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Leap into Modernity – Political Economy of Growth on the Periphery, 1943–1980

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Adam Leszczyński

This book describes struggles of different countries and their development after World War II. It presents a panorama of different ideologies of accelerated development, which dominated the world just before the war and in the next 40 years. The author explains why in the 1970s global and local elites began to turn away from the state, exchanging statism for the belief in the «invisible hand of the market» as a panacea for underdevelopment. He focuses not only on the genesis of underdevelopment, but also on the causes of popularity of economic planning, and the advent of neoliberalism in the discourse of development economics. This book evaluates the power of state as a vehicle of progress and focuses in detail on the Soviet Union, China, Poland, Ghana, Tanzania, and South Korea.

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Chapter 6. Dilemmas of the periphery. The dialectic of development in the “Third World” 1945–1980

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Socialism is more than mere logic.717

Jawaharlal Nehru, 1957

The division of labor among nations is that some

specialize in winning and others in losing.718

Eduardo Galeano, 1973

Chapter 6.Dilemmas of the periphery

The dialectic of development in the “Third World” 1945–1980

1.The black star of Africa

Ghana gained its independence on 6 March 1957. One minute after midnight, the British Union Jack was lowered from the flagpole, and the red-green-and-gold flag of a new country hoisted in its place. Over 2000 delegates from around the world took part in the new country’s birthday celebration. There was no end to the banquets. People were dancing in the streets.

The next evening, after the ceremonial transfer of power, Prime Minister Kwame Nkrumah danced to the melody of the hit blues song “Gotta Be This or That” with the Duchess of Kent, who had been sent to represent Queen Elizabeth. The banquet took place in the marble-clad rooms of the newly built State House. The atmosphere was full of optimism: a new, post-colonial order was taking shape, better than the former colonial model. Ghana, the black star of Africa, was to represent the hopes of the entire continent for emancipation and modernity. A better tomorrow was within reach.

In his autobiography, published during that first year of independence, Nkrumah would write:

As a ship that has been freshly launched, we face the hazards of the high seas alone. We must rely on our own men, on the captain and on his navigation. And, as I proudly stand on the bridge of that lone vessel as she confidently sets sail, I raise a hand to shade ←231 | 232→my eyes from the glaring African sun and scan the horizon. There is so much more beyond.719

At the time, no one could imagine just how quickly this ship would hit the rocks. Nine years later, the catastrophe was complete. Nkrumah’s government was hated and universally seen as corrupt and discredited. When a military coup d’état finally removed Nkrumah from power, Ghana was bankrupt, and its citizens were considerably worse off than on the day the country gained independence.720

The story of Ghana is instructive because it is nearly an archetype of the postcolonial fate of many other countries – including its hopes and ambitions, joy and disappointment. Nkrumah was more than just a leader: he was a prophet of Pan-Africanism, a star of world politics, and one of the creators of the Non-Aligned Movement, which sought to find its own way in a world divided between the Eastern and Western blocs, which were in the midst of a titanic struggle.

Ghana’s fight for freedom inspired and influenced us all, and the greatest contribution to our political awareness at that time came from the achievements of Ghana after its independence. It was from Ghana that we got the idea that we must do more than just the UN to bring about our own independence.

This was how Sam Nujoma, the first president of Namibia, remembered the period.721

Nkrumah loved media attention and was aware of his own charisma. It was thus not surprising that he agreed publically to a wager proposed by Félix Houphouët-Boigny, leader of the most important party in neighbouring Ivory Coast, during a visit to Ghana in April 1957 aimed at building Pan-African relations. The Ivory Coast was then still a colony, but independence was already within sight (it would be achieved in 1960). Houphouët-Boigny had a completely different vision for the future of his country: he wanted gradual development without radical experiments, based on agriculture and the know-how of French experts (tens of thousands of which were employed there in the 1970s). He believed in capitalism and the free market, which made him an exception at the time. He made a wager with Nkrumah on which country would develop faster over the next decade. Everyone expected that Houphouët-Boigny would lose.722 ←232 | 233→The leader of Ghana had no idea that he would already be out of power by the time the bet was settled.

When Ghana obtained independence, it faced truly bright economic prospects. Its monetary reserves amounted to 269 million dollars, and the country had one of the highest levels of per capita income in sub-Saharan Africa, comparable with the level of income in South Korea or Taiwan. Ghana was the largest cocoa producer in the world, and had significant reserves of gold, bauxite and magnesium.

At the same time, however, as Nkrumah was well aware, Ghana remained economically dependent on Western demand for its products, mainly cocoa, whose price was determined by a world market in which American and European buyers dominated. Ghana sold cocoa and gold, and imported machines, automobiles and most other consumer goods. Thus, Nkrumah thought, it remained at the mercy of the former colonizers, and there could be no talk of real independence as long as that was true.

The leaders of newly established countries like Ghana had good reason not to trust their former colonial masters. The British had begun to think about the economic development of their colonies quite late, only towards the end of the 1930s, when cracks in their empire were already visible. It had earlier been believed that the presence itself of Europeans, in whose wake came trade and civilization, would bring progress to the people they subjugated.

Parliament approved the first programme for development of Britain’s colonies during the war, in 1940, though immediately afterward even the modest funds allocated for this purpose were cut.723 From the negligible five million pounds yearly that were finally approved, very little was ever spent: through 1948, real spending in whole amounted to 24 million pounds. This was supposed to dramatically improve the life of 68 million people in 47 dependent territories, which in practice meant spending seven shillings per person over the nine years the programme was in force.724

This charity was accompanied by bombastic rhetoric, and not just from the Tories. The Labour Party Programme in 1949 declared that “Great Britain and the colonies have gone into partnership to liquidate ignorance, poverty and disease,” and the Labour Speaker’s Handbook for 1948–9 added that “[i]mperialism ←233 | 234→is dead, but the Empire has been given new life”.725 A British voter could further learn from the book that:

In the colonies Labour Britain has given a tremendous impetus to social and economic progress. Under the Colonial Development and Welfare Scheme, £120 million is given, to colonial governments to assist local planning. The Colonial Development Corporation with a capital of £110 million has been established to finance special projects of large-scale economic developments. Further still the Overseas Food Corporation is empowered to spend £55 million on great plans for increasing food production in the colonies.726

In the postwar Britain of food rationings, these numbers might look impressive, but in practice they amounted to mere pennies. The richest colonies, such as Nigeria, allocated a shilling for education a year, but many had no access to schools of any kind. Even in Nigeria there was only one doctor for every 133,000 inhabitants (in postwar Britain the figure was one in 1200, and in pre-war Poland, one in 10,000). The colonial system of rule did not inspire hope for improvement of the situation.

Among the most spectacular colonial development projects were the gigantic peanut plantations in Tanzania mentioned earlier, on which 24 million pounds were spent in 1946; they cost an additional 7 million pounds a year to maintain, and were supposed to employ more than 30,000 Africans. The project was in fact intended to serve the British more than Africans. Its main purpose was to supply Britain’s cities with half of their needs for fats by 1950. In practice, after four years of failures and delays, instead of the planned 228,000 tonnes of nuts, barely 2150 tonnes had been gathered, from an area covering 2% of the intended acreage. In practice nothing worked as planned. The land was not suitable for cultivation, machines broke down, and the colonial administrators complained that Africans did put enough effort into their work.727

Independence and industrialization seemed to Nkrumah to be the only way to break with colonial dependency and simultaneously pull the country out of poverty. In 1963, when his programme was crumbling, and Ghana stood on the verge of bankruptcy, he wrote: “the vicious circle of poverty which keeps us in our rut of impoverishment, can only be broken by a massively planned industrial ←234 | 235→undertaking.”728 Nkrumah’s views did not set him apart – they were more or less universally shared.

While the first five-year development plan, begun in 1954 when Ghana was still an autonomous British colony, concentrated on education and the roadbuilding, the next plan, officially labelled “Building a Welfare State”, was focused primarily on the development of industry: its central point was the construction of dams on the river Volta and a formidable aluminium steelworks.729 The next plan, announced in 1964 under the heading “Work and Happiness”, was intended to cover seven years. It called for investment expenditures of the then-astronomical sum of a billion British pounds and for tightening control over businesses, which had hitherto operated under free market conditions. The newly appointed National Commission on Economic Planning was now to designate production goals for them.

Planned industrialization in Ghana left a lot to be desired, however: construction projects dragged out mercilessly, and costs were higher than planned, with disappointing results. For example, the government built a mango processing plant, though it admitted that there was no local market for its products, and that its production capacity was several times higher than world demand. That is, if the enterprise ever got off the ground.

The government’s report on the factory is illuminating:

Project: A factory is to be erected at Wenchi, Brong Ahafo, to produce 7,000 tons of mangoes and 5,300 tons of tomatoes per annum. If average yields of crops in that area will be 5 tons per acre per annum for mangoes and 5 tons per acre for tomatoes, there should be 1,400 acres of mangoes and 1,060 acres of tomatoes in the field to supply the factory.

The Problem: The present supply of mangoes in the area is from a few trees scattered in the bush and tomatoes are not grown on commercial scale, and so the production of these crops will have to start from scratch. Mangoes take 5–7 years from planting to start fruiting. How to obtain sufficient planting materials and to organize production of raw materials quickly become the major problems of this project.730

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Another telling example was a coconut oil factory – the Esiama Oil Mill – built by the government of Ghana in 1961. On paper, this project seemed to make sense. It was true that no studies had ever been conducted that supported the planners’ optimistic view that local forests could provide sufficient raw materials, but the managers did at least make surveys of the local forests before making the decision to build it. Plans for the factory were commissioned from foreign experts and technologically advanced (for the period) machines were purchased with foreign currency. Two years after completion of the factory’s construction, its planned production capacity was additionally increased. Construction dragged on, the factory turned out to have been poorly designed, machines broke down due to poor operating conditions, and their operators lacked proper training. Due to rationing of foreign currency, the import of replacement parts took as long as three months, resulting in long pauses in production. In practice, this meant that the coconut oil produced by this modern factory cost considerably more than the oil local villagers had been producing by means of their own primitive methods. The oil from the Esiama Oil Mill cost almost a thousand cedis a tonne, whereas the world price was the equivalent of 600 cedis a tonne. The factory management wanted to lower costs, but when it turned out that this was beyond their means, a simpler solution presented itself: they simply demanded the government give them a monopoly on the purchase of raw materials – and, naturally, were given one. Poor farmers were thus made to pay for a large, inefficient factory.731

This was typical of many African industrial enterprises – from Ghana and Nigeria to Tanzania. Machines were ordered in offices very far from the places where they were to be used, and were thus often not suited to local conditions. Transport took a long time, and equipment often arrived damaged or in poor condition. When it did finally arrive, it was often installed improperly: a lack of educated cadres presented another enormous problem. All of these issues raised costs, as did the fact that imported equipment often could not be used to process local raw materials, which it proved incapable of handling. As a result, production was very expensive, and the survival of these companies ended up being financed by local consumers and contractors. The government subsidized production by means of a number of creative techniques: it limited the import of competing products or prohibited it entirely, lowered taxes, and provided local raw materials at a reduced price (which always meant that it bought them from farmers at a price lower than the market rate).

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Nkrumah thought that all of these difficulties were temporary – and were the price that had to be paid for building the country’s industry and economic (and therefore political) independence. He explained to the citizens of his country:

It may be true in some instances that our local products cost more, though by no means all of them, and then only in the initial period […] It is precisely because we were, under colonialism, made the dumping ground of other countries’ manufactures and the providers merely of primary products, that we remained backward; and if we were to refrain from building, say, a soap factory simply because we might have to raise the price of soap to the community, we should be doing a disservice to the country.732

At the beginning of the 1960s, local products were protected in Ghana by a ban on the import of competing products. Local factories thus had no incentive either to produce in large quantities, or to offer goods that were cheap or high in quality: they were guaranteed a profit and could calmly maintain that all the needs of the population were being met – in the end, after all, everything they produced found a buyer.

Nkrumah believed that industrialization at any cost was a necessary step in the building of socialism, and therefore on the path to independence and prosperity. In the introduction to his autobiography, he wrote:

The ideology of my Party may be formulated as follows: no race, no people, no nation can exist freely and be respected at home and abroad without political freedom. Once this freedom is gained, a greater task comes into view. All dependent territories are backward in education, in agriculture and industry. The economic independence that should follow and maintain political independence demands every effort from the people, a total mobilisation of brain and manpower resources. What other countries have taken three hundred years or more to achieve, a once dependent territory must try to accomplish in a generation if it is to survive. Unless it is, as it were, “jet-propelled”, it will lag behind and thus risk everything for which it has fought. Capitalism is too complicated a system for a newly independent nation. Hence the need for a socialistic society.733

Nkrumah had several reasons for rejecting capitalism, besides the fact it was “too complicated.” He judged that the problems that had plagued the former colonies were created by capitalism, and therefore could not be resolved by it. Furthermore, capitalism led to an unequal distribution of goods, and created a highly unstable economy – because it was driven by profit and not the good of society, which was to be the main goal of socialism.734

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His vision of socialism, however, lacked coherence. He never presented it in a systematic, lucid way. One thing is for certain: African socialism would be a socialism of community, not of class struggle. In it, the state would play a central role, planning development and running the largest investments. Nkrumah was nonetheless not hostile to private capital, though he did feel ambivalence toward it: on the one hand, he courted Western businessmen and sought help from Western governments in the construction of his largest industrial project, the building of dams on the Volta River. On the other hand, the Ghanan leader considered Western capital – including development aid – to be a tool that helped the West consolidate its domination over other countries.

Western capital thus carried with it threats. In 1962, Krobo Eduesi, minister of industry in Nkrumah’s government, boasted:

Since December last year, Ghana has for the first time decided to exercise one of the weapons of economic sovereignty—import control! So long as this weapon is carefully and wisely yielded, our young and infant industries which are facing ruthless competition from long established and giant monopoly industries overseas, will be protected from dumping.735

In explaining his political philosophy, Nkrumah wrote that the forces of neocolonialism were too powerful for one nation to stand up against – hence the need for collective action by all Africans. The worse things became in Ghana, the more its prime minister would speak of the need for pan-African economic planning.736

In April 1961, in the face of mounting problems with inflation and supplying goods, Nkrumah declared that the goals of his party – full employment, home construction and the building of industry – should be the task of the “whole nation,” which should devote itself to working together to accomplish these tasks. “How are we to achieve this goal within the shortest possible time?, he asked. “Socialism is the only pattern that can within the shortest possible time bring the good life to the people.”

In order to build socialism, they had to first build up industry, invest in farming equipment and electrify the country. “Hence my preoccupation with the Volta River Project and other schemes that will provide water power both for electricity and irrigation of regions that are starved of water at certain periods ←238 | 239→of the year.” Planning was now to enter a new stage, as previous efforts had been disappointing. “Our planning hitherto has been largely piecemeal and unpurposeful. It has not been linked in an organised manner”. Nkrumah complained of chaos and the waste of “precious funds” and “technical staff.” His party was to be “the pivot of our economic planning”.

This enterprise as a whole demanded the “consultation and participation of the people,” as a result of which Ghana was to become “the truest kind of democracy that has ever functioned”. Here, Nkrumah did not explain exactly what he had in mind.737

Any criticism of the prime minister’s vision was rejected. Polish economist Ignacy Sachs recalled a conference in Ghana in the 1960s, at which he stated that the proposed rate of growth in the plan then in effect was unrealistic. He was then told by the head of planning to never forget that “for we Africans only the best in the world is good enough.”738

Nkrumah’s response to growing economic problems was to rule with an iron hand. In 1964 he declared himself president for life, and Ghana a one-party state. He created a host of organizations designed to mobilize support, such as the PVA (Party Vanguard Activists). He was also becoming increasingly disconnected from the lives of ordinary people. In 1965 inflation and shortages of flour caused the price of bread to rise from half a crown to five shillings (whereas the average wage of a worker in Accra was six shillings). Nkrumah was not even aware of this development. When Hyman M. Basner, a South African journalist and political émigré from South Africa visited Nkrumaha in the presidential palace in October 1965, he brought him two loaves of bread. The news that they cost five shillings apiece and were filled with air came as a shock to Nkrumah. He blamed the rise in prices on corrupt officials at the centralized state wholesaler, who were selling expensive imported flour to bakeries. The problem remained unresolved, however.739 After an attempt on the Nkrumah’s life, the prisons began to fill up with his political opponents. Joseph Kwame Danquah, the leader’s main rival in previous democratic elections, was imprisoned twice. The second time he was chained to the floor of his cell, starved and refused medical treatment. When he died, an official statement gave the cause as heart failure. Nkrumah ostentatiously plunged himself into mourning and travelled to Danquah’s native village, where he stood over the deceased’s grave in quiet reflection.

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The country’s financial situation was a catastrophe. Wasteful spending on investments was compounded by a drastic fall in the price of cocoa, which despite Nkrumah’s efforts was still the country’s main source of foreign currency. In 1958 the price of a tonne of cocoa on the London stock market was 977 USD, while in 1965 it had fallen to barely 400 USD. An ambitious spending programme had brought with it an enormous deficit, paid for from currency reserves – until they ran out. Nkrumah’s final development plan did not bring the happiness it had promised. It remained only on paper and, ultimately, no attempt was even made to implement it.

Nevertheless, in January 1966 the construction of the dams on the Volta River was completed. Nkrumah personally flipped the switch – and electricity flowed from the new power station into the heart of the country.740 By now his government was deeply unpopular: inflation had spun out of control, shops were empty, and Ghana lacked foreign currency to import medicines and spare parts. In February, Nkrumah was removed from power by a military coup. Crushed and humiliated, the prophet of the African renaissance died six years later in exile. His great investment project had become a hostage to Western interests: profits from the dams on the Volta flowed mainly into the pockets of Western investors.

The example of Ghana speaks volumes not only because it reveals the defects of African-style socialism. The lack of coherence in Nkrumah’s ideology was typical of many African regimes. Elements of it were repeated, however, throughout the developing world. It was believed everywhere that the development of industry promoted independence; that a policy of import substitution, or a conscious limiting of imports and replacing foreign products with domestic ones was called for; that the state should steer development, even building its own industrial enterprises, since no one else would do it, and these were the motor of growth.

The brutal political economy that formed the background of such a programme was also shared by many countries. African, Arab or Latin American leaders did not control their societies the way Stalin or Mao did; they did not rule giant countries in isolation from the world or have a comparable apparatus of coercion at their disposal. The foundation of Nkrumah and other post-colonial leaders’ power was a coalition of various local interests, whose demands had to be met if these leaders were to maintain their hold on power. They were also forced to consider social discontent.

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The paradox of these systems was that in the name of development and prosperity, the heaviest burdens were placed on the shoulders of the poorest.741 In the case of Ghana, these were the farmers who produced cocoa. Even before independence, Nkrumah’s government had been given control of the Ghana Cocoa Marketing Board – a company created in 1947 with a monopoly on the purchase of cocoa in Ghana and its sale on the world market. It was originally created to guarantee farmers stable cocoa prices – compensating them for oscillations in prices from funds it accumulated during periods of high prices. For Nkrumah, the Cocoa Marketing Board became the main source of funds for financing his industrial programme. Purchase prices were set lower than on global markets, and the surplus was seized by the state. The company also quickly grew into a gigantic state-operated Moloch, employing tens of thousands of people, who were also charged with, among other things, supplying farmers with fertilizer and fungicidal agents, and helping them improve production. There was only one thing it did not do – pay workers a decent wage.

Governments in many African countries obtained money by similar means: for example, in Tanzania in the years 1971–1976, farmers received from one fifth to one half of the market price for their products.742 Of 28 African countries studied by the World Bank in 1994, fully half of them tightly controlled the food market and agricultural products according to this model.743 It was the same with cotton production in Chad and Benin, coffee in Burundi, peanuts in Niger, and coffee and cocoa in Sierra Leone. In Togo in the 1970s, producers’ income fell by almost half over just a few years, though world prices were rising at that time.744

In the absence of a domestic middle class, the backbone of support for African governments came from government workers. The government did not have sufficient funds to pay them a decent wage – and therefore it purchased this group’s support (or at least acceptance) by regulating the prices of basic foodstuffs, on which Africans spent most of their income. It thus had a double motivation for controlling agricultural production.

In many countries, attempts were made to organize state-run farms, but these culminated in catastrophe, as they did in the USSR and other countries of the ←241 | 242→socialist bloc. In Ghana, they began to be organized in 1962. Four years later there were 135, employing a total of 20,8000 workers. Hundreds of tractors were imported for use on them. State farms received 90% of the budget for agricultural development. Nonetheless, they were very badly managed, and were obliged to sell food at below market prices. As a result, their losses were enormous: in 1971 their annual revenue did not even cover a month’s costs.745

State enterprises were also inefficient because they served as a means for providing employment to masses of people. A commission studying the activity of the Cocoa Marketing Board in Ghana after the fall of Nkrumah noted that one of the local branches employed a dance group, football players, and actors and actresses, not to mention many other workers who could hardly be called essential. “The CMB’s area of operation … embraces activities and involves a staff which would have appeared absurd only ten years ago,” the authors of the report commented.746

In order to cope with a decline in agricultural production and simultaneously maintain low food prices on the market, governments not only imported food, but created complex systems of subsidies and incentives for their own farmers. In Ghana the government covered a third of the price of corn seed and three quarters of the price of rice seed. In Nigeria the government tried raising its own type of corn – better adapted to local conditions (unsuccessfully) and offered farmers credit at interest rates 5% lower than the market demanded. In Kenya and Zambia, governments subsidized part of the cost of research into new strains of corn. In Ghana a special bank was created to loans to farmers at interest rates no higher than 6%, thus considerably lower than the rate of inflation. That bank, however, only demanded repayment of two thirds of its loans; the rest amounted to a subsidy. The main problem with these loans was that they were primarily given to individuals with political connections. It was equally difficult to obtaining government-allocated fertilizer, which only in theory belonged to everyone. Allocations were always a reward for political supporters.747

Support for local industry proceeded in a similar fashion. The most important and most frequently employed mechanism was controlling the import of competing goods. In Kenya in the years 1965–1972, the government acceded to 90% of the requests from local and foreign companies asking for protection from competition by raising customs tariffs, limiting import licenses, and lowering the duty on raw ←242 | 243→materials brought in from abroad.748 In Kenya, the Committee for the Protection of Industry oversaw requests for import licenses: importing paints or varnishes from abroad required the prior consent of the local manufacturers’ association. The manufacturers of hundreds of different categories of goods, from car batteries to burlap bags, were protected in a similar fashion. If the committee found that the imported article was also produced in the country, it had the right to deny licensing to the importer, and it used that right without hesitation. Because the industrial sector was very small in most African countries, and a given article was not produced by more than a few companies, this policy promoted concentration and division of the market – naturally at the expense of the consumer. Thus, de facto monopolies were created, which had no motivation to keep prices low and quality high. Manufacturers found it more worthwhile to fight for their profits in government offices than on the market. Foreign investors, too, were often guaranteed a de facto monopoly if they built a factory in the country. For example, the Kenyan government gave the British Leyland company de facto exclusive rights to automobile assembly, and Firestone – to tire production. In the same country, de facto monopolies existed in petroleum and food processing, and in the production of cement, matches, sugar, building materials and textiles.749

The system was thus logical: the rhetoric of self-sufficiency and development went hand-in-hand with looking after local interests, whether these were a manufacturers’ group or urban supporters of the government. Territorially dispersed and uneducated, farmers were incapable of overthrowing those in power, so it was easiest to burden them with the costs of buying support from those groups on which the government depended for its power. Farmers protested using the only method available to them – either bribing officials, or selling their goods on the black market, or, if all else fails, limiting production. In Nigeria, agricultural production fell by 2% in the decade after independence, while in Ghana it rose by 0.3% and then decreased in the 1970s by 3.1%.750

The most dramatic course of action chosen was the attempt to control farmers in Tanzania. For the country’s socialist president, Julius Nyerere, the matter was literally one of life and death. When the country (then, before it merged with Zanzibar, called Tanganika) gained independence, half a million of its inhabitants were saved from dying of hunger only by food aid. At that time, Nyerere said:

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Poverty, ignorance and disease must be overcome before we can really establish in this country the sort of society we have been dreaming of. These obstacles are not small ones, they are more difficult to overcome than any alien government. From now on we are fighting not man, but nature.751

The first two Tanzanian economic plans – first a three-year plan 1961–1964), followed by a five-year plan (1964–1969) – did not lead to a breakthrough. Nyerere was struggling with a classic problem of underdevelopment: he did not have the means to finance the development of industry, which he believed to be the key to breaking out of poverty. Agriculture presented an additional challenge. How to change poor farmers into farmers producing large yields of commercial crops for foreign markets?

In 1956, before the end of the colonial era, the mission statement of the World Bank called for radical social transformation: the world of traditional villages needed to be destroyed, in order for quick new cultivation methods to be introduced. The author of a report prepared by the Bank wrote:

The Mission concludes that quicker progress toward these ends is likely to be made, within the limitations of the resources available for government action, by planned settlement of empty areas.… When people move to new areas, they are likely to be more prepared for and receptive of change than when they remain in their familiar surroundings. And where people are under pressure to move or see the advantage of doing so, they can be required to abide by rules and to adopt new practices as a condition of receiving new land.752

Two types of new settlements were anticipated. In the first type, the government would provide farmers with land and would help them cultivate their fields. The second was a form of trade cooperative, in which the government also provided machines, fertilizer, and advice, and in return received part of the profits from the largest (as the plan optimistically assumed) harvests. The authors were not dismayed by the spectacular failure of the programme for peanut cultivation in Tanzania during the colonial period. Even tractors built from Sherman tanks were unable to cope with Tanzanian soil and weather: a plan made in the abstract did not take real conditions into account in the least. The preliminary study for the project took just two weeks and was conducted from the air.753

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Nyerere’s government quickly accepted an essentially colonial resettlement plan. The Five-Year Development Programme (1964–1969) was supposed to produce 69 modern model villages. The establishment of one village was supposed to cost 150,000 British pounds. The residents were to be carefully selected, and the government was to lend them money to settle and begin cultivation, and to provide qualified managers to run the village. The entire project was to cost 12 million pounds, or 13% of the state’s entire budget allocated for development investment.754 It turned out to be a complete failure: ministries could not agree among themselves on issues, plans remained on paper, and the building of the villages started very late – not until 1965. When construction of the 23 villages finally began, a mere 3,642 farmers were persuaded to settle in them. Contrary to plans, none of the new villages had a pharmacy or a school, and only two had reliable sources of water.

Nyerere was close to the ideal of an African politician: an incorruptible, widely respected advocate for the poorest, with an aversion to violence. The socialism he imagined was community-based in character: the state was the owner of most of the means of production, it levelled incomes and provided most social services. In a pamphlet entitled “Ujamaa” on the fundamentals of African socialism, Nyerere painted an idyllic picture of a traditional, community-based Africa: socialism was to mean a return to traditional values, but in modern conditions. The word in “ujamaa” itself can be translated as “family” or “brotherhood”: it implied respect for the other, community property and the obligation to work.755 As a Polish economist of the time observed, from the point of view of the Polish People’s Republic, “we would not have called that socialism.”756 Nyere explained that the concept of “ujamaa”:

describes our socialism. It is opposed to capitalism, which seeks to build a happy society on the basis of the exploitation of man by man; and it is equally opposed to doctrinaire socialism which seeks to build its happy society on a philosophy of inevitable conflict between man and man. We, in Africa, have no more need of being “converted” to socialism than we have of being “taught” democracy. Both are rooted in our own past--in the ←245 | 246→traditional society which produced us. Modern African socialism can draw from its traditional heritage the recognition of “society” as an extension of the basic family unit.757

Paternalism and autocracy were inscribed in this vision of society as a large, traditional family. Frustrated by economic stagnation and his lack of success in building industry, Nyerere evolved over the years towards a vision of development in which growth moved to the background and what mattered most was equalizing incomes and building what he imagined to be the traditional African sense of community. (Proof that equality was a typical feature of traditional African society was supposed to be the fact, as he argued in “Ujamaa,” that it had had no millionaires.) Nyerere gradually grew more radical. In 1967, he announced the “Arusha Declaration,” in which he drafted his vision of a socialist, agrarian Utopia. He was at that time greatly impressed by Mao’s China, where he had visited some show communes, as well as Israeli kibbutzes. Economic constraints were also a factor: the country had proven too poor to invest in industry, and since poor villagers represented 97% of its residents, socialism could not be achieved without them. In his declaration, Nyerere enumerated the following conditions for development (a) intelligence, b) hard work, and c) good leadership, and insisted on self-sufficiency: foreign aid and investment created dependency.

There are various forms of exploitation. We must not forget that people who live in towns can possibly become the exploiters of those who live in the rural areas. All our big hospitals are in towns and they benefit only a small section of the people of Tanzania. Yet if we had built them with loans from outside Tanzania, it is the overseas sale of the peasants’ produce which provides the foreign exchanges for repayment. Those who do not get the benefit of the hospital thus carry the major responsibility for paying for them.758

Nyerere was right to the extent that in most “backward” countries, including those in Africa, poor farmers subsidized city populations in this way. He did not have any idea about how to change this, however. He decided to back a huge, ambitious programme of forced resettlements into new, rationally designed villages (called “ujamaa” of course), in which farmers were to cultivate land together, overseen by state experts. Ten years later, in 1977, over 3 million people had been resettled, and their old houses demolished.759 Because people did not want to move themselves, Nyerere, frustrated by the plan’s slow realization, announced in September 1973 ←246 | 247→that moving was compulsory.760 The operation was conducted by the army. The planning and founding of a new village lasted one day – which meant in practice that people were abandoned in empty space. The promised infrastructure and help were, of course, non-existent – the new, communal forms of farming were supposed to be sufficient. On the other hand, the state did prescribe in detail what to sow and harvest, in keeping with the plan proceeding from the top.

An official carrying out Operation Planned Villages (as it was named, military fashion) in the Shinyanga district in 1974 summed it up by calling the operation a matter of compulsion – since Tanzania could not wait passively while the majority of residents lived a “dead life” in the countryside.761

Thus, traditional life was seen as “dead life”: only a modern life was real life. Public services – access to healthcare, education, food aid – were available only to the inhabitants of the new villages. Villagers were settled along roads so that it would be easier to control them, and villages were designed not according to rules of efficiency, but following a modernist, geometric aesthetic that officials associated with modernity and efficiency.762

Instead of African communities, the “Ujamaa” programme created a centralized, authoritarian state which had little to do with equality – and in practice was run by urban, bureaucratic elites who also had the most comfortable lives in it.763 Tanzania was a de facto one-party state by 1965. Nyerere observed then that British-style democracy had become redundant:

Now my argument is that a two-party system can be justified only when the parties are divided over some fundamental issue … If, on the other hand, you have a two-party system where the difference between the parties are not fundamental, then you immediately reduce politics to the level of a football match. A football match may, of course, attract some very able players; it may also be entertaining; but it is still only a game, and only the most ardent fans (which are not usually the most intelligent) take the game very seriously. This, in fact, is not unlike what has happened in many of the so-called democratic countries today, where some of the most intelligent members of society have become disgusted by the hypocrisy of the party games called politics, and take no interest in them.764

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TANU (the Tanzanian African National Union), Nyerere’s party, systematically liquidated the remains of the embryonic democracy inherited from the British, as well as the traditional system of rule. The country was in crisis, and political campaigns did not help: as “Ujamaa” progressed, Tanzania was besieged with catastrophic hunger, and agricultural production fell instead of rising. Over 60% of the new villages were organized in quasi-desert areas, not suited to regular cultivation. In the years 1973–1974, the country needed gigantic food imports: according to Nyerere himself, a cow could have been bought for each Tanzanian family with the money spent.765

When Nyerere left office in 1985, Tanzania, after 24 years of experimentation, was as poor as it had been on the day it gained independence. It was not a typical case, however – not only because its leader had abandoned dreams of industrialization (though he did so only because he had no choice), but also because he stepped down from office voluntarily. Over the three decades following independence, there were over 75 coups d’état in the post-colonial world. In Ghana itself, there were three from 1966 to 1972 alone.

The political economy of African post-colonial countries was logical and coherent, but a crucial element was missing: a significant rise in the standard of living. Though African countries saw a considerable rise in the 1960s and 1970s, in many of them, the economy could not keep up with the growing population. Though over the course of 40 years of independence the countries of sub-Saharan Africa made progress – per capita income was 40% higher in 2000 than in 1960 – and average life expectancy and access to education markedly improved, the other parts of the developing world saw significantly greater improvements. In the end, the gap between Africans’ incomes and those of the inhabitants of developing countries in Latin America and Asia grew by a third between 1960 and 2000.766

2.Socialism is more than mere logic

India, the largest of the post-colonial countries, also strove for a home-grown version of socialism. Unlike African countries, India not only had its own industrial tradition and highly qualified specialists in many areas, but had been ←248 | 249→discussing the issue of how to emerge from poverty and backwardness for several decades.

This was the main subject of the writings and thought of the outstanding Indian colonial-era economist Mahadeva Govinda Ranade, who died in 1901. In the 1890s, Ranade had written:

We need only walk through our streets, and study the most superficial aspects of our economic situation and the fact forces itself upon us that we are a people of little resources. Many millions among us scarcely earn a couple of annas a day. Many millions more are always underfed, and live on the borderland of famine and slow death, into which the failure of a single monsoon precipitates them767.

Ranade had an ambivalent attitude toward British rule over India: on the one hand, he thought it perpetuated the country’s poverty; on the other, he believed that contact with the West had torn India out of a centuries-long lethargy. As Ranade himself has written, the German Friedrich List was the Western economist to whom he was most indebted.768 (List inspired a great many economists from countries on the periphery; we shall return to him presently.) Like many intellectuals from the developing world, Ranade had a less than stellar opinion of his compatriots:

The characteristics of our social life are the prevalence of status over contract, of combination over competition. Our habits of mind are conservative to a fault. Labour is cheap and plentiful, but unsteady, unthrifty, and unskilled. Capital is sacarce, immobile, and unenterprising […] Agriculture is the chief support of nearly whole population, and this agriculture is carried on under conditions of uncertain rainfall. Commerce and manufactures on a large scale but recent importations […] Our laws and institutions favour a low standard of life, and encourage sub-division and not concentration of wealth. The religious ideals of life condemn the ardent pursuit of wealth as a mistake to be avoided as far as possible […] To these must be added the economical drain of wealth and talents, which foreign subjugation has entailed on the country.769

The prescription for ending underdevelopment was supposed to be industrialization – brought about primarily using the country’s own strength and by means of its own capital. Ranade wrote that the latter did not really amount to much, but if it could be concentrated in a few, decisive hands, it should suffice. Hostility toward foreign, especially British, capital, was in fact typical of ←249 | 250→all nineteenth-century Indian nationalists: they saw it as a lever of exploitation, rather than of development.770 The country should invest in secular education and not restrict the import of western technical expertise and machines. “When factories and mills on a small or large scale were set up all over the land, the present paralysis would give way to a play of energies,” the economist wrote.771 Ranade was open to foreign trade on the condition that India would export goods and import technologies. He considered the main obstacle to the development of industry to be the absence of native capital, which in turn was caused by a lack of incentives to save. (In addition, savings were locked up in precious metals and not invested.) Because Indians lacked experience in modern business, and local businessmen were not able to conduct business on an adequately large scale, the state should look after investment. In 1890 Ranade said:

We can well count upon the assistance of the State in regulating our Cooperative efforts by helping us to form Deposit and Finance Banks, and facilitating recoveries of advances made by them, by encouraging New Industries with Guarantees or Subsidies, or loans at low interest, by pioneering the way to new Enterprises, and by affording facilities for Emigration and Immigration, and establishing Technical Institutes and buying more largely the Stores they require here and, in many cases, by producing their own Stores.772

Ranade did not set any protectionist goals, although they were applied in the countries that India was to be modelled on – Germany, France, and the United States. He did not touch on this theme at all, perhaps – as one specialist in his thought suspects – because India was a British colony and to do so was unthinkable from a political perspective.773

Gandhi, the founder and father of the Indian nation, was by comparison with Ranade (and many other representatives of the elites) a hopeless romantic and radical dreamer. Towards the end of the 1920s, Gandhi’s colleague and successor, Nehru, was fascinated by Soviet economic planning and development of industry: “The Soviets have put magic into the word [planning],” he is said to have said in 1933.774 As for Gandhi, he had an aversion to planning: he even told a group of Indian communists once that they wanted to turn India into the USSR, and that this was pathetic because it showed they lacked respect for the culture of ←250 | 251→their own country.775 He believed that India was moving toward industrialization, modernization, and a strong state, whereas his ideal India was a land of farmers living in traditional villages – self-sufficient and living modestly, though without hunger. “The whole planning is a waste of effort. But he (Nehru) cannot be satisfied with anything that is not big,” Gandhi wrote in a private letter.776 In his programmatic, visioanry book Hind Swaraj, published in 1909, he wrote that India’s civilization had no equal:

I believe, that the civilization India has evolved is not to be beaten in the world. Nothing can equal the seeds sown by our ancestors […] Many thrust their advice upon India, and she remains steady. This is her beauty: it is the sheet-anchor of our hope […] India, as so many writers have shown, has nothing to learn from anybody else, and this is as it should be. We notice that the mind is a restless bird; the more it gets the more it wants, and still remains unsatisfied. The more we indulge our passions the more unbridled they become. Our ancestors, therefore, set a limit to our indulgences. They saw that happiness was largely a mental condition. A man is not necessarily happy because he is rich, or unhappy because he is poor. The rich are often seen to be unhappy, the poor to be happy. Millions will always remain poor. Observing all this, our ancestors dissuaded us from luxuries and pleasures […] It was not that we did not know how to invent machinery, but our forefathers knew that, if we set our hearts after such things, we would become slaves and lose our moral fiber.”777

Gandhi was opposed to large cities and industry. He saw them as sources of contamination. He dreamed of an India in which people lived modestly and avoided rivalry over material goods. He thought that the advent of modern civilization had brought with it thieves and plunderers, sin and prostitution. Nehru believed that poverty could be rooted out and that planning and the development of industry represented the only road in that direction. His concession to the master consisted in admitting that traditional crafts – for Gandhi, the foundation of the economy – would have their place in the new India.

In 1938, nearly 10 years before independence, the Congress Party created a National Planning Committee. Nehru became its chairman. Nehru was thinking of socialism, thought it had to be a different socialism from the Soviet kind – and at first, for tactical reasons, he preferred not to talk about it. In 1939, he wrote in a letter to one of the Committee members:

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If we start with the dictum that only under socialism there can be planning, we frighten people and irritate the ignorant. If, on the other hand, we think of planning apart from socialism and thus inevitably arrive at some form of socialism, that is a logical process which will convert many who are weary of words and slogans778.

In 1940 Nehru was arrested by the British and the committee’s work came to a standstill. The idea, however, remained active: a group of influential Bombay industrialists led by J. R. D. Tata, head of the largest family business conglomerate in India, wrote its own economic plan in 1944, anticipating the state government’s support for industrialization. The magnates of business naturally did not want socialism, but they did want a modern, industrialized nation that protected its indigenous capitalists – and they thought such a plan was the only solution.

Gandhi’s opposition remained firm to the end. When in October 1945 the British released Nehru and other Party Congress leaders, he wrote a list to Nehru in which he clarified that he had not relinquished his vision for the Indian economy – unplanned, rural, and based on traditional crafts.

… people will have to live in villages, not in towns; in huts, not in palaces Crores of people will never be able to live at peace with each other in towns and palaces. They will … resort to both violence and untruth.

Nehru replied:

The question before us is not of truth versus untruth or non-violence versus violence. … I do not understand why a village should necessarily embody truth and non-violence. A village, normally speaking, is backward intellectually and culturally and no progress can be made from a backward environment. Narrow-minded people are much more likely to be untruthful and violent …779

“The world has changed”, such was the announcement the young idealist made to the old. When Gandhi was murdered in January 1948, India was moving in the direction designated by Nehru. The socialism he had imagined was a peculiar mixture of concern for the idealized masses, inherited from Gandhi, belief in self-sufficiency (typical of many leaders of post-colonial countries), a mistrust of Western capital and modern faith in “scientific” methods of planning.780 Nehru was not opposed to native capital, but considered it weak and lacking mobility, certainly not sufficient for the “great push forward.”

The Indian system of planning arose gradually from 1948 to 1952. The Planning Commission, founded in 1950 and chaired by Nehru himself, had the ←252 | 253→deciding vote in all economic affairs. In Nehru’s vision, three sectors would coexist in India – the state sector, encompassing key branches of industry (such as energy, steel and transportation); the sector regulated by the state (most big business) and the sector operating on free market principles (most small enterprises). Growth and development would be dependent on large public investments. Planning was less detailed than in countries in the orbit of the USSR, but more detailed than in the West at that time – with detailed tables of “raw materials” and “products” for particular branches of industry. “The idea of planning and a planned society,” Nehru observed in the early 1940s, “is accepted now in varying degrees by almost everyone.” (In the following passage, with his typical distaste for radicalism, he warned against haste, the use of violence and serving the interests of a narrow group of industrialists: planning only made sense when it was conducted in the common interest.)781

Atop this carefully constructed machine for state planning stood, not a trained economist, but a physicist and statistician: Prasanta Chandra Mahlanobis. He had formulated an image of the economy using the exact sciences, in which everything could be described using a detailed system of equations and statistics. The first plan merely assembled various projects developed during the colonial era, but it placed little emphasis on industrialization. Two-thirds of expenditures were marked for farming, energy, transportation and education. In 1952, the First Community Development Programme was declared; its aims included the building of roads, schools, and community centres in rural areas. Socialism was recognized as the official state (and Party Congress) ideology two years later, though Nehru was quick to stipulate that this did not mean total nationalization, the confiscation of property, or class struggle, but merely a preference for state industry, equality and social harmony. Planning began in earnest with the Second Five-Year Plan (1956–61). State automobile factories, steelworks, airlines, and even a line of hotels were established.782 The Indian leader’s philosophy was an intriguing mixture of Marxist ideas, Gandhian thought and Western liberalism; he was more a poet than a dogmatist and systematizer.783 He was certainly opposed to dictatorship and violence. He valued the achievements of the USSR, but was happiest with Lenin’s NEP, which had left a great deal of room for the free market. “The price paid for rapid industrialization,” he said in 1956, “has been terrific in some socialist countries. I am certain that no country with any kind of ←253 | 254→parliamentary democracy can possibly pay it. […] But even a dictator cannot go too far without the consent of the people.”784

The second plan did, however, assume accelerated industrialization based to a great extent on the Soviet model. It planned to double the amount spent on investment in the first plan, and placed an emphasis on the production of steel and machines and technologically advanced products: India was to cease being primarily a provider of raw materials to the West, and thereby finally achieve real independence.

Following the logic of this model, Nehru considered heavy industry, particularly steel, to have the highest importance for the country’s future. In 1953 he said:

One thing is clear to me: that if we do not develop heavy industry here, then we either eliminate all modern things such as railways, airplanes and guns, as these things cannot be manufactured in small-scale industry, or else import them. But to import them from abroad is to be the slaves of foreign countries. Whenever these countries wished they could stop sending these things, bringing our work to a halt; we would thus remain slaves.785

Mahlanobis, the chief planner, was the author of a growth model that in practice was identical to the one developed in the USSR by Feldman in the 1920s (there is no evidence that he knew of Feldman’s work). Mahlanobis’s model likewise postulated that the secret of growth lay in investments and the accumulation of capital, and he proposed a similar transaction: it was worth tightening one’s belt and investing now, in order to gather fruits in the form of higher consumption in the future. First and foremost, the government ought to invest in the production of “the means of production.” Heavy industry naturally was to have priority.

The implementation of these plans, however, met with obstacles from the very start: floods and droughts in 1956 and 1957 forced the country to import food on a large scale, and the import of machines for newly constructed factories was unbelievably expensive, and ate into the country’s modest foreign currency reserves. India had to ask for assistance from the World Bank and the United States. By 1958, all that remained of the original plans were investments in energy and three massive steelworks, built by the British, Russians and Germans, respectively.786

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The first two five-year plans could be declared successful: national income rose by 42%, and per capita income by 16%. Farm production had risen by half, and industrial production almost two times over. All of this was not enough, however: prosperity remained a distant dream.

During the second plan, due to the government’s need for foreign currency for investment, it limited imports and introduced a system of licensing for foreign trade. This also had an ideological purpose, in that it encouraged self-sufficiency.

Nationalization was not considered, but the private sector needed to be subordinated to the planners’ aims. This was achieved by means of a complicated system of licensing and regulations, which had been quickly expanding since 1951. The government developed a detailed catalogue of types of businesses; each new investment required its permission. Theoretically, enterprises employing fewer than 50 persons (if they used machines) or 100 persons (if they did not) were exempted, but in practice the government required permission for each businessman attempting to expand his activities.787 The law had given officials enormous power – not only could they in certain circumstances take control of enterprises, but they could also control prices and distribution in certain trades. In the 1950s, the bureaucracy rarely used this power to its advantage; later, however, the system stiffened and expanded. By the 1960s, before issuing permission to import raw materials or machines, officials expected an exact description of the production technology and machinery used, and they could refuse permission if they concluded that what was to be imported could be purchased domestically (even if at a higher price).

In the 1950s, the administration was still functioning efficiently, the number of cases it oversaw was small, and its procedures were not riddled with corruption. In the subsequent decade, all of this gradually changed: officials took decisions in an arbitrary manner and became susceptible to lobbying. Lobbying got the most results when it was carried out by large companies, who also had the greatest interest in restricting the activities of their foreign competitors.788 In issuing licenses, officials also failed to analyze the economic rationality of the enterprise.789

As a result, economic growth slowed, the third five-year plan was not executed, and the economy plunged into stagnation. From 1964 to 1970 at least six extensive government reports were issued placing blame for the worsening situation squarely on the system of licensing. Reforms nonetheless went nowhere, ←255 | 256→since the power of the rooted interests in the bureaucracy and big business was too great. The world’s largest post-colonial country closed its borders to the world and plunged into economic lethargy, crushed by the gigantic weight of a corrupt and inefficient bureaucracy. India did not endure disasters comparable with those experienced by Mao’s China, but its economic results were no better.

3.Open veins of Latin America

In the countries of Latin America, too, there was a widespread sense that the West was dealing the cards on world markets. It was true that they had gained their independence in the early nineteenth century, but a hundred years later they still felt like pariahs in the international order and were keenly aware of how their postcolonial heritage burdened them.

In the early 1970s, Eduardo Galeano, a Uruguayan left-wing journalist and intellectual imprisoned by the military dictatorship in that country, wrote the following about Latin America:

The region has been condemned to sell primary products to keep foreign factories humming; and it happens that those products are mostly exported by strong consortiums with international connections, which have the necessary world-market relations to place their products under the most convenient conditions – the most convenient for them, suiting the interest of buyer countries: that is the to say, at the lowest prices. In international markets there is a virtual monopoly of demand for raw materials and of supply of industrial products, while suppliers of basic products, who are also buyers of finished goods, operate separately. The former, grouped around, and dominated by, the United States – which consumes almost as much as all the rest of the world – are strong; the latter are isolated and weak: the oppressed competing against the oppressed. The so-called free play of supply and demand in the so-called international market does not exist; the reality is a dictatorship of one group over the other, always for the benefit of the developed capitalist countries.790

Galeano entitled his book Open Veins of Latin America. It was from these “open veins” that the exploited continent’s wealth and raw materials flowed in the direction of the centres of world business. There – in Washington, New York, London, Paris, Amsterdam and Hamburg, in the quiet of offices and amidst the clamour of stock market floors, the Europeans and American set world prices, and Latinos had no choice but to submit to them. As a result, they were producing more and more, but were able to buy less and less. “What Latin America sells gets constantly cheaper,” Galeano wrote, “and – also in relative terms – what it buys gets ←256 | 257→constantly dearer.” He calculated that in 1954 Uruguay could buy a Ford tractor for the equivalent of 22 young bulls; 20 years later it had to sell twice as many.791

A perceived reliance on foreign capital and structural trade dependence on the West for the past 30 years had led politicians and economists in Latin America to the same conclusion as the rest of the developing world: it was necessary to build up domestic industry, whose products would replace imported goods and bring much-desired independence. All of the elements typical of economic doctrines in post-colonial countries took shape in a unified theory in Latin America. Nationalistic and emancipatory ideology and economic analysis both led these leaders to the same conclusion.

The starting point was the feeling of their growing backwardness in relation to Europe and the United States. This belief was not unfounded. In 1700 the level of income in the Spanish and Portuguese colonies in Latin America was the same as in the British colonies in North America: their paths of development began to visibly diverge about a hundred years later.

Currently accepted theories explain the low economic growth in the Latin countries primarily in terms of the difference between the social structures of the British and Spanish colonies.792 While the former were settled mainly by free people of equal status, with relatively small differences in property among them, enormous inequalities in the division of property, knowledge and power weighed heavily on the countries of Latin America from the first days of their independence. For the small groups of European settlers ruling masses of subjugated Indians and slaves brought from Africa it was relatively easy to create institutions that ensured power and property for the elite, but it hampered economic development because they were based on the unequal distribution of existing goods more than on the creation of a new production base. A second explanation also stresses the legacy of the colonial past: decades of violence, upheavals and instability in Latin America following independence had caused the continent to develop slowly in the nineteenth century, when the United States began to outpace it. That period also witnessed an emerging international structural division between developed and industrial countries, on the one hand, and backward agricultural ones on the other, which determined that in the twentieth century, ←257 | 258→the divide between North and South America in terms of economic development became irremediably fixed. In the decades following independence, Latin America developed economically, though more slowly than Western countries (particularly the United States); it kept pace with them in the years 1860–1938 and began to fall back again in the postwar period, with the brief exception of the 1970s. Though Latin America had periods of rapid growth – especially the years 1880–1914, and again in the years 1938–1980, only in the 1970s decreased its distance from the countries of the West.793

Yet beyond these numbers – which show slow but systematic growth – we see development that was colonial and incomplete in nature: islands of modernity were surrounded by an almost feudal economy dominated by large landowners who produced tobacco, coffee and sugar for global markets. They ruled masses of poor people who were deprived of any prospects for a better life, whose language and skin colour were often different, and who lived in very primitive conditions.

A good example of such change is Mexico during the era of the dictator Porfirio Diaz (1876–1910). The numbers unambiguously show that the country was developing: the population rose by 1.4% yearly (to 25.2 million in 1910), and economic growth amounted to 2.7% annually. Foreign trade increased almost four-fold, driven by exports of cotton and raw materials. The railway network increased from 666 km in 1876 to 24,560 in 1910, and the production of sugar increased five-fold. The discovery of oil began a great boom: by 1911, Mexico had become the third biggest oil producer in the world. Its GDP rose from 435 million pesos in 1877 to 1,184 million in 1910, doubling on a per capita basis.

However, beyond these indicators lay an economy that was semi-colonial in its structure. Foreign capital controlled 90% of the 80 largest enterprises, including nine of the top ten. 80% of textile production was in the hands of the French, while oil drilling was carried out almost exclusively by companies backed by British capital. In banking, over 94% of capital belonged to foreign banks. Americans invested the most in Mexico’s economy during the reign of Diaz – over 1 billion dollars (not adjusting for inflation) – more than Mexico’s entire domestic capitalist class. Americans controlled 80% of the mining and owned tens of millions of hectares of land, and the U.S. received three quarters of Mexico’s exports. ←258 | 259→Even the railways were built in such a way as to facilitate the delivery of goods to the U.S.794

The profits from this growth went largely into foreign hands. At the same time, Mexican peasants were losing their land to plantation owners who raised sugar for export. According to one estimate, 90% of the residents of Mexico’s central provinces had no land. The production of food for the local market was being supplanted by production for export, while food in cities was growing more expensive. In 1908 the purchasing power of a typical income in the cities was the same as it had been a century earlier.795

Mexico’s situation was typical of that in most Latin American countries.796 For many Latinos, it was clear that the sources of these problems were structural in nature, and slow, unevenly distributed economic growth in conditions of dependence could not solve them. The West’s economic domination was accompanied by political dependence. The American ambassador was the most important person in local politics and often decided who would wield power. Protests against foreign domination were combined with the belief that it was structurally tied to economic underdevelopment, poverty and the exclusion of the majority.797

This was the context in which economic efforts to overcome backwardness were being discussed in Latin America. A structural change was necessary, and such a change – so went the view shared by all intellectuals in the developing world concerned about modernization and development – would not occur automatically. It had to be achieved through a conscious, collective effort.

During his trial after the unsuccessful attack on the Moncada Barracks in 1953, Fidel Castro, the revolutionary fighting to overthrow the Cuban dictatorship, made his famous speech in which he expressed the feelings of many educated Latinos. “History will absolve me,” he said, justifying his decision to take up arms:

What is inconceivable is that there should be men going to bed hungry while an inch of land remains unsown; what is inconceivable is that there should be children who die without medical care; that thirty percent of our campesinos cannot sign their names and ninety-nine percent don’t know the history of Cuba; that most families in our countryside should be living in worse conditions than the Indians Columbus found when he ←259 | 260→discovered the most beautiful land human eyes had ever seen […] Cuba continues to be a factory producing raw materials. Sugar is exported to import candles; leather exported to import shoes; iron exported to import plows.798

The answer to this injustice was to be a new policy of economic nationalism, which declared that economic independence from foreign countries must go hand-in-hand with changes in the social structure (toward a more egalitarian one) and the economic structure (toward industrialization).

This was an expansion of a considerably older idea. One of the founding fathers of the United States, Alexander Hamilton, had expressed the view in 1791 that deliberate restrictions on imports would encourage development of the country’s domestic industry.799 A few years later, in 1800, Johann Gottlieb Fichte gave fuller expression to the same idea in his treatise The Closed Commercial State.800 Fichte wrote that for the purpose of maintaining the peace, nations should be isolated from each other. His treatise was a disinterested, analytical and consistent apologia for national collectivism. It was overlooked and forgotten in the liberal age of the nineteenth century, but was rediscovered in Germany during the First World War, when it had become isolated from the world by the allied blockade.801

Fichte’s state was egalitarian: all citizens are to be “comfortably and warmly clothed” before anyone is able to wear beautiful clothes. The national economy would be entirely planned by the government, which would decide what was to be produced and in what quantities, at what prices good would be sold, and who their buyers would be. The bureaucracy controlled everything: the number of craftsmen allowed in a particular trade was recorded in special registers, and officials ensured that this number was not exceeded. Since the government had to control the supply of goods on the market, it also had to control foreign trade. Fichte wrote:

The state is obliged to guarantee for all its citizens, through law and compulsion, the state of affairs that results from this balance of commerce. Yet it cannot do this if there is any person able to influence this balance who does not stand under the state’s law and command. […] All commerce with foreigners must be forbidden to its subjects and rendered impossible. It is not necessary to prove that there is absolutely no place ←260 | 261→for commerce between the subjects and foreigners in the system of trade set forth. The government should be able to count on a certain quantity of goods entering into trade, in order that it may always guarantee its subject the continuing enjoyment of his accustomed needs. How will it achieve this vis-a-vis a foreigner, since indeed in cannot determine the prices that he must pay in his country to live and to purchase raw materials? […] It should fix and guarantee the price of goods. […] The government should guarantee to its subjects the sale of his produce or manufactured goods and the fitting price at which they are sold. How can the government do this if its subject should sell to foreign countries whose relation to the goods of the government’s subject the government is able neither to oversee nor to regulate?802

The German philosopher captures here in its pure form the conflict that would plague all planned economies. None of them, even the hermetically sealed USSR under Stalin or China under Mao, could manage without engaging in trade with foreign countries. The unpredictability of global markets continually clashed with the plan and introduced confusion and an element of uncertainty into what, to the planners at least, had seemed like rational calculations.

Fichte was also opposed to exports, perceiving in them a potential threat to the political stability of the government. It is difficult to build industry when one is dependent on foreign markets, he argued, since demand there is unstable and unpredictable, and its potential collapse, leading to the bankruptcy of export-oriented businesses, could provoke a crisis and discontent in society. Thus, according to Fichte, a simple choice has to be made between a “rational and well-organized state” and foreign trade. In a rational state, ordinary citizens cannot trade directly with foreigners.803 Fichte knew that limiting foreign trade by imposing taxes and special restrictions on it would initially breed discontent among the public, who would think that this would adversely affect their quality of life. Citizens nonetheless had to reconcile themselves to this policy, as it was a rational measure, and in the long term would serve the common interest. First, foreign trade had to be nationalized. Next the government needed to gradually reduce and eliminate it. (Limiting ordinary citizens’ freedom to travel was also a further logical step: they simply had no need to travel if they were not performing artists or scholars.)

Only a nation that is free of dependence on foreign countries – and industrialized, because it produces everything to meet its own needs – can develop in an unhindered and safe manner. This was the same conclusion reached by the most well-known nineteenth century theoretician of economic nationalism, the German economist Friedrich List. In his National System of Political Economy ←261 | 262→(published in Germany in 1841, and in the United States, where List worked for many years as a journalist, in 1856), he was severely critical of then-dominant liberal ideas on open borders and free trade.804 List had no doubts that nations producing industrial goods had an advantage over agricultural countries in commercial exchange. He had a prescription for the latter, however: isolation – whether established through withdrawal from trade or through war – would, once transitional difficulties passed, stimulate development. On the stagnation in trade caused by war, he wrote:

While, however, the manufacturer (especially if he belongs to a nation powerful at sea, and carrying on extensive commerce) readily finds compensation from the agriculturists of his own country, or from those of other accessible agricultural countries, the inhabitant of purely agricultural country suffers doubly through this interruption of intercourse. The market for his agricultural products will fail him entirely, and he will consequently lose the means of paying for those manufactured goods which have become necessaries to him owing to previously existing trade; his power both of production and consumption will be diminished. If, however, one agricultural nation whose production and consumption are thus diminished by war has already made considerable advances in population, civilisation, and agriculture, manufactures and factories will spring up in it in consequence of the interruption of international commerce by war. War acts on it like a prohibitive tariff system.”805

If after such a war-related interruption, List wrote, an agricultural country returns to the old rules of trade, its young industry will fail because it is unable to compete with more powerful and more experienced industrialized countries. A system of prohibitive tariffs was therefore necessary, one that would protect native producers, even at the cost of temporarily lowering the standard of living for those purchasing imported goods. A responsible government should explain to its citizens that they had to tighten their belts now in order to have a better life in the future.

It was no coincidence that List was popular in the nineteenth century in both the United States and in Germany, rising industrial powers that were protecting their markets with high tariffs against competition from British industry, which was more advanced. The lessons learned during the war were taken to heart in Latin America. Economists and politicians there had noticed, and remembered well, that industry developed most rapidly during world wars, when imports from the West were limited.

←262 | 263→

In 1948, riding a wave of postwar optimism and concern for the poorest countries’ development, the UN created the Economic Commission for Latin America (ECLA). In 1950, Raúl Prébisch, an economist from Buenos Aires trained in the neoclassical tradition, became its second executive director. Prébisch had grown up in a country that at least until the 1920s could pass for an example of liberalism’s economic successes. According to David Ricardo’s classical theory of comparative advantage, Argentina was making incredible gains and developing at an impressive pace, exporting what it could produce most cheaply, especially grain and meat, to Western countries (chiefly Great Britain), and importing machines and consumer goods in exchange. After a few decades of economic prosperity, Argentina in the 1920s was one of the world’s richest countries, and in terms of per capita GDP surpassed both Canada and Australia. In the 1920s, however, problems began to appear: the prices of Argentina’s main export products fell, and the country lapsed into stagnation. The reason for this lay in external conditions. The British market was beginning to shrink, and the new global economic hegemon, the United States, had plenty of its own grain and beef, and therefore did not need what Argentina had to offer.

These changes in trade relations coincided with the Great Depression of the 1930s, which caused a global decline in prices. To make things worse, agricultural products dropped in price significantly faster than industrial ones. According to Prébisch’s calculations, in 1933 Argentina had to increase its sales of goods on global markets by as much as 73% in order to import the same amount from abroad as it had in the mid-1920s (itself not a prosperous time).806

Around 1937, Prebisch and his colleagues in the Central Bank of Argentina (where he then worked) developed a theory that explained the relative collapse in prices on agricultural products. Industrial production was flexible: it decreased together with a fall in demand. Prices obviously fell as well, but slowly and very predictably. At the same time, in agricultural markets, the supply was determined by farmers, many of whom had very small fields that were planted every year. Since supply was less flexible, the price would fall faster if demand collapsed.

Agricultural countries were thus naturally, his conclusion went, in a worse situation in relation to global markets. Furthermore, there were good reasons to think that their situation was also subject to constant deterioration regardless of whether the economy thrived or crashed. In 1949 the UN published a report in which its experts stated unambiguously that the prices of farm products had systematically ←263 | 264→fallen on global markets since the nineteenth century.807 Naturally this had to have a bad influence on exporter countries’ development, since it meant they had less money for investment and imports.808

To support his theory, Prébisch cited statistical studies made by an economist working for the UN, Hans W. Singer. In them he found the argument clearly laid out: the poverty of agricultural countries was caused by their structure of production. “The principle of specialization along the lines of static comparative advantages has never been generally accepted in the underdeveloped countries, and not even generally intellectually accepted in the industrialized countries themselves,” Singer wrote.

In the economic life of a country and in its economic history, a most important element is the mechanism by which “one thing leads to another,” and the most important contribution of an industry is not its immediate product (as is perforce assumed by economists and statisticians) and not even its effects on other industries and immediate social benefits […] but perhaps even further its effect on the general level of education, skill, way of life, inventiveness, habits, store of technology, creation of new demand, etc. And this is perhaps precisely the reason why manufacturing industries are so universally desired by underdeveloped countries; namely, that they provide the growing points for increased technical knowledge, urban education, the dynamism and resilience that goes with urban civilization […].809

Such industries could only be built by importing machinery, and that, Singer demonstrated, was impossible, due to the worsening terms of trade between agricultural and industrial countries: the former were producing ever increasing quantities of goods, but earning less and less, a claim the economist supported with detailed statistical studies.

He may have been correct – the dispute over whether he really was correct continued over the next several decades, and involved very sophisticated discussions about the methodology used to gather economic statistics.810 This argument continues today and remains unresolved, though a recent survey of 24 studies ←264 | 265→published in the years 1984–2005 points to a decreasing trend in prices for agricultural products on global markets (it was found in 19 out of the 24 studies).811

In the late 1940s and early 1950s, Singer explained the deteriorating situation faced by exporters of agricultural products in terms of differences between agricultural and industrial countries in terms of their social structure and the mechanisms guiding their domestic politics: whereas in agricultural countries a rise in productivity simply translated into increased production (and not higher wages), in industrial countries unions and politicians fought to ensure that higher productivity translated into higher pay – and not necessarily lower product prices.

Such considerations led Prébisch and his colleagues at ECLA to a highly rational conclusion: the only road leading out of backwardness was industrialization, and this had to be tied to changes in the country’s economic and social structure. The economies of Latin American countries needed to be reoriented toward the export of industrial products and domestic consumption. Initially, ECLA therefore recommended a strategy of import substitution: replacing imported products with domestically produced ones by means of high tariffs, controlling trade and supporting investments in those branches of industry that promised/ assured the fastest growth. The process had to begin with basic consumer goods, before including more complex and advanced ones. The new industrial culture would also increase agricultural productivity, bringing in new technologies and bettereducated workers.

In such circumstances, economic planning was crucial. Years later, Prébisch reminisced:

The structural changes inherent in industrialization require rationality and foresight in government policy and investment in infrastructure to accelerate growth, to obtain the proper relation of industry with agriculture and other activities, and to reduce the external vulnerability of the economy. These were strong reasons for planning. Another important one was the need to intensify the rate of internal capital accumulation through proper incentives and other policy measures. International financial resources were to complement and enhance a country’s capacity to save, while changes in the structure of trade were necessary to use these savings for capital goods imports. Planning should help obtain these resources and accomplish the latter objective. Planning was ←265 | 266→compatible with the market and private initiative. […] But it did not necessarily require detailed state investment, except in infrastructure and development promotion.812

Though the belief in the structural dependency of underdeveloped capitalist countries on the West was widespread from the 1950s to the 1970s, there was a difference of opinion as to whether the development of dependent countries was possible – and if so, whether it would demand radical solutions.

Exponents of the theory of dependency– Raúl Prébisch, Paul Baran, Celso Furtado, Fernando Enrique Cardoso, and André Gunder Frank – included economists, sociologists and political scientists, Marxists and non-Marxists; some believed in the need for revolution, others believed that breaking free of the circle of dependence could take place without such an upheaval. They were united in their choice not to analyze the economic development of particular countries in isolation, but to examine global capitalism as a system in which there was a lack of equality, with positions of privilege and marginal positions.813 Andre Gunder Frank was a determinist: he wrote that backward countries (contrary to what Marx had once believed) were not simply at an earlier stage on the road to prosperity and industrial power: their place in the structure of global trade condemned them to a subordinate place, to a misformed social and economic structure. In his classic book Capitalism and Underdevelopment in Latin America, published in 1967, he found confirmation for this theory in the history of Chile and Brazil. Violence was the source of their economic dependence: the “capitalist metro-satellite relationship between Europe and Latin America,” Frank wrote, “was established by force of arms,” with the former condemning its former colonies to being merely suppliers of raw materials and capital and keeping a close eye on them to ensure – if necessary by means of military force – that they did not try to change their position.814 The unorthodox Marxist Paul A. Baran was pessimistic: according to him, local elites in underdeveloped countries had allied themselves with international capitalists, sacrificing long-term growth in their own countries in the name of short-term profits. The system by which latifundia and plantations grew crops for export was coherent and logical, and it could not be expected to undergo spontaneous transformation. Interests, lifestyle and social contacts united the elites of underdeveloped countries and the centre of ←266 | 267→the system: without a shift in power and a social upheaval (here Frank and Baran agreed) improving the situation of the millions who were shut out/ excluded by this system was unthinkable.815 These theorists, who admitted to drawing inspiration from Lenin’s theory of imperialism, deviated from it in a significant way. For Lenin, imperialism was merely one of the phases in the development of capitalism – development that necessarily occurs following a defined path. Countries of the periphery and dependent territories played a role in this system, first assisting in the primary accumulation of capital, then acting as a means of late capitalism’s “escape” from the contradictions plaguing it: the exploitation of imperial possessions allowed capitalists to protect themselves from the rise of competition that could hinder the growth of their companies.816 For Lenin, just as for Marx, capitalism nonetheless remained the motor of history: once a country entered onto the path of development, it could no longer veer from it.

Since the publication of Baran’s book The Political Economy of Growth in 1957, it had become clear to many Marxists and Marxist-leaning intellectuals in peripheral countries that no Third World country could change its position in the global system of capitalism and emerge from its state of economic dependence by natural means. This view had already begun to appear in Soviet writings in the 1920s. By the 1960s, it had become obvious to many Marxists that the bourgeoisie of the underdeveloped countries was unwilling to bear the burden of industrialization, because it was too deeply integrated with the global capitalist system and had no interest in changing it. The declaration of the first conference of the Organization for Latin American Solidarity (OLAS) in 1967 explained this structural shortcoming of the Latin American bourgeoisie in the following terms:

It would be absurd to suppose that … the so-called Latin American bourgeoisie is capable of developing a political line independent … of imperialism, in defence of the interests and aspirations of the nation. The contradiction within which it is objectively trapped is, by its nature, insuperable.817

←267 | 268→

This view of the structural sources of underdevelopment quickly became orthodoxy, and remained so until at least the early 1980s. The countries of Latin America would not develop on their own – the process demanded, if not revolution, then at least, as ECLA had stated, “deliberate direction of the process of import substitution industrialization through the use of planning.”818

Some prominent theorists of dependency tried to play an active role in enacting structural change. The Brazilian Celso Furtado stayed in Europe after serving in the army in World War II and wrote a doctoral thesis in economics at the Sorbonne; in 1949, he began working with Prébisch as an economist at ECLA. In 1957–58, he spent a year at Cambridge, where he befriended two distinguished Keynesians, Joan Robinson and Nicholas Kaldor. After his return to Brazil in 1959 he wrote the classic book The Economic Growth of Brazil, in which he analyzed the causes of his country’s underdevelopment from a broad historical perspective. Brazil, he wrote, had been driven by an “outward impulse” in colonial times, which had shaped its social and economic structure. Furtado did not believe (unlike W. A. Lewis) in the possibility of absorbing masses of people from rural areas into urban-based industry: the sector was too small, and moreover, was using modern, imported technologies that did not require large numbers of unspecialized workers. A legacy of colonialism was extensive social stratification – in Brazil only about 10% of the population, the elites and middle classes, were consumers of industrial products, so local manufacturers had little surplus market for their goods and could not expand their businesses.

After returning to Brazil, Furtado also began a political career: he became the head of BNDES, a state bank that financed large, development-oriented industrial and infrastructural investments, and shortly afterward became Minister of Planning and was responsible for the recently announced “Triennial Plan” (Por. Plano Trienal) for development. He also founded SUDENE – a government agency devoted to eliminating the cultural and economic divide separating the Brazil’s poor north from the its more affluent south (the difference between the average income of a farmer in the north and of a resident of São Paulo was greater in the 1950s than the difference in income between a resident of São Paulo and the average citizen of Western Europe).

Furtado emigrated from Brazil after a military coup in 1964 backed and financed by the CIA – among the reasons for the coup was the fact that the gov←268 | 269→ernment was trying to limit the export of foreign (mainly American) companies’ profits and nationalize oil refineries (also controlled by Americans). In the years 1965–1985 Furtado worked as a professor at the Sorbonne; after the return to democratically elected governments in the 1980s he was appointed ambassador and Minister of Culture. Furtado, the author of 30 books that were translated into 15 languages and sold two million copies, was always a proponent of industrialization, but he perceived the problems it created (above all, an increase in inequality – its benefits were enjoyed by the top few percent of society). With the passage of time and his increasing engagement in practical political matters, he became less and less radical.

Another eminent intellectual, the sociologist Fernando Henrique Cardoso, was eventually elected President of Brazil. Before becoming a patron of liberal reforms in his country (he held office from 1995 to 2002) he was an incisive critic of the social structure of Latin American societies, demonstrating how Brazil’s “enclave economy”– consisting of modern export-oriented sectors of the economy – bolstered a alliance between the latifundists and native bourgeoisie and thus impeded development.819 Unlike the most pessimistic attitude of the dependistas, Cardoso believed that development (even feeble and fragmentary “dependent development”) was still possible, even within the existing international division of labor.820

The political sphere of social behavior necessarily influences the form of the development process. Thus, in a global interpretation of development, arguments based solely on market incentives and reactions do not suffice to explain industrialization and the economic process. Such incentives or mechanisms to defend the economy can only begin an industrialization process; its continuation requires changes favorable to development in the international market, and, still more essential, elements favorable to a broader measure of autonomy within the socio-political game of the developing countries.821

Industrialization could not, therefore – if it were to be carried out in a healthy manner, fostering long-term development and leading to true independence – be subordinated to the market: it must be implemented by the state and not according to the criterion of profit. It should be subordinated to changes in the social structure: its purpose was to be transformational, not purely economic ←269 | 270→(according to theorists of dependence, no such thing as “pure economics” exists; for Marxists the idea had always been a bourgeois fiction).

In practice, the countries of Latin America had been pursuing a policy of import substitution long before Prébisch and his colleagues from ECLA developed a theoretical basis for it. This had been a reaction to the Great Depression of the 1930s, which had caused a sudden collapse in Western demand for agricultural products and raw materials. In Chile in the years 1929–1932, GDP decreased by almost 40%, and the level of imports and exports fell correspondingly by 78% and 84%. The situation further deteriorated, as it did in Poland at the time due to the government’s stubborn adherence to the gold standard, making Chilean exports less competitive. Prices for its two main export products, brass and salt-petre, fell on international markets by 60–70%. Recovery from the collapse took a long time: GDP did not return to its pre-Depression level until 1938, and in per capita terms remained lower (due to population growth).822 Chilean elites of every political stripe drew a very simple conclusion from this economic disaster – liberalism had outlived its day, capitalism had disappointed them, and the country in the future should avoid being dependent on exports and exposed to such external shocks.

At the other end of Latin America, in Mexico, the government of President Lazaro Cardenas announced a “Six-Year Plan” in 1934 that included agrarian reform and support the development of Mexican industry. Over the course of his six years in power, Cardenas distributed 18.8 million hectares of latifundia (more than during the previous 20 years, in which a less radical version of reform had been enacted), created the state-run Nacional Financiera bank to provide credit for investment in industry, and in 1938 nationalized the oil industry. The state made gigantic investments in infrastructure: the roadways increased seven-fold.823 In December 1940, Mexico officially pronounced industrialization to be the main goal of its economic policy, and gradually closed its borders to imports of foreign goods.

Most Latin American nations went through a similar evolution. A policy of import substitution might also have seemed to Latin American intellectuals and politicians to be the only rational choice because they simply saw no alternative. Leaving the market to its own devices appeared particularly naïve. That would require at the very least the ability to trade with the U.S. on equal terms, and suc←270 | 271→cessive administrations in Washington made no secret of the fact that this was not in their interest.

In the 1930s, the Roosevelt administration adopted what it called a “good neighbour” policy toward Latin America, dictating disadvantageous bilateral trade deals and intervening repeatedly in the domestic politics of Latin American countries. The U.S. provided its neighbours to the south with military and economic aid – not in order to support growth, but to consolidate its domination in the western hemisphere, a policy that was spoken and written about openly in Washington. During the Second World War the United States promised – in an attempt to win the support of Latin American governments – to actively support the development and diversification of their economies. After 1945, Truman nevertheless refused to organize a pan-American economic conference and quickly dashed all hopes of a Marshall Plan for Latin America. Brazil, for example, was outright refused a one million dollar loan that it had sought.

The U.S. government immediately cancelled the wartime price regulations that had led to a quick rise in the prices for goods imported to Latin America from the north. However, long-term contracts signed during the war for imports of raw materials and agricultural goods were not renegotiated, so the countries of Latin America had to sell their export products at low wartime prices. This cost them the colossal (at that time) sum of three million dollars, i.e., the majority of the trade surplus accumulated during their “wartime prosperity”. In response to protests, the U.S. government replied that it had sacrificed lives and money defending the entire hemisphere from totalitarianism.824

In the postwar decades, Latin American hopes for obtaining assistance from the U.S. for economic development were revealed to have been misplaced. Washington’s policies were now dictated by the fear of communism, of which the progressive radicalization of the Cuban revolution was seen as a harbinger – and Cuba was one of the wealthiest and most developed nations in the region, with a standard of living comparable to that of the countries of southern Europe. On 13 March 1961 President Kennedy announced the creation of the “Alliance for Progress,” which he declared would be a “vast cooperative effort, unparalleled in magnitude and nobility of purpose, to satisfy the basic needs of Latin American people for homes, work and land, health and schools”.825 In August 1961 at an intergovernmental conference in Punta del Este in Uruguay, Secretary of State ←271 | 272→C. Douglas Dillon assured the representatives of Latin American governments that they could count on 20 billion dollars of private and public capital from the U.S. over the course of the next decade. Together with 80 billion dollars in investments from domestic sources, this was to guarantee real economic growth of 2.5% per capita annually, that is, twice the rate of the 1950s.

In practice, however, the U. S. did not back up its promises with action. In exchange for economic aid, the Kennedy administration expected full political cooperation, and interests tied to American exporters blocked reform projects in those countries that undertook them. In the two countries that were supposed to demonstrate the successes of the “Alliance,” Venezuela and Chile, the project ended in complete failure. Chile, which had fallen into economic stagnation – its per capita growth in the 1950s did not exceed 1% annually – received over one billion dollars in aid over the following decade, the largest amount per capita in all of Latin America. This money linked the U.S. to the unpopular right-wing President Jorge Alessandri (1958–1964), and was largely designed to keep him in power. Without success: the Americans had to spend hundreds of thousands of dollars more and use the CIA to guarantee the victory of a right-wing candidate in the 1964 election. The U.S. similarly intervened in Brazil’s elections.826 The “Alliance for Progress” proved to be a disaster – it neither accomplished its intended political goals, nor did it help Latin America achieve modernization and economic growth.

In contrast, a national industrial policy based on import substitution seemed for a long time to bring impressive successes. From the 1920s to the 1940s, countries with higher tariffs developed faster than those with more open economies, and until the 1970s the level of trade barriers did not have an obvious connection to growth.827 For two decades, the average rate of growth in Latin America exceeded 6% annually.828

Brazil initiated an active industrial policy in the 1940s, and Chile and Venezuela in the 1950s.829 Between 1958 and 1967, half of public investment expenditures were invested in the steel industry, making Brazil into a self-sufficient producer of ←272 | 273→steel.830 Domestic production of automobiles followed. The public sector began to mushroom. In the 1960s, the number of state enterprises rose to more than 700, mostly in large, capital-intensive industries, such as energy, metallurgy and the chemical industry. In 1979, state companies in Brazil represented just 7% of all companies, while 50% of capital investments were concentrated in them.831

Even the poorest countries, such as Bolivia, tried to implement an industrial policy. When a revolution broke out 1952, the country was completely controlled by three large tin mining companies. Although they were owned by Bolivians, they were treated by Bolivian law as foreign companies and sent most of their profits abroad.832 Before the revolution, the three mining companies provided the country with 95% of its foreign currency and over half of the government’s budget.833 When the National-Revolutionary Movement (Span. Movimiento Nacional Revolucionario, or MNR), supported by the middle class and the trade unions, took power, it nationalized the mining companies and introduced agrarian reform, stripping landowners of power. It also attempted to accelerate economic growth by following the prescriptions then popular, that is, supporting industrialization by means of tariffs and subsidies. In 1964, a pro-American military dictatorship took control of the country, opening the country to foreign loans and investments and eliminating industrial subsidies.834 As it turned out, the mountainous, land-locked and sparsely populated country (population 4.6 million in 1970) was unable to attract foreign investment outside of the mining industry, and the policies dictated by the International Monetary Fund and the World Bank placed greater emphasis on stability and protecting the interests of foreign capital than on the development of local industry. In practice, the Bolivian government was too weak to impose its own investment priorities on foreign investors, and too poor to finance major projects on its own. However, opening the economy to foreign capital and carrying out the recommendations ←273 | 274→of international financial institutions did not help – toward the end of the 1970s Bolivia was one of the poorest countries in Latin America.

The weakness of government bureaucracies and their susceptibility to pressure groups had posed a problem for import substitution policies from the outset. The new industrial sectors – gigantic steelworks and chemical factories, refineries and automobile plants – were considerably less productive than those of their Western competitors, and thus required constant protection. A side effect of such protectionism was overly high exchange rates for Latin American currencies, which discouraged exports.835 For this reason, basic consumer goods were significantly more expensive in most Latin American countries than in developed countries. In Chile in the 1960s, a bicycle cost four times as much as in the United States, small transistor radios cost three times as much as in Europe, and a small electric heater was nearly twice as expensive as on the international market. High tariffs on many components needed for the production of various industrial products had a similar effect.836

Supporters of this import substitution strategy believed it should be used in a limited way. The economist Albert O. Hirschman – one of its advocates – wrote that it should meet three basic conditions. Firstly, customs protections and subsidies should be temporary and reduced over time. Secondly, they should not be too high – they were meant to force manufacturers to be more productive, not incline them to behave imprudently. Third, only certain branches of industry should be protected – ideally those that, in keeping with the doctrine of “unbalanced development,” would “pull” along with them the development of the largest number of local sectors of industry.

These conditions were not fulfilled, primarily for political reasons. It did not take much time for lobbyists for a particular industry’s to persuade politicians that their industry was the one that deserved protection. Customs regulations in Latin America spanned thousands of pages and included thousands of products in a complicated system of licenses, tariffs and exceptions.

In Chile – to stay with that example – not only did bicycles and radios cost several times more than they did in developed countries: local products were also much lower in quality. Shoes quickly fell apart, and electric equipment simply stopped working. Customs barriers had reached a surrealistic level: the duty on ←274 | 275→car tires was 125%, on drills – 75%, on heaters – 244%, on electric motors – 162%, on radios – 340%, on vacuum cleaners – 85%, on refrigerators – 136%. In the mid-1960s the Chilean government also required importers to make a deposit equal to 10,000%(!) of the imported product at the central bank before their goods could pass through customs. Because customs procedures were lengthy, and the annual inflation rate had risen to above 30%, keeping money in an interest-free account further raised the cost of imported goods. In Mexico, tariffs on consumer goods – from textiles to tobacco, shoes, soap, paper and cars – ranged from 57% to 141%.837 In the 1970s, over 70% of imports to Mexico required licensing.838 The average customs duty amounted to 131% in Argentina, 168% in Brazil, 138% in Chile, 112% in Colombia and 61% in Mexico.839

The political economy of Latin American industrialization programmes differed in a significant way from the African model, though it, too, was supported by an alliance between urban population groups – the national bourgeoisie, the bureaucratic middle class and urban workers. These groups were the primary short-term beneficiaries of programmes to develop the domestic market, the government’s protectionist policies and public investments. The most privileged were the middle and working classes. The middle class gained additional jobs in government offices and state enterprises, better access to education, and increased power for the bureaucracies in which they were employed. Workers received protection from their trade unions, influence over national policy, and social welfare benefits. As in Africa, the Latin American pacto social operated at the expense of the rural population and the urban poor, to whom it offered nothing. Although the need for foodstuffs grew in cities, rural areas remained underdeveloped and underinvested – the overwhelming majority of funds were designated for the development of industry. Social welfare legislation privileged the relatively small group of urban residents who were formally employed – at the cost of slum dwellers, who were mainly employed in the informal sector.840 As a result, economic growth was unevenly distributed, the gap between the poor and rich grew, and Latin American politics – built on ←275 | 276→this social coalition – remained permanently unstable. Social inequality increased people’s susceptibility to political radicalization.841

This dynamic was not just typical for Latin American countries. Throughout most of the developing world, development policy was guided by a strikingly similar logic, both in economic and political terms. Efforts at industrialization through import substitution were also made in Pakistan, Turkey and Thailand.842 Economic planning was implemented in Turkey, Syria, Egypt, Iran, Indonesia and Taiwan. Nationalization of major enterprises, prohibitive tariffs on imports and the construction of the largest dam in Africa were key ingredients in Nasser’s “Arab socialism” in Egypt – which nevertheless diverged clearly from the Soviet model, as did the policies of Nehru, Nyerere, Nkrumah and most other leaders in the post-colonial world.843 All of these regimes tried to maintain power through the support of a nationalistically-oriented middle class, which was fairly closely tied to the government and dependent on it. All were also marked by permanent instability, which revealed itself when the mechanisms created by domestic policies hindered growth. Public spending helped buy support, as long as it could continue to be increased. When the system exhausted itself, a crisis occurred.

Space here does not allow for a discussion of all of those projects, which differed from one another significantly in terms of the scope, level of radicalism, scale of nationalization, and extent of government control over the economy. Their common elements, however, should be noted. All were based on the belief that the nation-state was the mainspring of economic development. All postulated that capitalism in its Western version was a game with marked cards in which the West always won. All were deeply distrustful of outsiders, particularly the West, but they were also – despite rhetoric underscoring the brotherhood of all colonial nations and the community of the “non-aligned world” – wary of their neighbours. The trade barriers erected by the countries of Africa and Latin America protected them not only from Western imports, but also from those of neighbouring countries. All of these projects were also marked by hostility towards foreign capital. Even when it was needed and efforts were being made to encourage investment, it was treated with mistrust, considered a tool of imperialism and neocolonial ←276 | 277→domination (such fears were not necessarily irrational, as we see from the story of the “Alliance for Progress” and U.S. investment in Latin America).

All of these undertakings would have been impossible without faith in the rationality and effectiveness of government bureaucracies, in whom more trust was placed than in market forces – and again, for good reason, since local capitalism did not appear to offer any hope for development. Economic liberals were not only small in number, but were also generally considered to be what Galeano called “ideologists of impotence.”844

All of these visions assumed that the rate of accumulation and investment could be increased through local efforts. In practice, this meant draining money from the poorest members of society, usually farmers, and in many cases, also from the consumers of the expensive and low-quality goods produced by local industry.845 The grim irony of this situation is, nonetheless, only visible from a distance: at the time this was universally believed to be the price of development, as there was no other path. These policies were not as ineffective as their neoliberal critics often claimed in the 1970s and 80s: they assured at least two decades of high economic growth and brought at least a partial structural transformation to many countries of the “Third World.” But only the countries of Asia managed to make the leap into modernity once and for all.


717 Quoted in P. Chatterjee, Nationalist Thought and the Colonial World, London 1993, p. 157.

718 E. Galeano, Open Veins of Latin America, New York 1973, p. 1.

719 K. Nkrumah, Autobiography, New York 1957, p. 290.

720 R. Betts, Decolonization, New York–London 2004, p. 65.

721 Quoted in A. Biney, “The Legacy of Kwame Nkrumah in Retrospect”, The Journal of Pan African Studies, March 2008, vol. 2, no. 3.

722 See J. Woronoff, West African Wager: Houphouët versus Nkrumah, Metuchen 1972.

723 S. Constantine, The Making of British Colonial Development Policy 1914–1940, London 2005, p. 197 ff.

724 R. Palme Dutt, Britain’s Crisis of Empire, London 1949, p. 80.

725 Ibid., p. 82.

726 Quoted in Ibid., p. 80.

727 Ibid.

728 K. Akonor, Africa and IMF Conditionality. The Unevenness of Compliance, New York– London 2006, p. 19.

729 K. Botwe-Asamoah, Kwame Nkrumah’s Politico-Cultural Thought and Policies. An African-Centered Paradigm For the Second Phase of the African Revolution, New York–London 2005, p. 115.

730 Quoted in T. Killick, Development Economics in Action, New York 1978, 233. The book tells the entire story in great detail.

731 R. H. Bates, Markets and States in Tropical Africa. The Political Basis of Agricultural Policies, Berkeley–Los Angeles 1981, pp. 20–21.

732 Quoted in R. H. Bates, Markets and States…, p. 73.

733 K. Nkrumah, Autobiography, x.

734 A. Biney, The Political and Social Thought…, p. 106.

735 K. Akonor, Africa and IMF…, p. 20.

736 K. Botwe-Asamoah, Kwame Nkrumah’s Politico-Cultural Thought and Policies. An African-Centered Paradigm For the Second Phase of the African Revolution, New York–London 2005, p. 20.

737 A. Biney, The Political and Social Thought of Kwame Nkrumah, Houndmills–New York 2011, p. 103.

738 M. Kula, “Swój do swego… po co?”, Studia migracyjne – Przegląd polonijny, 2009, p. 2.

739 A. Biney, The Political and Social Thought…, p. 97.

740 K. Botwe-Asamoah, Kwame Nkrumah’s Politico-Cultural Thought…, p. 116.

741 This mechanism was described in the classic works of economists Robert H. Bates and Benno J. Ndulu.

742 R. H. Bates, Markets and States…, p. 39.

743 R. H. Bates, “Domestic interests and control regimes”, in The Political Economy of Economic Growth in Africa, 1960–2000, vol. 1, ed. B. J. Ndulu, et al., Cambridge–New York 2008, p. 178.

744 Ibid., p. 183.

745 R. H. Bates, Markets and States…, op. cit., pp. 46–47.

746 Ibid., p. 27.

747 Ibid., p. 53.

748 Ibid., p. 64.

749 Ibid., p. 68.

750 R. Betts, Decolonization…, op. cit., p. 71.

751 Quoted in J. Iliffe, A Modern History of Tanganyika, Cambridge 1994, p. 576.

752 Quoted in M. Jennings, Surrogates of the State: NGOs, Development, and Ujamaa in Tanzania, Bloomfield 2008, p. 41.

753 J. C. Scott, Seeing Like State: How Certain Schemes to Improve the Human Condition Have Failed, New Haven 1998, p. 229.

754 M. Jennings, Surrogates of the State…, p. 42.

755 G. Kitching, Development and Underdevelopment in Historical Perspective. Populism, Nationalism and Industrialization, London 2011, pp. 64–65.

756 S. Chodak, J. Kleer, Socjalizm i modernizacja w „czarnej” Afryce, Warszawa 1967, p. 14.

757 J. Nyerere, “Ujamaa. Basis of African Socialism”, Journal of Pan African Studies, 1987, vol. 1 no. 1, p. 1.

758 J. Nyerere, Arusha Declaration, quoted from: http://www.marxists.org/subject/africa/nyerere/ 1967/arusha-declaration.htm.

759 M. Jennings, Surrogates of the State…, p. 48.

760 I. G. Shivji, “The village in Mwalimu’s thought and political practice”, in The Legacy of Nyerere, eds. C. Chachage, A. Cassam, Kampala 2010, p. 123.

761 Quoted in J. C. Scott, Seeing Like State…, p. 234.

762 Ibid., p. 237

763 N. van de Walle, African Economies and the Politics of Permanent Crisis 19791999, Cambridge 2001, p. 57.

764 A. Eckert, “Julius Nyerere, Tanzanian Elites, and the Project of African Socialism”, [in:] Elites and Decolonization in the Twentieth Century, eds. J. Dulffer, M. Frey, pp. 228–229.

765 J. C. Scott, Seeing Like State…, p. 239.

766 B. J. Ndulu, S. A. O’Connell, “Policy Plus: African Growth Performance, 1960–2000”, [in:] The Political Economy of Economic Growth in Africa, 1960–2000, vol. 1, eds. B. J. Ndulu, et al., Cambridge–New York 2008, p. 5.

767 Quoted in A. K. Dasgupta, A History of Indian Economic Thought, London–New York 2002, p. 88. The greater part of the book is devoted to a discussion of Ranade’s views.

768 J. Adams, “The Institutional Economics of Mahadev Govind Ranade”, Journal of Economic Issues, vol. 5, 1971.

769 Quoted in J. Adams, The Institutional Economics…, op. cit.

770 B. Chandra, India’s Struggle for Independence: 18571947, London 1989, p. 94.

771 Quoted in A. K. Dasgupta, A History of Indian Economic Thought, p. 91.

772 Quoted in Ibid., p. 94.

773 Ibid., p. 98.

774 S. Ghose, Jawaharlal Nehru, A Biography, Bombay 1993, p. 232.

775 D. Yergin, J. Stanislaw, The Commanding Heights. The Battle for the World Economy, New York 2002, p. 53.

776 S. Ghose, Jawaharlal Nehru…, op. cit., p. 232.

777 M. Gandhi, Hind Swaraj or Indian Home Rule, http://www.soilandhealth.org/03sov/0303critic/hind%20swaraj.pdf

778 S. Ghose, Jawaharlal Nehru…, op. cit., p. 233.

779 Ibid., p. 234.

780 S. Tharoor, Nehru. The Invention of India, New York 2003, p. 175.

781 J. Nehru, The Discovery of India, Oxford 1994, p. 501.

782 J. N. Bhagwati, P. Desai, India: Planning for Industrialization. Industrialization and Trade Policies since 1951, Oxford 1970, p. 127.

783 S. Ghose, Jawaharlal Nehru, 240

784 Ibid., p. 244.

785 quoted in A. Panagariya, India. The Emerging Giant, New York 2008, p. 25.

786 S. Ghose, Jawaharlal Nehru, op. cit., p. 247.

787 A. Panagariya, India. The Emerging…, op. cit., p. 35.

788 Ibid., p. 40.

789 Ajit K. Dasgupta, A History of Indian …, op cit., p. 171.

790 E. Galeano, Open Veins of Latin America, New York 1997, pp. 237–238

791 Ibid., p. 238.

792 A classic exposition of this theory can be found in S. Engerman, K. Sokoloff, “Institutional and Non-Institutional Explanations of Economic Differences”, NBER Working Paper no. w9989, September 2003; and in K. Sokoloff, S. Engerman, “History Lessons. Institutions, Factor Endowments, and Paths of Development in the New World”, Journal of Economic Perspectives, 2000, vol. 14, no. 3.

793 L. Prados de la Escosura, “When Did Latin America Fall Behind?”, [in:] The Decline of Latin American Economies Growth, Institutions, and Crises, eds. S. Edwards, G. Esquivel, G. Marquez, Chicago–London 2007, p. 15 ff.; the article also offers a survey of the literature on this subject.

794 J. Foran, Taking Power. On the Origins of Third World Revolutions, Cambridge–New York 2005, p. 35.

795 Ibid., p. 36.

796 Perhaps with the exception of Argentina, where the standard of living was closest to that of Western countries.

797 H. Szlajfer, Droga na skróty: nacjonalizm gospodarczy w Ameryce Łacińskiej i Europie Środkowej w epoce pierwszej globalizacji, Warszawa 2005, p. 19 ff.

798 Quoted in: J. Foran, Taking Power, op. cit. p. 61.

799 A. Hamilton, Report on the Subject of Manufactures, Philadelphia 1828 (sixth edition).

800 J. G. Fichte, The Closed Commercial State: Perpetual Peace and Commercial Society from Rousseau to Fichte, Princeton 2011.

801 On the reception of Fichte, see M. A. Heilperin, Studies in Economic Nationalism, Publications de L’Institut Universitaire de Hautes Etudes Internationales no. 35, Geneve–Paris 1960, pp. 83–84.

802 J. G. Fichte, The Closed Commercial State, Albany 2012, p. 107

803 M. A. Heilperin, Studies…, op. cit. p. 86.

804 K. Tribe, Strategies of Economic Order. German Economic Discourse 17501950, Cambridge 1995, p. 33 ff.

805 F. List, National System of Political Economy, vol. 2, New York 2006, p. 79.

806 J. M. Cypher, J. L. Dietz, The Process of Economic Development, Abingdon–New York 2009, p. 170 ff.

807 Relative Prices of Exports and Imports of Under-developed Countries: A Study of Postwar Terms of Trade Between Under-developed and Industrialized Countries, New York 1949, p. 13.

808 Ibid., p. 126.

809 H. W. Singer, “The Distribution of Gains between Investing and Borrowing Countries”, The American Economic Review, 1950 vol. 40, no. 2.

810 The debate is summarized in, e.g. P. Sarkar, “The Singer-Prebisch Hypothesis: A Statistical Evaluation”, Cambridge Journal of Economics, 1986, no. 10; see also H. W. Singer, “The Terms of Trade Controversy” [in:] Pioneers in Development, ed. G. Meier, D. Seers, Oxford 1984, pp. 275–303.

811 J. A. Ocampo, M. A. Parra, “The Continuing Relevance of the Terms of Trade and Industrialization Debates” [in:] Ideas, Policies and Economic Development in the Americas, ed. E. P. Caldentey, M. Vernengo, London 2007, 157 ff.

812 R. Prebisch, “Five Stages in My Thinking on Development”, in Pioneers in Development, p. 180.

813 P. Franko, The Puzzle of Latin American economic development, Lanham–Plymouth 2007, pp. 57–58.

814 A. G. Frank, Capitalism and Underdevelopment in Latin America: Historical Studies of Chile and Brazil, London 1967, p. 21.

815 P. A. Baran, On the Political Economy of Backwardness, Manchester School, no. 1, 1952, reprinted and quoted in: The Political Economy of Development, ed. C. Wilber, K. P. Jameson, New York 1973.

816 G. Palma, “Dependency: A Formal Theory of Underdevelopment or a Methodology for the Analysis of Concrete Situations of Underdevelopment?”, World Development, 1978, vol. 2 no. 6, especially p. 885 ff.

817 Quoted in D. Booth, “Andre Gunder Frank: An Introduction and Appreciation”, [in:] Beyond Sociology of Development. Economy and Society in Latin America and Africa, eds. I. Oxaal, T. Barnett, D. Booth, Oxon–New York 2011, pp. 5–66.

818 R. Capriles, M. de Gonzalo, “Economic and Business History in Venezuela”, [in:] Business History in Latin America: The Experience of Seven Countries, Liverpool 1999, p. 160.

819 F. Henrique Cardoso, E. Faletto, Dependency and Development in Latin America, Berkeley–Los Angeles 1979, pp. 75–76.

820 G. Rist, The History of Development. From Western Origins to Global Faith, London 2006, pp. 116–117.

821 F. Henrique Cardoso, E. Faletto, Dependency and Development in Latin America…, Op. cit., pp. 19–20.

822 P. Meller, Un siglo de economia politica chilena 18901990, Ed. Andres Bello, Barcelona–Buenos Aires–Mexico–Santiago 1998, pp. 47–48.

823 J. C. Moreno-Bird, J. Ros, Development and Growth in the Mexican Economy, Oxford–New York 2009, pp. 87–88.

824 S. G. Rabe, Eisenhower & Latin America. The Foreign Policy of Anti-Communism, Chapel Hill–London 1988, pp. 11–16.

825 S. G. Rabe, The Most Dangerous Area in the World. John F. Kennedy Confronts Communist Revolution in Latin America, Chapel Hill–London 1999, p. 2.

826 S. G. Rabe, The Most Dangerous Area…, op. cit., pp. 113–114.

827 A. Vamvakidis, “How Robust is the Growth-Openness Connection? Historical Evidence”, Journal of Economic Growth, 2002, no. 7.; M. A. Clemens, “Why did the Tariff-Growth Correlation Change after 1950?”, Journal of Economic Growth, 2004, no. 9.

828 S. Edwards, S. Teitel, “Introduction to Growth, Reform, and Adjustment: Latin America’s Trade and Macroeconomic Policies in the 1970s and 1980s”, Economic Development and Cultural Change, 1986, vol. 34, no. 3.

829 L. C. Bresser Pereira, Economia Brasileira: Uma Introdução Crítica, Editora 34, São Paulo 1998, p. 51.

830 Alice H. Amsden, Escape from Empire. The Developing World’s Journey Through Heaven and Hell, Cambridge–London 2007, p. 89.

831 J. Kochanowicz, “Reforming Weak States and Deficient Bureaucracies”, [in:] Intricate Links: Democratization and Market Reforms in Latin America and Eastern Europe, ed. J. M. Nelson, Washington 1994, p. 209.

832 M. Kula, Anatomia rewolucji narodowej: Boliwia w XX wieku, Warszawa 1999, p. 37 ff.

833 S. Eckstein, F. Hagopian, “The Limits of Industrialization in the Less Developed World: Bolivia”, Economic Development and Cultural Change, vol. 32, no. 1, 1983.

834 J. Dunkerley, Rebellion in the Veins. Political Struggle in Bolivia 19521982, London 1984, particularly p. 163 ff.

835 S. Edwards, “Forty Years of Latin America’s Economic Development: From the Alliance for Progress to the Washington Consensus”, NBER working paper 15190, July 2009.

836 V. Bulmer-Thomas, The Economic History of Latin America Since Independence, Cambridge–New York 2003 p. 275 ff.

837 G. Esquivel, G. Marquez, “Economic Effects of Closing the Economy: The Mexican Experience”, [in:] The Decline of Latin American Economies Growth, Institutions, and Crises, eds. S. Edwards, G. Esquivel, G. Marquez, Chicago–London 2007.

838 N. Lustig, Mexico: The Remaking of an Economy, Washington 1998, p. 14.

839 S. Edwards, Forty Years of Latin America’s Economic Development…, op. cit.

840 E. Cardoso, A. Helwege, “Populism, Profligacy and Redistribution”, [in:] The Macroeconomics of Populism in Latin America, ed. R. Dornbusch, S. Edwards, pp. 61–62.

841 A. Przeworski, C. Curvale, “Does Politics Explain the Economic Gap between the United States and Latin America?” [in:] Falling Behind. Explaining the Development Gap Between Latin America and the United States, ed. F. Fukuyama, Oxford–New York 2008, p. 100.

842 Cf. Economic Transition in the Middle East, ed. H. Handoussa, Cairo, 2000.

843 J. Gordon, Nasser. Hero of the Arab Nation, Oxford 2006, pp. 70–76.

844 E. Galeano, Open Veins…, op. cit., p. 3.

845 R. K. Sah, J. E. Stiglitz, Peasants Versus City-Dwellers. Taxation and the Burden of Economic Development, Oxford–New York 1992, p. 17 ff.