THE STRUCTURE OF DEPENDENCE* By THEOTONIO DOS SANTOS University of_Chile This paper attempts to demonstrate that the countries(orto“modernize'”or"develop”them- dependence of Latin American countries on other selves).Although capitalist development theory countries cannot be overcome without a qualita- admits the existence of an"external"dependence, tive change in their internal structures and exter- it is unable to perceive underdevelopment in the nal relations.We shall attempt to show that the way our present theory perceives it,as a conse- relations of dependence to which these countries quence and part of the process of the world ex- are subjected conform to a type of international pansion of capitalism-a part that is necessary to and internal structure which leads them to under- and integrally linked with it. development or more precisely to a dependent In analyzing the process of constituting a world structure that deepens and aggravates the funda- economy that integrates the so-called "national mental problems of their peoples. economies"in a world market of commodities, capital,and even of labor power,we see that the I.What is Dependence? relations produced by this market are unequal By dependence we mean a situation in which the and combined-unequal because development of economy of certain countries is conditioned by the parts of the system occurs at the expense of other development and expansion of another economy to which the former is subjected.The relation of inter- parts.Trade relations are based on monopolistic dependence between two or more economies,and control of the market,which leads to the transfer between these and world trade,assumes the form of of surplus generated in the dependent countries dependence when some countries(the dominant ones) to the dominant countries;financial relations are, can expand and can be self-sustaining,while other from the viewpoint of the dominant powers, countries (the dependent ones)can do this only as based on loans and the export of capital,which a reflection of that expansion,which can have either permit them to receive interest and profits:thus a positive or a negative effect on their immediate de- increasing their domestic surplus and strengthen- velopment [7,p.61. ing their control over the economies of the other The concept of dependence permits us to see countries.For the dependent countries these rela- the internal situation of these countries as part of tions represent an export of profits and interest world economy.In the Marxian tradition,the which carries off part of the surplus generated theory of imperialism has been developed as a domestically and leads to a loss of control over study of the process of expansion of the imperial- their productive resources.In order to permit ist centers and of their world domination.In the these disadvantageous relations,the dependent epoch of the revolutionary movement of the countries must generate large'surpluses,not in Third World,we have to develop the theory of such a way as to create higher levels of technol- laws of internal development in those countries ogy but rather superexploited manpower.The re- that are the object of such expansion and are gov- sult is to limit the development of their internal erned by them.This theoretical step transcends market and their technical and cultural capacity, the theory of development which seeks to explain as well as the moral and physical health of their the situation of the underdeveloped countries as a people.We call this combined development be- product of their slowness or failure to adopt the cause it is the combination 'of these inequalities patterns of efficiency characteristic of developed and the transfer of resources from the most back- ward and dependent sectors to the most advanced This work expands on certain preliminary work and dominant ones which explains the inequality, done in a research project on the relations of depen- dence in Latin America,directed by the author at the deepens it,and transforms it into a necessary and Center for Socio-Economic Studies of the Faculty of structural element of the world economy. Economic Science of the University of Chile.In order to abridge the discussion of various aspects,the au- II.Historic Forms of Dependence thor was obliged to cite certain of his earlier works. The author expresses his gratitude to the researcher Historic forms of dependence are conditioned Orlando Caputo and Roberto Pizarro for some of the by:(1)the basic forms of this world economy data utilized and to Sergio Ramos for his critical which has its own laws of development;(2)the comments on the paper... type of.economic relations dominant in the capi- 231 Copyright 2001 All Rights Reserved
232 AMERICAN ECONOMIC ASSOCIATION talist centers and the ways in which the latter ex- plementary economic activities (cattle-raising and pand outward;and (3)the types of economic re- some manufacturing,for example)which were lations existing inside the peripheral countries dependent,in general,on the export sector to which are incorporated into the situation of de- which they sell their products.There was a third, pendence within the network of international eco- subsistence economy which provided manpower nomic relations generated by capitalist expansion. for the export sector under favorable conditions It is not within the purview of this paper to and toward which excess population shifted dur- study these forms in detail but only to distinguish ing periods unfavorable to international trade. broad characteristics of development. Under these conditions,the existing internal Drawing on an earlier study,we may distin- market was restricted by four factors:(1)Most guish:(1)Colonial dependence,trade export in of the national income was derived from export, nature,in which commercial and financial capital which was used to purchase the inputs required in alliance with the colonialist state dominated by export production (slaves,for example)or the economic relations of the Europeans and the luxury goods consumed by the hacienda-and colonies,by means of a trade monopoly comple- mine-owners,and by the more prosperous em- mented by a colonial monopoly of land,mines, ployees.(2)The available manpower was subject and manpower (serf or slave)in the colonized to very arduous forms of superexploitation,which countries.(2)Financial-industrial dependence limited its consumption.(3)Part of the con- which consolidated itself at the end of the nine- sumption of these workers was provided by the teenth century,characterized by the domination subsistence economy,which served as a comple- of big capital in the hegemonic centers,and its ment to their income and as a refuge during peri- expansion abroad through investment in the pro- ods of depression.(4)A fourth factor was to be duction of raw materials and agricultural prod- found in those countries in which land and mines ucts for consumption in the hegemonic centers. were in the hands of foreigners (cases of an en- A productive structure grew up in the dependent clave economy):a great part of the accumulated countries devoted to the export of these products surplus was destined to be sent abroad in the (which Levin labeled export economies [11];other form of profits,limiting not only internal con- analysis in other regions [12][13]),producing sumption but also possibilities of reinvestment what ECLA has called "foreign-oriented develop- [1].In the case of enclave economies the relations ment"(desarrollo hacia afuera)[4].(3)In the of the foreign companies with the hegemonic cen- postwar period a new type of dependence has been ter were even more exploitative and were comple- consolidated,based on multinational corporations mented by the fact that purchases by the enclave which began to invest in industries geared to the were made directly abroad. internal market of underdeveloped countries.This form of dependence is basically technological-in- IV.The New Dependence dustrial dependence [6]. The new form of dependence,(3)above, Each of these forms of dependence corre- is in process of developing and is conditioned by sponds to a situation which conditioned not only the exigencies of the international commodity and the international relations of these countries but capital markets.The possibility of generating new also their internal structures:the orientation of investments depends on the existence of financial production,the forms of capital accumulation, resources in foreign currency for the purchase of the reproduction of the economy,and,simultane- machinery and processed raw materials not pro- ously,their social and political structure. duced domestically.Such purchases are subject to two limitations:the limit of resources generated III.The Export Economies by the export sector (reflected in the balance of In forms (1)and (2)of dependence,produc- payments,which includes not only trade but also tion is geared to those products destined for ex- service relations);and the limitations of monop- port (gold,silver,and tropical products in the co- oly on patents which leads monopolistic firms to lonial epoch;raw materials and agricultural prod- prefer to transfer their machines in the form of ucts in the epoch of industrial-financial depen- capital rather than as commodities for sale.It is dence);i.e.,production is determined by demand necessary to analyze these relations of depen- from the hegemonic centers.The internal produc- dence if we are to understand the fundamental tive structure is characterized by rigid specializa- structural limits they place on the development tion and monoculture in entire regions (the Ca- of these economies. ribbean,the Brazilian Northeast,etc.).Alongside 1.Industrial development is dependent on an these export sectors there grew up certain com- export sector for the foreign currency to buy the Copvriaht .2001.All Rights Reserved
ECONOMICS OF IMPERIALISM 233 inputs utilized by the industrial sector.The first tal retains control over the most dynamic sectors consequence of this dependence is the need to of the economy and repatriates a high volume of preserve the traditional export sector,which lim- profit;consequently,capital accounts are highly its economically the development of the internal unfavorable to dependent countries.The data market by the conservation of backward relations show that the amount of capital leaving the coun- of production and signifies,politically,the try is much greater than the amount entering; maintenance of power by traditional decadent oli- this produces an enslaving deficit in capital ac- garchies.In the countries where these sectors are counts.To this must be added the deficit in cer- controlled by foreign capital,it signifies the re tain services which are virtually under total for- mittance abroad of high profits,and political de- eign control-such as freight transport,royalty pendence on those interests.Only in rare in- payments,technical aid,etc.Consequently,an im- stances does foreign capital not control at least portant deficit is produced in the total balance of the marketing of these products.In response to payments;thus limiting the possibility of impor- these limitations,dependent countries in the tation of inputs for industrialization. 1930's and 1940's developed a policy of exchange c)The result is that "foreign financing"be- restrictions and taxes on the national and foreign comes necessary,in two forms:to cover the ex- export sector;today they tend toward the grad- isting deficit,.and to“finance”development by ual nationalization of production and toward the means of loans for the stimulation of investments imposition of certain timid limitations on foreign control of the marketing of exported products. and to“supply”an internal economic surplus which was decapitalized to a large extent by the Furthermore,they seek,still somewhat timidly, remittance of part of the surplus generated do- to obtain better terms for the sale of their prod- mestically and sent abroad as profits. ucts.In recent decades,they have created mech- Foreign capital and foreign "aid"thus fill up anisms for international price agreements,and to- the holes that they themselves created.The real day UNCTAD and ECLA press to obtain more value of this aid,however,is doubtful.If over- favorable tariff conditions for these products on charges resulting from the restrictive terms of the the part of the hegemonic centers.It is important aid are subtracted from the total amount of the to point out that the industrial development of grants,the average net fow,according to calcula- these countries is dependent on the situation of tions of the Inter-American Economic and Social the export sector,the continued existence of Council,is approximately 54 percent of the gross which they are obliged to accept. ow[5]. 2.Industrial development is,then,strongly If we take account of certain further facts- conditioned by fuctuations in the balance of pay- that a high proportion of aid is paid in local cur- ments.This leads toward deficit due to the rela- rencies,that Latin American countries make con- tions of dependence themselves.The causes of tributions to international financial institutions, the deficit are three: and that credits are often“tied”-we find a“real a)Trade relations take place in a highly mo- component of foreign aid"of 42.2 percent on a nopolized international market,which tends to very favorable hypothesis and of 38.3 percent on lower the price of raw materials and to raise the a more realistic one [5,II-33].The gravity of prices of industrial products,particularly inputs. the situation becomes even clearer if we consider In the second place,there is a tendency in mod- that these credits are used in large part to finance ern technology to replace various primary prod- North American investments,to subsidize foreign ucts with synthetic raw materials.Consequently imports which compete with national products,to the balance of trade in these countries tends to be introduce technology not adapted to the needs of less favorable (even though they show a general underdeveloped countries,and to invest in low- surplus).The overall Latin American balance of priority sectors of the national economies.The trade from 1946 to 1968 shows a surplus for each hard truth is that the underdeveloped countries of those years.The same thing happens in almost have to pay for all of the "aid"they receive.This every underdeveloped country.However, the situation is generating an enormous protest move- losses due to deterioration of the terms of trade (on the basis of data from ECLA and the Inter- ment by Latin American governments seeking at least partial relief from such negative relations. national Monetary Fund),excluding Cuba,were 3.Finally,industrial development is strongly $26,383 million for the 1951-66 period,taking conditioned by the technological monopoly exer- 1950 prices as a base.If Cuba and Venezuela are cised by imperialist centers.We have seen that excluded,the total is $15,925 million. the underdeveloped countries depend on the im- B)For the reasons already given,foreign capi- portation of machinery and raw materials for the Copyright 2001 All Rights Reserved
234 AMERICAN ECONOMIC ASSOCIATION development of their industries.However,these sponds to new entries of capital and 45 percent to goods are not freely available in the international reinvestment of profits;in recent years,the trend market;they are patented and usually belong to is more marked,with reinvestments between 1960 the big companies.The big companies do not sell and 1966 representing more than 60 percent of machinery and processed raw materials as simple new investments.(2)Remittances remained at merchandise:they demand either the payment of about 10 percent of book value throughout the royalties,etc.,for their utilization or,in most period.(3)The ratio of remitted capital to new cases,they convert these goods into capital and flow is around 2.7 for the period 1946-67;that is, introduce them in the form of their own invest- for each dollar that enters $2.70 leaves.In the ments.This is how machinery which is replaced 1960's this ratio roughly doubled,and in some in the hegemonic centers by more advanced tech- years was considerably higher. nology is sent to dependent countries as capital The Survey of Current Business data on for the installation of affiliates.Let us pause and sources and uses of funds for direct North Ameri- examine these relations,in order to understand can investment in Latin America in the period their oppressive and exploitative character. 1957-64 show that,of the total sources of direct The dependent countries do not have sufficient investment in Latin America,only 11.8 percent foreign currency,for the reasons given.Local came from the United States.The remainder is in businessmen have financing difficulties,and they large part,the result of the activities of North must pay for the utilization of certain patented American firms in Latin America (46.4 percent techniques.These factors oblige the national net income,27.7 percent under the heading of de- bourgeois governments to facilitate the entry of preciation),and from "sources located abroad" foreign capital in order to supply the restricted (14.1 percent).It is significant that the funds ob- national market,which is strongly protected by tained abroad that are external to the companies high tariffs in order to promote industrialization are greater than the funds originating in the Thus,foreign capital enters with all the advan- United States. tages:in many cases,it is given exemption from exchange controls for the importation of ma- V.Efects on the Productive Structure chinery;financing of sites for installation of in- It is easy to grasp,even if only superficially, dustries is provided;government financing agen- the effects that this dependent structure has on cies facilitate industrialization;loans are avail- the productive system itself in these countries able from foreign and domestic banks,which pre- and the role of this structure in determining a fer such clients;foreign aid often subsidizes such specified type of development,characterized by its investments and finances complementary public dependent nature. investments;after installation,high profits ob- The productive system in the underdeveloped tained in such favorable circumstances can be re- countries is essentially determined by these inter- invested freely.Thus it is not surprising that the national relations.In the first place,the need to data of the U.S.Department of Commerce reveal conserve the agrarian or mining export structure that the percentage of capital brought in from generates a combination between more advanced abroad by these companies is but a part of the total economic centers that extract surplus value from amount of invested capital.These data show that the more backward sectors,and also between in- in the period from 1946 to 1967 the new entries ternal "metropolitan"centers and internal inter- of capital into Latin America for direct invest- dependent "colonial"centers [10].The unequal ment amounted to $5,415 million,while the sum and combined character of capitalist development of reinvested profits was $4,424 million.On the at the international level is reproduced internally other hand,the transfers of profits from Latin in an acute form.In the second place the indus- America to the United States amounted to $14,775 trial and technological structure responds more million.If we estimate total profits as approxi- closely to the interests of the multinational cor- mately equal to transfers plus reinvestments porations than to internal developmental needs we have the sum of $18,983 million.In spite of (conceived of not only in terms of the overall in- enormous transfers of profits'to the United terests of the population,but also from the point States,the book value of the United States's di- of view of the interests of a national capitalist rect investment in Latin America went from development).In the third place,the same tech- $3,045 million in 1946 to $10,213 million in 1967. nological and economic-financial concentration of From these data it is clear that:(1)Of the new the hegemonic economies is transferred without investments made by U.S.companies in Latin substantial alteration to very different economies America for the period 1946-67,55 percent corre- and societies,giving rise to a highly unequal pro- Copyright©2001 All Riahts Reserved-·---.-
ECONOMICS OF IMPERIALISM 235 ductive structure,a high concentration of in- their full development come from the way in comes,underutilization of installed capacity,in- which they are joined to this international system tensive exploitation of existing markets concen- and its laws of development. trated in large cities,etc. The accumulation of capital in such circum- VI.Some Conclusions:Dependent Reproduction stances assumes its own characteristics.In the In order to understand the system of depen- first place,it is characterized by profound dent reproduction and the socioeconomic institu- differences among domestic wage-levels,in the tions created by it,we must see it as part of a context of a local cheap labor market,combined system of world economic relations based on with a capital-intensive technology.The result, monopolistic control of large-scale capital,on con- from the point of view of relative surplus value, trol of certain economic and financial centers is a high rate of exploitation of labor power.(On over others,on a monopoly of a complex tech- measurements of forms of exploitation,see [3].) nology that leads to unequal and combined de- This exploitation is further aggravated by the velopment at a national and international level. high prices of industrial products enforced by Attempts to analyze backwardness as a failure to protectionism,exemptions and subsidies given by assimilate more advanced models of production the national governments,and "aid"from hege- or to modernize are nothing more than ideology monic centers.Furthermore,since dependent accu- disguised as science.The same is true of the at- mulation is necessarily tied into the international tempts to analyze this international economy in economy,it is profoundly conditioned by the un- terms of relations among elements in free com- equal and combined character of international cap- petition,such as the theory of comparative costs italist economic relations,by the technological which seeks to justify the inequalities of the and financial control of the imperialist centers by world economic system and to conceal the rela- the realities of the balance of payments,by the tions of exploitation on which it is based [14]. economic policies of the state,etc.The role of In reality we can understand what is happening the state in the growth of national and foreign in the underdeveloped countries only when we see capital merits a much fuller analysis than can be that they develop within the framework of a pro- made here. cess of dependent production and reproduction. Using the analysis offered here as a point of This system is a dependent one because it repro- departure,it is possible to understand the limits duces a productive system whose development is that this productive system imposes on the limited by those world relations which necessarily growth of the internal markets of these countries. lead to the development of only certain economic The survival of traditional relations in the coun- sectors,to trade under unequal conditions [9],to tryside is a serious limitation on the size of the domestic competition with international capital market,since industrialization does not offer under unequal conditions,to the imposition of hopeful prospects.The productive structure cre- relations of superexploitation of the domestic la- ated by dependent industrialization limits the bor force with a view to dividing the economic growth of the internal market. surplus thus.generated between internal and ex- First,it subjects the labor force to highly ex- ternal forces of domination.(On economic sur- ploitative relations which limit its purchasing plus and its utilization in the dependent countries, power.Second,in adopting a technology of inten- see [1].)! sive capital use,it creates very few jobs in com- In'reproducing such a productive system and parison with population growth,and limits the such international relations,the development of generation of new sources of income.These two dependent capitalism reproduces the factors that limitations affect the growth of the consumer prevent it from reaching a nationally and interna- goods market.Third,the remittance abroad of tionally advantageous situation;and it thus re- profits carries away part of the economic surplus produces backwardness,misery,and social margin- generated within the country.In all these ways alization within its borders.The development that limits are put on the possible creation of basic na- it produces benefits very narrow sectors,encoun- tional industries which could provide a market for ters unyielding domestic obstacles to its con- the capital goods this surplus would make possible tinued economic growth (with respect to both if it were not remitted abroad. internal and foreign markets),and leads to the pro- From this cursory analysis we see that the al- gressive accumulation of balance-of-payments def- leged backwardness of these economies is not due icits,which in turn generate more dependence and to a lack of integration with capitalism but that, more superexploitation. on the contrary,the most powerful obstacles to The political measures proposed by the devel- Copvright 2001 All Rights Reserved
236 AMERICAN ECONOMIC ASSOCIATION opmentalists of ECLA,UNCTAD,BID,etc.,do 5.Consejo Interamericano Economico Social (CIES) not appear to permit destruction of these terrible O.A.S.,Interamerican Economic and Social Coun- chains imposed by dependent development.We cil,External Financing for Development in L.A. have examined the alternative forms of develop- EI Financiamiento Externo para el Desarrollo de ment presented for Latin America and the depen- America Latina (Pan-American Union,Washing- dent countries under such conditions elsewhere ton,1969). 6.THEOTONIO Dos SANTOS,El nuevo cardcter de la [8].Everything now indicates that what can be dependencia,CESO (Santiago de Chile,1968). expected is a long process of sharp political and 7. -La crisis de la teoria del desarrollo y las military confrontations and of profound social relaciones de dependencia en America Latina, radicalization which will lead these countries to a Boletin del CESO,3 (Santiago,Chile,1968). dilemma:governments of force which open the 8. La dependencia economica y las alterna- way to facism,or popular revolutionary govern- tivas de cambio en America Latina,Ponencia al ments,which open the way to socialism.Intermedi- IX Congreso Latinoamericano de Sociologia (Me- ate solutions have proved to be,in such a contra- xico,Nov.,1969). dictory reality,empty and utopian. 9.A.EMMANUEL,L'Echange Inegal (Maspero,Paris, 1969). 10.ANDRE G.FRANK,Development and Underde- REFERENCES velopment in Latin America (Monthly Review 1.PAUL BARAN,Political Economy of Growth Pres8,1968). (Monthly Review Press,1967). 11.I.V.LEvIN,The Export Economies (Harvard 2.THOMAS BALOGE,Unegual Partners (Basil Black- Univ.Press,1964). well,1963). 12.GUNNAR MyRDAL,Asian Drama (Pantheon,1968). 3.PABLO GONZALEZ CASANOVA,Sociologia de la ex- 13.K.NKRUMAH,Neocolonialismo,tiltima etapa del plotacion,Siglo XXI (Mexico,1969). imperialismo,Siglo XXI (Mexico,1966). 4.CEPAL,La CEPAL y el Andlisis del Desarrollo 14.CRISTIAN PALLOIX,Problemes de la Croissance Latinoamericano (1968,Santiago,Chile). en Economie Ouverte (Maspero,Paris,1969). Copyright _2001 All Rights Reserved