Re: standard of living?

Carl Dassbach writes:

>>>>
> I haven't checked my e-mail for some time, so I apologize for entering this
> discussion in the middle. Nonetheless, I intervene precisely becuase these
> observations strike me as inaccurate and downright wrong.
>
>
> > "Jeffrey L. Beatty" wrote:
> >
> > > Actually, it's a "zero-sum game" primarily in the minds of people in the
> world-system tradition. The >claim of Andre Gunder Frank and others  that
> development and underdevelopment are two sides of the >same coin and that,
> in effect, what one country gains another loses depends upon the assumption
> that >the total size of the economic "pie" cannot increase, i.e., that
> worldwide aggregate growth is impossible.
>
>
> This is downright absurd, I don't think that AGF or IW or anybody else who
> is even vaguely familar with W-S would maintain that the "economic pie" can
> not increase.
<<<<

I am flattered by attention from one of such distinguished radical credentials as Carl Dassbach, whose contributions to CSF's "IPE" list I have always valued.  Nevertheless, I must disagree with his argument.

Note that I said AGF and Wallerstein's argument depends upon the assumption that what one country gains another loses.  Here is what Wallerstein himself says on the subject in one of his early essays from the 1970s (this passage may or may not reflect later views he has expressed; I have not read the entire corpus of the man's work, which would be a difficult undertaking indeed):

To be very concrete, it is not possible theoretically for all states
to 'develop' simultaneously.  The so-called 'widening gap' is not an 
anomaly but a continuing basic mechanism of the operation of the world-
economy.  Of course, _some_ countries can 'develop'.  But the some that
rise are at the expense of others that decline. . . .  (Wallerstein 1979,
73).


This is all but an explicit statement that global economic development is a zero-sum game in the sense that all countries cannot grow at the same time.  Andre Gunder Frank is less clear, and again this may or may not reflect views he's expressed in his later work, but he uses language that also strongly implies a zero-sum logic.  

Economic development and underdevelopment are the opposite faces of the
same coin.  Both are the necessary result and contemporary manifestation
of internal contradictions in the world capitalist system.  Economic dev-
elopment and underdevelopment are not just relative and quantitative, in
that one represents more economic development than the other; economic
development and underdevelopment are relational and qualitative, in that
each is structurally different from, yet caused by its relationship with 
the other.  Yet development and underdevelopment are the same in that
they are the product of a single, but dialectically contradictory,
economic structure and process of capitalism. . . . (Frank 1967, 9).

It's clear from these quotations that the core develops at the expense of the periphery in dependency and world-system theory.  Inasmuch as all countries cannot grow at the same time, development in one country requires a loss to another.  Thus there cannot be growth _worldwide_ if worldwide growth is understood as growth in all countries simultaneously.

But I think Carl was probably trying to suggest that, contrary to my statement, the Marxist, dependency, and world-system (hereafter designated radical political economy) arguments do not imply that there can be no worldwide aggregate growth, where the latter is understood as increase aggregate (worldwide) production in goods and services, without respect to increases in particular countries.  In short, he argues that, contrary to my suggestion, radical political economists do not argue that the total size of the pie cannot increase.

For what it's worth, I am not the only one who has interpreted Frank and Wallerstein as in effect arguing for a "no-growth" economy.  The Marxist Anthony Brewer comments in what he calls his oversimplified treatment of Frank and Wallerstein that they describe "capital accumulation. . .not as a precondition for genuine, qualitative advances in the level and methods of production, but rather as a _redivision of a fixed magnitude_, a transfer of resources from the exploited periphery to the centre.  Development in some areas and the 'development of underdevelopment' in others are opposite sides of the same coin" (Brewer 1980, 17, italics added).


But I can certainly do better than an argument from the authority of Brewer.  There are two ways in which the wealth of the world-economy might increase, given the premises of radical political economy. Growth _might_ occur, if the core used wealth from the periphery to improve production methods and increase the amount produced per unit of time.  >From the point of view of Marxian economics, this would constitute an increase in relative surplus value produced (Brewer 1980, 35).  From the point of view of mainstream economics, this would constitute "intensive growth" requiring technological innovation.  
But if this is how growth takes place, one must explain why the core requires extraction of wealth from the periphery.  In the language of growth theory, there must be an explanation of why "endogenous" (self-generating) growth through technological innovation is not possible.  In other words, why can't the core simply increase the productivity of its own factors of production to increase growth?  If this question cannot be answered, the argument that underdevelopment is a _necessary_ part of the development of the core would seem to be undermined.  

One might attempt a Bukharin-esque answer to this question:  as the productivity of the core increases, industry becomes less labor-intensive (the amount of socially necessary labor declines).  Since, according to Marx and Bukharin, only socially necessary labor produces use-value, and, in turn, exchange-value reflected in the profits of capital, the rate of profit declines as productivity increases.  The greater organic composition of capital in the periphery thus entices capital to flow to the periphery (cf. Brewer 1980, 20, 104).  One might argue that the extra profits thus obtained allow the core more opportunities for investment producing technological progress than profits available at home.  Note, however, that this answer cannot explain underdevelopment, since it virtually assumes that the periphery is less developed than the core already (why would the periphery's economic activities be more labor-intensive than those of the core, and thus contain more organic content, otherwise?).  This undermines Frank's claim that "even a modest acquaintance with history shows that underdevelopment is not original or traditional" (Frank 1969, 4).

Moreover, this answer is at odds with observable patterns in capital flows.  It does not explain Gilpin's (1975) observation that, Lenin's analysis of imperialism notwithstanding, most European investments in the 19th century flowed to the "lands of recent settlement" in North America and Australia, certainly not to the periphery.   Moreover, Lebergott (1987, 129) finds that U.S. investments abroad between 1890 and 1929 do not appear to have substantially increased the rate of return on U.S. capital.  Moreover, it is by no means immediately obvious that, in a period when U.S. productivity is gaining and when some of the hottest earnings reports on Wall Street are coming from high-tech sector firms like IBM (i.e., not necessarily firms producing commodities containing the highest organic content), that the rate of profit must diminish as productivity increases.


It is difficult, therefore, to explain why technological progress in the core requires the exploitation of the periphery.  I must conclude that if radical political economy is to explain aggregate growth as the result of intensive growth in the core, no satisfactory theory of how this occurs exists, at least in the work I've cited.

A second possibility for producing aggregate growth exists: growth _could_ take place if the integration of the periphery into the world-system resulted in employment of previously underemployed factors of production extracted from the periphery.  Thus, the extraction of wealth from the periphery would produce "extensive growth" in the core.  It is certainly possible that, e.g., slaves relocated from Africa to the New World were in a state we would normally think of as underemployed (not working as much as they wished, other things being equal) when in their homelands.  But if such underemployed factors of production exist in the periphery prior to their integration, this implies that the periphery is underdeveloped, at least in a relative sense, in the first place (why would there be relatively large supplies of underemployed factors otherwise?).  Once again, Frank's notion that development is not an original state is undermined.

I therefore consider that I am justified in making the claim that I made, namely that the argument of world-system and dependency theory that the core necessarily develops at the expense of the periphery logically implies that worldwide aggregate growth cannot increase.  There appears to be no mechanism through which aggregate growth can increase if we assume periphery and core cannot both develop simultaneously.

Carl continues:

>>>>
> One merely has to look at history. In fact, this has never
> been an issue. The issue is that the pie is ALWAYS divided unequally in
> such a matter that certain regions of the world economy accumulate surplus
> wealth, if you will, wealth over and above that which is created in the
> region, by transferring it from other regions. Historically, the
> mechanisms and means of transfer have varied and ranged from colonialism,
> through the slave trade and unequal exchange to massive loans made by core
> banks to the "Third World", but the end result is that a susbtantial part of
> the wealth that accumulates at one pole or region of the world economy,
> i.e., the core, is derived from other regions of the world economy. At the
> same time, transfer of wealth out of the periphery has historically stunted
> and perverted ("underdeveloped")the periphery (as opposed to an image of the
> periphery or "less developed countries" as "undeveloped.)
<<<<

This argument can hardly claim to have been demonstrated by 'history', as Carl claims.  As I've noted already,  at least some scholars who have investigated the question empirically have failed to substantiate it.


>>>>
> >This argument, in turn, depends upon the assumption that the productivity
> of a finite set of factors of >production cannot be increased by
> technological change. Is anyone willing to argue that technological >change
> increasing productivity never occurs? If so, is there any economic theory
> that can explain why or >in what sense it never occurs?>
>
>
> This merely illusrtates that you can't see the forest for the trees. Again,
> no one in their right mind would argue that produvtivity is fixed. This is
> not the issue. For W-S as for Marx, the issue is not that there is any
> fixed limit or cap on the ability of humanity to generate wealth but rather
> how this welath is divided. AS the bourgoise exploits the proletariat, the
> core (in W-S lingo) exploits the periphery. BTW, I think this point was
<<<<


Obviously, Marx and the rest of radical political economy is aware of the possibility of increased productivity.  I submit however, that my argument above suggests that the Marxist economics underlying much of radical political economy makes it difficult to understand technological progress, and thus increased productivity.  Recapping briefly, technological progress is supposed to result in a diminishing rate of profit.  That profits have diminished is not self-evident, by any means.  Moreover, the diminishing rate of profit is supposed to impel exploitation of the periphery as capital seeks superprofits there.  But, as I've argued, this theory fails to explain observable capital flows.

REFERENCES

Brewer, Anthony.  _Marxist Theories of Imperialism:  A Critical  Survey_.
London and New York:  Routledge and Kegan Paul, 1980.

Frank, Andre Gunder.  "Capitalist Development of Underdevelopment in Chile."           
Chap. in _Capitalism and Underdevelopment in Latin America:  Historical
Studies of Chile and Brazil_.  New York and London:  Monthly  Review
Press, 1967. 

Frank, Andre Gunder.  "The Development of Underdevelopment."  Chap. in _Latin
America:  Underdevelopment or Revolution:  Essays on the Development of
Underdevelopment and the Immediate Enemy_  New York and London:  Monthly
Review Press, 1969.

Gilpin, Robert.  _U.S. power and the multinational corporation : the political           
economy of foreign direct investment_.  New York : Basic Books, 1975.

Lebergott, Stanley.  "The Returns to U.S. Imperialism, 1890-1929."  Chap. in
_International Political Economy:  Perspectives on Global Power  and
Wealth_, ed. Jeffry A. Frieden and David A. Lake.  New York:  St.
Martin's Press, 1987.


Wallerstein, Immanuel.  "Dependence in an interdependent world:  the limited          
possibilities of transformation within the capitalist world-economy."                      Chap. in  _The capitalist world-economy: Essays by Immanuel Wallerstein_.                      Cambridge and Paris:  Cambridge University Press and Editions de la Maison                     des Sciences de l'Homme, 1979.



--

Jeffrey L. Beatty
Doctoral Student
Department of Political Science
The Ohio State University
2140 Derby Hall
154 North Oval Mall
Columbus, Ohio 43210

(o) 614/292-2880
(h) 614/688-0567

Email:  Beatty.4@osu.edu
___________________________________________________

"Sometimes a scream is better than a thesis."  
Ralph Waldo Emerson