo-Ricardian analysis of crisis
are
well established (Fine & Harris 1976, 1979), and we need only
note
their relevance to Frank’s argument briefly. He is unable to
analyze
crisis as an inherent outcome of the dynamics of capitalist
accumu-
lation, and its contradictions rooted in the capital relation itself.
Because he sees accumulation as a quantitative phenomenon,
with
the relevance of classes limited to their role in distribution (and
demand), Frank views crisis as resulting from a lack of
technical
change in production in the face of conflict over distribution.
Mass
unemployment is also seen primarily in terms of distribution: it
is
manipulated by capital t o weaken the bargaining power of
workers
over wages. For Marxists the massive expansion of the reserve
army
of labour is, i f anything, even more important as a weapon in
class
614 Henry Bernsrein und Howurd Nicholus
struggle over the restructuring of production. The introduction
of
new technologies and work practices requires an offensive
against
the capacity of workers to resist forms of control imposed on
them

by the capitalist labour process itself.
In Frank’s account, crisis appears in principle as both
resolvable
and avoidable. I t is resolvable through the introduction of new
technologies and the reduction of costs of production, and
avoid-
able through the imposition of some kind of ( d e f u c f o )
domestic
and international incomes policy, together with state
sponsorship
of technological change and diffusion (within and between
countries).
The role of UDCs in the response of metropolitan capital to the
crisis is primarily as a supplier of cheap labour, whether
directly to
(export oriented) industries relocated in the Third World or to
the
production of primary commodities for the world market (export
production vs import-substitution for the internal market). This
argument, in fact, does not distinguish the role of UDCs in a
period
of crisis from their role in the capitalist world economy during
periods of ‘boom’: what is demanded of them now is essentially
the
same as before only, perhaps, more so. The ‘before’, i t should
be
remembered, comprises five centuries of world capitalist
economy
marked by an essential structural continuity as far as ‘world
system’ theorists are concerned. Frank himself expresses this:
The new dependent export-led growth of manufacturing and
agribusiness
production for the world market are i n no wu.v signiJicunrly

di’j-erenr from the old
raw materials export-led growth which underdeveloped the
Third World in /hejirsr
pluce (Frank 1983: 3 3 5 ; our italics).
I t follows that the two responses identified by Frank as
available
to UDCs and socialist countries - ‘acceptance’ or ‘rejection’ -
can not be specified as responses to the demands of the
metropole
at any time. Bearing this in mind, we shall briefly consider
Frank’s
description of the ‘acceptance’ response and its effects, and
then
his description of ‘rejection’ and de-linking.
The acceptance response (further integration in the world
capitalist economy) is discussed mostly in relation to the Newly
Industrializing Countries (NICs) of South Korea, Taiwan, Hong
Kong, Singapore, Brazil and Mexico. Frank’s aim is to show
that
despite their impressive rates o f industrialization and
economic
growth more generally, they d o not constitute a generalizable,
viable or desirable ‘model’ of development for other UDCs to
emulate. I n criticizing Frank it is-not necessary to endorse the
A Response lo Gunder Frank 612
recent experience of the NlCs as providing a positive ‘model’
(which is more the position of Warren 1980). Our position is
rather
that the significance of those experiences cannot be adequately
assessed by Frank’s methodology and the criteria i t employs.

Our
disagreement entails very basic issues of theory and historical
method which can only be briefly summarized here (for fuller
discussion see Bernstein 1979, 1982).
Frank’s conception of ‘underdevelopment’ is derived from an
underlying notion of ‘normal’ capitalist development
historically
realized in the metropole. At the same time, the capitalist
develop-
ment of the metropole required the formation of a ‘world
system’
that denies the possibility of development to the UDCs.
Whatever
changes (even ‘transformations’ in Frank’s term) occur in the
latter, they can never replicate the pattern of development of the
DCs. This is essentially a tautology with a negative (and not
very
illuminating) punch-line: history does not repeat itself. That the
industrialization of certain countries at certain times influences
the
conditions of industrialization in other countries subsequently is
a
perception neither unique to the ‘world system’ approach, n o r
a
demonstration of its ‘scientific’ character. That the Marxist
historian Eric Hobsbawm was able to analyze the specificity of
Britain’s industrial revolution ‘without the benefit of “world
system analysis”’ (as Frank puts i t . 1983: 332) is hardly
surprising.
Nor is it surprising that a non-Marxist historian Alexander Ger-
schenkron (1952, 1962) produced a still rewarding discussion of
the
ways in which one ‘generation’ of capitalist industrialization
changes the conditions for the next.

All that Frank is saying is that capitalist development of the
NICs neither (i) leads to ‘relatively autonomous and self-
propelling
technological development based on national resources and
capacities’ (1983: 335) (an accolade bestowed uniquely on
North
Korea among the dozens of countries he refers to), nor ( i i )
delivers
the goods of full employment, satisfaction of basic needs,
equaliza-
tion of income, and so on. But neither of these is what capitalist
development means. I t means the accumulation of capital and
the
development of the productive forces through a distinctive mode
of
exploitation, and the class struggles it generates. The types of
questions that socialists need to investigate are: what are the
‘trans-
formations’ that have occurred in the NICs? How have they
changed the conditions of class and popular struggle? What are
their implications for political organization and programmes,
strategy and tactics?
616 Henry Bernsrein and Howard Nicholas
These are not questions that can be answered according to pre-
packaged o r deductive formulas - and that is precisely the
point.
Frank’s theory provides no means of investigating the
specificity of
particular social formations and sites of struggle within the
capitalist world economy, characterized as it is by a basic
structural
dualism (metropole/satellite, centrelperiphery) and a

fundamental
continuity over five centuries. The dead weight of Frank’s
‘world
system determinism’ either negates specificity (all UDCs are
ultimately trapped in the same blind alley), or can only
construct
specificity in an ad hoc and empiricist fashion. This is clearly
illustrated in his assertion of the ‘exceptionalism’ of the Asian
‘Gang of Four’ NICs, as Frank feels it necessary to distinguish
them from the rest of the (theoretically) undifferentiated
periphery
(pp. 3 3 1 f f ) .
His discussion of the ‘acceptance’ response (Ibidem) of UDCs
can only provide negative conclusions: ‘acceptance’ may
provide a
limited avenue of growth for a limited number of UDCs, and it
cannot provide ‘real’ development for any UDC. The experience
of
the NICs fails the test of development according to both
nationalism and socialism. ‘Dependence’ is the key term in the
nationalist lexicon because industrialization and accumulation
cannot connote ‘real’ development, if they are considered to be
determined by metropolitan capital as a means of maximizing
‘surplus drain’. As Anne Phillips pointed out, the ‘national
capitalist’ response was rejected by dependency theorists nor
because it is capitalist but because it is insufficiently ‘nafional’
(1977: 19). The nationalist reaction to imperialism, therefore,
cannot provide a revolutionary critique of capitalism of the kind
required by the struggle for socialism.
Furthermore, it is only confusing to dismiss capitalist develop-
ment, as Frank does, because it fails to d o what we believe
socialism should d o for human emancipation. The result is a
moralistic and utopian critique of poverty, misery, injustice and
oppression. I t completely misses the point that these

widespread
phenomena may manifest the ‘success’ of capitalist
development
rather than its ‘failure’, expressing the contradictions through
which capitalism develops.
The ‘transformations’ experienced by the NlCs encompass
simultaneously (i) new forms of ‘marginalization’ and
oppression
(emphasized by Frank), (ii) major developments of internal
productive linkages, of the internal market, and of indigenous
capital accumulation (Frank’s empirical generalizations to the
A Response 10 Gunder Frunk 617
contrary are inaccurate),’ and (iii), most importantly, massive
pro-
letarianization and urbanization. The significance of the last for
generating new forms of class and popular struggle - in short,
new
political possibilities - is altogether lost in the story as Frank
tells
i t . This is the political point that we shall carry forward to our
discussion o f Frank’s account of the ‘rejection’ response of
UDCs
and socialist countries (p. 331).
The extension of Frank’s theory to the current period of crisis
contains no surprises, as far as the ‘acceptance’ response is
concerned. What he says about the effects of world economy
integration for UDCs in the context of 1983 is familiar from
what
he said in the 1960s. The extension of his discussion to take in
‘rejectionist’ responses (including socialism) is more novel (pp.

338 ff).
I t is also, in our view, even more confused and politically
dangerous.
In the last part of his paper, socialism appears more or less
synonymous with ( i ) de-linking from the world economy, plus
( i i )
the redistribution of political power together with popular
participation (p. 342). The inadequacies of these (vague)
notions
for assessing the record of socialism (and of UDCs that have
followed a ‘rejectionist’ line at certain times) is borne out in
Frank’s ad hoc and impressionistic judgements. First, i t is not
clear
to what extent countries termed socialist satisfy these criteria;
for
example, Frank states that ‘the Soviet Revolution certainly did
not
bring the Russian proletariat to power’ (p. 345). One may also
inquire (and genuinely, because we d o not know) about the
role of
popular participation in North Korea development.
Second, while the achievements of socialism are registered in
terms of (an initial) de-linking, increasing production, and
satisfy-
ing basic needs, socialist economies are seen as trapped in low
levels
of productivity (he does not explain why). This impels them to
turn
to the West for technology (1983: 345). and thus draws them
into
re-linking with the capitalist world economy. This both
threatens
the social gains they have made, and entails the danger of a
transition to capitalism (which Frank thinks is occurring in

Eastern
Europe) (p. 345). The practical difference between socialist
countries and non-socialist but ‘progressive’ UDCs appears only
as
one of degree. Attempts by the latter to de-link are nipped in the
bud sooner, and re-integration with the world economy imposed
on
them more easily.
The general conclusion is necessarily a gloomy one. Frank
refers
t o the ‘real economic limitations. social costs and political
short-
comings of both the integrationist and rejectionist options - and
618 Henry Bernslein and Howard Nicholas
the failure of Marxist theory and socialist models in the Soviet
Union, China and elsewhere to offer sufficiently persuasive
alternatives’ (p. 341; our e m p h a ~ i s ) . ~ He also points out
that the
‘very fact that de-linking is not only a policy that is attempted
by
progressive governments but is also an arm that is used against
the
progressive governments, gives cause for reflection about the
rational utility of de-linking in the world today’ (p. 343).
We argue that Frank’s ability to assess the nature and signifi-
cance of capitalist development is limited by the lack of
adequate
conceptions of class contradiction and struggle. The same
applies
to his assessment of socialism. The meaning of the latter for

Frank
is effectively exhausted by the existence of progressive regimes
and
the pursuit of de-linking as a policy. The remarks about
mobiliza-
tion and participation are too abstract and vague to inform his
sub-
stantive judgements. The history of mobilization and
participation
in Vietnam and China, for example, has not saved their
socialisms
from the clutches of re-linking in Frank’s view (p. 344).
In short, Frank shows no awareness of the politics of state
forms, practices and policies in relation to class struggles and
their
contradictions. I t appears that ‘the people’ is simply a residual
and
homogenous mass, which regimes more or less succeed (or fail)
to
rally behind their policies. That the construction of socialism is
a
complex process of transition, constituted by its own specific
contradictions, both ‘external’ and ‘internal’, antagonistic (class
contradictions) and non-antagonistic (contradictions amongst
the
people), is not indicated in even the most general way. Nor is
there
any recognition that relations of production in factories and
farms,
social divisions between mental and manual labour and between
town and countryside, gender and cultural divisions, party and
state organization, strategy and policy, are all actual or
potential
sites of contestation and struggle, in the transition to socialism.

The reason for this is Frank’s dual obsession with de-linking
and
with policy (‘responses’, ‘options’, ‘alternatives’, etc.). While
de-
linking stems directly from his ‘world system determinism’, the
obsession with ‘policy’ paradoxically reflects an astonishing
volunfarism: ‘de-linking is in essence voluntary’ (p. 343). This,
as
much as anything, expresses the core of the problem: the whole
apparatus of the world system approach is put at the disposal of
finding a ‘policy’ of development alternative to (capitalist)
under-
development or dependence. ‘Socialism’ is thereby reduced to
an
impoverished conception of finding the right policy and making
i t
work (a spuriously technico-rationalist view that mirrors the
A Response 10 Gunder Frank 619
‘applied’ ideology of conventional development studies).
With de-linking as the key litmus test, the examples given by
Frank appear as failures on either voluntarist or determinist
grounds. The former include Zimbabwe where Mugabe ‘has
completely failed to pursue the policies that he had promised’,
and
Guinea-Bissau, Angola and Mozambique ‘none of [which] have
sought to de-link significantly from the world capitalist
economy’
(p. 3 3 9 ) . In Mozambique ‘the FRELIMO regime has recently
back-
(racked on its earlier policies’ (p. 339). The emphases we have
added to these revealing phrases highlight the subjective

attribution
of ‘failure’ consistent with a voluntarist approach. All that these
statements tell us. in fact, is that their author is disappointed
with
the individuals and regimes concerned, not about the severe
contra-
dictions that socialists in these countries have to confront and
try to
act on.
The determinist version of failure is expressed by the over-
whelming power of imperialism to impose its demands on,
under-
mine or threaten progressive regimes (Tanzania, the Manley
government in Jamaica, Nicaragua). The point here is not to
under-
estimate the power of international reaction, but to suggest that
Frank’s erratic leaps between the poles of voluntarism (failure
through subjective weakness or betrayal) and determinism
(failure
in the face of hopeless odds) is an effect of his lack of grasp of
class
contradiction and struggle. I t is precisely the absence of class
struggle that enables Frank to provide ‘a review of some recent
experiences’ (p. 3 3 8 ) constituted, on one hand, by a
voluntaristic
conception of the way forward, and, on the other hand, by a
determinism that denies its possibility.
The theoretical incoherence of this framework reflects itself in a
number of throwaway remarks displaying a lack of political
responsibility that we can only regret coming from Gunder
Frank.
For example, the intensity of class contradiction and struggle in
the
Chile of the Popular Unity government, and the painful lessons

to
be learned from its defeat, are betrayed by reducing the counter-
revolutionary class forces in the country to the status of a
‘Quisling
fifth column’ (p. 3 4 3 ) . No less irresponsible is the casual
reference
to Deng Ziaoping (and the millions of Chinese he speaks for?)
being in ‘alliance with American imperialism’ (p. 344).
The only thing that Frank has to counter the mechanical deter-
minism of his own theoretical framework, is a voluntaristic
aspiration to the right ‘policy’ as a means of moving forward. It
is
perhaps not surprising, then, that he has discovered that
everything
620 Henry Bernstein and Howard Nicholus
is for the worst in the worst of all possible world systems, that
the
will has succumbed to the pessimism of the intellect.
CONCLUSION
Communism is not for us a stute o/uJ/uirs which is to be
established, a n ideal to
which reality (will) have to adjust itself. We call communism
the r e d movement
which abolishes the present state of things. (Marx and Engels
1970: 56-57)’
T h e immediate effect of ‘marxifying’ radical structuralism
was to shift the implied
solution t o the problem of underdevelopment from economic

nationalism to
sociulism. and to shift the means from utopian recommendations
of structural
reforms to revolutionary struggle. But this was an illusion. It is
n o less utopian to
appeal to ‘revolution’ and ‘socialism’ to solve the problem a s
rudirol structurulism
formulures it, than to the existing third world governments o r
the USAID, since a
structuralist analysis doesn’t disclose the potential class forces
o n which a
revolutionary struggle can be based, o r the contradictions
which condition and are
developed by the struggle. o r a strategy o r organisational
forms of struggle. o r - u
fortiori - a ‘socialist’ solution since a socialist solution must
itself be disclosed by
t h e interests and capacities of the revolutionary forces and
their strategy which has
not been identified a t all (Leys 1977: 98).
I t has not been easy for us to engage with Frank’s arguments
and
the style in which they are presented, for the following reasons.
First, his problematic combines a deductive and a prior;
determinism drawing on a few global propositions about the
world
system (and its history), and a verificationist empiricism in
which
any set of facts illustrates and ‘proves’ these global
propositions. I f
the latter are assimilated uncritically (and even unwittingly as
part
of the mainstream of contemporary anti-imperialist ideology)
then
everything that follows is plausible. The ‘conjuring trick’ of

empiricism is that it provides descriptions of the world that we
‘recognize’ as valid. When Frank talks about the chronic
indebted-
ness of Brazil and Mexico, or state repression in the
Philippines, we
are confident that he is describing important facets of the
current
world conjecture. In this sense, he continues to contribute to
what
could be called the ‘symptomology’ of contemporary
imperialism.
However, the ‘recognition’ factor in our reading of his
description
of the manifesfations of crisis and transformation, should not be
the same thing as accepting its (often submerged) explanations
and
prognoses.
A second difficulty in getting to grips with Frank is his
A Response lo Gunder Frank 62 I
undoubted commitment to anti-imperialist struggle and to the
goals
of socialism, which a number of us share. At the same time we
have
argued that his commitment is expressed through a utopian and
voluntarist, hence politically impoverished, notion of
development.
It is rooted in the search for an ‘ideal’ state of affairs
(progressive
regimes with the correct ‘models’ and policies and the ability to
make them work), detached from the centrality of class struggle
and uninformed by any understanding of contradiction - ‘the

real
movement which abolishes the present state of things’ (Marx
and
Engels). Such a utopian and voluntarist conception contains the
seeds of its own ‘disillusionment’, leading only too easily to
pessimism of the will as well as of the intellect.
In trying to uncover what is at stake in Frank’s paper, we have
not been able to confront all the particular points it raises. I t
is,
after all, a kind of whirlwind ‘Cook’s tour’ of the present world
conjecture, containing many statements that are unsubstantiated,
unelaborated, o r only partially valid empirically. In our
criticism,
however, we have indicated some of the elements of a different
approach based in (our understanding of) historical materialism.
Criticism has clustered around three kinds of points and the
links
between them: theoretical, methodological. and political.
Theorefically, we have criticized the form and content of
Frank’s
version of ‘world system’ analysis. Its content lacks concepts of
relations of production, contradiction and class struggle; its
form is
that of a mechanical and deductive determinism.
Merhodologically, this expresses itself in a form of empiricism
more committed to ‘verification’ than t o invesfigofion. i.e. the
production of new knowledges adequate to changing conditions
and processes of struggle. Frank’s methodology lacks any
differ-
entiation of levels of abstraction necessary to construct
specificity
within the general. I t essentially packages facts in a few global
categorical boxes.

Politically, the formulation of a voluntarist conception of
‘development’/‘socialism’ which neither starts from the
concrete
struggles of the exploited and oppressed nor puts them at the
centre
of analysis, leads to a gratuitous and dangerous pessimism.
There is
a painful irony in this for those of us who respect Frank’s
commit-
ment but have to recognize that the ways in which it is
expressed
can undermine the struggle for the very goals that he believes
in.
622 Henry Bernstein and Howard Nicholas
NOTES
I . It is relevant that Frank announces ‘the failure of Marxist
theory’ (see note 4
below), and that one of his followers assimilates his work t o a
body of current ‘neo-
Marxism’ presented a s establishing a salutary break with the
older traditions of
Marxism (Foster-Carter 1974). Tensions a n d debates within
the Marxist tradition are
illustrated. for example, by Bill Warren’s criticism of Lenin’s
/mperialism and of
Comintern policy on the national question, a s historical
precursors of contemporary
‘Third Worldist’ political economy (Warren 1980: chs. 3 and 4).
2. Valuable recent discussions of the dialectical method can be

found in Nicolaus
1973, Echeverria 1978, Banaji 1979, Mepham & Ruben (eds.)
1979.
3. We are unable t o go into the details of this disagreement
here. Some idea of the
theoretical and methodological issues involved in interpreting
the relevant evidence,
and the political sources and implications of diverging
interpretations, are conveyed
in the recent ‘Kenya debate’: see. for example, Leys 1978. the
exchanges between
Kaplinsky 1980. Leys 1980, and Henley 1980, the commentary
by Beckman 1980.
the special issue of the Review of African Political Economy
1981. and the
penetrating discussion by Kitching (forthcoming). For an
incisive analysis of
comparable issues in the Nigerian context see Beckman
(forthcoming).
4. This statement reveals once again Frank’s ‘all o r
nothingism’ tied to his utopian
and voluntarist conception of development (discussed below).
The definitive
pronouncements of ‘failure’ it produces can only be disturbing
to socialists. To
whom is Frank’s assertion of ‘the failure of Marxist theory and
socialist models’ (p.
341) addressed? What is a ‘persuasive alternative’ (p. 341) and
to whom is it
‘persuasive’? T h e experiences of the Soviet Union, China and
a number of other
countries constitute the most profound and critical ‘school’ for
learning about the
contradictions and struggles intrinsic to the transition to

socialism. Frank, however,
more o r less writes them off a s having ‘failed’ to conform to
the (utopian)
expectations of his conception of ‘development’. His
pronouncements show no
awareness of the intense debates these experiences have
generated among socialists;
see. for example, the original and provocative work of Corrigan,
Ramsay and Sayer
1978.
5 . We are grateful 10 Peter Waterman for reminding us of this
apposite statement
by Marx and Engels.
REFERENCES
Banaji. J . (1977): ‘Modes of Production in a Materialist
Conception of History’,
Capital and Class, 3 .
_ _ (1979): ‘From the Commodity to Capital: Hegel’s Dialectic
in Marx’s Capirul‘.
in D. Elson (ed.): Value: the Representation of Labour in
Capital (London).
Beckman. B. (1980): ‘Imperialism a n d Capitalist
Transformation: Critique of a
Kenyan Debate’. Review of African Polirical Economy. 19.
-- (forthcoming): ‘Neo-colonialism, Capitalism and the State of
Nigeria’,
in Bernstein & Campbell (eds.).
Bernstein, H . (1979): ‘Sociology of Underdevelopment vs
Sociology of

Development?’. in D. Lehmann ( e d . ) : Development Theory.
Four Criricul Studies
(London).
!
A Response to Gunder Frank 623
- - (1982): ’Industrialization, Development and Dependence’.
in H . Alavi & T.
Shanin (eds.): Introduction to the Sociology of the ‘Developing’
Societies (New
York a n d London).
Bernstein, H . a n d B. Campbell (eds.) (forthcoming):
Contradictions of
Accumulation in Africa. Studies in Economy and State (Beverly
Hills, Cal.).
Brenner. R. (1977): ‘The Origins of Capitalist Development: a
Critique of Neo-
Smithian Marxism’, New Left Review, 104.
Corrigan. P., H . Ramsay & D. Sayer (1978): Socialist
Construction and Marxist
Theory. Bolshevism and its Critique (London).
Echeverria, R. (1978): ‘Critique of Marx’s 1857 Introduction’.
Economy and
Society, 7, 4.
Fine, B. & L. Harris (1976): ‘Controversial Issues in Marxist
Economic Theory’, in
R. Miliband & J . Saville (eds.): The Socialist Register 1976

(London).
-- (1979): Re-reading Capital (London).
Foster-Carter. A. (1974): ‘Neo-Marxist Approaches to
Development and Under-
development’, in E. d e Kadt & G . Williams (eds.): Sociologv
and Development
(London).
Frank, A.G. (1975): On Capitalist Underdevelopment (Bombay).
-- (1980): Crisis: In the World Economy (London).
-- (1983): ‘Global Crisis a n d Transformation’. Development
and Change. 14, 3.
Cerschenkron. A. (1952): ‘Economic Backwardness in
Historical Perspective’. in
B.F. Hoselitz (ed.): The Progress of Underdeveloped Areas
(Chicago).
_ _ (1962): ‘Typology of Industrial Development a s a Tool of
Analysis’, in !Second
International Conference of Economic History. Vol. 2 (The
Hague).
Gibbon, P . & M. Neocosmos (1983): ’Some Problems in the
Political Economy of
“African Socialism”’ (paper presented to the Annual Conference
of the British
Sociological Association; Cardiff).
Henley, J.S. (1980): ‘Capitalist Accumulation in Kenya - Straw
Men Rule O.K.?’.
Review of A fricon Political Economy. 17.
Kaplinsky, R. (1980): ‘Capitalist Accumulation in the Periphery

- the Kenyan Case
Re-examined’, Review of African Political Economy, 17.
Kitching. G . (forthcoming): ‘Politics. Method and Evidence in
the “Kenya
debate”’. in Bernstein & Campbell (eds.).
Leys. C. (1977): ‘Underdevelopment and Dependency: Critical
Notes’, Journal of
Contemporary Asia. 7 . 1.
- - (1978): ‘Capital Accumulation. Class Formation and
Dependency - the
Significance of the Kenyan Case’, in R . Miliband & J . Saville
(eds.): The Socialist
Register 1978 (London).
- - ( 1980): ‘Kenya: What Does “Dependency” Explain?’,
Review o j Ajrican
Politicul Economy. 17.
Marx, K. & F . Engels (1970): The German Ideology (Part I ) .
Ed. C . Arthur
(London).
Mepham. J . & D-H. Ruben (eds.) (1979): fssues in Marxist
Philosophy, Vol. I .
Dialectics and Method (Hassocks. Sussex).
Nicolaus. M. (1973): ‘Foreword’ to K. Marx: Grundrisse
(Harmondsworth).
Phillips, A . (1977): ‘The Concept of Development’, Review of
African Political
Review of African Political Economy. 20 (1981): special issue o
n Kenya: the

Warren, B. (1980): Imperialism: Pioneer of Capitalism
(London).
323-46.
Econoniy. 8.
Agrarian Question.
624 Henry Bernstein and Howard Nicholas
Henry Bernstein is a Lecturer in Third World studies at the
Open University, and Visiting Research Fellow at the
Institute of Social Studies during 1982-3. He has published
many articles on theories of development and
underdevelopment, peasant economy, African
historiography, and state and peasantry in Tanzania. He is
the editor of Underdevelopment and Development. The
Third World Today (Penguin, fourth printing 198 1); co-
editor with Hazel Johnson of Third World Lives of Struggle
(Heinemann, 19821, and with Bonnie Campbell of
Contradictions of Accumulation in Africa. Studies in
Economy and State (Sage Publications, forthcoming).
Howard Nicholas is Assistant Lecturer in Economics at the
Institute of Social Studies. He has recently been awarded a
doctorate for a dissertation on the role of money in world
market crises. His interests include value theory, modes of

production and uneven development, and national liberation
movements.
THE DEVELOPMENT OF
UNDERDEVELOPMENT
BY ANDRE GUNDER FRANK
We cannot hope to formulate adequate development theory
and policy for the majority of the world's population who suf-
fer from underdevelopment without first learning how their
past economic and social history gave rise to their present
underdevelopment. Yet most historians study only the
developed
metropolitan countries and pay scant attention to the colonial
and underdeveloped lands. For this reason most of our theo-
retical categories and guides to development policy have been
distilled exclusively from the historical experience of the Euro-
pean and North American advanced capitalist nations.
Since the historical experience of the colonial and under-
developed countries has demonstrably been quite different,
avail-
able theory therefore fails to reflect the past of the under-
developed part of the world entirely, and reflects the past of
the world as a whole only in part. More important, our igno-
rance of the underdeveloped countries' history leads us to as-
sume that their past and indeed their present resembles earlier
stages of the history of the now developed countries. This igno-
rance and this assumption lead us into serious misconcep-
tions about contemporary underdevelopment and development.

Further, most studies of development and underdevelopment fail
to take account of the economic and other relations between
the metropolis and its economic colonies throughout the history
of the world-wide expansion and development of the
mercantilist
and capitalist system. Consequently, most of our theory fails to
explain the structure and development of the capitalist system
as
a whole and to account for its simultaneous generation of under-
development in some of its parts and of economic development
in others.
Andre Gunder Frank, a frequent contributor to MR, is Visiting
Professor in Economics and History at Sir George Williams
University in
Montreal.
17
MONTHLY REVIEW SEPTEMBER 1966
It is generally held that economic development occurs in a
succession of capitalist stages and that today's underdeveloped
countries are still in a stage, sometimes depicted as an original
stage of history, through which the now developed countries
passed long ago. Yet even a modest acquaintance with history
shows that underdevelopment is not original or traditional and
that neither the past nor the present of the underdeveloped
coun-
tries resembles in any important respect the past of the now
developed countries. The now developed countries were never
v' underdeveloped, though they may have been undeveloped. It
is

also widely believed that the contemporary underdevelopment
of
a country can be understood as the product or reflection solely
of its own economic, political, social, and cultural
characteristics
or structure. Yet historical research demonstrates that
contempo-
rary underdevelopment is in large part the historical product of
past and continuing economic and other relations between the
satellite underdeveloped and the now developed metropolitan
countries. Furthermore, these relations are an essential part of
the structure and development of the capitalist system on a
world scale as a whole. A related and also largely erroneous
view is that the development of these underdeveloped countries
and, within them of their most underdeveloped domestic areas,
must and will be generated or stimulated by diffusing capital,
institutions, values, etc., to them from the international and na-
tional capitalist metropoles. Historical perspective based on the
underdeveloped countries' past experience suggests that on the
contrary in the underdeveloped countries economic development
can now occur only independently of most of these relations of
diffusion.
Evident inequalities of income and differences in culture
have led many observers to see "dual" societies and economies
in the underdeveloped countries. Each of the two parts is
supposed to have a history of its own, a structure, and a con-
temporary dynamic largely independent of the other. Supposed-
ly, only one part of the economy and society has been im-
portantly affected by intimate economic relations with the "out-
side" capitalist world; and that part, it is held, became modern,
capitalist, and relatively developed precisely because of this
contact. The other part is widely regarded as variously isolated,
18

DEVELOPMENT OF UNDERDEVELOPMENT
subsistence-based, feudal, or precapitalist, and therefore more
underdeveloped.
I believe on the contrary that the entire "dual society"
thesis is false and that the policy recommendations to which it
leads will, if acted upon, serve only to intensify and perpetuate
the very conditions of underdevelopment they are supposedly
designed to remedy.
A mounting body of evidence suggests, and I am confident
that future historical research will confirm, that the expansion
of the capitalist system over the past centuries effectively and
entirely penetrated even the apparently most isolated sectors
of the underdeveloped world. Therefore, the economic,
political,
social, and cultural institutions and relations we now observe
there are the products of the historical development of the
capitalist system no less than are the seemingly more modern
or capitalist features of the national metropoles of these under-
developed countries. Analogously to the relations between de-
velopment and underdevelopment on the international level, the
contemporary underdeveloped institutions of the so-called back-
ward or feudal domestic areas of an underdeveloped country
are no less the product of the single historical process of
capitalist
development than are the so-called capitalist institutions of the
supposedly more progressive areas. In this paper I should like to
sketch the kinds of evidence which support this thesis and at the
same time indicate lines along which further study and research
could fruitfully proceed.
II

The Secretary General of the Latin American Center for
Research in the Social Sciences writes in that Center's journal:
"The privileged position of the city has its origin in the colonial
period. It was founded by the Conqueror to serve the same
ends that it still serves today; to incorporate the indigenous
population into the economy brought and developed by that
Conqueror and his descendants. The regional city was an instru-
ment of conquest and is still today an instrument of domina-
tion."'* The Instituto Nacional Indigenista (National Indian In-
* Footnotes are at the end of the article.
19
stitute) of Mexico confirms this observation when it notes that
"the mestizo population, in fact, always lives in a city, a center
of an intercultural region, which acts as the metropolis of a
zone of indigenous population and which maintains with the
underdeveloped communities an intimate relation which links
the center with the satellite communities."? The Institute goes
on to point out that "between the mestizos who live in the
nuclear city of the region and the Indians who live in the
peasant hinterland there is in reality a closer economic and
social interdependence than might at first glance appear" and
that the provincial metropoles "by being centers of intercourse
are also centers of exploitation.l"
Thus these metropolis-satellite relations are not limited to
the imperial or international level but penetrate and structure
the very economic, political, and social life of the Latin Ameri-
can colonies and countries. Just as the colonial and national

capital and its export sector become the satellite of the Iberian
(and later of other) metropoles of the world economic system,
this satellite immediately becomes a colonial and then a
national
metropolis with respect to the productive sectors and population
of the interior. Furthermore, the provincial capitals, which thus
are themselvessatellites of the national metropolis-and through
the latter of the world metropolis-are in turn provincial centers
around which their own local satellites orbit. Thus, a whole
chain of constellations of metropoles and satellites relates all
parts of the whole system from its metropolitan center in
Europe
or the United States to the farthest outpost in the Latin Ameri-
can countryside.
When we examine this metropolis-satellite structure, we
find that each of the satellites, including now-underdeveloped
Spain and Portugal, serves as an instrument to suck capital or
economic surplus out of its own satellites and to channel part
of this surplus to the world metropolis of which all are
satellites.
Moreover, each national and local metropolis serves to impose
and maintain the monopolistic structure and exploitative rela-
tionship of this system (as the Instituto Nacional Indigenista of
Mexico calls it) as long as it servesthe interests of the
metropoles
which take advantage of this global, national, and local
structure
20
DEVElOPMENT OF UNDERDEVElOPMENT
to promote their own development and the enrichment of their

ruling classes.
These are the principal and still surviving structural char-
acteristics which were implanted in Latin America by the
Conquest. Beyond examining the establishment of this colonial
structure in its historical context, the proposed approach calls
for study of the development-and underdevelopment-of these
metropoles and satellites of Latin America throughout the fol-
lowing and still continuing historical process. In this way we
can understand why there were and still are tendencies in the
Latin American and world capitalist structure which seem to
lead to the development of the metropolis and the under-
development of the satellite and why, particularly, the satellized
national, regional, and local metropoles in Latin America find
that their economic development is at best a limited or under-
developed development.
III
That present underdevelopment of Latin America is the
result of its centuries-long participation in the process of world
capitalist development, I believe I have shown in my case
studies of the economic and social histories of Chile and
Brazil.' My study of Chilean history suggests that the Conquest
not only incorporated this country fully into the expansion
and development of the world mercantile and later industrial
capitalist system but that it also introduced the monopolistic
metropolis-satellite structure and development of capitalism
into
the Chilean domestic economy and society itself. This structure
then penetrated and permeated all of Chile very quickly. Since
that time and in the course of world and Chilean history during
the epochs of colonialism, free trade, imperialism, and the
present, Chile has become increasingly marked by the
economic,
social, and political structure of satellite underdevelopment.

This
development of underdevelopment continues today, both in
Chile's still increasing satellization by the world metropolis and
through the ever more acute polarization of Chile's domestic
economy.
The history of Brazil is perhaps the clearest case of both
21
national and regional development of underdevelopment. The
expansion of the world economy since the beginning of the
sixteenth century successivelyconverted the Northeast, the
Minas
Gerais interior, the North, and the Center-South (Rio de
Janeiro, Sao Paulo, and Parana) into export economies and
incorporated them into the structure and development of the
world capitalist system. Each of these regions experienced what
may have appeared as economic development during the period
of its respective golden age. But it was a satellite development
which was neither self-generating nor self-perpetuating. As the
market or the productivity of the first three regions declined,
foreign and domestic economic interest in them waned; and
they were left to develop the underdevelopment they live today.
In the fourth region, the coffee economy experienced a similar
though not yet quite as serious fate (though the development
of a synthetic coffee substitute promises to deal it a mortal
blow in the not too distant future). All of this historical
evidence
contradicts the generally accepted theses that Latin America
suffers from a dual society or from the survival of feudal in-
stitutions and that these are important obstacles to its economic

development.
IV
During the First World War, however, and even more dur-
ing the Great Depression and the Second World War, Sao
Paulo began to build up an industrial establishment which is
the largest in Latin America today. The question arises whether
this industrial development did or can break Brazil out of the
cycle of satellite development and underdevelopment which has
characterized its other regions and national history within the
capitalist system so far. I believe that the answer is no.
Domestically the evidence so far is fairly clear. The
development
of industry in Sao Paulo has not brought greater riches to the
other regions of Brazil. Instead, it converted them into internal
colonial satellites, de-capitalized them further, and consolidated
or even deepened their underdevelopment. There is little evi-
dence to suggest that this process is likely to be reversed in the
foreseeable future except insofar as the provincial poor migrate
22
and become the poor of the metropolitan cities. Externally, the
evidence is that although the initial development of Sao Paulo's
industry was relatively autonomous it is being increasingly
satellized by the world capitalist metropolis and its future de-
velopment possibilities are increasingly restricted." This
develop-
ment, my studies lead me to believe, also appears destined to
limited or underdeveloped development as long as it takes place
in the present economic, political, and social framework.

We must conclude, in short, that underdevelopment is not
due to the survival of archaic institutions and the existence of
capital shortage in regions that have remained isolated from the
stream of world history. On the contrary, underdevelopment was
and still is generated by the very same historical process which
also generated economic development: the development of
capitalism itself. This view, I am glad to say, is gaining
adherents
among students of Latin America and is proving its worth in
shedding new light on the problems of the area and in affording
a better perspective for the formulation of theory and policy."
The same historical and structural approach can also lead
to better development theory and policy by generating a series
of hypotheses about development and underdevelopment such as
those I am testing in my current research. The hypotheses are
derived from the empirical observation and theoretical assump-
tion that within this world-embracing metropolis-satellite struc-
ture the metropoles tend to develop and the satellites to under-
develop. The first hypothesis has already been mentioned
above:
that in contrast to the development of the world metropolis
which is no one's satellite, the development of the national and
other subordinate metropoles is limited by their satellite status.
It is perhaps more difficult to test this hypothesis than the fol-
lowing ones because part of its confirmation depends on the test
of the other hypotheses. Nonetheless, this hypothesis appears to
be generally confirmed by the non-autonomous and unsatis-
factory economic and especially industrial development of Latin
America's national metropoles, as documented in the studies al-
ready cited. The most important and at the same time most
23

confirmatory examples are the metropolitan regions of Buenos
Aires and Sao Paulo whose growth only began in the nineteenth
century, was therefore largely untrammelled by any colonial
heritage, but was and remains a satellite development largely
dependent on the outside metropolis, first of Britain and then of
the United States.
A second hypothesis is that the satellites experience their
greatest economic development and especially their most
classic-
ally capitalist industrial development if and when their ties to
their metropolis are weakest. This hypothesis is almost dia-
metrically opposed to the generally accepted thesis that
develop-
ment in the underdeveloped countries follows from the greatest
degree of contact with and diffusion from the metropolitan
developed countries. This hypothesis seems to be confirmed by
two kinds of relative isolation that Latin America has
experienced
in the course of its history. One is the temporary isolation
caused,
by the crises of war or depression in the world metropolis.
Apart
from minor ones, five periods of such major crises stand out and
seen to confirm the hypothesis. These are: the European (and
especially Spanish) Depression of the seventeenth century, the
Napoleonic Wars, the First World War, the Depression of the
1930's, and the Second World War. It is clearly established and
generally recognized that the most important recent industrial
development-especially of Argentina, Brazil, and Mexico, but
also of other countries such as Chile-has taken place precisely
during the periods of the two World Wars and the intervening
Depression. Thanks to the consequent loosening of trade and

investment ties during these periods, the satellites initiated
mark-
ed autonomous industrialization and growth. Historical research
demonstrates that the same thing happened in Latin America
during Europe's seventeenth-century depression. Manufacturing
grew in the Latin American countries, and several of them such
as Chile became exporters of manufactured goods. The Na-
poleonic Wars gave rise to independence movements in Latin
America, and these should perhaps also be interpreted as con-
firming the development hypothesis in part.
The other kind of isolation which tends to confirm the
second hypothesis is the geographic and economic isolation of
24
regions which at one time were relatively weakly tied to and
poorly integrated into the mercantilist and capitalist system. My
preliminary research suggests that in Latin America it was these
regions which initiated and experienced the most promising
self-generating economic development of the classical industrial
capitalist type. The most important regional cases probably are
Tucuman and Asuncion, as well as other cities such as Mendoza
and Rosario, in the interior of Argentina and Paraguay during
the end of the eighteenth and the beginning of the nineteenth
centuries. Seventeenth and eighteenth century Sao Paulo, long
before coffee was grown there, is another example. Perhaps
Antioquia in Colombia and Puebla and Queretaro in Mexico
are other examples. In its own way, Chile was also an example
since, before the sea route around the Hom was opened, this
country was relatively isolated at the end of the long voyage
from Europe via Panama. All of these regions became manu-

facturing centers and even exporters, usually of textiles, during
the periods preceding their effective incorporation as satellites
into the colonial, national, and world capitalist system.
Internationally, of course, the classic case of industrializa-
tion through non-participation as a satellite in the capitalist
world system is obviously that of Japan after the Meiji Restora-
tion. Why, one may ask, was resource-poor but unsatellized
Japan able to industrialize so quickly at the end of the century
while resource-rich Latin American countries and Russia were
not able to do so and the latter was easily beaten by Japan in
the War of 1904 after the same forty years of development
efforts? The second hypothesis suggests that the fundamental
reason is that Japan was not satellized either during the
Tokugawa or the Meiji period and therefore did not have its
development structurally limited as did the countries which
were
so satellized.
VI
A corollary of the second hypothesis is that when the
metropolis recovers from its crisis and re-establishes the trade
and investment ties which fully re-incorporate the satellites into
the system, or when the metropolis expands to incorporate pre-
25
viously isolated regions into the world-wide system, the
previous
development and industrialization of these regions is choked off
or channelled into directions which are not self-perpetuating

and
promising. This happened after each of the five crises cited
above. The renewed expansion of trade and the spread of eco-
nomic liberalism in the eighteenth and nineteenth centuries
choked off and reversed the manufacturing development which
Latin America had experienced during the seventeenth century,
and in some places at the beginning of the nineteenth.
After the First World War, the new national industry of Brazil
suffered serious consequences from American economic
invasion.
The increase in the growth rate of Gross National Product and
particularly of industrialization throughout Latin America was
again reversed and industry became increasingly satellized after
the Second World War and especially after the post-Korean
War recovery and expansion of the metropolis. Far from having
become more developed since then, industrial sectors of Brazil
and most conspicuously of Argentina have become structurally
more and more underdeveloped and less and less able to
generate continued industrialization and/or sustain development
of the economy. This process, from which India also suffers,
is reflected in a whole gamut of balance-of-payments, inflation-
ary, and other economic and political difficulties, and promises
to yield to no solution short of far-reaching structural change.
Our hypothesis suggests that fundamentally the same pro-
cess occurred even more dramatically with the incorporation
into
the system of previously unsatellized regions. The expansion of
Buenos Aires as a satellite of Great Britain and the introduction
of free trade in the interest of the ruling groups of both
metro poles destroyed the manufacturing and much of the re-
mainder of the economic base of the previously relatively
prosperous interior almost entirely. Manufacturing was
destroyed
by foreign competition, lands were taken and concentrated into
latifundia by the rapaciously growing export economy, intra-

regional distribution of income became much more unequal, and
the previously developing regions became simple satellites of
Buenos Aires and through it of London. The provincial centers
did not yield to satellization without a struggle. This
metropolis-
26
satellite conflict was much of the cause of the long political and
armed struggle between the Unitarists in Buenos Aires and the
Federalists in the provinces, and it may be said to have been the
sole important cause of the War of the Triple Alliance in which
Buenos Aires, Montevideo, and Rio de Janeiro, encouraged and
helped by London, destroyed not only the autonomously de-
veloping economy of Paraguay but killed off nearly all of its
population which was unwilling to give in. Though this is no
doubt the most spectacular example which tends to confirm the
hypothesis, I believe that historical research on the satellization
of previously relatively independent yeoman-farming and in-
cipient manufacturing regions such as the Caribbean islands
will
confirm it further.' These regions did not have a chance against
the forces of expanding and developing capitalism, and their
own development had to be sacrificed to that of others. The
economy and industry of Argentina, Brazil, and other countries
which have experienced the effects of metropolitan recovery
since the Second World War are today suffering much the same
fate, if fortunately still in lesser degree.
VII
A third major hypothesis derived from the metropolis-

satellite structure is that the regions which are the most under-
developed and feudal-seeming today are the ones which had
the closest ties to the metropolis in the past. They are the
regions
which were the greatest exporters of primary products to and
the biggest sources of capital for the world metropolis and
which
were abandoned by the metropolis when for one reason or an-
other business fell off. This hypothesis also contradicts the
generally held thesis that the source of a region's underdevelop-
ment is its isolation and its pre-capitalist institutions.
This hypothesis seems to be amply confirmed by the former
super-satellite development and present ultra-underdevelopment
of the once sugar-exporting West Indies, Northeastern Brazil,
the ex-mining districts of Minas Gerais in Brazil, high-
land Peru, and Bolivia, and the central Mexican states of
Guanajuato, Zacatecas, and others whose names were made
world famous centuries ago by their silver. There surely are no
27
major regions in Latin America which are today more cursed
by underdevelopment and poverty; yet all of these regions, like
Bengal in India, once provided the life blood of mercantile and
industrial capitalist development-in the metropolis. These re-
gions' participation in the development of the world capitalist
system gave them, already in their golden age, the typical struc-
ture of underdevelopment of a capitalist export economy. When
the market for their sugar or the wealth of their mines dis-
appeared and the metropolis abandoned them to their own
devices, the already existing economic, political, and social

structure of these regions prohibited autonomous generation of
economic development and left them no alternative but to turn
in upon themselves and to degenerate into the ultra-underde-
velopment we find there today.
VIII
These considerations suggest two further and related hypo-
theses. One is that the latifundium, irrespective of whether it
appears as a plantation or a hacienda today, was typically born
as a commercial enterprise which created for itself the institu-
tions which permitted it to respond to increased demand in the
world or national market by expanding the amount of its land,
capital, and labor and to increase the supply of its products.
The fifth hypothesis is that the latifundia which appear isolated,
subsistence-based, and semi-feudal today saw the demand for
their products or their productive capacity decline and that they
are to be found principally in the above-named former agri-
cultural and mining export regions whose economic activity
declined in general. These two hypotheses run counter to the
notions of most people, and even to the opinions of some
historians and other students of the subject, according to whom
the historical roots and socio-economiccauses of Latin
American
latifundia and agrarian institutions are to be found in the
transfer of feudal institutions from Europe and/or in economic
depression.
The evidence to test these hypotheses is not open to easy
general inspection and requires detailed analyses of many cases.
Nonetheless, some important confirmatory evidence is
available.
28

The growth of the latifundium in nineteenth-century Argentina
and Cuba is a clear case in support of the fourth hypothesis and
can in no way be attributed to the transfer of feudal institutions
during colonial times. The same is evidently the case of the
post-
revolutionary and contemporary resurgence of latifundia par-
ticularly in the North of Mexico, which produce for the Ameri-
can market, and of similar ones on the coast of Peru and the
new coffee regions of Brazil. The conversion of previously yeo-
man-farming Caribbean islands, such as Barbados, into sugar-
exporting economies at various times between the seventeenth
and twentieth centuries and the resulting rise of the latifundia in
these islands would seem to confirm the fourth hypothesis as
well. In Chile, the rise of the latifundium and the creation of the
institutions of servitude which later came to be called feudal
occurred in the eighteenth century and have been conclusively
shown to be the result of and response to the opening of a
market for Chilean wheat in Lima." Even the growth and
consolidation of the latifundium in seventeenth-century Mexico
-which most expert students have attributed to a depression
of the economy caused by the decline of mining and a shortage
of Indian labor and to a consequent turning in upon itself and
ruralization of the economy-occurred at a time when urban
population and demand were growing, food shortages became-
acute, food prices skyrocketed, and the profitability of other
economic activities such as mining and foreign trade declined."
All of these and other factors rendered hacienda agriculture
more profitable. Thus, even this case would seem to confirm
the hypothesis that the growth of the latifundium and its feudal-
seeming conditions of servitude in Latin America has always
been and still is the commercial response to increased demand
and that it does not represent the transfer or survival of alien
institutions that have remained beyond the reach of capitalist

development. The emergence of latifundia, which today real-
ly are more or less (though not entirely) isolated, might
then be attributed to the causes advanced in the fifth hypo-
thesis-i-i.e., the decline of previously profitable agricultural
enterprises whose capital was, and whose currently produced
economic surplus still is, transferred elsewhere by owners and
29
merchants who frequently are the same persons or families.
Testing this hypothesis requires still more detailed analysis,
some
of which I have undertaken in a study on Brazilian agriculture.'?
IX
All of these hypotheses and studies suggest that the global
extension and unity of the capitalist system, its monopoly struc-
ture and uneven development throughout its history, and the
resulting persistence of commercial rather than industrial
capital-
ism in the underdeveloped world (including its most industrially
advanced countries) deserve much more attention in the study
of economic development and cultural change than they have
hitherto received. Though science and truth know no national
boundaries, it is probably new generations of scientists from
the underdeveloped countries themselves who most need to, and
best can, devote the necessary attention to these problems and
clarify the process of underdevelopment and development. It is
their people who in the last analysis face the task of changing
this no longer acceptable process and eliminating this miserable
reality.

They will not be able to accomplish these goals by im-
porting sterile stereotypes from the metropolis which do not
cor-
respond to their satellite economic reality and do not respond
to their liberating political needs. To change their reality they
must understand it. For this reason, I hope that better confirma-
tion of these hypotheses and further pursuit of the proposed
historical, holistic, and structural approach may help the
peoples
of the underdeveloped countries to understand the causes and
eliminate the reality of their development of underdevelopment
and their underdevelopment of development.
30
FOOTNOTE5
1. America Latina, Afio 6, No.4, October-December 1963, p. 8.
2. Instituto Nacional Indigenista, Los centros coordinadores
indigenistas,
Mexico, 1962, p. 34.
3. Ibid., pp. 33-34, 88.
4. "Capitalist Development and Underdevelopment in Chile"
and "Capi-
talist Development and Underdevelopment in Brazil" in
Capitalism and
Underdevelopment in Latin America, to be published soon by
Monthly
Review Press.

5. Also see, "The Growth and Decline of Import Substitution,"
Economic
Bulletin for Latin America, New York, IX, No.1, March 1964;
and
Celso Furtado, Dialectica do Desenvolvimiento, Rio de Janeiro,
Fundo
de Cultura, 1964.
6. Others who use a similar approach, though their ideologies
do not
permit them to derive the logically following conclusions, are
Anibal
Pinto S.C., Chile: Un caso de desarrollo frustrado, Santiago,
Editorial
Universitaria, 1957; Celso Furtado, A [ormaqao econ6mica do
Brasil,
Rio de Janeiro, Fundo de Cultura, 1959 (recently translated into
English and published under the title The Economic Growth of
Brazil
by the University of California Press); and Caio Prado Junior,
Historia
Econ6mica do Brasil, Sao Paulo, Editora Brasiliense, 7th ed.,
1962.
7. See for instance Ramon Guerra y Sanchez, Azucar y
Poblaci6n en las
Antillas, Havana 1942, 2nd ed., also published as Sugar and
Society
in the Caribbean, New Haven, Yale University Press, 1964.
8. Mario Gongora, Origen de los "inquilinos" de Chile central,
Santiago,
Editorial Universitaria, 1960; Jean Borde and Mario Gongora,
Euolu-
ci6n de la propiedad rur.al en el Valle del Puango, Santiago,
Instituto

de Sociologia de la Universidad de Chile; Sergio Sepulveda, El
trigo
chileno en el mercado mundial; Santiago, Editorial
Universitario, 1959.
9. Woodrow Borah makes depression the centerpiece of his
explanation
in "New Spain's Century of Depression," Ibero-Americana,
Berkeley,
No. 35, 1951. Francois Chevalier speaks of turning in upon
itself in
the most authoritative study of the subject, "La formacion de los
grandes latifundios en Mexico," Mexico, Problemas Agrlcolas e
In-
dustriales de Mexico, VIII, No.1, 1956 (translated from the
French
and recently published by the University of California Press).
The
data which provide the basis for my contrary interpretation are
sup-
plied by these authors themselves. This problem is discussed in
my
"Con que modo de produccion convierte la gallina maiz en
huevos
de oro?" El Gallo Ilustrado, Suplemento de El Dla, Mexico,
Nos. 175
and 179, October 31 and November 28, 1965; and it is further
analyzed in a study of Mexican agriculture under preparation by
the
author.
10. "Capitalism and the Myth of Feudalism in Brazilian
Agriculture," in
Capitalism and Underdevelopment in Latin America, cited in
footnote
4 above.

31
Six
THE STATE REALLY
DOES MATTER
CHAPTER OUTLINE
‘The state is dead’ – oh no it isn’t! 174
That was then; this is now 174
States, nations, nation-states 175
States as containers 178
States as cultural containers 178
Variegated capitalisms 181
States as regulators 183
The competition state 183
Managing national economies 184
Regulating and stimulating the economy 188
Trade 188
FDI 190
Industry and technology 191
Labour markets 193
Economic strategies in the older industrialized economies 194
Jump-starting economic development 197
From import substitution to export orientation 198
Variations on a theme 201
States as collaborators 207
The proliferation of regional trade agreements 207
Types of regional economic integration 210
Regional integration within Europe, the Americas, East Asia
and the Pacific 211

The EU 212
The Americas 216
East Asia and the Pacific 219
Potential Transatlantic and Trans-Pacific initiatives 222
06_Dicken-7E_Ch-06.indd 173 18/11/2014 11:01:52 AM
PART TWO PROCESSES OF GLOBAL SHIFT174
‘THE STATE IS DEAD’ – OH NO IT ISN’T!
That was then; this is now
‘State denial’1 has formed a central claim of the ‘hyper-
globalizers’ (and many
social scientists) over the past 40 years: that we live in a
borderless world where
states no longer matter. A combination of the revolutionary
technologies of trans-
portation and communications (see Chapter 4) and the
increasing power of TNCs
(see Chapter 5) has, it was argued, shifted economic power out
of the control of
nation-states to ‘the market’. ‘Market fundamentalism’ – a neo-
liberal agenda urg-
ing the reduction of state involvement in the economy, the
privatization of state
economic and social assets, lower direct taxation, unfettered
trade and financial
movements, a reduction in the state’s social welfare role –
became the mantra, espe-
cially in the USA and the UK. ‘Government’, argued the US
President, Ronald
Reagan, in the early 1980s, ‘was not a solution to our problem,
government is the

problem.’ A similar sentiment was echoed by the UK
government of Margaret
Thatcher (and revived by the Conservative-dominated UK
coalition government
of 2010–15). Such a free market ideology formed the basis of
what came to be
called the ‘Washington Consensus’, the set of views that
exerted immense influ-
ence on both developed and, especially, developing countries.
That was then.
This is now – and how the world has changed! The cataclysmic
events that
stunned the global economy in 2008 saw a dramatic reversal in
the apparently
unchallenged dominance of the free market and a revival of the
view that ‘states
really do matter’. The change was most apparent in the financial
sector (see
Chapter 16), where the ‘Masters of the Universe’2 had to go on
bended knee to
the state to be rescued, but also in such industries as
automobiles (see Chapter 15).
Governments poured billions of dollars, pounds and euros into
propping up the
financial sector. In some cases, notably in the USA and the UK,
this amounted to
little short of nationalization, a bête noire of the market
fundamentalists. Quite how
this will play out over the next few years is not yet clear.
However, there is a gen-
erally held view that things will never be quite the same. The
state is back.
In fact, the state never really went away. The notion that the

power of the state
had been totally emasculated by globalizing forces was always
highly misleading.
While some of the state’s capabilities were reduced, and there
may well have been
a process of ‘hollowing out’,3 the process was not a simple one
of uniform decline
on all fronts:4
Much of the ‘end of the state’ … literature focuses on western
notions of
statehood and experiences … Implicit is a common experience
of the
emergence of the state in the nineteenth century and its zenith
in the
postwar Fordist regime of accumulation … In many parts of the
world,
however, experiences of statehood have followed a quite
different trajectory and
THE STATE REALLY DOES MATTER 175
are, in a postcolonial context, still being actively constructed,
strengthened and
extended rather than weakened.5
The state unquestionably remains a most significant force in
shaping the world
economy, despite the hyper-globalist rhetoric. It has always
played a fundamental
role in the economic development of all countries6 and, indeed,
in the process of

globalization itself. After all, an increased facility to transcend
geographical distance
made possible by transportation and communication
technologies is of little use
if there are political barriers to such movement. An important
enabling factor
underlying globalization, therefore, has been the progressive
reduction in political
barriers to flows of commodities, goods, finance and other
services.
In fact, the more powerful states have used globalization as a
means of increasing
their power:
States actively construct globalization and use it as soft geo-
politics and
to acquire greater power over, and autonomy from, their
national econ-
omies and societies respectively … [for example] … The US
and the
G-7’s other dominant members design and establish the
international
trade agreements, organizations, and legislation that support and
govern
the trans-border investments, production networks, and market-
pene-
tration constitutive of contemporary economic globalization.
Advanced
capitalist states, particularly, use these political instruments to
shape
international economic decision-making and policy in their
interests.7
Governments have also used the rhetoric of the supposedly
unstoppable forces of

globalization to justify particular kinds of domestic policy
(including not taking
certain kinds of action) on the argument that ‘there is no
alternative’.
States, nations, nation-states
We need to be clear about what we mean by the terms ‘state’,
‘nation’ and
‘nation-state’:8
•• A state is a portion of geographical space within which the
resident population
is organized (i.e. governed) by an authority structure. States
have externally
recognized sovereignty over their territory.
•• A nation is a ‘reasonably large group of people with a
common culture, sharing
one or more cultural traits, such as religion, language, political
institutions,
values, and historical experience. They tend to identify with one
another, feel
closer to one another than to outsiders, and to believe that they
belong
together. They are clearly distinguishable from others who do
not share their
culture.’ A nation is an imagined community. Note that whereas
a state has a
recognized and defined territory, a nation may not.

•• A nation-state is the situation where ‘state’ and ‘nation’ are
coterminous. ‘A nation-
state is a nation with a state wrapped around it. That is, it is a
nation with its own
state, a state in which there is no significant group that is not
part of the nation.’
Although it is often regarded as a natural institution (for all of
us it has always been there),
the nation-state is actually a relatively recent phenomenon. It
emerged from the particu-
lar configuration of power relationships in Europe following the
Treaty of Westphalia
that ended the Thirty Years War in 1648. Since then, the map of
nation-states has been
redrawn continuously, sometimes peacefully and incrementally,
often violently through
revolution. During the second half of the twentieth century, two
particular events had
a profound effect on the map of nation-states. First, the waves
of decolonization that
swept through Africa and Asia in the 1960s created a whole new
set of nation-states.
Second, the collapse of the former Soviet Union, after 1989,
resulted in the creation not
only of a new Russian Federation, but also of a number of
newly independent states
throughout Eastern Europe. As a result, the number of nation-
states, as measured by UN
membership, has grown dramatically (Figures 6.1 and 6.2).
But that is not all. An important feature of today’s world is the
tension between
the triad of nation, state and nationalism. Increasingly, it seems,
there are more and
more ‘nations without states’, manifested in separatist

movements engaged in con-
flict with the state in which they are (wrongly in their view)
embedded (obvious
0
50
100
N
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o
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e
m
b
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rs
150

200
1945
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
Figure 6.1 The increasing number of nation-states: growth in
UN membership
Source: United Nations
U
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.2
A
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-s
ta
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s
examples include the Basques in Spain and France, the
indigenous groups in
Chiapas, Mexico, the East Timoreans in Indonesia, the
Palestinians in Israel).

STATES AS CONTAINERS
The ‘black box’ of the state acts as a kind of ‘container’ of
distinctive practices
and institutions. Of course, the term ‘container’ should not be
taken literally. It is
used here as a loose metaphor to capture the idea that nation-
states are one of the
major ways in which distinctive cultures, practices and
institutions are ‘bundled
together’.9 Of course, such containers are not (except very
rarely) hermetically
sealed off from the outside world. A major impact of modern
communications
systems, especially the Internet, is to make national containers
even more perme-
able. But that does not mean that the container no longer exists.
Indeed, there is a
good deal of compelling evidence to show the persistence of
national distinctive-
ness – although not necessarily uniqueness – in structures and
practices which help
to shape local, national and global patterns of economic
activity.
States as cultural containers
All economic activity is enmeshed in broader cultural structures
and practices,10
although ‘culture’ is an extremely slippery concept to define.
Here it is taken to be
a learned, shared, compelling, interrelated set of symbols whose
mean-
ings provide a set of orientations for members of a society.
These

orientations, taken together, provide solutions to problems that
all
societies must solve if they are to remain viable.11
From an economic perspective, there are relatively few
comprehensive and robust
analyses of how cultures vary between countries. The most
widely known is Geert
Hofstede’s classic study of more than 100,000 workers
employed by the US company
IBM in 50 different countries.12 Hofstede claimed that, by
focusing on a controlled
population within a common organizational environment, he
was able to isolate
nationality as a variable. On this basis he identified four
distinct cultural dimensions:
•• Individualism versus collectivism: societies vary between
those in which people, in
general, are motivated to look after their own individual
interests – where ties
between individuals are very loose – and those in which ties are
very close and
the collectivity (family, community, etc.) is the important
consideration.
•• Large or small power distance: societies vary in how they
deal with inequalities (e.g.
in power and wealth) between people. This is reflected in the
extent to which
authority is centralized and in the degree of autocratic
leadership within society.

•• Strong or weak uncertainty avoidance: in some societies, the
inherent uncertainty
of the future is accepted; each day is taken as it comes, that is
the level of
uncertainty avoidance is weak. In other societies, there is a
strong drive to try
to ‘beat the future’. Efforts (and institutions) are made to try to
create security
and to avoid risk. These are strong uncertainty avoidance
societies.
•• Masculinity versus femininity: societies can be classified
according to how sharply
the social division between male and females is drawn.
Societies with a strong
emphasis on traditional masculinity allocate the more assertive
and dominant
roles to men. They differ substantially from societies where the
social gender
role division is small and where such values are less evident.
Hofstede went on to show how different countries could be
characterized in terms
of their positions on varying combinations of these four
dimensions (Figure 6.3).
Peru
Portugal
Venezuela
Chile
Colombia
Mexico

High power distance
High uncertainty avoidance
Low individualism
Whole range on masculinity
8. Less developed
Latin
France
Spain
Argentina
Belgium
Brazil
High power distance
High individualism
Medium masculinity
7. More developed
Latin
Greece
Iran
Turkey
High power distance

Low individualism
Medium masculinity
6. Near Eastern
Singapore
Taiwan
Thailand
India
Pakistan
Philippines
High power distance
Low uncertainty avoidance
Low individualism
Medium masculinity
5. Less developed
Asian
Japan
Medium power distance
Medium individualism
High masculinity

4. More developed
Asian
Norway
Sweden
Denmark
Finland
Netherlands
Low power distance
Low to medium
uncertainty avoidance
Low masculinity
3. Nordic
Italy
South Africa
Switzerland
Austria
Germany
Israel
Low power distance

High masculinity
2. Germanic
Ireland
New Zealand
U.S.A.
Australia
Britain
Canada
Low power distance
Low to medium
uncertainty avoidance
High individualism
High masculinity
1. Anglo
Countries
Characteristics
Group
Countries
Characteristics
Group
Figure 6.3 National variations in cultural characteristics

Source: based on Hofstede, 1980: p. 336
Although Hofstede’s work has stood the test of time remarkably
well,13 it has its
critics. For example, Shalom Schwartz14 argued that not enough
countries were
included fully to capture national cultural variation and that the
respondents were too
narrowly drawn to be truly representative of the entire
population. Using rather dif-
ferent methods, he identified the following seven distinctive
cultural dimensions:
•• Conservatism: places an emphasis on preserving the status
quo and in restricting
behaviour likely to disrupt the traditional order.
•• Intellectual autonomy: the extent to which people are free to
pursue their own
intellectual ideas.
•• Affective autonomy: the extent to which people are free to
pursue their own
personal and emotional desires.
•• Hierarchy: the extent to which an uneven allocation of power
and resources is
legitimized.

•• Egalitarian commitment: the extent to which individuals are
prepared to subju-
gate self-interest for the greater communal good.
•• Mastery: the extent to which individual self-assertiveness is
legitimized as a
means to achieve specific goals.
•• Harmony: the importance placed on fitting harmoniously into
the environment.
Although there is obviously some overlap between these two
schemes, what mat-
ters here is not so much the detail as the fact that there are
identifiable cultural
attributes that appear to vary across countries and that this, in
turn, affects both
how the major actors we identified in Chapter 3 are likely to
behave and the kinds
of institutions within which such behaviour is organized and
regulated. Although
it is always rather dangerous to classify phenomena into
statistical boxes, the cat-
egories shown in Figure 6.3 seem intuitively reasonable. Most
of us would be able
to recognize our own national contexts, while also realizing the
danger of using
simple stereotypes without due care.
For example, East Asia’s emergence as the most dynamic
growth region in recent
decades has often been attributed to its having a very distinctive
set of value systems:
specifically an emphasis on collective responsibility rather than
individualism and on
the roles and responsibilities of the state, which is seen as

essentially paternalistic. Figure
6.4 sets out the major components of this concept of ‘Asian
values’ which, in effect,
East Asians believe in
the virtues of
saving and frugality.
They believe that individuals,
families and governments
should lead frugal lives.
East Asians do not
believe in extreme
forms of individualism.
Every individual is a member
of a nuclear and extended
family, clan, neighbourhood,
community, nation and state.
East Asians want their
governments to maintain
a morally wholesome
environment in which to
bring up their children.
Good governments in Asia
want a free press.
They do not believe that such a
freedom is an absolute right …
the press must act responsibly.

East Asians believe
in strong families.
They believe that the family is
the building block of society.
In some Asian countries,
governments have
sought to make every
citizen a stakeholder
in the country.
East Asians
revere education.
This is a value held by
all strata of society.
There is an Asian version of
a social contract between
the people and the state.
Governments have an obligation to treat
their people with fairness and humanity.
Citizens are expected to be law-abiding,
respect those in authority, work hard,
save and motivate their children
to learn and be self-reliant.
East Asians practise
national teamwork.

Government, business
and employees work
cooperatively for
the good of the nation.
East Asians consider
hard work a virtue.
The chief reason
that this region is
outcompeting Europe.
‘Taken together, these 10 values
form a framework that has enabled
societies in East Asia to achieve
economic prosperity, progress,
harmonious relations between
citizens, and law and order.’
Figure 6.4 ‘Asian values’?
Source: based on material in Koh, 1993
‘recast “Asia” as a moral opposite of the West. Thus … the
Asian penchant for hard
work, frugality and love of the family are unproblematically

figured as things the West
lacks or has lost.’15 It is extremely doubtful that this reflects
the situation across the
whole of East Asia (let alone of Asia as a whole). This is, after
all, a region of immense
social, cultural and religious diversity. But insofar as these
attributes reflect at least some
of the social and political characteristics of some successful
East Asian economies, they
form a considerable contrast with the situation in other parts of
the world.16
Variegated capitalisms
The specific cultural and institutional forms that have evolved
over time in differ-
ent national contexts have resulted in distinctive modes of
economic organization,
even within the apparently universal ideology of capitalism.
Capitalism, in other
words, is variegated, not uniform.17 The traditional ‘varieties
of capital’ literature
focuses on just two broad categories of ‘national’ capitalism:
•• the liberal market economy (LME), generally associated with
the USA and, to a
large extent, the UK;
•• the coordinated market economy (CME), most commonly
associated with such
countries as Germany, Sweden and Japan.
This is not a very satisfactory classification.18 In particular, the
CME category
encompasses enormous diversity and needs to be further
unpacked. Here we iden-
tify four variants of capitalist organization, based on differing

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