Address by V. V. Volsky on Trends in the Economic Development of Latin America

V. V. VOL'SKY

When we talk about the main trends of economic development of the countries of Latin America it stands to reason that this subject is immense and it is very difficult to cover the diversity of degrees of the development of all 22 countries of Latin America at the current stage. Hence the wording of the subject is this, "the main trends"; we will try today to briefly tell about them.

The main substance of the economic problem of Latin America is the dominance of economic colonialism in it. That is why the topic of our conference is called "The Problems of the National Liberation Movement in Latin America". This concerns the fact that contemporary imperialism, as V. I. Lenin pointed out at one time, cannot exist without robbing and oppressing backward and underdeveloped countries. The forms of robbery and oppression can be diverse. In some cases it is colonialism based on the dominance of armed force, the type of British or French colonialism. But imperialism still remains and right now the economic colonialism of the US is the main scourge for Latin America.

If imperialism cannot exist without oppression and robbing underdeveloped countries this means that the main country of imperialism, the US, moreover cannot survive without oppressing underdeveloped countries. This means that the collapse of the colonial system, which is now occurring in Asia and Africa, should unavoidably switch to the countries of Latin America.

And here the question is already more complex. I had to be present at a conference on the economic problems of the countries of Africa at the University of Rio de Janeiro, and the main speaker raised a very interesting question: it is easier for the countries of Africa to create an independent national economy than the countries of Latin America. I was surprised and asked why. They answered me: for they are creating it in a clean place, it is a blank slate [inserted by hand: tabula rasa]. In the conditions where a powerful socialist system exists, in conditions where the balance of forces in the world which has developed the countries of Africa can rapidly create new, effective sectors, introduce new technology in industry, etc. But here it is harder for the countries of Latin America because here the dominance of American imperialism has already taken root, here the corresponding productive forces and production relations have been created which essentially need to be broken and something else created on this available base or anew. But what does it mean to break an almost century-long already-rooted dominance of foreign capital in the countries of Latin America? This is a very complex matter because all this is deeply based in the social and economic relations in the Latin American countries which have taken root.

Now, there exists a multitude of the most varied theories of economic development of underdeveloped countries both in the countries of Latin America and beyond them, primarily and mainly in the US. Open any economics journals, Mexican, Brazilian, or another - you will without fail find some latest theory of economic development.

Open the speeches of [Pregish] and you will see the justification of the need for industrialization, open the speeches of Kennedy and you will see there the same calls for social progress in Latin America, etc. And this is really so. No one denies that this is already the dictate of the times, the call of the times, the need for economic development.

But the problem is along what path this development is to go, where it goes, and to what prospects this development leads. And here it needs to be said that there are absolutely no people who would deny the need for two things for Latin American most of all: the need for agrarian reform and the need for industrialization.

These two problems are very closely tied to one another. Industrialization is unthinkable without conducting an agrarian reform. Agrarian reform is the first stone in the foundation of building of an independent economy which is an absolutely mandatory basis for creating an independent economy in general in a number of underdeveloped countries, and in the countries of Latin America in particular.

How are matters with agrarian relations at the present time and why does the economic development of the countries of Latin America turn on just them most of all? If figures are cited just for mention and reference I have no need at all in this audience to talk only about facts for the sake of facts - but if one mentions the distribution of land plots at the present time by groups of farms in the countries of Latin America one can say the following. When this is done the specifics of the census in which not property, but the size of the farms is registered, consequently both the renters and occupants of another's land and the managers of many estates belonging to a single person are entered here. That is, the statistics here are clearly distorted in favor of depicting this property in an embellished light. This embellished statistic demonstrates that 73% of all farms in 20 countries of Latin America belong to only 3.8% of the entire agricultural area of these countries. At the same time, the share of farms, each of which has no more than 1,000 hectares of land, is only 1.5% of all the farms and 65% of the entire land area in the countries of Latin America.

Such are the agrarian relations.

I have no need here to speak of the socioeconomic consequences of the agriculture of large landed estates [latifundizm] in these countries. I would like to dwell on something else, what agrarian reform can give in this respect. The development of capitalism in the agriculture of the Latin American countries can still give very little, but already all the same the Latin Americans themselves sometimes draw some conclusions in this respect.

In fact, whereas until recently, before the agrarian reform in Cuba, there was only one country which had carried out a more or less serious agrarian reform, Mexico. In Mexico at the present time about 40% of all land belongs to the peasants; the rest belongs to landowners, but this is the greatest achievement among the countries of Latin America. To what could such a halfway agrarian reform even lead to in this country if one goes along the path of evolution, along a path of fully tortuous progress, that is, of such halfway reforms[?]

What has this produced? It has produced the following: the structure of Mexican agriculture has fundamentally changed. First Mexico, which was always hungry, had always imported a large quantity of food from the neighboring US, now at the end of the '50s has essentially stopped importing food crops. In Mexico the production of wheat, corn, rice, haricot beans, and other food crops has increased sharply, not only by expanding planted areas and the use of those lands of the landowners which were not previous used, but also through an intensification of agriculture, and by the development of capitalism in agriculture. For example, in particular, the yield of corn grew from 5-7 centners per hectare to 20 centners per hectare. This is a substantial growth which we absolutely do not see in the other countries of Latin America.

At the same time it is very important and essential to note that this very Mexican agriculture has become a serious base for the development of industry as a very important source of raw material. Let's say, industrial crops, which in the five years preceding the war produced approximately one-fourth of the value of the agricultural production of Mexico, has recently produced about half of the entire value of the country's agriculture. Mexico has become a very important country in the production of cotton, sugar cane, and a whole series of other crops.

Moreover, the appearance of small and mid-sized commodity producers, first and foremost from the peasantry, has provided an opportunity to considerably expand the domestic market in the country. If one considers that of the 16,000 cooperatives which exist in Mexico 9,000 sell half their production on the market (that is, more than half of the production of these cooperatives is traded), then one can imagine how much the domestic market of this country for industry is expanding.

And here this result is also decisively reflected not only in the development of Mexican agriculture. Mexico is essentially the only country of Latin America in which the production of agricultural output per capita has grown considerably. In Brazil it has grown insignificantly, and in other Latin American countries production per capita has not grown at all; in some countries it has even dropped sharply (let's assume, in Argentina, one of the most developed countries of the Latin American countries).

Thus we see that even those scanty agrarian reforms which were carried out in Mexico have played a significant role in the creation of a domestic market and in providing the country with a base for the development of industry, in providing the country with food products.

Comrades, there is no need to say what is going on in Cuba right now. Substantial shifts are taking place there in the field of agrarian reforms which all of Latin America sees and cannot fail to be excited at what has been done there in agriculture in a very short historical period, in conditions of an economic embargo, in conditions of transportation and other difficulties in the ties between the countries of the socialist system and Cuba, with the presence of other difficult factors, and in three or even two years of agrarian reform. According to the results of the 1961 agricultural year the proportion of sugar cane in the value of Cuba's agricultural production dropped from 59% to 39% compared to 1958, but the proportion of food crops which Cuba always needs very much rose from 12% to 24%, that is, it doubled.

This is only the first sign of those changes which will occur in Cuba in connection with agrarian reform.

Literally everyone is occupied with questions of agrarian reform. In the countries of Latin American they are striving right now to reduce them to evolution, not revolution. This cannot provide such a result which the countries of Latin America need as a basis for further socioeconomic transformations.

Nevertheless, it needs to be said that capitalism in Latin American agriculture has been developing along a Prussian path, basically along the path of a tortuous revolution; nevertheless, it continues to develop there.

Of course, it is necessary to distinguish the possibilities of the various countries in this field. Let's say, the possibilities of Brazil, are completely different from the possibilities of Colombia and the other countries. In Brazil the development of capitalism in agriculture is occurring chiefly in the south, over a broad territory, at a time when in the northeast of the country there continue to remain the vestiges not only of feudalism, but even of slavery, which is curbing the development of this part of Brazilian territory very much.

In spite of the very slow growth of the domestic market in the Latin American countries it nevertheless needs to be said that all these countries are seized by a common desire, a desire for industrialization as a basis for creating an independent national economy.

The process of industrialization in the countries of Latin America has its own great features compared to the industrialization of those countries which are highly-developed at the present time. In fact, take any developed country of modern capitalism: the US, Britain, France, Germany - each of them began is industrialization or was industrialized primarily with the aid of resources received from outside: Britain, by robbing colonies. This process of an initial accumulation of capital was done just on this account. France - by robbing colonies and by usurious capitalism. Germany, by indemnities received from France in the Franco-Prussian War. The US - from the seizure of new lands and by foreign loans from all the countries of Europe.

But, how is the situation in contemporary underdeveloped countries, in particular and especially in the countries of Latin America? The fact that they not only do not receive such money from outside but are forced to pursue industrialization in conditions of the extortion of national wealth from these countries and in conditions where foreign capital is robbing these countries is a feature of the process of industrialization in these countries.

This feature of industrialization leads to it being pursued to a much greater degree in the countries of Latin America than in any country of capitalism at the expense of increasing the oppression of the working masses, at the expense of an increase of the impoverishment of these masses, and at the expense of an increase of their exploitation in a literal meaning of the word. Look, the index of the number of working hours per week is growing constantly in Brazil, in spite of the fact that strikes and walkouts convulse this country. Or the real wages. For example, in Mexico where possibly more attention is paid to the situation of the workers to some degree (although often hypocritically) compared to other countries, at the present time real wages are merely 93% of the 1939 level. But how much has the intensification of work increased, how much has labor productivity in Mexico increased during this period of time? By a very great amount.

How is the situation, for example, with such an indicator in the same Mexico as the distribution of the national income between those who receive wages and those who receive the profits? This ratio exists between wages and profits in Mexico: in 1939 the share of wages in the national income was 30.5% and the share of profits was 26%; at the present time the share of wages is 22.3% (instead of 30%), and the share of profits is 48% (instead of 26%). This means a further increase of the exploitation of the workers and their further impoverishment.

It needs to be said that inflation has become one of the main sources of industrialization, one of the main levers of transferring money for the goals of industrialization in the Latin American countries. Inflation is truly a way out of the situation for many countries of Latin America. Instead of receiving real value, putting a printing machine in motion provides an opportunity to get this money from the consumer, although with an incredible growth of prices (both in the area of consumer and in the area of manufactured goods). But the people are the main consumer.

I have no opportunity to analyze this lever in detail but this is what [Bradish] noted at a session of the Inter-American Economic Council in a report of April this year. He devoted a special section of his report to the negative effect of the so-called "orthodox anti-inflationary policy" of some Latin American governments. He said that it is not necessary to fight inflation in orthodox ways, that this needs to be done skillfully, because inflation nevertheless promotes… and is one of its levers. "The masses of Latin American workers should also contribute their own share of money to the main task of the formation of capital". That is, he thinks that in connection with inflation workers should also contribute money by means of such a lever. Moreover, they pay all the indirect taxes, but the growth of prices and the disproportion of these prices provide an opportunity for capitalists to mobilize additional resources for these purposes.

The difficulties of the search for money for industrialization in the countries of Latin America also leads to the state sector growing in these countries involuntarily. Of course, the state sector grows not only because of it, and I don’t want to limit its growth only by this factor, the need for the mobilization of resources.

There are very many different problems here and possibly I will still dwell on one of them in passing. But I want to stress the following fact, that the investment of resources by private capital and the private sector always causes resistance from private capital: small and medium-sized national capitalists do not want to invest their resources for a long period, for the long period of amortization deprives them of a quick turnover and, thus, deprives [them] of the opportunity to get a rapid additional profit. That is why the state sector takes the main amount of capital investment for construction on itself. At the present time, if one analyzes the ratio between the state sector and the private sector in the sphere of the main such things associated with industrialization like investments in machines and equipment, on the one hand, and investments in capital construction, on the other, then the private sector has the lion's share of capital investment in equipment and machine tools, but the state sector has the lion's share of investments in the area of capital construction. This is primarily energy, infrastructure, roads, ports, etc.

What this is all about here is that, in spite of the fact that construction still dominates over equipment in the countries of Latin America right now, the state takes on the lion's share of this construction.

One more fact which causes alarm through the mobilization of resources for industrialization is the distribution of profits between the productive sectors of the economy and commerce. It needs to be said that in contemporary Latin America, even in the most developed countries (and possibly there most of all) - I have analyzed these facts about Mexico, Brazil, and Argentina - the lion's share of profits accumulates not in the productive sectors, but in commerce. In Mexico 41% of all profits go to industry and agriculture and 60% to commerce.

Accordingly, when we talk about such a factor as the reinvestment of profits, then the productive sectors of the economy in these capital investments are limited by those amounts which they receive in general. But what it gets in commerce goes further into trade turnover; it goes through banking channels, and often it is simply exported abroad through capital flight or because of inflation. This is causing ever-growing alarm among Latin American countries.

Now, next about manifestations of industrialization in the countries of Latin America.

First of all it needs to be said that the clearest indicator of industrialization is, of course, the growth of cities, the urbanization of these Latin American countries. Right now the urbanization of Latin American countries is going on at a very rapid pace and, although throughout all of Latin America the share of the urban population is only 46% of the total population at the present time, this is very great progress: according to the 1950 censuses it comprised approximately 31%. In six countries of Latin America the urban population exceeds half of the total population of the country, among which it includes: in Uruguay - 81%, in Argentina - 68%, in Chile - 66%, in Venezuela - 61%, in Cuba - 55%, and in Mexico - 50%.

But the problem is not how much the urban population comprises. The growth of the urban population might be of different types. For example, the grow of the urban population in large scale might essentially not be in the conditions of industrialization, but in the conditions of the creation of a resettlement center, as was in particular in Buenos Aires, predominantly from emigrants from Europe. Therefore, when we talk about urbanization it is necessary to identify the type of urbanization associated with industrial development.

When we talk of such a type of industrialization it is necessary to first of all bear in mind the appearance in Latin American countries of new urban industrial centers literally before our eyes. One could name a great many such centers, for example, Monoclova, Irola, and a number of others in Mexico; in Brazil, such centers in the state of Sao Paulo as San[to] Andre, Campinas, [Libeiran], and many others; in Brazil, Belo Horizonte, [Beluaritoid], and others have essentially sprung up anew.

Thus, if one analyzes the statistics one would need first of all to take the appearance of new centers as a basis the approach to these problems, that is, the growth of cities within the range of approximately two to twenty thousand residents. Calculations show that in this framework Argentina is making no headway, and newly-appearing city centers here can be considered entities. This is an example of the fact that the process of industrialization has sharply slowed in this country in conditions of large landed estates, in conditions of the reactionary agrarian relations which exist in Argentina right now, and the oligarchic interlocking of the landed aristocracy with the financial [aristocracy]. In this respect Argentina takes last place among the other countries of Latin America, although by level it is perhaps still the most developed country. Right now in Argentina the growth rates of the rural population exceed the growth rates of the new cities: the growth of new cities totals 0.8% (with the number of residents from 2,000 to 20,000), but the growth of the rural population is 1.4%. As before, Buenos Aires, a spider-city [gorod-pauk], draws to itself the main forces of those who are fleeing from the countryside. The desertion of the countryside is not accompanied here by a process of industrialization. It is an entirely different picture in Mexico: here the growth of urban centers is sharply dominant in this range, from 2,000 to 20,000 residents; it is an average of 7% per year (the period between two successive censuses). But in Brazil the growth of these cities in the southeast of the country and the south of the country was approximately 12% per year at a time when in the northeast of the country, in a backward region, the growth of the cities was 2.5%. This again shows the enormous importance of agrarian reform in the development of capitalism in agriculture as the basis for development in general.

It is interesting to note that in Mexico, let's say, it is those very states in which agrarian reform was carried out the most vigorously that were subjected to the greatest urbanization and are those where Zapata and Villa were active with their armed detachments. This is first of all Coahuila, Tamaulipas, and the state of Morelos, not far from Mexico [City].

Thus, the problem of industrial development is accompanied by the creation of a domestic market and the creation of urban consumer and industrial centers.

Next, industrialization is manifested in the industrial shifts which have occurred in Latin America and in the shifts in the structure of the economies of these countries.

However, industrialization in this country is still not very great. According to recent data (I calculated according to 1950 data, [as] there was no later [data]) in almost all the countries of Latin America with the exception of Argentina, and in Mexico there the industry concerns a net product, that is, it concerns the share contributed to the national income (not concerning a gross product) and provides more than the agrarian raw materials sectors. In all the remaining countries, also including Brazil, the agrarian raw materials sectors still provide much more national output than the sectors of the manufacturing industry.

This already immediately shows that our economists - and not only economists - cannot get carried away when without a moment's hesitation they declare the countries of Latin America agro-industrial and even industrial, saying that the development is going on at a rapid pace. The direction of this process needs to be seen.

But this is far from being everything that affects the indicator of what kind of countries the Latin Americans countries are.  

At the same time, from the point of view of the structure of the industry of the Latin American countries themselves it needs to be said that industrialization as a process of priority development of heavy industry sectors is already taking place in the Latin American countries. The growth rates of heavy industry are considerably higher in these countries, almost double the growth rates of light industry. But the share of heavy industry sectors is still not very high on the whole. And, although the shifts here are quite substantial, in absolute figures this is still expressed in comparatively small numbers.

What are the shifts in the structure of industry if they are taken for all the countries of Latin America?

The shifts are these: at the present time the share of mining sectors of industry, including oil, are equal to the share of industrial production before the Second World War, 22%. The role of the textile and food sectors, these two main pillars of Latin American industry, have decreased right now, but in general is small for the 20 countries. The share of heavy industry sectors has increased, although this is an increase, and is in rates, and is high, it is manifested in small values. For example, in Brazil, the largest country of Latin America, metallurgy (ferrous and non-ferrous) provides 10% of the country's entire industrial production; the electrical engineering industry provides 4%; transportation engineering, 6%, and all the remaining metalworking sectors provide 2% of the country's industrial production. Thus, the share of metalworking and metallurgical sectors is still very small and is only 22% of the total industrial production of Brazil. But in the rate of development in Brazil these sectors just take a leading position, that is, industrialization is taking place.

However, comrades, the results of this industrialization cannot be overstated. First, it is necessary to bear in mind the features of the development of the heavy sectors [sic] in the underdeveloped countries, and not only the heavy sectors, but any new sector. This is just a very interesting aspect and here is what an analysis of some figures yields. First, the share of metalworking sectors in Brazil by the employment of the work force in them is higher right now than the relative share of the value of their production. This shows that labor productivity in these sectors remains lower than what the traditional sectors of industry previously had.

There are new industrial sectors arising in these countries en masse. I am not talking about the individual enterprises which are being introduced by foreign capital. It is natural that Ford Motors or WIllys Overland creates their own enterprises based on new technology; however, nevertheless they do not decide the development of these sectors. Let's say, here we're talking about sales of manufactured goods in Brazil for automotive firms - automobiles, primarily as a means of the private consumer. But foreign firms do not produce the machine tools in Brazil; not one foreign firm produces mechanical equipment in Brazil, this is just national capital. And here, the development of these sectors proceeds on the basis of a very low technology, often primitive, on the basis of the use of workers' muscle power. The creation of a new industry in the conditions of the existence of an enormous reserve army of labor is occurring such that, for example, in Sao Paulo the per capita power consumption of an individual production worker in the textile industry is 10 times higher than the per capita power consumption of a worker in metalworking.

And this, it would seem, is an incompatible comparison. In other words, the appearance of heavy industry is traveling a tortuous path. It is a conflict between imperialism, which has technical progress, and the technical backwardness of the underdeveloped countries.

The last question is the economics of Latin America from the point of view of the world economy. When we say that some country is agrarian, agro-industrial, or we define another type of country we are taking the entire country as a whole and primarily from the point of view of the world economy.

How are things with the development of Latin America within the framework of the world capitalist economy? It needs to be said that right now Latin America has not grown much in the share of production of the manufacturing industry. Before the War the share of the countries of Latin America in the world manufacturing industry was 3.8%. Right now it is 4.7% on the whole. But if one takes the proportion of this index of production per capita then it turns out that the proportion of Latin America in world industrial production has not increased, for during this period of time the proportion of the Latin American population in the world population taken in the same boundaries of the capitalist world which exists to this day has increased by 9% to 11%. What is called a demographic explosion, when the growth of the population is occurring at faster rates than the growth of the economy as a whole, is occurring in Latin America. And even without taking the sharp polarization of the distribution of the national output in Latin American countries in time, but just the growth rates of the national income as a whole, on the one hand, yet on the other, considering the fact that Latin America cannot absorb of its own annual population growth in the productive sectors. This fact shows that the Latin American countries are not developing from the point of view of the entire world capitalist economy, but are becoming even more backward. And this fact needs to be firmly remembered and studied in order to show the growing contradictions between world imperialism and the backward countries.

The backward countries cannot free themselves from imperialism through an imperialist evolution which the various plans of the Alliance for Progress suggest; they cannot thus free themselves from economic dependence on capitalism. Only by a revolutionary means, only by embarking on the path of socialism can this problem be solved.

And here is one more proof of this fact: the share of Latin America in world trade has fallen compared with the prewar period. This is despite the fact that the actual or physical volume is growing sharply. The index of the physical volume of trade which comes from the countries of Latin America is growing. But the exports of Latin American countries are continually declining. And this is because the exports of raw materials from Latin America are increasing and the global scale of exports of manufactured finished goods is declining.

If we take, let's say, Mexico: it has begun to export petroleum products and started to export some kinds of machines. But from the point of view of global exports of these goods Mexico's share has dropped compared with what it had before the Second World War. It has become more backward from the point of view of the capitalist system of the world economy.

And if one considers that at the present time that the developed countries increasingly drain raw materials from the underdeveloped countries, reducing the exports of raw materials from their own countries, this will mean that the raw material orientation of the Latin American countries is growing and its is also decreasing their industrial participation in the capitalist world.

Only the embarkation of the Latin American countries on a path to joining the world socialist economy, on a path of building socialism, and on a path of democratic transformations solves this contradiction.

//APPLAUSE//

S. S. MIKHAYLOV.

Permit [me] to end the morning session with this and announce a break until 1600.