Louis Proyect: The Unrepentant Marxist

November 18, 2008

Bill Warren’s folly

Filed under: economics,imperialism/globalization,Introduction to Marxism class — louisproyect @ 7:40 pm

(Posted to the Introduction to Marxism mailing list)

Where Bill Warren came from (image courtesy of The Cedar Lounge Revolution)

As should be obvious by now, much of the material that I have been forwarding is connected to major debates within Marxism, such as underconsumption/overaccumulation, dependency theory/Brenner critique, etc. This was not my original intention, but I have become persuaded that this is a good way to approach the material. Keep in mind that much of Marx and Lenin’s writings specifically arose in the context of a debate. I would also say that much of my training in Marxism, except for the occasional classes organized by the theory-bereft SWP, took place through my exposure to debates in the party.

Although the late Bill Warren is a pretty obscure figure today, he generated a lot of attention in the early 1970s when he wrote a 66 page article in the September-October 1973 New Review titled “Imperialism and Capitalist Industrialization” that argued that imperialism was dying out in the 3rd world under the impact of local industrial development. In other words, capitalism was basically playing a progressive role in places like Brazil, India, Nigeria, etc. The end result of this development would be something approximating Thomas Friedman’s “The World is Flat” thesis.

As counter-intuitive as all this seems, there have always been bits and pieces of the Marxist classics that people like Warren could have appealed to. For example, Karl Marx wrote “The country that is more developed industrially only shows, to the less developed, the image of its own future” in the preface to V. 1 of Capital (1867 German Edition). Nearly 50 years later Leon Trotsky would write in “Third International After Lenin”:

In contrast to the economic systems which preceded it, capitalism inherently and constantly aims at economic expansion, at the penetration of new territories, the surmounting of economic differences, the conversion of self-sufficient provincial and national economies into a system of financial interrelationships. Thereby it brings about their rapprochment and equalizes the economic and cultural levels of the most progressive and the most backward countries. Without this main process, it would be impossible to conceive of the levelling out, first, of Europe with Great Britain, and then, of America with Europe; the industrialization of the colonies, the diminishing gap between India and Great Britain.

Since Warren’s article is so long, it would not be useful for me to forward the entire item. However, I will include some key passages from it as well as some rejoinders that appeared in the New Left Review. For those of you who have a particular interest in the topic, contact me offlist and I will be happy to send you the entire article(s).

Before proceeding, I would like to sketch out the political and historical context in which Warren’s ideas were put forward. To start with, Warren was a member of British and Irish Communist Organization (B&ICO, often referred to simply as BICO), a split from the Irish Communist Group in 1965 that adhered to various aspects of Stalinist and Maoist orthodoxy with some rather odd innovations, the most controversial of which was opposition to the Northern Irish Catholic struggle. They argued from a workerist perspective that was reminiscent of the CPUSA’s hostility to Malcolm X in the early 1960s.

In my view, it is no accident that both Warren and Robert Brenner were hostile to dependency theory, the only thing separating them ideologically was Warren’s going whole hog in favor of capitalism. Both were convinced that capitalism would be diffused from the more advanced countries to the less advanced ones, a view that owes much to the Communist Party’s intellectual traditions. In Warren’s case, you are dealing with a rather unmediated acceptance of Stalin-era stagism. With Brenner, you are getting an analysis that is heavily in debt to the Communist Party Historians Group that included such highly respected figures as Maurice Dobb, Christopher Hill, Eric Hobsbawm and E. P. Thompson. No matter how brilliant their scholarship, all of them was wedded to the idea that history proceeds through stages. Since Dobb was a primary influence on Robert Brenner, it is easy to understand why he would have such a strong reaction against a figure like Andre Gunder Frank who was so deeply influenced by Fidel Castro’s crypto-Trotskyist call for socialist revolution throughout Latin America even though conditions might not have ripened (in other words, an industrial proletariat had not been formed yet.) I say this despite the fact that Brenner has professed sympathy for Trotsky’s ideas in his NLR article. Politics is complicated, after all.

80 percent of Bill Warren’s article consists of empirical data meant to prove that capitalist industrialization was proceeding apace in the underdeveloped countries, thus rendering obsolete A.G. Frank’s notion that capitalism produces the “development of underdevelopment”. Additionally, Warren argues that Lenin’s theories were becoming obsolete as the differences between India, for example, and Great Britain were diminishing.

Warren’s article begins:

Current Marxist views of the relationship of imperialism to the non-socialist underdeveloped countries are that the prospects of independent economic development or independent industrialization in such countries are nil or negligible (unless they take a socialist option); and that the characteristics of backwardness, underdevelopment and dependence [1] which prevent such development are the necessary results of imperialist domination. Despite the state of controversy in which the theory of imperialism currently finds itself, these conclusions were generally accepted by all participants in a recent symposium on imperialism. [2] It will, on the contrary, be the burden of this article that empirical observations suggest that the prospects for successful capitalist economic development (implying industrialization) of a significant number of major underdeveloped countries are quite good; that substantial progress in capitalist industrialization has already been achieved; that the period since the Second World War has been marked by a major upsurge in capitalist social relations and productive forces (especially industrialization) in the Third World; that in so far as there are obstacles to this development, they originate not in current imperialist-Third World relationships, but almost entirely from the internal contradictions of the Third World itself; that the imperialist countries’ policies and their overall impact on the Third World actually favour its industrialization; and that the ties of dependence binding the Third World to the imperialist countries have been, and are being, markedly loosened, with the consequence that the distribution of power within the capitalist world is becoming less uneven.

To support his argument that the 3rd world is becoming industrialized, Warren supplies many statistical tables. The first one he deploys is perhaps the most useful in at least understanding why he came to the conclusion that things were “improving”:

I should mention that I heard exactly the same type of arguments back in 1973 but not from a Marxist. When I worked at the First National Bank of Boston, I had a very likable manager who had graduated from Harvard and embraced liberal orthodoxies. When I used to argue that capitalism was destroying the 3rd world (this was when I was young and impetuous), he frequently held up Brazil as a success and an exception that disproved my Marxist dogma.

If you go back and look at newspaper reports of the time, there were plenty of articles that supported my boss and Bill Warren who refers to Brazil frequently in his article, stating in one footnote that “Brazil ranks seventh among capitalist countries in commercial vehicle production and has nearly double the output of Italy in this important capital goods sector.”

Indeed, one 1971 N.Y. Times article sounds like it could have been written a couple of years ago when Brazil, Russia, India, China and South Africa (BRICS) were being widely discussed as a new economic bloc that would rival the traditional imperialist powers–just substitute “Lula” for “military government” and “progressive” for “conservative”:

There are holes in Brazil’s current economic boom-vast, blank areas where millions of people live on the edge of subsistence-and the military government has undertaken to fill them in its own conservative way.

Two Government projects are designed to give more of Brazil’s current industrial prosperity to the working poor at the bottom of urban society and to transform the medieval structure of the Northeast, a semiarid area where about 15 million people live in deadly poverty.

Of course these hopes were dashed as soon as the next major world economic crisis ensued, just as surely as they are being dashed in the BRICS countries today. That, after all, is how capitalism works. It is a system of expansion and contraction. If it only expanded, then Karl Marx and V.I. Lenin probably would have found careers as philosophy professor and lawyer instead of revolutionists.

The text that accompanies the table seen above should suffice to define Bill Warren’s basic argument:

Despite statements and predictions to the contrary, the underdeveloped world, considered as a whole, has made considerable progress in industrialization in the post-war period. Already, by the 1950s, the Third World accounted for a higher proportion of the world’s manufacturing output than it did pre-war. Whereas in 1937 the developed capitalist countries accounted for about nine times the manufacturing output of Latin America, Africa and Asia, by 1959 the ratio had been reduced to seven to one. Moreover, this tendency for manufacturing output to grow faster in the underdeveloped world than in the developed capitalist world continued into the 1960s-with Third World manufacturing output growing at about 7 per cent per annum between 1960 and 1968 while that in the advanced capitalist world grew at about 6 per cent. This was despite the fact that during the 1960s industrial growth in the developed capitalist world has been exceptionally high by historical standards, overall GNP growth easily exceeding the famous OECD Growth Target for the 1960s of 50 per cent over the decade.

It may be argued that this apparent success is attributable to the high statistical growth rates associated with very small industrial bases and is therefore delusive, or, alternatively, that in terms of output per head the record of the underdeveloped countries compared with the developed capitalist countries is rather poor. However, inspection of the figures for individual countries over a longish period shows the ability of many underdeveloped countries to maintain faster rates of growth of manufacturing output than the already industrialized economies (table iii). Moreover, the really unique feature of the post-war industrialization advance in the Third World taken as a whole, is its sustained momentum over a period longer than any previously recorded. Thirdly, this industrialization has been (and is) taking place in a period when neither war nor world depression have acted to ‘cut off’ the ThirdWorld from the advanced capitalist countries-and yet it is this cutting-off that Gunder Frank considers crucial in explaining such industrial progress as has been made (in partial exception to his ‘developing underdevelopment’ and ‘increasing polarization’ theses.)

Certainly, the growth of manufacturing output per head in the underdeveloped countries does lag behind that of the imperialist world, in part because of the unprecedented post-war rates of population growth in the former. But to take the growth of manufacturing output per head as a basis of comparison is to apply an extremely demanding criterion of performance. Similarly, the same point applies to the growth of total output per head. Clearly, from the point of view of living standards, per capita growth rates are the most relevant criterion. However, from the perspectives of the distribution of world industrial power and the growth of the market (which are more relevant to the problem at hand) total, rather than per capita, growth rates are the central issue.

One of the first responses to Warren’s article came from Philip McMichael, James Petras and Robert Rhodes in the May/June 1974 issue of NLR. (It should be mentioned that Petras had weighed in against Andre Gunder Frank beforehand, thus proving that you can’t automatically amalgamate Warren and the Brenner critique just on the basis that they both are opposed to dependency theory.)

Their article titled “Imperialism and the Contradictions of Development” zeroes in on Warren’s fixation on growth for growth’s sake:

Warren argues from his Table III (Annual Average Rates of Growth of Manufacturing for Selected Countries) that the ‘unique feature of the post-war industrialization advance in the Third World taken as a whole, is its sustained momentum over a period longer than any previously recorded’. But time series data reveal a cyclical pattern of industrial expansion interrupted by crises. For example, growth conditions in Brazil alternated between a boom in the 1950s, stagnation in the early and mid-1960s, and boom again in the late 1960s. To average out growth conditions is to conceal the specific problems of industrial expansion in the Third World. Warren also ignores the phenomenon of ‘internal colonialism’-by citing industrial growth apart from overall growth, he fails to establish the size of the sector affected and its relationship to and impact upon the Third World economy. In Latin America for instance, the overall growth rate between the mid-1950s and mid-1960s was low, yet industry expanded. To exclude these various conditions of industrial expansion allows Warren to project quite unqualified and optimistic assertions, devoid of any direct recognition of the contradictions accompanying this phenomenon.

Warren claims from his observations of absolute growth rates that there has been a significant ‘redistribution of world industrial power’. To measure distribution of world industrial power by ‘growth rates’ of industry, which include economies starting from the barest minimum of industrial production and cover a generation, is delightful simplicity. The volume of production, the level of technology, the research capabilities, the allocation of resources, the development of education and the use of manpower, are equally or more relevant to measuring the historic capacity of a country to become a significant industrial power. Warren wishes to prove a ‘redistribution’ of industrial power, but can only scrape up a one per cent difference in the industrial growth rate between the imperial centres and the Third World: a very slender reed upon which to hang such a weighty claim!

Specifically, the growth of the proportion of industry to GDP is in part accounted for by the low-productive nature of non-manufacturing sectors in the Third World; and in the imperialist countries the expansion of highly mechanized agricultural production and skilled services account for a greater proportion of GDP. Very different conclusions would have been suggested if Warren had acknowledged these critical realities of contemporary capitalism.

In the same issue of NLR, there was also a rebuttal by Arghiri Emmanuel titled “Myths of Development versus Myths of Underdevelopment”. Emmanuel was a dependency theorist committed to the theory of “unequal exchange” shared by Samir Amin.

Emmanuel accused Warren of cherry-picking his data, especially through its failure to address the largely agrarian composition of 3rd world countries that indicated their failure to evolve toward 1st world conditions, where farm labor and the peasantry are insignificant. One particular table spoke volumes:

Also of particular interest is how Emmanuel challenge’s Bill Warren’s rosy-hued view of the role of oil in the 3rd world. Keep in mind that the early 70s were marked by a petroleum boom quite similar to that of recent years and led to illusions at the time that Saudi Arabia would rival the U.S., just as there have been illusions until recently that Russia would become a major world power as well.

It may well be that the recent oil upheaval will help to demystify these matters. We can now see that the increase in the price of oil, and the fantastic profits made from it, will be largely illusory-manifested in mere alterations in book-entries in banks in Zürich, London and New York-for lack of adequate structures for the absorption, and so for the consumption, of commodities and services that could be imported by the oil-producing countries. These ‘structures of reception’ are, quite simply, domestic incomes, and in particular adequate wage-levels, since, even if it is a question of importing capital-goods, the latter will eventually lead to an increase in the production of consumer-goods, and under the free-enterprise system no entrepreneur is going to invest ‘upstream’ of a branch when he has not already available, ‘downstream’, an outlet for the corresponding final product.

Thus, the rise in the price of oil will very probably remain formal, costing nothing to the consumer countries as a whole, and bringing no profit to the producing countries. The latter will continue to receive, in real values, only the cost of production, some 10 or 20 cents per barrel, plus a very small additional part of the price, realized in the form of armaments, or of a few tankers and perhaps also some refineries installed here and there. The rest of the price they will never receive, for lack of capacity to consume it. In other words, these countries, after having been for a long time too poor to be able to sell their oil at a normal price, when at last they have the opportunity to unite and, nominally, dictate this price, turn out to be too poor to be able to ensure that they are paid it in real terms.

Furthermore, the fact that the cost of production of oil in the Middle East continues to be between 10 and 20 cents a barrel today renders present prices very vulnerable. The least weakening of the Arab ‘united front’ will lead to their rapid collapse. The only force that could consolidate these prices durably would be an increase in the actual cost of extraction. Let us imagine that the recent price-increases had been preceded by a wave of strikes in the Middle East which had resulted in a very substantial increase in wages. Let us further imagine that, as a consequence, there had followed a rapid economic development of these countries, and intense urbanizations so that the price of a square metre of land in Saudi Arabia or Iraq had risen to the level of California or Texas; and that, as a result of all this, the real cost of extraction had risen from 10 cents to 10 dollars a barrel. It is clear that nobody, in those circumstances, would have vociferated about ‘blackmail’.

For this is the logic of capitalism: you can easily make the rest of the world pay for your wages and your consumption as previously established, that is, the prices of your factors of production, whatever these may be. You cannot, without problems and conflicts, make the rest of the world pay a price based on an exchange of equal quantities of such factors.

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