..

REFLECTIONS
01 THE
WORLD
ECONOMIC
CRISIS
,.
REFLECTIONS
ON THE
WOR
ECONOMIC
CRISIS
AR GUER FRK
(g
MONTHLY RV PRS
NE YOR A LONDON
Copyright 1981 by Andre Gunder Frank
All rights reserved
Librar o/Congress Cataloging in Publication Data
Frank , Andre Gunder, 1929-
Reflections on the world economic crisis.
1. Economic history-1945- -Addresses,
essays, lectures. 2. Underdeveloped areas-
Addresses, essays, lectures. 1. Title.
HC59.F7323 330.9'048 80-29270
ISBN 0-85345-563-5
ISBN 0-85345 -564-3 (pbk.)
Monthly Review Press
62 West 1 4th Street, New York, N.Y. 1 0011
47 Red Lion Street, London WC lR 4PF
Manufactured in the United States of America
1 09 8 765 432 1
'-. j
CONTENTS
Preface
Reflections on the World Economic Crisis 1.
2.
World Crisis and Latin America's
International Options 17
Economic Crisis, Third World, and 1984 3.
4. World Crisis and Underdevelopment
23
39
5. Imperialism, Crisis, and Superexploitation
in the Third World 53
6. The Economics of Crisis
and the Crisis of Economics 66
7. Equating Economic Forecasting
with Astrology Is an Insult-
to Astrologers 104
8. World Crisis Theory and Ideology
9. Let's Not Wait for 1984:
Discussion of the Crisis
Andre Gunder Frank and Samir Amin
Notes 163
111
143
PRFACE
This book brings together some of my lectures and essays on
the present world economic and political crisis dating from
1972 to 1980, as well as a long interview made jointly with
Samir Amin, with whom I have had large areas of agreement
about this crisis, in 1974. All of these pieces were originally
intended for students and general readers who had no special
economic or other professional training and who were hardly
aware of the depth of the crisis before the mid- 1970s. There
fore, these ideas should now be all the more comprehensible
to general audiences, whose own experience in the meantime
has made them increasingly aware of the development of this
world crisis. Some of the material in the later chapters is based
on my recent research; a more technical and extensive presen
tation is contained in my two longer books, Crisis: In the World
Econom
y
and Crisis: In the Third Worl, published in 1980 and
1981, respectively, by Holmes & Meier in New York and
Heinemann in London.
The publication of these lectures and essays in a single
volume necessarily involves some repetition of the central
thesis, especially with regard to the place of the economic crisis
of the industrial capitalist countries in the world economy. For
present purposes, however, I have cut or otherwise revised
some of the original pieces in order to avoid undue repetition
?
f detail. On the other hand, the assembly here of the chapters
In the chronological order of their delivery usefully reveals the
evolution of one observer's perceptions of and refections on
the crisis step by step with its real development. Therefore this
book also offers something of a sociology of knowledge (at
least by one student) of the development of this world crisis
1
2
Andre Gunder Frank
and its economic, social, political, ideological and theoretical
manifestations between 1972 and 1980.
'
.
-he first

hapter, announcing the development of a capitalist

CrISIS of capItal accumulation, is a lecture delivered in Rome in
1972, when the existence or even the threat of such a crisis was
ha
r
dly yet perceived by anyone. With later hindsight the indi
catIons of the development of this crisis coul have been ob
served from the mid-1960s, although some economists and
politicians s

iII have not seen them today. Before the 1973-

1975 recessI
<
, the manifestations of the developing crisis
were hardly vI

Ible to the untrained eye of the general public,

or even the tralOed eye of most professional economists. Paul
Samuelson, the world's foremost Keynesian economist author
of the m
.
ost
.
widely studied economics text, Winner
'
of the
N
o
bel rIze lO economics, and economic advisor to presidents,
matntat?ed as late as 1970 that Keynesian economic theory

nd poltcy had

onverted the prewar business cycle dinosaur

lOtO a postwar ltzard that virtually eliminated recessions. As a
nearly solitary voiC
(
in the wilderness (along with my friends
Ernest Mandel, GIOvanni Arrighi, Bob Sutcliffe, Andrew
Gwy

, and very few others) in 1972, it should come as no

surprIse
.
that my analysis of the crisis was stilI relatively vague
and partIal. But I believe it is a useful exercise to read these
early reflections here and now.
Th

second
.
chapter was prepared for a symposium on Latin
AmerIca held lO !ondon in early 1974 under the sponsorship
of t?e Royal I

stltute o
.
f International Affairs, with the partici
patI
?
n of a tlO AmerIcan ambassador and representatives of
the InternatIonal fnancial press. In contrast to them, I outlined
some of th
I
r

bable exploitative and repressive consequences

that t
.
he cr

sIs lO the metropolitan capitalist countries would

have lO LatlO America in particular and in the Third Wodd in
general. I regret to say that-as the reader can now verify-my
somber predictions have been more than fully borne out by
subsequent developments. Moreover, this conference took
place shortly after the outbreak of the petroleum crisis in
October 1973, when politicians and publicists the wodd over
hastened to blame the "OPEC oil sheikhs" for all manner of
Preface 3
Omic diffculties and particularly for the beginnings of the
econ
I'
.
d h d h
197
31975 recession. By contrast, lOsIste t en an t ere
h t the economic crisis was much deeper and had other
t a
es and that the oil crisis was more the consequence than
cauS ,
al
. .
the
cause of the real

ener C

lSls .
.
The third chapter IS a comblOatIon of two lectures .
.
The fr
.
st
was delivered at the International Congress of SOCIology lO
Toronto, Canada, in August 1974 and concentrated the
litical and economic problems generated by the CrISIS of
pital accumulation in the West, with some references
.
to the
socialist countries of Eastern Europe. he s

cond was deltver

d
at the University of Papua New GUlOea lO Port Moresby lO
July 1975 and therefore placed greater em
p
hasis o
.
n the p

s
peets for the Third Wodd in the current Interna
t
al CrI

IS.
The two lectures were consolidated into a single artIcle, whICh
was published in World Development in 1976 and is reprint

d
here. By the time of the Port Moresby conference, the graVIty
of the crisis had become abundantly evident-there were more
than 15 million registered unemployed in the industrial
economies and rates of infation ranged from 10 t. O
25 percent
a year. The attribution of the recession,

nd the
.
crisis in
general, solely or even primarily to the prIce of oIl
.
no
longer very plausible, and an increasing number of polltlCIans
and publicists were beginning to appeal to other arguments to
justify the austerity policies that their populations were asked
to accept without much resistance or complaint
:
S
.
ome per
sonalities, like US Secretary of State Henry KisslOger and
West German Chancellor Helmut Schmidt, began to specu
late about the danger of another depression like that of the
1930s. Yet with the recovery after mid-I975, these fears
began to disappear and were replaced by renewed optimism.
The recession was a short-lived bad dream that had supposedly
been caused by a unIque combination of "external shocks"
like oil prices and bad harvests-which would not recur and
could therefore be safely forgotten. Like hope, unfounded
optimism and ostrich-like behavior seem to spring eternal.
The long recovery until 1979 seemed to justify this hope for
many, but not for the present writer. On the other hand, the
4
Andre Gunder Frank
continuing weakness of the recovery in investment and em
ployment in the metropolitan economies (indeed, unemploy
ment continued to grow during the "recovery" in Europe,
Japan, Canada, and Australia) and the deterioration of the
balance of payments in the peripheral economies also gradually
undermined this hope for others and sowed increasing confu
sion among economists and politicians.
The fourth chapter is a transcription of a lecture which I
delivered in the Netherlands, at the Catholic University in
Tilburg, in October 1976. It begins with a review of the then
current economic development and political manifestations of
the crisis, particularly in the Third World, and attempts to
explain them by analyzing how the crisis of accumulation has
led to the imposition of austerity policies in the industrial
capitalist countries and to accelerated differeiltiation, growing
economic exploitation, and increased political repression in
the Third World. The discussion examines the economic
imperatives and political feasibility of pursuing austerity poli
cies in the industrial countries and also refers to the growing
participation of the socialist countries in the capitalist inter
national division of labor.
Despite the recovery from the 19731975 recession, I con
tinued my research on the further development and deepening
of the crisis. The ffth chapter is a lecture delivered at the
University of Barcelona in May 1977; it draws on my ongoing
research into the superexploitation in the Third World as the
counterpart of its new export promotion, particularly of manu
factured goods. In the emerging international division of
labor, low-wage exports from the Third World are intended
to reduce costs of production and support proftability for
international capital domiciled in the metropolitan countries.
The same chapter also reviews the ideology and doctrine of
"national security" that Third World military and authoritarian
regimes have been invoking to legitimate their increased
exploitation and repression.
Chapter 6 returns to the industrial capitalist countries. It
was originally drafted (but subsequently not used) in 1976 as
the frst two chapters of my longer Crisis books. As subse-
Pre/ace 5
ntly edited and published by the editors of Critique, this
que
f
. L
chapter examines the bankruptcy 0 economlC lorecasters,
who had been completely unable to foresee the 19731?7 5
recession or the limitations t

the recove

. It so eX

lOes
h ineffectiveness of KeyneSIan economIC poltcy and ItS de
=nd manaers, who were completely helpless
.
in te f

ce of
the recession, except to promote it further, and lOaCtl

e lO the
recovery, except to restrain it. Subsequently, ec

OomlC even

s
and the December 1977 meetings of te .mencan conoml
.
c
Association led Business Week to a slmtlar eval

tlon, as
.
It
wrote in its issue of January 16, 1978, that the ec

nomlCs
profession fc

d int

ll

ctual ankruptcy . . . as

he O1garUy
old-maidish SClence IS lOcreaslOgly concerned W1t

ran

lO

and rearranging old furniture . . . and the AdmlO1stratlOn s
statements about the economy had been so vague th
.
at th

y
had the character of a Greek oracle." Chapter 7, wntten lO
early 1979, documents the extreme extent to which not only
vague but downright contradictory government statements
about the economy had become the rule throughout 1
.
977. US
Secretary of the Treasury Michael Blumenthal, for lOstance,
predicted within one month's time that at least three years of
prosperity lay ahead and that the then current upturn would not
last. After his resignation from public office, Mr. Blumenthal
said that "the people running the major economies of te
world don't know what they are doing . . . . Of all the economlC
projections we got on growth and unemployment-and we
consulted a wide spectru-not a single one tur

ed out to
.
be
right" (Financial Times, October 19, 1979). ThIS was tellt

g
commentary on the best that orthodox, professional economlC
forecasting and high-level economic policymakn

have had to
offer in the face of the ever deepening world cnSlS.
This same theme is taken up aain on a much broader canvas
in Chapter 8, which combines an essay and a lecture from
mid-1979 that were revised in 1980. It reviews both the
development of the real, international economic and poltcal
crisis and the associated crisis in economic theory, polmcal
ideology, and social policy in each sector of the world

nd in
Current political philosophies tendencies, from the reactlonary
6 Andre Gunder Frank
rigt through the soci democratic center to the Marxist left.
Thls capter summanzes many of the findings presented at
len

t tn IY onger b

oks on the crisis and explores some of

thelf l

phca
.
o
,
at a nme when President Carter is lamenting

he na
t
al

ns

s O! confdence," the World Bank and other

tnternanonal tnstltunons foresee growing poverty in the Third
World, and the leading socialist and self-reliant countries "teach
others a lesson" by invading their neighbors to change their
governments or political policies.
The n p
.
iece i

the first English translation of a very
lngth

101nt
.
tnt

rvlew of Samir Amin and myself, frst pub

hshed tn Itallan tn It Mantfesto in February 1974 and subse
quently t

anslated into various other languages. The interview

ranged
.
ldely over

any of these problems. Already in 1974

we r
.
evlewed, and, tn alternate fantasies of Orwell's 1984
prevlewed dev
.
elopments in various parts of the world in crisis:
Our mess

ge tn 1974, as now, was "Let's not wait for 1984" to

do somethtng about it!
June 1980
Andre Gunder Frank
Norwich, England
1. RECTIONS ON THE WORL ECONOMIC CRISIS
Since 1970, though the roots go further back than that, there
has been a new crisis of capital accumulation in the imperialist
camp. One could perhaps discuss whether this crisis is most
similar to the one in 1873, the frst so-called great crisis. One
of the important things which became evident at that time was
that it was possible to increase the wage level in industrialized,
metropolitan countries in spite of, or even as an integral part
of, the crisis. As Alonso Aguilar noted yesterday, however,
this was done at the cost of the growing exploitation of the
labor force in the colonies and neocolonies associated with
imperialist penetration. Or perhaps the crisis is more like the
world crisis in 1929. At that time, at least in some colonial and
neocolonial countries, what then seemed to be a more autono
mous capitalist development began; yet this was later revealed
to be nothing but a sort of repetition of previous dependent
development. In other words, the frst kind of dependent
development, focussed on raw material extraction, followed
the 1873 crisis, while another form of development came with
the last crisis and centered around an industrial pole
.
The third
possibility would be to discuss this current crisis as more than a
major cyclical crisis, but also a a long-term structural crisis of
the
capitalist process of capital accumulation. In addition to
having cyclical features, the crisis may bring with it transforma
tions unknown up to now and perhaps still not adequately
This is a revised version of a speech presented in Spanish at the Conference
of Latin American and Italian Social Scientists, organized by the Institute for
Study of Contemporary Society (ISSOCO), in Rome, September 1972.
Some references to statements by other participants have been omitted. It
Wa translated by Mimi Keck.
7
8 Andre Gunder Frank
analyzed because we are only at the beginning of this great
cnsts.
However you want to look at it, a series of features of the
current crisis more or less jumps out at you: the relative
decline of production, the decline of profts and investments,
and the resulting renewed strugle over markets. One of the
ways this was expressed was in last year's [1971] fnancial
crisis. Even the United Nations Conference on Trade and
Development secretariat recognized that this was primarily a
fnancial crisis motivated by a strugle over markets, develop
ing through changes in exchange rates and currencies, with the
goal being to win and hold onto more markets than one's rivals.
Another more or less clear expression is the resurgence or
strengthening of economic blocs. After twenty yeas of what
for some seemed to be an ae of superimperialism, there has
been a tendency toward a renewed strengthening of economic
blocs, like the United States and Latin America, Western
Europe with its backyard in Africa, and Japan's renewed ex
pansion, similar to its Greater East Asian Co-prosperity Sphere
of the 1930s. This leaves undefined for the moment an area
represented primarily by Asia and perhaps by part of the
Middle East. It is interesting to note that in the two previous
crises there was a marked tendency toward the strengthening
or formation of economic blocs; classical colonialism was one
expression of this. The same can be said of the policies which
Joan Robinson and others call "begar-my-neighbor," the
attempt to make one's neighbor pay the costs of the crisis
.
With the development of fascism in Europe, a large part of
Eastern Europe was similarly used as a backyard for the
imperialist powers.
As in the past, it also appears that the greatest qualitative
changes in the international division of labor occur during a
period of crisis in capital accumulation, and that these changes
are then quantitatively extended during a following period of
expansion, which has been facilitated by these changes. Such
upswings evidently took place after previous crises; it remains
to be seen whether the present crisis will also be followed
by an expansion.
Refections on the World Economic Crisis 9
I would like to stress the fact that even though quantitatively
these changes in the int

rnatio
?
-al division of labor are m
?
st
isible during the ascendmg penods of the great cycle, qualtta
vely they seem to be concentrated at the moment of crisis and
in the frst years of downturn. It is then that a major strugle
over
markts takes place, a

trugle that is also based on

.
a
relative change in the productive forces between one econOflC
power and another, as happene at th

end of

he las

c

tury.
These new qualitative changes m the mternational dtvlSlon of
labor are, of course, seen most clearly in Europe and Japan.
One aspect of these changes is the development of sub
imperialism, as Ruy Mauro Marini analyzed it with referenc

to
Brazil. But the Brazilian case must not be seen as somethmg
unique: we could also study the subimperialist development of
South Africa. Indeed, it has been said that Brailian and South
African subimperialism behave like allies at the same time as
they behave like competitors in Africa. Evidence of South
African subimperialism can be seen in what is called the
"dialogue" in Africa, which frst took place between South
Africa and Dr. Hastings Banda of Malawi and, later, with
Mouphouet-Boigny of the Ivory Coast. We can suppose that
this will happen more and more with other African countries,
even those where, up to two or three years ao, the idea of
entering into a dialogue with the South African racist govern
ment was unthinkable. Nevertheless, today they are doing it,
in part on their own account, in part not. In the case of the
Ivory Coast, which is nothing but a neocolony (hardly that, for
it is practically a colony of France), it is clea that its interest in
South African subimperialism can only be the interest of France
and perhaps of the whole European Economic Community. In

his perspective, it can be seen as the cutting edge, as an

mstrument with which to confront US imperialism in Africa,
which (and I don't know if this could happen) could in turn
carry on its activities through Brazilian subimperialism.
. Other cases include the nascent subimperialism in Iran
In the Middle East (even though Israeli subimperialism has
been active there for a long time). The new and growing
subimperialism in formative stages in India is important for the
'10
Andre Gunder Frank
whole South Asian subcontinent, now that it has eliminated
Pakistan as a rival in the same way that Brazil eliminated
Argentina as a potential rival in its respective sphere. What is
interesting about Indian subimperialism is its relation not only
with the United States, but with the Soviet Union. The two
powers would seem to be encouraging Indian subimp

rialism:
although they are competitors, they also have common mterests
in the region, and Indian subimperialism could protect these
:
Evidently the spread of the subimperialist eno

enon IS
due not only to the economic, political, and mdltary mterests
of the imperialist powers or of the Soviet Union, but also to
the development of the productive forces in each of thos

regional centers-India, Brazil, Israel, and so forth. In

ddl
tion there is growing interest on the part of the SOClalist
coutries, and especially the Soviet Union, in part
.
icipatin

to a
much greater degree and in a different way in the Intern

tIO
?
al
division of labor, which is now undergoing these qualltatIve
changes. The economic, diplomatic, and political offensive by
the socialist countries must at least patly be interpreted as an
attempt to take advantage of this conjuncture, and of the
changing international division of labor. Th

y do not want t
.
o
be left out of the new positions which the dIfferent economlC
powers will have reached when this period
.
of rapid
.
change is
over. All evidence points to the fact that thIS offenSIve on te
part of the socialist countries stems in part
.
f

om dom

lC
causes, and is certainly also due to charactenstIcs of SOClallSt
capital accumulation, which ae insuffciently well unders
.
tood.
It is interesting to note the similarity, perhaps superfiClal but
perhaps not, between the role of the subimperialist powe
!
s
.
in
the international division of labor and that of some SOClallSt
countries, particularly the Soviet Union
.
In both cases, tey
import the most advanced technology possible from the Im
perialist centers: that is, they do not import the most advanced
technology, because they cannot get access to it, but they
import what we might call second-level technology,
nd they
develop their industry using this. The products of tha

mdustry
are then exported to poorer countries, whose productive forces
are currently not developed enough to participate in the inter-
Refections on the Word Economic Crisis 11
national divi

io
.
n of labor
.
at the same level. It is also interesting
that the SOClallSt countnes have a growing balance of pay
ments surplus with the underdeveloped countries: the under
develo
p
ed coun

ries run a defcit both with the imperialist

countnes a

d WIth the socialist countries, and the growing

exchan

e WIth the socialist countries only serves to agravate

the underdeveloped countries' defcit.
The tendency is thus for the socialist countries to export
raw material-especially fuel-to the imperialist countries
importing industrial products in turn. At the same time, the;
exp

rt manufactured goods to the underdeveloped countries,

and Import raw materials from them, but not the same ones
they export to the imperialist nations. In reality, this is planned
by the socialist countries themselves, as can be seen in the
1971 Comecon economic plan of the Council for Mutual
Economic Assistance, in the national plans of different sociaist
countries, and in t?eir public statements. Now, it is interesting
to note that Corrlere dela Sera (I don't know whether it is a
reliable source) said recently that last week's US-Soviet talks
arrived at an agreement that implies an exchange between
these two countries, for 1973 alone, amounting to $5 billion,
equal to more than half of US exports to all of Latin America.
n other words, we are talking about something signifcant, not
JUSt a secondary phenomenon within the international division
of labor.
All this must have a political counterpart, what has come to
be known on an international level as "detente." This was
exemplifed in the well-known Nixon trips. I would be inclined
to say that the crisis in the imperialist countries has as a
Consequence-Ruy Mauro Marini might say that the conse
quence has a cause-the growing mobilization of the working
clas
d
. .
.
s an ItS strugle for hIgher waes, or at least its strugle
t
gal
llst the bourgeois imperialist governments' attempts to
h
ower the wage

e. In

he case of England, for example, this

as been very VISIble. FIrst the Labour government failed to
com
.
h I '
e up WIt a aw to restram labor. The Conservative Party
:
s

oted in to me

uch a la

and drew up the Industrial
latIons Act. But m splte of major efforts, it has not up to now
12
Andre Gunder Frank
been able to enforce that law because of the exceptional resist
ance of the English trade unions, a level of resistance which has
not been seen since perhaps the 1926 coal strike. Other Euro
pean countries have also experienced growing working-cl

s
mobilization, which the bourgeoisie has attempted to contain,
or to channel in a social democratic direction (borrowing the
word "social democracy" from an earlier crisis).
I do not know if this implies-and this is what Mauro Marini
seems to think-that, despite many differences, we are ex
periencing a crisis similar to the one of a
.
centu
:
ago,
.
wich
was not expressed by a decline in wages 10 the 10dustnallzed
urban centers but therefore all the more so in the colonies and
neocolonies. If this were true, it would indicate-though it is a
little too soon to say-that social democracy will be on the
agenda in the imperialist countries, as in the nomination of
George McGovern as Democratic candidate for president in
the United States, the popular front or even popular unity type
of pact between Franois Mitterand and the F

ench Com

munist Party, or what some have called "Chile WIth spaghettl
sauce" in Italy. These would be, in other words, social demo
cratic efforts whose chances are diffcult to predict, but they
are accompaied by fascist responses in case social democratic
efforts fail.
In the underdeveloped countries the crisis also shows up in
growing mobilization, especially of the working masses. his is
particularly the case in Latin America, but one can also P010t to
analogous phenomena in South Asia, Bangladesh
.
' Celon, to a
certain extent in Indira Ghandi's India and even 10 All Butto's
Pakistan, after his defeat in the war. Up to the present, this has
also ended in a series of neosocial democratic attempts to form
broad electoral fronts, as seen in Ecuador, Venezuela, Uruguay,
in the electoral conduct in Chile until its victory in 1970, and in
the resurgence of Peronism in Argentina. It is premature to
voice an opinion about the prospects of these social democratic
arrangements in the underdeveloped countries. In Ceylon
they have already met with almost complete failure; in Bang
ladesh, though they are still very new, they are heading for
defeat and we can note a slow movement toward a kind of
, ,
Refections on the World Economic Crisis 13
neofascism. This also appears very likely in India, to say nothing
of Egypt and other countries in the Middle East. In Ecuador,
electoral procedures were cut short by a coup. We can harbor
some doubts about Venezuela, Argentina, and Uruguay. In
summary, the tendency toward neofascist arrangements seems

o be gro
,
ing i

te unerdeveloped countries, particularly
10 the sublmpenallst natIons-especially, of course for the
reasons Marini has given.
'
Tese altenatives would leave a margin for building a
thesls-somewh
.
at like Arghiri Emmanuel's, although that was
errone01sly d

ed from his analysis of unequal exchange

that the Impenallst countries might be able to face the world
crisis "successfully" by using social democratic means. This
would be possible if they could make an appreciable part of the
cost and fnancing of the recovery of the rate of proft fall back
on the superexploitation of the underdeveloped countries and
also of at least some of the socialist countries. However and
especially as the crisis grows deeper, we must bear in mind the
danger that, in spite of the safety valve which the underde
veoped and
.
socialist worlds represent for imperialism, and in
splte of SOClal emocratic arrangements, or, better yet, be
c
.
aus

of the SOClal democratic leadership of popular mobiliza tIon 10 te imperalist countries, the bourgeoisie may be pre
sente

lth a
.
fasClst or neofascist option as the only way out of
the cnSlS. ThIS could happen with both the imperialist and the
underdeveloped b?

rgeoisies-unless, of course, the working

class h

s the pohucal leadership necessary to open up a

revoluuonary and socialist solution.
Fin
.
ally, then, under these circumstances we should not be

rpnsed th
.
at dependency theory, as it was developed during
fr
e 1,960s, IS not

t
.
all ade

uate to understanding and con

OntlOg the new criSIS of capltal accumulation which requires
a r
.
.
' eturn to the analYSIS of that process. It IS natural that this:
sh
.
ld ?e happening now, as accumulation is once again in
Cf
ISIS: L

ke the business cycle, capital accumulation is studied I

only I

ltS phase of decline, because in its phase of ascent no
cy
cle IS perceived, only a "natural" and "permanent" develop
ment upward. Then the study of the cycle passes out of fashion'
Andre Gunder Frank
/until the next crisis, when it becomes fashionable again. Thus
we can understand why today there is a call for this kind of
global analysis. It is a response not so much to theoretical gaps,
which might have been found long ago because t

y were
inherent in the theory of dependency, but to the polmcal and
ideological demands of the present situation in the world today.
The call for a study based on class structure and its dynamic
in each country is also necessary in view of the renewed mass
mobilization underway in the imperialist as well as the under
developed countries. Although ependenc

theory is de

d, i
?
reality it is alive, because there IS no questIon of replacmg It
with a theory or ideology that negates dependency, but rather
with one that goes beyond the limits of dependency theory to
incorporate dependency and dependency theory into a global
analysis of accumulation. This also implies the inadequacy of
the kind of analysis-I would even call it ideology-coming
from such sources as the orthodox, pro-Moscow Communist
parties. In the imperialist countries they criticize dependency
theories and then espouse a theory which on the one hand
criticizes Wall Street-type monopolies, and the connections
among them as separate entities, and on the oter h

nd
focuses on an apparent antifascist strugle, the claIm bel
,
:g
that fascism is only an occasional, extreme, and superfClal
aberration of capitalist society, a sort of nonmalignant tumor
that can be extricated by a coalition policy of social democratic
fronts. Furthermore, in the underdeveloped countries-in
Latin America, but also in India, and perhaps elsewhere-the
Communist parties also criticize dependency theory. But wh

t
they try to put in its place is nothing but an

pdate of tral
tional policy of anti-imperialist, antioligarchlC
.
al strugle I
?
favor of a bourgeois democratic revolution. ThIS, so to say, IS
the underdeveloped social democratic version of the same
position but applied to the specifc conditions of

he u

d
.
er
developed, neocolonized countries. This Com

untst
l
o

1t1on
is not a real critique of dependency theory; stIll less IS It the
needed substitute for dependency theory. In fact, it is nothing
but the resurrection of the position (of the Third International)
that these parties adopted during the last crisis, when it was
Refections on the World Economic Crisis
15
obviously not very successful. In the current crisis, which has
original characteristics, we can expect that this position will be
destined to even greater failure.
Therefore we have to support the call for a global analysis
of accumulation, and perhaps attempt to thoroughly analyze
power politics. Finally, we must consider that this apparent
choice between fascism and social democratic reformism is
p
erhaps less a choice than two different forms of one single
lme of development in the crisis, in both the imperialist and
subimperialist countries, in the underdeveloped and sub
imperialized ones. In this respect it is symbolically interesting
to watch the attemp" of Italian fascism to convert Peronism
into a banner, given the fact that Peronism, though at the time
it sometimes called itself fascist, has been interpreted for the
last two decades in Latin America as a social democratic
reformist, bourgeois movement.
'
.
Part!culary n the underdeveloped countries, and perhaps
m the Impenallst ones as well, we are beginning to understand
that these categories (social democracy, fascism, etc. ) were
borrowed from the last crisis, and in some cases even from the
one before that. They may no longer be adequate for the social
form which the current crisis will take. It could combine
elements of social democracy and fascism into a form that has
been little known up to now and that could be nationalist
corp
?
ratist or neocommunist. We must emphasize the fact
that m the underdeveloped countries developments will take
or have already taken, the form of wars, where most of th
combatants act in the capacity of figureheads for other powers.
For revolutionaries, then, It will be important in the frst
place
.
not to let ourselves be deceived by solutions that are not
solutions, but rather to prepare ourselves and the mobilized
mas

es,
.
especially the working masses, to take advantage of
the l
?
evItable worsening of the crisis, and to avoid insofar as is

osslble both social democracy and fascism, or any combina

tIon of the two. And in those cases where the crisis generates
an
obj

ctively revolutionary situation-which may happen in

f

rt
.
WIth the help of those wars that Jose Augustin Silva was
a king about-we must be able to take advantage of these
16
Andre Gunder Frank
crises and be in a position to make the socialist revolut

n. We
must not once again lose the opportunity the last cnS1S pre
sented in countries like France, Italy, and Greece; th

e

I
re
cisely because of the kind of strategy we have been
.
cnn

lzmg,
the opportunity was lost, and we have the world sltuanon we
live in today.
2. WORLD CRISIS AND lTIN AMRICA'S
INTERNATIONAL OPTIONS
The international options of the countries of Latin America
will depend in the future, as in the past, on the course of
capitalist development in the remainder of the world, including
internal political developments in the Latin American countries
themselves. These in turn will depend largely on the nature
and course of capitalist development in the world as a whole, as
well as on the stage and kind of capital accumulation in each
Latin American cQuntry. With respect to these economic and
political developments during the 1970s, we may hazard the
following working hypotheses. These summarize, however
schematically, some of the contradictory tendencies of uneven
capitalist development, which for the foreseeable future are
likely to determine the international options and relations of
Latin America in the 1970s.
Uneven capitalist development. World capitalist development
appears to be entering upon another major crisis of capital
accumulation analogous to, albeit not repetitive of, the period
between 1873 and 1895, which witnessed the birth of
monopoly capitalism and imperialism, and the period which
included World War I and World War II and the intervening
Great Depression. Whether or not such periods of more fre
quent and deeper cyclical crises of accumulation correspond to
the quarter-century-long downswings of so-called long cycles
This is a revised version of a paper that wa presented at a symposium on
Latin America, sponsored by the Royal Institute of International Affairs in
London, May 1974.
17
I 8
Andre Gunder Frank
soue::ues assoc:a:ec ::| :|e aaue oi Koac:a::eii aac o:|e:s,
:|e eac oi :|e loag pos:-vo:lc va: ll aps:ag aac :|e
eeg:aa:ag oi :|e ca::ea: coas:ag ua; :ea:a::vel; ee ca:ec
i:ou 96, ai:e: |:c| :a:es oi p:oa:ae:l::; aac oi g:o:| oi
:aves:uea: :a :|e ua,o: cap::al:s: coaa:::es oi ro::| Aue::ca,
La:ope, aac )apaa seeu :o |ave :a:::a:ec a pe::oc oi cecl:ae
I|e coa:eupo:a:; s:aga::oa, ca::eac; c::ses, aac e:ea:|
:a|:ag c|aages :a :a:e:aa::oaal pol:::cal :ela::oas ua; ee seea
as s;up:ous oi :|:s g:o:ag c::s:s oi accauala::oa. I|e saue
c::s:s io:eeoces :ac:easec :eupo:al, spa::al, aac sec:o:al ual
ac, as:uea:s, as ell as a s|a:pea:ag oi :|e class s::agle, aac
:|:s a: :|e saue ::ue :ll geae:a:e :|e oppo::aa::; aac :|e
aecess::; io: ua,o: :eac, as:uea:s :a o:lc cap::al:s: cevelop
uea:, :eac, as:uea:s |:c| :ll ee aecessa:; :i ca::al:su :s :o
ove:coue ::s p:esea: c::s:s :as:eac oi ee:ag ces::o;ec e; :: aac
:eplacec e; aao:|e: soc:al s;s:eu. I|e :a:e:aa::oaal :ela::oas
oi :|e coaa:::es oi Ia::a Aue::ca, l:|e :|ose oi :|e :eua:ace:
oi :|e o:lc, :ll ee la:gel; ce:e:u:aec e; :|:s p:ocess oi
ualac,as:uea: aac :eac, as:uea: :a :|e cou:ag ;ea:s.
The interational division 0/ labor. I|e :ac:easec es|aas::oa oi
ua,o: :aves:uea: oppo::aa:::es aac :ecacec :a:es oi p:oi: a:e
l:|el; :o :es::a:a :|e aaa:::a::ve es:eas:oa oi :|e :a:e:sec:o:al
aac :a:e:aa::oaal c:v:s:oa oi laeo: :a ce::a:a c::ec::oas ,sac| as
:aaaa; s|ops :a :es::le aac elec::oa:cs pa::s :acas:::es :o
a:eas oi c|eap laeo:, :i oal; eecaase oi pol:::cal :es:s:aace e;
aa:oas aac o:|e:s :a :|e ue::opol::aa ecoaou:es:. A: :|e
saue ::ue, :|e c::s:s oi o:lc cap::al accauala::oa :s l:|el; :o
geae:a:e ceepe: aac ias:e: aal::a::ve c|aages :a :ec|aolog:cal
:avea::oa aac :a :|e :a:e:sec:o:al aac :a:e:aa::oaal c:v:s:oa
oi laeo:. I|e cevelopuea: oi ua,o: ae soa:ces oi eae:g;
,aaclea: ias:oa, sola:, aac so io::|:, esplo::a::oa oi :|e oceaas
aac :|e oceaa aoo: io: u:ae:als aac ag::cal:a:al p:ocac:s,
aac cevelopuea:s :a e:oc|eu:s::; aac geae::cs a:e l:|el; :o ee
auoag :|ese ua,o: ae c::ec::oas. li aac |ea p:oa:ae:l::; caa
aga|a ee ea|aacec :|:oag| :ec|aolog:cal p:og:ess, :ecac::oa
oi :|e age :a:e, aac aa :ac:e+se :a :|e :a:e oi esplo::a::oa, :|e
ceg:ee oi cap::al :a:eas::; oi cap::al:s: p:ocac::oa :s l:|el; :o
Latin America's International Options I9
aga|a :ac:ease. la :|ese pe::ocs oi accele:a:ec ualac,as:uea:
aac :eac, as:uea:, :|e cevelopuea: aac esplo::a::oa oi soa:ces
oi :a ua:e::als appea:s :o ee uo:e :upo::aa: :ela::ve :o :|a:
oi :|e p:ocac::oa aac ::ace oi :acas:::al couuoc:::es :|aa :: :s
ca::ag :|e cecaces oi :ap:c cap::al:s: ecoaou:c g:o:|, sac| +s
:|ose p:ecec:ag vo:lc va: l aac iollo:ag vo:lc va: ll. la
acc:::oa, :|e cou:ag pe::oc ua; ::aess a ::aasie: oi :|e
p:ocac::oa oi eae:g; aac ce::a:a u:ae:als :o :|e :acas:::al:zec
coaa:::es aac :|e:: oceaas, |:le :|ese coaa:::es :ll :a :a:a
::aasie: soue p:ocac::oa, ao: oal; oi :es::les aac elec::oa:c
pa::s ea: also oi s:eel aac aa:ouoe:les, :o ce::a:a oi :|e
aace:cevelopec aac soc:al:s: coaa:::es. I|ese la::e: :ll ee
:ac:eas:agl; c:aa :a:o :|e :a:e:aa::oaa| aac :a:e:sec:o:al
c:v:s:oa oi laeo:, ::| ia::eac|:ag coaseaeaces io: :|e::
:a:e:aa::oaal aac coues::c ecoaou:c aa! pol:::cal :ela::oas.
Capitalist competition for monopoly and exploitation. I|e cap:
:al:s:s a::eup: :o :a:a :|e ::ce oi cecl:a:ag p:oa:s aac p:oa:aele
:aves:uea: oppo::aa:::es ca::ag :|e c::s:s oi accauala::oa
:ac:eases coupe::::oa io: ua:|e:s auoag :|eu ,a pa:::al :e
aec::oa oi :s :s :|e ca::eac; c::s:s: aac p:ou:ses a :ev:val oi
:|e eega:u;ae:g|eo: pol:c; oi :|e p:ev:oas ua,o: c::s:s
i pa:::cala: :elevaace io: Ia::a Aue::cas op::oas, :: also
ucaces :|eu :o :a:eas:i; aac accele:a:e :|e esplo::a::oa oi
soue soc:al:s: aac I|::c vo:lc ecoaou:es :|:oag| p::u:::ve
aoacap::al:s:: accauala::oa aac aaeaal esc|aage, |:le
accec:ag :o :|e g:ea:e: pa:::c:pa::oa :a :|:s saue p:ocess e;
soue :a:e:uec:a:; ecoaou:es aac :eg:ues. A: :|e saue ::ue,
:o assa:e :|e g:ea:es: poss:ele s|a:e oi :|e p:e io: eac| oi :|e
ua,o: poe:s, :: aaga:s :|e s::eag:|ea:ag oi ecoaou:c elocs
aac uoaopol:s::c :ela::oas ::|:a :|e cap::al:s: coaa:::es. I|:s
:eaceac; :ll ee :ac:e+s:agl; s::eag:|eaec e; aa; ia::|e:
e:ea|coa oi :|e p:esea: colla:easec :a:e:aa::oaal ca::eac;
s,s:eu aac :|e :eaeec io:ua::oa oi a coll+: +:ea, oi La:o
.a::eac; o: cea:sc|e ua:| aac i:eac| i:aac +:eas, a s:e:l:ag
a:ea, a ;ea a:ea-ao: :o uea::oa a :aele a:ea. lac:easec
cal::pola:::; leacs :o ce:ea:e aac s|:i::ag all:aaces ea: also
:|:ea:eas ua,o: pol:::cal coaa:c:, :aclac:ag u:l::+:; coai:oa:a
!u
Andre Gunder Frank
:|oa ee:eea soue oi :|e all|es, sac| as :|e Lssk aac
C||a oa :|e oae |aac, aac )apaa aac |:s Ls aac La:opeaa
pa::ae:s oa :|e o:|e: |aac, |i ao: c|:ec:l;, :|ea |ac|:ec:l; |a
I||:c vo:lc coaa::|es.
Class struggle in the industrialized capitalist countries, I|e p:oi:
saeeze |a :|e ua,o: cap|:al|s: coaa::|es |upl|es ao: oal;

aa
a::eup: :o s||i: :|e ea:cea oi :|e cos:s oa:o o:|e: coaa:ne

s,
ea:~espec|all; |asoia: as :|e |ac:easec cos:s :|e o:|e:s H
:|ese coaa::|es |ll |ave :o eea: |ll ee |asaiac|ea: :o s:eu
aac :eve:se :|e :|ce oi :|e c:|s|s oi cap|:al accauala:|oa |a :|e
ua,o: cap|:al|s: coaa::|es-:|e o:|e:s |a :|e ua,o: cap|:al|s:
coaa::|es |ll ee oel|gec :o eea: a saes:aa:|al pa:: oi :|e
sac:|ices :|euselves. I|e s|a:pea|ag oi :|e class s::agle, pa:
:|cala:l; |a ves:e:a La:ope, |as eeea |ac:eas|agl; |a ev|ceace
aac p:ou|ses :o eecoue s:|ll uo:e es:eas|ve aac |a:eas|ve |a
:|e cecace :o coue. A a:s: :espoase :o :||s |a:eas|aca:|oa oi
:|e class s::agle |s :|e :ev|val oi soc|al ceuoc:a:|c, laeo:,
popala: aa|:;, o: popala: i:oa:s |a aa a::eup: :o s|a:e :|e
ea:cea oi :|e c:|s|s aac :o pe:saace laeo: :o sac:|ace |:s
selas| |a:e:es:s :o :|e aa:|oaal |a:e:es: |a :||s :|ue oi c:|s|s.
I|e :|:ea:eaec ia|la:e oi :|ese soc|al ceuoc:a:|c sola:|oas
:o :|e c:|s|s, espec|all; as |: ceepeas |a:e:aa:|oaall; aac aa:|oa
all;, |ll ea|aace aac accele:a:e :|e :|:ea: oi, aac |aceec pave
:|e a; io:, :ecoa:se :o aeoiasc|s: co:po:a:|ve aac evea
u|l|:a:|s: sola:|oas. I|e coa:se oi :||s class ::agle |a :|e
ua,o: cap|:al|s: coaa::|es |ll, oi coarse, also ce:e:u|ae :|e
ecoaou|c, pol|:|cal, aac |ceolog|cal pos|:|oas :a|ea e; :|e|:
gove:auea:s, as ell as :|e|: io:e|ga pol|c|es |:| :espec: :o
eac| o:|e:, :|e soc|a||s: coaa::|es, aac :|e I||:c vo:lc coaa
::|es, |aclac|ag :|ose oi La:|a Aue:|ca. reecless :o sa;, :||s
|ll ee all :|e uo:e ::ae |i :|e eoa:geo|s|e ia:ls :o iac :|e
:esoa:ces :o save cap|:al|su |a |:s aes: pe:|oc oi c:|s|s aac :|e
o:||ag class iacs :|e pol|:|cal ueaas :o ove::|:o :|a: :a||ag
class aac :eplace cap|:a||su e; soc|al|su
The Third World in the present crisis
.
T|e accele:a:ec aal|:a:|ve
::aasio:ua:|oa oi :|e |a:e:aa:|oaa| c|v|s|oa oi laeo: ca:|ag
Latin America's International Options !
:|e p:esea: c:|s|s oi cap|:al|s: cevelopuea: oiie:s |ac:easec
oppo::aa|:|es io: :|e cevelopuea: oi |a:e:uec|a:;, sae|u
pe:|al|s: ecoaou|es aac :eg|ues aloag :|e :az|l|aa uocel aac
a: :|e saue :|ue geae:a:es ia::|e: p:essa:es io: :|e io:ua:|oa
oi |ac:eas|agl; cepeacea: cl|ea: s:a:es aloag :|e pos:Alleace
C||leaa uocel. Lcoaou|es ||c| ac||evec a ce::a|a level oi
cevelopuea: oi :|e|: p:ocac:|ve io:ces s|ace :|e las: ua,o:
c:|s|s oi o:lc cap|:al|su, l||e lac|a, soa:| Ai:|ca, :az|l, aac
:o a lesse: es:ea: mes|co aac A:gea:|aa ,aac, alee|: aace:
soc|al|su, :|e sov|e: La|oa; |ll aac ae oppo::aa|:|es :o
acvaace :|e|: pos|:|oa |a :|e |a:e:aa:|oaal c|v|s|oa oi laeo: |a
ae c|:ec:|oas. soue o:|e: pe::oleaup:ocac|ag coaa::|es
aac, :o a lesse: ceg:ee, Lg;p: aac Alge:|a, |ll aac :|e oppo:
:aa|:; :o aca|:e sae|upe:|al|s: s:a:as. I||s |upl|es ia::|e:
cap|:al|s: cevelopuea: io: :|ose ecoaou|es :|a: pe:u|: a
pol|:|cal all|aace oi :|e|: eoa:geo|s|es |:| :|ose |a :|e |u
pe:|al|s: aa:|oas, aac |:| soue sec:o:s oi :|e|: oa u|ccle
class. Hoeve:, espec|all; io: :|e io:ue: coaa::|es, aal||e :|e
|upo::saes:|:a:|ag cevelopuea: oi coasaue: goocs |acas::|es
easec oa aa es:eas|oa oi :|e |a:e:aal ua:|e:, a uo:e p:og:es
s|ve |acoue c|s::|ea:|oa, aac a :ela:|vel; p:og:ess|ve popal|s:
:eg|ue, all oi ||c| :oo| place ca:|ag :|e las: o:lc c:|s|s
oi accautsa:|oa, :|e cou|ag cap|:al|s: cevelopuea: oi :|ese
ecoaou|es |s l||el; :o :es: |ac:eas|agl; oa accauala:|oa
:|:oag| cap|:al goocs aac espo:: |acas::|es, |ose oa:pa:
uas: ee eoag|: e; :|e es:e:aal ua:|e:, e; |acas::; |:seli, e;
||g||acoue :ece|ve:s, aac pa::|cala:l; e; :|e s:a:e, |aclac|ag
|:s u|l|:a:; appa:a:as. I||s |upl|es ( I ) ia::|e: :eg:ess|oa |a :|e
c|s::|ea:|oa oi |acoue, ,!; |ac:easec aaeuplo;uea: ee;oac
:|e ! pe:cea: eiiec:|ve aaeuplo;uea: ea|valea: es:ua:ec
e; :|e La|:ec ra:|oas io: La:|a Aue:|ca io: 9u, ,}; lo
age pol|c|es, sac| a :|ose :|a: |ave :ecacec :|e age :a:e |a
:az|l e; +u pe:cea: ca:|ag :|e ecoaou|c u|:acle, ,+; |a
c:easec ua:g|aal|za:|oa oi la:ge po::|oas oi :|e popala:|oa,
aac ( J) :eac:|oaa:; pol|:|cal :eg|ues :|a: pa:sae |a:e:aal pol|
c|es oi :ep:ess|oa, es:e:aal pol|c|es oi espaas|oa|su, u|l|:a:|su,
aac |a:e:aa:|oaal pol|:|cal all|aaces |:| o:|e: :eac:|oaa:;
:eg|ues, ||le see||ag :o ua:a:a:a a cel|ca:e aa! s||i:|ag
!2 Andre Gunder Frank
balancc ot dcpcndcnt autonomy in tbcir intcrnational cco-
nomicandpoliticalrclations.
Ocspitctbcvainbopcsottbcirpoliticallcadcrs,mostcoun-
trics in tbc Tbird World, including Latin Amcrica, cannot
rcalisticallyaspirctosucbsubimpcrialistdcvclopmcnt.Intbis
crisis, as in past oncs, tbc largc masscs otpcoplc will likcly
suttcr trom vastly intcnsibcd supcrcploitation and political
rcprcssionHcrc,asistbccascintbcPbilippincsandlargcparts
ot Soutb Asia, tbc dcgrcc ot supcrcploitation, uncmploy-
mcnt,marginalization,and,otcoursc,rcprcssion,tbrcatcnto
gomucbtartbcrastbcyalrcadybavcinCbilcinbaltaycar
tban in tbccasc ot tbcsubimpcrialistrcgimcs,wboscvictims
tbcy arc incrcasingly likcly to bccomc For tbccorporatist,it
nottbc military, statc appcarstobctbcordcrottbc day, and
tbcdcgrcctowbicbbrutalrcprcssionwillrcplaccinstitutional
rcprcssion will bc a mcasurc ot tbc dcgrcc to wbicb sucb
corporatismbasbccnacbicvcd.Intbcirintcrnationalrclations
witb tbc impcrialist powcrsand witb somc subimpcrialist
oncstbcscrcprcssivc,ncotascist,corporatiststatcsarccon-
dcmncdtoancvcngrcatcrcconomicandpoliticaldcpcndcncc
tban was tbc cascintbcpast. Andas tortbcrclationsamong
countrics ottbc Tbird World and Latin Amcrica, tbcrc is tbc
tbrcatotgrowingcuttbroatcconomiccompctition, as wcll as
political controntation and war. In tbc nct dccp crisis ot
capitalism,onlytbcsucccsstulpopularrcvolutionaryovcrtbrow
otcapitalismcan avoid sucbbumancosts.
3. ECONOMIC CRISIS, TIR WORL, A 1984
Tbcrc isgrowing cvidcncc tbat tbcworld isagain in crisis, a
crisisanalogous tootbcrs in rcccnt bistory.Tbcrcbasbccna
lotottalk,incrcasingtalkpcrbaps,abouttbccndotancra,tbc
cnd ottbcpostwarworld, tbcpassagc to ancwcra Somcot
tbis cvidcnccistbatsomcycarsagotbcrcwas,brst,apassagc
trom bipolarity to multipolarity in tbc intcrnationalpolitical
arcna,tbcntbccurrcncycrisisotI970-I 97 I , associatcdwitba
cyclical downturn in scvcral ottbc industrialcountrics, tbcn
tbc oil crisis in I97 3- I 974and tbc rcncwcd cyclical dcprcs-
sion, or cyclical rcccssion, ot I974I97J, by tar tbc most
scrioustbattbcindustrializcdcountricsbavcknownsincctbc
cndottbcwarand,inascnsc,sincctbc I930s.
Isu_csttbattbismountingcvidcncc,andotbcrcvidcnccto
wbicbIsballrctcr,addsuptotbcprobabilitytbattbccapitalist
worldisagaininascriouscrisisotaccumulation,tbatistosay,a
crisisintbcproccssotcapitalaccumulation.Inpart,oncottbc
otbcrsymptomsistbattbcratcotprobtintbcmajorindustrial
countricssccmstobavcdcclincd,aproccss tbat bcganintbc
mid- I 90s.Fortbisrcasononcpossiblcdatcottbcbcginning
ottbccrisismigbtbcplaccdat tbattimcpriortotbcmounting
cvidcncc I rctcrrcd to in tbc prcvious paragrapb. Tbcrc bas
bccn adccrcascintbcratcotprontoncapitaland adccrcasc
inanumbcrotimportantarcasotprobtablcincstmcntoppor-
tunity.Tbcrcbasalsobccnanincrcasc,knowntomostotus,in
tbcmonctizationottbccconomyandanincrcascintbcamount
otcrcdit, tbc brst associatcd in largc part witb tbc indation
This is a revised version of a paper that originally appeared in World
Development 4: 853861 , 1 976. It is reprinred here by permission of the
publisher.
23
24
Andre Gunder Prank
wbicb tbc industrial countrics, but not only tbc industrial
countrics,bavccpcricnccdinrcccntycars, tar bcyondanyin
rcccntmcmory. (I wouldsu_cstasanasidctbattbisinhation
rchccts not simply an incrcasc in tbc supply otmoncy and
crcditbutanattcmptontbcpartotcapitaltostcmtbctidcot
tallingprobtsbyj ackingup priccsand tbis otcoursc issup-
portcdbytbcgovcrnmcntalmonctaryand

apitalautboritcs. )
Tbisisincrcasingly possiblc, inanincrcasmgly monopohzcd
cconomy,sotbattbcrccanbcasubstantialratcotinhationand
simultancouslyasubstantialundcrutilizationotrcsourccsand
substantialuncmploymcnt. In addition, tbcincrcascincrcdit,
in tbc dcbt-cquity ratio among corporations, and in privatc
indcbtcdncss arc all attcmpts to avoiu a total collapsc ottbc
cconomic systcm. t coursc, to tbc ctcnt tbat continucd
cconomic activity is bascd on an incrcasingly trqilc crcdit
structurc, tbis postponcmcntmayI cannot say tbat itwill,
but it bas inpast cpcricncc donc so onscvcraloccasions
lcadtoavcryscriouscrasb,alltbcmorcscriousbyvirtucottbc
constructionotasortotbouscotcardsbascdoncrcdit.
Tbcrcisgrowingagrccmcntalongtbcsclincsamongworld
lcadcrs, industrialists, and bankcrs. Hcnry Kissingcr, Harold
Wilson, tormcr primc ministcr ot Grcat Britain, Hclmut
Scbmidt, primc ministcr otWcstGcrmany, to namc only a
tcw, bavc all sincc I974 madc rcpcatcd rctcrcnccs to tbc
dangcr, tbc immincnt dangcr as implicd in somc ot tbcir
dcclarations,otacrasbottbc I929varictyandotadcprcssion
analogoustotbatottbc I 930s.Tbcyrbcmsclvcsdonotrccall,
pcrbapsbccauscas politicians tbcirmcmoricsarcnotlongor
bccausc tbc audicnccs towbom tbcy spcakdo notbavclong
mcmorics, tbat tbc worldpasscdtbrougb sucb criscs

otonly
in tbc I930s, but also in tbc I870s and I 880s, and m cvcn
carlicr pcriods ot world capitalist dcvclopmcnt. Morcovcr,
altougbtbcscgcntlcmcnrctcrprimarilytotbcdcprcssionot
tbc I 930s tbatwaspartandparccl(inoncscnscpcrbapstbc
culminatin,inanotbcrscnscnotsomucbso)otadccpcrisis
intbccapitalistaccumulationotcapitaltbatl

tcdtrom

I9 4
to I94Jbctorcgivingway againtoalongpcrodotcapitaltst
cpansion tbat bas comc to bc known as tbc postwar craof
Economic C risis, Third Word, and I 9S4 2J
pcrmancntgrowtbpcrmancntgrowtbtbatbasnowturncd
outtobcnotsopcrmancntatall.
Tbcsc pcriods otdccp crisis in tbc proccss otcapital ac-
cumulation bavc in tbc past brougbt witb tbcm important
qualitativccbangcsintbcintcrnationalandintcrscctoraldivi-
sionsotlabor,andasarcsultotimportantconcomitantcbangcs

intbcsocialandpoliticalstructurcintbcworldasawbolc,tbcy
havc sbarpcncd intranational and intcrnational conhict. Tbc
last ottbcsc criscsgcncratcdWorldWarI andWorldWarII,
tbc dcprcssion bctwccn tbcm, and tbc risc ottascism as a
dircctrcsultottbis dcprcssionaswcllas tbc Sovictrcvolu-
tion, tbc Cbincsc rcvolution, and tbc apparcntpotcntial tor
socialistrcvolutionsinFranccandItalyattcrI94J.
Intbcpasttbcscmajorcriscsotaccumulationbavcnotonly
ncccssitatcd, butbavc alsorcndcrcdpossiblc, atar-rcacbing
qualitativc cbangc in tbc division otlabor. Tbc crisis itsclt
mcans tbat tbc proccss otaccumulation (dcvclopmcnt or
growtbarcpcrbapsmorcpopularlyuscdtcrms,butarcnot
quitctbcsamctbing) nolongcrtunctionsasitbasintbcpast
andrcquircsmajorrcadjustmcntsinordcrtomakcittunction
again intbc tuturc. Attbcsamc timc, tbc crisismakcs tbcsc
rcadj ustmcnts possiblc inasmucb as witbout tbc crisis tbcrc
would bc no rcason, or nopressing rcason, to undcrgo tbc
tar-rcacbing cbangcs, ottcn at vcrygrcat social and political
costs.Forinstancc,oncottbcmanitcstationsot,andoncottbc
rcasons tor, tbc crisis ot accumulation is tbat tbc lcading
industricstbat is, tbosc tbatwcrc tbc lcading industrics in
tbcprcviouspcriodotgrowtbtcndtolosctbcirpositionsot
lcadcrsbip,towallowinparticularlyscriousprobtabilitycriscs,
andtobc,itnotrcplaccd,displaccdtootbcrpartsottbcworld.
Tbis was substantially tbc casc in tbc crisis ottbc I870s to
I 880s, towbicbI rctcrredcarlicr,wbicbwas associatcdwitb
tbcriscotimpcrialism. Itwasalsotbccascottbccrisisottbc
warandintcrwarycars,wbicbrcsultcdintbcriscottbcLnitcd
Statcs to cconomic and political dominano and in tbc nnal
rclativc dcclinc otGrcat Britain, a dcclinc tbat bcgan attcr
i870. (Final is pcrbaps not tbc rigbt word bccausc tbcrc is
rcasontosuspcct,andHaroldWilsonbastcltobligcdtodcny
Andre Gunder Frank
it

obisAmcricanbosts,tbattbistimcBritainisgoingtodcclinc
s

illturtbcrandpracticallydisappcarbclowtbcwavcsngura-
tivcly,otcourseIbopconlyngurativcly' )

ntbconcband,lcadingindustricssucbastbcautomobilc
mdustry (wbicb is vcry cvidcntly in dccp troublc tbc world
ovr)andtbctctilcindustrynccdtodcvclopncwtccbnology
wbucncwlcadingindustricsbascdonncwtccbnologynccdt
bc dc

clopcd. Sucb dcvclopmcnts, bowcvcr, can only takc

P
lacc 1 part

ougb tbc displaccmcnt otprcvious lcading

md

str

cs. Tbis m turn can only bappcn ittbc ratc otpront

agmn rscs to acccptablc lcvcls so as to makc itprontablc to
und

rtc tbc

assivcncwinvcstmcntncccssarytortbcncw
lcadmg mdustrcs. At tbc samc timc, industrics tbat bavc
bccomc rclativcly labor intcnsivc (labor intcnsivc witb bigb-
cost labo

) arc dsplaccd to low-cost laborarcas,or rcplaccd

b
/
otbcr mdustrcs tbat producc substitutc goods tbrougb a
dittcrcntsortottccbnology.ncottbcobviousarcasinwbicb
tiskindotcbangcisbcginningtotakcplaccisintbcproduc-
tionot

ncwsourccsotcncrgytorcplaccpctrolcum,aswcllas
tbcr

cvi
"
alo oldsourccsotcncrgy.Coal,torcamplc,isagain
cmmgmtoitsow

, altbougbitissupposcdtbatcoalmining
wul bccomc vcry dittcrcnt tbrougb, torinstancc,gasincation
otcoalbclowtbcground.
In)unc I 97JinLuropc,Hcnry Kissingcrprcscntcdaplan
(pcrbaps a
P
lan is an ovcrstatcmcnt, an announccmcnt, at
lcast)toranmvcstmcntprogramotS I trilliontodcvclopncw
sourc

s otcncrgy, including nuclcar, solar, and gcotbcrmal.

Tbat is a lot otmoncy, almost two-tbirds ottbc cntirc LS

rossnationalproduct,andbctorctbatkindotmoncywillbc
mvcstcd, a tcw cbangcs will bavc to takc placc in tbc world
c

conomy. nc ottbcsc,aboutwbicbKissingcrbas bccnpar-

ticularlyadamant, istbattbcpriccotpctrolcummustriscand
must rcmain ?igb in ordcr to makc it prontablc to dcvclop
tbcsc altcrnativc sourccs otcncrgy. Itpctrolcum priccs arc
low,tbcrcis no inccntivctoinvcstinotbcrsourccsotcncrgy
ortodcvcloptbc ncccssarytccbnology.
Anotbcri

po

tantarca,pcrbapsparticularlyintcrcstingin
SoutbcastAsia, is tbc dcvclopmcntottbc sca(tbatistosay,
Economic Crisis, Third World, and I9S4 27
botbtbcscaandtbcscabcd)asasourccotmincrals,andtood,
particularlyprotcin.Tbiswillalsorcquircvastncwinvcstmcnt
and implics tar-rcacbingcbangcsintbcintcrnational division
ot labor. Tbc undcrdcvclopcd countrics, or somc ottbcm,
bavcbccnvcryworricdabouttbis,andattbcLaw ottbc Sca
contcrcnccsinCaracasandGcncvatbcybavcsougbtcontrols
on sucb dcvclopmcnt tbrougb an intcrnational agcncy witb
liccnsing rigbts. Wbctbcr tbcy willacbicvc tbis is unccrtain.
I tcnd to tbink it doubttul, and tbat tbis dcvclopmcnt will
primarily bc in tbc bands ot tbc major industrial countrics,
includingtbcSovictLnion,wbicbontbisissucsitscntirclyon
tbc samc sidc ottbc tablc as tbc Lnitcd Statcs, against tbc
so-callcdTbirdWorld.
tcoursc,tbcincrcascintbcpriccotpctrolcumbasalrcady
vastlyattcctcdtbcbalanccotpaymcntsinmanycountrics,not
onlytbcconsumingcountrics,butalsotbcproducingcountrics,
wbicbbavcalltbisncwmoncy.Tbisraiscsqucstionsotinvcst-
mcnt, and intcrcstingly cnougbtbc Lnitcd Statcs,wbicb bas
always supportcd tbc principlc tbat torcign invcstmcnt is a
grcatboontobumanity,isnowbcginningtomakcallkindsot
lawsagainsttorcigninvcstmcntbyotbcrsintbcLnitcdStatcs.
Somc ottbc most scrious victims ot tbc pctrolcum pricc
risc bavc bccn tbc nonpctrolcum-producing Tbird World
countrics,mostparticularlyIndia,wbicbbasbadtoincrcascits
paymcntsbyavastproportion
Anotbcrarcaotcbangcintbcsctimcsotcrisisisintbcrcla-
tionsbctwccntbcproductionotindustrialcommoditicsandot
rawmatcrialsandtoodproducts.Hcrctbccvidcncctrom tbc
past is not cntircly clcar, buitwould appcar tbat tbcrc is a
dcclinc(notncccssarilyabsolutcbutrclativc)intbcimportancc
otindustrialcommoditics (ccrtainly comparcd to tbcpcriods
otrapidcconomiccpansion)rclativctotbatottbcproduction
otraw matcrialstbougb ottcn tbc incrcasc in tbc produc-
tionotrawmatcrialsisnotacrosstbcboardtorallrawmatcrials
and is not ncccssarily a rcsult ot tbc old tccbnology but ot
cbangcsin tbctccbnologyotrawmatcrialctraction.
In any cvcnt, onc ottbc mostimportantrcquircmcnts tor
tbisproccsstromtbcpointotvicwotca
[
italistbattbcratcot
28
Andre Gunder Frank
pront,wbicbbasdccrcascdandmaydccrcascfur

bcr,must

bc
madc to riscagaininordcrtocnablc tbc cpansionofcapital
into ncwarcas. And tbis is likcly to involvcawbolc scrics of
important cbangcs, among tbcm tbc dcprcssion oftbc wagc
ratcandassociatcdcconomic,social,andpoliticaltransforma-
tions.Tbcrcistbcimportantpossibilitytbatcvcntbougbtbcrc
may bcanupturnattbc cnd oftbcycarorattbcbcginningof
I 976 tbis may bc sbort-livcdand may lcad to a furtbcr
cyclialdownturn. Tbiswastbcpattcrn intbccarlicrpcriods
ofcrisis,butnowtbcrcarcmorccyclicaldownturns,andtbcy
arc dccpcr, morc frcqucnt, and morc coordinatcd from onc
part oftbcworld to tbcotbcr. Tbisistbc nrsttimc sincc tbc
cndofWorldWarII tbatinalltbc majorindustrialcountrics
tbcrc bas bccnanimportantcyclical

downturn. IntbcLnitcd
Statcs,forinstancc,tbistakcstbcformof9pcrccntuncmploy-
mcnt, approimatcly 8. J million pcoplc uncmploycd. Tbc
prospccts arc tbat tbis uncmploymcnt will not bc rcduccd
bclow 7 pcrccnt in tbc nct fcw ycars. Tbcrc arc at prcscnt
about I million uncmploycd in cacb oftbc major Luropcan
cconomicssotbataltogctbcrintbcmajorindustrialcountrics
tbcrcarcatlcast I J millionofnciallyuncmploycd.
Tbispcriodofcrisis,tbcn,likctboscintbcpast

maylc

dto
incrcascdintcrnalpoliticalcondictandtoctcrnal ntcrnauonal
politicalconnict. Itmaycvcn,asitbasintbcpast, lcadtowar.
Iwouldlikcnowtoturntoabricfcaminationofpossibilitics
for diffcrcnt rcgions oftbc world, or, morc accuratcly, for
diffcrcnttypcsofcountricsanddiffcrcntpartsoftbcso-callcd
TbirdWorld.
Asarcsultoftbispcriodofcondicttbcrcis,andtbcrcmay
continuc to bc, an incrcasc and strcngtbcning in progrcssivc
andrcvolutionarypoliticalmovcmcnts. Asancamplc(tbougb
I do notknowtowbatctcntbisistruc),scvcralncwspapcrs
bavc quotcd Kissingcr as saying tbat it was W

tcr
F
a

and
Watcrgatc again mustbctraccd to tbc cconomic crisis H tbc
worldandintbcLnitcdStatcstbatcffcctivclyprcvcntcdtbc
Lnitcd Statcs from politically intcrvcning again against tbc
Victnamcsc.TbistosomcctcntaccountsfortbcLSfailurcto
postponcvictoryinVictnam.
Economic C risis, Third Word, and I 9S4 29
Altbougbtbcrcisi ntbispcriodof connictapartialstrcngtb-
cningandanincrcascinprogrcssivcmovcmcnts,Itbinktbcrc
isscriousrcasontofcar(orbopc,dcpcndingonwbicbsidcyou
arc on' )tbat in tbclongruntbcscmayfail unlcss tbcyfollow
tbcuncompromisingcamplcoftbcVictnamcsc.
n tbc otbcr band, tbcrcisscriousrcasonto supposc tbat
tbcrc will bc somc oftbc following kinds ofdcvclopmcnt,
scvcralofwbicbbavcalrcadybcguntotakcplacc.
I . In tbc cbcap labor, industrial cconomics oftbc Tbird
World-oftbcKorca,Taiwan,Singaporc,HongKongvaricty
(andimportantstcpsarcnowbcingmadctoconvcrtMalaysia
into sucb an cconomy)I tbink tbat tbc nccds of capital
worldwidcandtbcnccdsofcapitalandtbcrulingclassintbcsc
countrics, wbicb bavc to compctcforforcign invcstmcntina
pcriod ofcrisis, will obligc tbcm to continuc to dcprcss tbc
wagcratc and to dosotbrougb incrcascdpoliticalrcprcssion
and cvcngrcatcrincrcascdmilitaryintcrvcntionandattcmpts
to cstablisb wbat migbt bc callcd somc kind ofa military-
corporatiststatc.
2. lortbccbcap labor, rawmatcrials, andfood-producing
countricstbcrcisalsorcasontobclicvctbattbcrcprcssionis
likclytoincrcascsubstantiallyalongtbclincsofwbatmigbtbc
callcdtbcCbilcanmodcl.Intbisbrutalrcprcssion,ovcr30,000
pcoplc bavc bccn killcd, bundrcds oftbousands jailcd, and
torturcbas bccomcinstitutionalizcdallinordcrtogctridof
tbc usual dcmocratic institutions and to dcstroy tbc labor
movcmcnt. In tbc courscofalittlcmorc tbanaycar, tbcrcal
wagc ratc bas bccn dcprcsscd by approimatcly J0pcrccnt,
wbilc tbc cconomy bas bccn bandcd to forcign capitalon a
silvcr plattcr. lorcign capital was bc_cd to invcst in raw
matcrialsandinindustrialproduction.Tbusfartbcrcbas bccn
somc invcstmcnt in raw matcrials, particularly coppcr, but
nonc inindustry.Tbcrcisalsoanimportantmovctoconvcrt
Cbilcintoanagricultura|cportcconomy-orrcturnit,sincc
tbatwaswbatCbilcwasbcforctbcintcrnationalgrainmarkct
bcgantodcclincattbccndoftbc I920s.Tbcrcgimcwantsto
cportagain,andisinfactdoingso,butattbcpriccofstarving
tbcpopulation.Tbisitcanonlydowitbpoliticalrcprcssion,by
30 Andre Gunder Frank
imposingamilitary-fasciststatc.Tbcmilitaryistbcrc,fascism
sofarlcssso.Bccausctbcrcgimcbasbccnunablctoco

struct
a corporatist statc, it bas bad to rcplacc tbc corporatsm by
nakcdbrutcforccandrcprcssion.
I tbink tbat tbc Cbilcan modcl is by no mcanslimitcdto
Cbilc.Iamnotquitcsurcwbcrctoplacctbc

Pbilip

incs,butit
sccmstomctbatitisvcryclcartbattbcmartallawimposcdby
Marcos is an analogouspolitical instrumcnt for tbis kind

f
ncwintcgration intoworld capitalism, ortbcworldm

arkctif
you prcfcr, tbat is in tbc intcr

st of

botb
"
orld capital and
somclimitcdscctionsofdomcsticcaptal.Itbinktbattbcsamc
tbing bas bcgun to bappcn, and s vc

y likcly

ocontinuc to
bappcn, in mucb grcatcrdcgrcc U Sr

Lanka, Bangldcsb,
andinscvcralcountricsofLatinAmcrica,apartfromCbdc.
3. AnotbcrcatcgoryofTbirdWorldcountryincIudcsBrazil,
Mcico Soutb Africa (iftbat is to bc includcd in tbc Tbird
World,

wbicb is notclcar), and, morc doubtfully, Argcntina

and India. Tbcscarccconomics tbatwcnt tbrougb astqcof
import substitution in tbc I930sand I940s, associatcd witb
nationalist,rclativclyprogrcssivc,politicalmovcmcnts-pro-
grcssivc in tbat tbcy madc tbc distribution ofincomc morc
cqual,orlcssuncqual,tbanitbadbccnbcforc.(Is
'
farastbcy
did so, ofcoursc, tbcy wcrc also ablc to bc pohtcally morc
progrcssivc and lcssrcprcssivc. Tbcy did

bis, itmay cs

g-
gcstcd,mainlyforcconomicrcasons. )Sucbimportsubsttuton
mcant itwas ncccssary to crcatc an intcrnal markct, so tbat
tbcworkcrswboproduccdccrtainkindsofgoods,sucbas

c-
tilcs,badtobavcanincomcinordcrtobuytbcscsamctctilcs.
Tbcrcforc tbcrc was awidcr distribution ofincomc and tbc
cmcrgcnccoftbc nationalist-populistrcgimcsassocia

cdwtb
Vargas,Pcron,Cardcnas,andItbinktbcCongrcsstyIndia.
Tbcsccconomicsbavcrcacbcdastagc ofcaptalaccumula-
tion substantially diffcrcnt from tbat of most of tbc Tbird
World. Tbcy nowbavc tbcopportunitytorc-cntcrtbcintcr-
national divisionoflabor in adiffcrcntway, to bccomc rcla-
tivclymucbmorcimportantcportcrs,notonl
/
ofrawmat

ria|s
oroflabor-intcnsivcconsumcrgoodsoftbcSingaporcvaricty,
but also ofcapitalgoods and particularly ofautomotivc and
Economic C risis, Third World, and 1984 3I
stcclproducts. Brazil,for instancc, nowcports Volkswagcn
cngincstotbcLnitcdStatcsfortbcLSmarkctwitbGcrman
capital,ofcoursc.
Tbcsc countrics, as I said, oncc again bavc an important
opportunityinasortofaccclcratcdgamcofmusicalcbairsin
tbc cbangc in tbc intcrnational division of labor. But tbc
political prospccts arc now quitc dissimilar to tbosc of tbc
I 930s and I940s, sincc it is no longcr a qucstion ofimport
substitutionofconsumcrgoodsandancpansionoftbcintcr-
nalmarkct. Now tbcprimaryarcaforcapitalaccumulationis
capital goods (tbat consumcrs do not buy), in tbc ctcrnal
markct, and vcry importantly in tbc govcrnmcnt, or statc,
scctor,particularlytbcmilitary,sotbattbcrcisavastincrcasc
in military procurcmcnt and military production in tbcsc
countrics

ItbinktbatIndia`sproductionoftbcatomicbombis
intimatclyrclatcdtotbisdcvclopmcnt.
I su_cstcd tbatIndiaandArgcntinamaybcasubcatcgory,
inasmucbasitisnotclcartbattbcyarcgoingtomakcit.Tbcy
arc facing considcrablc difncultics. Argcntina bas bccn in a
pcrmancntstatc ofcconomic and political crisis for approi-
matcly two dccadcs, wbilc tbcproccssofcconomic dcvclop-
mcntinIndiabasdrasticallyslowcddownintbclastfcwycars
and tbcrc docs not sccmto bcmucbprospcctofrccovcryin
tbc forcsccablc futurcaltbougb cfforts to tbatcnd will bc
madc.Tbcsccfforts,bowcvcr,implyavastincrcascinpolitical
rcprcssion,as bas bccn tbccasc witb tbcimpositionofcmcr-
gcncyrulcinIndia

4. Tbcn tbcrc arc anotbcr twocatcgorics ofTbird World

countrics. tbc nrstmigbtbccallcd old intcrmcdiatc or old
subimpcrialist countrics, tbc otbcr includcs tbc `ncw sub-
impcrialistoncs,ofwbicbIranispcrbapstbcbcstcamplc

A
numbcrofotbcrpctrolcum-producingcountricsarcinaposi-
tiontoattcmptasimilardcvclopmcnttotbatofIran.Anotbcr
casc is Vcnczucla, and pcrbaps to somc ctcnt also Algcria,
"igcria,and Indoncsia

In Indoncsia, sincc tbccoupin I9,

Subarto` srcgimcbasmadcsignincantcffortstobccomcasort
ofBrazil but bas so far failcd, botb cconomically and politi-
cally. Howcvcr,witbitspctrolcumincomcitmaynowbcina

52 Andre Gunder Frank

bcttcrpositiontoattcmpttbatkindotdcvclopmcnt,including
otcoursctbcctcrnalcpansionism-tbccconomic, political,
and military dominanccotarcgion, sucb as Iran iscvidcntly
acbicving. In tbc casc ot Indoncsia, as I say, tbc rcsult is
considcrablymorcindoubt.
In tbcprcscntcrisis, tbcrcmaybcsomclibcralization in
tbcscsubimpcrialistcconomicsinsotarsomctbatarcalrcady
subimpcrialistbavc tbc opportunitytomovcupaproductivc
notcb in tbcir participation in tbc intcrnational division ot
labor,andtbcsamccrisisottcrstbcopportunitytorsomcotbcr
cconomics to movc into Brazil-typcpositions. Tbc most ob-
viouscascis Iran, butprobablyanumbcrototbcrpctrolcum-
producing ccntcrs bavc similar, albcit lcsscr, opportunitics.
Tbcrcisconsidcrablccompctitioninvariouspartsottbcworld
tor tbis kind otposition. In tbc casc ottbc Middlc Last, tor
instancc, tbcrciscompctition bctwccn Iran, Iraq,Lgypt, and
SaudiArabia.Itistairlyclcarwboisgoingtowin.Iran. Insomc
subimpcrialistccntcrstbcrcmaybcsomcdcgrccotlibcraliza-
tionottbcpoliticalrcgimcs,bycomparisonto tbcrcprcssion
tbcybadbctorc.Tbcabilityotsomcscctorsotcapitalintbcsc
cconomics, in tbcsc cconomic ccntcrs, to takc advantagc ot
tbis crisis andmovc into adittcrcnt spotintbc intcrnational
division otlabor is bascd on, in part, an opcning to torcign
capital in tbc prcvious pcriod, combincd witb vcry scvcrc
politicalrcprcssion. Insomc ottbcscplaccs,butnotinIndia,
somc libcralizationottbispoliticalrcprcssionmaynowbc
possiblc,assccmstobavcbccnannounccdbytbcGcisclrcgimc
in Brazil, and rcccntly in Soutb Atrica by ppcnbcimcrs
suddcnbackingottbcProgrcssivcParty.
Butwcwillnotgctarcpctitionottbckindotpopulismtbat
wcgotintbclastcrisis, bccausctbctypcotcapitalaccumula-
tiontbatisncccssarytorcapitalintbcscpartsottbcworldisno
longcrbascdontbccpansionottbcconsumcrgoodsindustry
(tctilcs) tor tbc intcrnal markct, wbcrc capital wants tbc
workcrswboproducc tbcproducts to consumctbcmalso. In
tbis casc, capital bas togivc labor a grcatcr cut inwbat it
produccs, so tbat labor can providc an intcrnal markct. Tbc
prcscntstagcotcapitalaccumulationnolongcrrcquircs tbis.
Economic C risis, Third World, and 1984 33
ntbccontrary, iti s notatallsuitcd to tbcprcscntnccdsot
capital tbcrc. Now capital bas to producc produccrs` goods
and tor tbc world markct. Tbcrctorc, wc gct instcad, itI
may symbolizc, tbc Indian bomb. Tbc production ot tbc
atomic bomb costsalototmoncy,butabsorbsalototcapital-
producing industry nnanccd by tbc statc. tcoursc, tbis is
rcallyonlyacaricaturc, sincc notonlyistbcbombproduccd,
butsoarcotbcrgoodswbicbarcnottortbcdomcsticconsumcr.
Iwouldlikctoaddtbatoncimportantaspcct,cconomically
andpolitically,ottbisdcvclopmcntotsubimpcrialism(aswcll
as ot tbc kind ot incrcasingly rcprcssivc outward-oricntcd
dcvclopmcntcttortsontbcpartottbcnrsttwocatcgoricsot
countrics, tbc Korca-Taiwan modcl and tbc Cbilcan modcl)
is tbc mucb incrcascd prospcct otwaramong tbcsc undcr-
dcvclopcdcountrics,notamongallottbcm,butintbcrcgions
inwbicb tbcsccconomicandpoliticaldcvclopmcntstorcbodc
incrcasing tbrcats. I sbould say notonly tbrcats, bccauscwc
bavc alrcady bad somc ottbcscrcgional wars-tor camplc,
tbcIndo-Pakistanwar.
Turningnow tosocialimpcrialism,as tbc Cbincsccallit,in
tbissortot gamcotmusicalcbairswitbtbcaccclcratcdcbangc
in tbc intcrnational divisionotlabor, bctorc tbc music stops
playing and tbcrc is onc lcss cbair cvcrybody bas to scurry
around in ordcr to bc ablc to participatc in tbc intcrnational
divisionotlaborand not to bc lctt outintbc cold, or sitting
bctwccntwocbairs, andtbatincludcstbcsocialistcconomics.
Tbat, I tbink, is onc rcason tor tbcNion-Brczbncvdctcntc
and tbcvast incrcasc incconomic collaboration bctvccntbc
SovictLnionandtbcWcstc

nimpcrialistcountrics

tcoursc,
tbcrc arc also intcrnal rcasons, and tbcsc arc tbc rcally im-
portant oncs. n tbc onc band, tbcrc sccm to bc cconomic
nuctuationsintbcsocialstcconomics,witbasortotcigbt-ycar
cyclcintbcproccssotaccumulation.Tbcyarcnowinadown
pbascottbatcyclcorductuation-Iam somcwbatrcluctantto
call it a cyclcand in tbc down pbascs tbcy arc undcr grcat
prcssurctoincrcasctbcircconomiccontactswitbtbccapitalist
vorld.Tbctundamcntalrcasontortbcincrcascdcontactisnot
crop tailurc, but tbc inability ot tbc socialist countrics to
54 Andre Gunder Frank
continucsatistactoryindustrialdcvclopmcntwitboutbccoming
tarmorc intcgratcd into tbc impcrialistcconomy. Wbattbcy
bavc to do is to importWcstcrn tccbnology. tcoursc, tbis
satistaction bas a class basc. It is, in a word, to build tbc
automobilcintbcSovictLnion,andtbattoraparticularscctor
ottbcsocicty.Tbc I97 II97Jnvc-ycarplan,tortbcnrsttimc
sincc I 928, callstormorcproductionotconsumcrgoodstban
otcapitalgoodsintbc SovictLnion. IntbcLastcrnLuropcan
countrics, tbcincrcasc intbcproduction otconsumcrgoods
rclativc to capital goods bas also incrcascd, but bas not yct
passcdJ0pcrccnt.Buttbcscarcnotjustanykindotconsumcr
goods.AsI say,tbcyarcsymbolizcdbytbcautomobilcandall
tbatimplicsabouttbcclassstructurc.Witbducrcspccttoour
collcaguc in tbc Sovict Lnionwbo says, itI undcrstand bim
corrcctly, tbat tbcrc is no morc class socicty in tbc Sovict
Lnion,alltbisdcvclopmcntsaysalotaboutclassstructurcin
tbcSovictLnion.TbatiswbyIprctcrtocalltbistbcBrczbncv
modcl, ratbcr tban tbc Sovict modcl. It is not pcrbaps tbc
Suslovmodcl,torinstancc.
Witbtbisdcvclopmcntmodcl,tbcsocialistcountricsinscrt
tbcmsclvcs into tbc intcrnational division otlabor in a way
vcry similar to tbat ottbc subimpcrialist countrics. Wcgcta
sort otitonc may coin apbrasc-social subimpcrialism ot
tbc Sovict Lnion and a subsocial impcrialism ot tbc Last
Luropcancountrics.Tbatistosay,tbcybuytccbnologytrom
tbc impcrialistcountricsnotnrst-rank tccbnology, bccausc
tbat is not availablc to tbcm, but sccond-rank tccbnology
and usc it to producc goods botb tor tbc domcstic markct
and torcportparticularly to tbcTbird World. Ocspitctbcir
paymcnt witb raw matcrials and ligbt manutacturcs to tbc
impcrialistworld,tbcsocialistcountricsarcgcttinganincrcas-
i ngly untavorablc balancc ot paymcnts witb rcspcct to tbc
impcrialistcountricsbytbcirimportottbis tccbnology.Tbcy
bavc topaytor tbat tbrougbcportto tbcTbird World, witb
wbicb tbcy arc gctting an incrcasingly tavorablc balancc ot
paymcnts-tbcrcby,otcoursc,makingtbcbalanccotpaymcnts
sillmorctavorablctortbcTbirdWorldasawbolc. Buttbcy
bavc to pay tbc impcrialist countrics witb torcign cchangc
Economic C risis, Third Word, and 1984 3J
tbattbcycarnintbccapitalist-dominatcdpcripbcry. Isu_cst
tbattbisisoncrcason,tbougbnottbccntircrcason,torSovict
policywitbrcspccttoCbina. Cbinarcprcscntsapolitical,idco-
logcal,andcconomictbrcatotcompctitiontotbcSovictLnion
inccrtain parts ottbc Tbird World, wbicb tbc Sovict Lnion
attcmpts tocliminatcpartlytbrougbitsidcologicalbattlcwitb
Cbinaand,otcoursc,tbrougbtbcstationingotamilliontroops
ontbcSino-Sovicttronticr. IntbcsociaIistcountricsotLastcrn
Luropc, tbis proccss is morc accclcratcd and tbis cconomic
pattcrn is turtbcr advanccd, symbolizcd, sball wc say, by
Kumanias j oiningtbcIntcrnationalMonctarylund.
Turningnowtotbcimpcrialistccntcr,wcalsotaccaproccss
otSoutbAtricanizationortbcimpositionot I984policics.
CapitalisimposingandwclcomingtbcCbilcan,Brazilian,and
Brczbncvmodclsintbcpcripbcryandscmipcripbcry,tbcrcto
augmcntcploitationandsupcrcploitationaswcllastorcvcrt
incrcasingly to a sort otprimitivc accumulationtbat is, c-
tractionotsurplusvalucwitbnoncapitalist,includingsocialist,
productivc rclations but tor capitalistaccumulation. But in-
sotaras tbisadditionalsourccotsurplusvalucandotprontis
still insutncicnt to stcm tbc tidc ot tbc capitalist crisis ot
accumulation, itwillbccomcncccssarytoincrcasctbcratcot
cploitationandtorcorganizctbcproccssotproductionintbc
so-callcddominantimpcrialistccntcrs.
A nrst rcaction otcapital bcrc is to try to stcm tbc tidc
tbrougbsocialdcmocracy,tbrougbanincomcspolicy,tbrougb
gcttingtbc LabourPartyinLngland,torinstancc,totakccarc
ottbcunions.Attcrtbclcbruary I974clcctions,torinstancc,
tbcFinancial Times otLond

ncamcouttorWilsoninstcadot
Hcatb, but said vcry clcarly wby and wbat it tbougbt tbc
mandatc tor Wilson was. According to tbc Financial Times,
Wilson did not bavc anytbing likc a mandatc to do wbat
Wcdgwood Bcnn is trying, or s

pposcdly is trying, to do.

LaboursmainmandatcwastocutotttbclcttwingottbcTradc
LnionCongrcssandtodisciplinclabor.Andititcoulddotbat,
tbcnitwould bc tulnlling tbc job wbicb tbc F inancial Times
assigns to tbcLabourgovcrnmcnt. It is now cvidcnttbat tbc
Wilsongovcrnmcntcould notdoitotcoursc,itwascvidcnt
3 Andre Gunder Frank
allalongtbattbcywouldncvcrbcablcto.Inotbcrpartsoftbc
impcrialist world,capital is also attcmpting, as a nrst linc of
dcfcnsc, to rcorganizc tbc cconomy and tbc socicty tbrougb
socialdcmocracy.Mysuspicionistbattbisisincrcasinglygoing
tofail.Lvcn intbccitadclofsocialdcmocracy,inScandinavia,
itbasratbcrnzzlcd.Lvcrybodyisgovcrningonarazorscdgc,
citbcrwitbaJ0- J0govcrnmcntoraminoritygovcrnmcnt.In
tbclastclcctions around tbc capitalist world, wc saw anin-
crcasc in minority govcrnmcnts, nonc ofwbicb is going to
bavcasufncicntpoliticalbasctofacctbcdccpcningcconomic
crisis,wbicb bccamcconsidcrablydccpcrin I974

Tbcscgov-
crnmcntsarc notgoingtobcablctobandlctbiscrisis.
My suspicion is tbat tbc nct ordcroftbc day is govcrn-
mcntsof`national unity, `as apoliticalattcmpttobandlctbc
cconomic crisis. And tbcsc govcrnmcnts ofnational unity, I
tbink, will bc dcsigncd to pavc tbc way for I984. In somc
placcs,pcrbaps,itwillbcimpossiblctocstablisbagovcrnmcnt
ofnationalunityandtbcrcmaysimplybc amilitary takcovcr
straigbtaway,wbicbwillimposc I 984witboutgoingtbrougba
long drawn-out proccss. In Britain, cvcn tbc prcss alrcady
discusscstbisprospcct.Tbatistosay,tbcclassstru_lc,around
tbcissucoftbcrcorganizationoftbccconomyandtbcsocicty,
bccomcscvcrmorcacutcintbcfaccoftbiscconomiccrisis.As
Imcntioncdcarlicr,oncoftbcmajorwaystotrytoovcrcomc
tbis crisis is to introduccncw tccbnology, butonlywbcn tbc
timc isripc, wbcntbccconomybasbccnrcorganizcd,andtbc
pront ratc bas riscn again, ifit docs. Tbcn wc will gct ncw
tccbnology,particularly intbc cncrgy scctornuclcarfusion
or solar cncrgy, wbicb may bccomc prontablc tbrougb tbc
incrcascintbcpriccofpctrolcum,andtbcminingoftbcsca
bcncctbcCaracasConfcrcncc,dcvclopmcntsinbiocbcmistry
and pcrbaps in gcnctics will fccd into tbc I984 tbat is on
tbc borizon.
Tbcrcforc,tbcclassstru_lcisgoingtoturnontbcattcmpt
ofcapital not only to dcprcss tbc wagc ratc, but also to rc-
organizc tbc cconomy intcrnationally, intcrrcgionally, and
intcrscctorallyfor instancc, tbrougb workcr participation
andtbrougb tbcVolvomodclofcliminatingtbcasscmblylinc
Economic C risis, Third World, and 1984 37
and cstablisbing small work groups. Tbis bccomcs possiblc
and dcsirablc,particularlyincountricswbicbnolongcrmass-
producc standardizcdproductsbutinstcadmovcintoabigb-
tccbnology (sucb as acrospacc production ofrclativcly fcw
capitalgoods tbatarcbigblycapitalintcnsivc),producclabor-
intcnsivcgoods incbcap-laborcountrics,andmovc tbcauto-
mobilc and stccl industrics to Brazil and tbc Sovict Lnion.
Tbis bappcns not only for cconomic rcasons, but also for
politicaloncs.Tbc mostpoliticallyscnsitivcmass-production
industrics arc movcd outand in tbiswaycapital cancontrol
labor intbc impcrialistcountrics,wbilcitcanproduccintbc
SovictLnionnotonlyatalowwagcbutalsowitbdisciplincd
laborandnostrikcs.Tbuscapitalcanusctbismovcasaployin
bargaininganddisciplininglaborintbcimpcrialistcountrics.
Tbisraiscstbcqucstion,forinstancc,wbctbcrintbcpursuitof
tbc class stru_lc, labor sbould go along witb tbis kind of
rcorganization oftbcworkproccssandwitbtbcimplcmcnta-

tion ofworkcrparticipation,wbicbIsuspcctintbclongrunis
rcally bclping capital to do wbat it bas to do in ordcr to
rcorganizctbccconomy.
In sum,capitalismmay ormay not bc onitslastlcgs.Tbc
prcscntcrisisofaccumulationobligcscapitaltorcorganizctbc
cconomy, socicty, and polity` (I rcally do not know tbc
diffcrcnccamongalltbcsc),tbrougbaqualitativccbangcintbc
divisionoflaborandtbcimpositionofncwtccbnology,wbicb
capitalcanonlydoifitbccomcsprontablc todosoandiflabor
is sufncicntly disciplincd and rcorganizcd to pcrmit it. Tbc
qucstionofwbctbcrcapitalismdocssurvivctbiscrisistbrougb
rcorganizationand can tbusgoontoanotbcrmajorupswing,
sucb as tbat aftcr I 89andaftcr I94J, lics intbcoutcomc of
tbcclass stru_lc, on wbctbcr tbcpolicyoftbcworkingclass
probibitsorpcrmis,lcaloncfacilitatcs,tbcrcorganizationof
tbccconomyintbcintcrcstand nccdsofcapital. Agnclli,tbc
bcadofliatinItaly,saystbatbcnownndstbattbcpolicyoftbc
CommunistPartyofItalyismucbbcttcr,mucbmorcrational,
tban tbat oflanfani and tb Cbristian Ocmocratic Party. If
Agnclli tbinks tbat, it is bccausc tbc political policy oftbc
CommunistParty ofItaly is dcsigncd tocollaboratc witb tbc
58 Andre Gunder Frank
rcorganization oftbc cconomy and socictyintbcintcrcstsof
capital,andtopcrmitnotonlytbctccbnologicalrcvolutionbut
also tbc dcprcssion of tbc wagc ratc. Tbcsc mcasurcs arc
ncccssary to gct capital out of tbc doldrums and into a ncw
pbasc ofcpansion aftcr I 984`aftcr I984` in tbc scnsc of
tbcimpositionof I 984in ordcrtorcorganizctbc socicty.
Tbcqucstionbcrcistbckindofclassallianccstbcworking
classmakcs.Tbccompromesso historico oftbcItalianCommunist
Party to j oin tbc govcrnmcnt in alliancc witb tbc Cbristian
Ocmocrats symbolizcsaworking-classcollaborationistpoliti-
calprogram dcsigncd bytbc majorCommunistparticsinand
outsidcofWcstcrnLuropc. In Cbilc, forinstancc, tbcpolicy
oftbcCommunistPartybcforcAllcndc,duringAllcndc, and
nowagainaftcrAllcndc,basbccntomakcanallianccwitb tbc
CbristianOcmocrats. Tbc rcaction to dcvclopmcnts in Cbilc
byMarcbais, tbcsccrctarygcncraloftbcFrcncbCommunist
Party, was, Wcll, Allcndc rcally didnt bavc a basc to do
anytbing sincc bc didntbavc I pcrccnt oftbc votc. And
tbcn camc Bcrlingucr, tbc sccrctary gcncral of tbc Italian
CommunistParty, wbosaid, `Wcll, itsnot only tbatAllcndc
didn tbavc I pcrccntoftbcvotc,youbavctobavcmorctban
I pcrccntoftbcvotc.Youbavctobavc I pcrccntoftbcvotc
and tbc CbristianOcmocratsinordcrtodoanytbing. Iftbat
istbcpoliticallincoftbcworkingclassintbccomingorcurrcnt
crisis,tbcnitsccmstomctbattbcrcisabsolutclynodoubttbat
wcarcpavingtbc sbortcstroad to I 984.Tbcrcis avcryclosc
conncctionbctwccntbcpoliticalorganizationandtbcpolitical
lincoftbcworking-classmovcmcntingcncral and tbc Com-
munistparticsinparticular. InordcrtostcmtbctidcofI984,
wc nccd a political linc and a political organization tbat is
radically diffcrcnt from tbc onc wc now bavc in tbc major
impcrialist countrics, includingmostparticularly)apan. Tbc
clcctoralpolicyoftbc)apancscCommunistPartybasprobably
bclpcd topusbtbccountry tbcfartbcstdowntbcroadto tbc
impositionofasortofI 984.Howcvcrbarditisto dcnnc and
bowcvcrdifn culttoconstruct,tbatiswbywcsourgcntlynccd
an altcrnativc rcvolutionary political policy and organization
wbicbcanlcadusnottoI 984buttoHasta!aictoriaSicmprc'
4. WOR CRISIS A UEREVELOPMENT
TbclastcoupdctatintbcTbirdWorld tookplacconctobcr
, I 97, inTbailand and basrcsultcdinconsidcrablc rcprcs-
sion, not only of ordinary dcmocratic libcrtics but of tb

pcoplc. Strikcs bavc bccn banncd, and tbc junta says tbat

:t
docsnotcpccttoallowclcctionsagainforsitccnycars,wb:lc
implcmcnting, infour-ycarstagcs, awbolcprogram ofsocial
rcorganization. Commcnting on tbis coup, tbc Frcncb ncws-
papcrLe Monde ofctobcr20,I 97,madcasurvcyofSout-
cast Asia sincc tbc victory in Victnam, !aos, and Cambod:a
(Kampucbca) in I 97. Le Monde obscrvcd tbat dcspitc, and
pcrbaps to somc ctcnt bccausc of, tbis popular victory in
Indocbina,rcprcssionbasbccnincrcasingintbcrcmaindcrof
tbc countrics of tbc rcgion. In Indoncsia, tbcrc bas bccn
rcprcssionsincctbcSubartocoupin I 9. IntbcPbilippincs,
rcprcssion basincrcascd,tbcrcbas bccnmartial law for ovcr
twoycars,strikcsarcbanncd,ctc.InSingaporc,rcprcssio

bas
incrcascd rcccntly, as manifcstcd particularly in tbc umvcr-
sitics. I nMalaysia,rcprcssionbasalso incrcascd. inalcttcrto
tbc cditoroftbcFar Eastern Economic Review onctobcr 22,
I 97, tbc opposition lcadc i n tbc parliamcnt co

plaincd
about tbc ncwlaborlaws tbatarcdcsigncd to pcrm:tgrcatcr
cploitation, bc says, ofMalaysian labor and to ccmpt par-
ticularbrmsfromcomplianccwitbtbclaborlawsinordcrtobc
ablc,bcsays,toattractforcigninvcstmcntonmorcfavorablc
This is a revised version of a lecture that U delivered at the Catholic
University of Tilberg, the Netherlands, in October 1 976 and published in
Contemporar Crises 1 : 243260, 1977. It is reprinted by permiSSIOn of
the publisher.
39
40 Andre Gunder Frank
tcrms. Tbcrc bas bccn incrcasing rcprcssion, particularly of
labor,inKorcaandTaiwan.
ln India, according to scvcral sourccs, pticularly sincc
Gandbis imposition of cmcrgcncy rulc on)unc 26, I97,
I 7 J ,000pcoplcbavcbccndctaincd.Tbcsocialistlaborlcadcr
lcrnandcs is now bcing tricd, but tbc prcss is unanimous in
obscrving tbat tbc nmbcr ofdays lost tbrougb strikcs bas
dcclincd and tbat, altbougb tbcrc bavc bccn lockouts and
layoffs,labordisciplincbasincrcascd.Tbisbasbccnwclcomcd
by forcign capital, wbicb in turn bas rcccivcd incrcasingly
favorablctcrmsfromtbcgovcrnmcnt.Tbcrcbavcbccnsimi-
lartcndcncicsinBangladcsb,wbcrctbcrcisalsoincsscncca
militarygovcrnmcnt.TbcrcisalsoincrcasingrcprcssioninSri
Lankaandsofortb.
lntbcMiddlcLast,tbcmomcntarydcfcatoftbcPalcstinians
andoftbcprogrcssivcforccsinLcbanonbasmcantasignibcant
movctotbcrigbt.Tbisdcfcatbasoccurrcdpticularlytbrougb
tbc intcrvcntion ofSyria, wbicb, aftcr tbc installation oftbc
Assad govcrnmcnt, movcd considcrably to tbc rigbt but not
cnougb, at lcast until rcccntly, to intcrvcncmilitarily against
tbclcftandtbcPalcstiniansin!cbanon.Aswcknow,inLgypt
govcrnmcntpolicybasbccntobrcakwitbtbcSovictLnionand
toopcntbc doordiplomatically,politically,andcconomically
toWcstcrn impcrialismandforcigncapital,and-vcrysignib-
cantlytosbifttbcbalanccofpowcrtotbcrigbt.LvcnAlgcria
bas not offcrcd any signibcant support to tbc Palcstinians in
tbis last balf ycar. It is not ncccssy to mcntion tbc vcry
rigbt-wing rcgimcs of Saudi Arabia and otbcrs, wbicb wcrc
always tbcrc. Smming up, wc can say tbat tbcrc bas bccn a
signibcant sbift to tbc rigbt, cconomically and politically,
nationally and intcrnationally, andtbattbc Palcstinians bavc
bccntbcmostvisiblc,but nottbconly,victimsoftbissbift.
LatinAmcrica, as my sonobscrvcd in aconvcrsationwitb
mc, isalmostallintbcbandsoftbcsoldicrs(biscprcssion
formilitaryrcgimcs).Tbcrcarconlytwocountrics-Colombia
and Vcnczucla-tbat arc not now undcr military rcgimcs.
Tbcsc arc not j ustany kind ofmilitary rcgimc, but rcgimcs
tbat, bcginning witb Brazil and now including Cbilc, arc
Word Crisis and Underdevelopment 4I
following a particularly rcprcssivc political policy and insti-
tutingancconomicpolicyassociatcdwitbtbcnamcofMilton
lricdman. (lricdmanbasj ustwontbcNobclPrizc,pcrbapsin
part for tbc advicc bc gavc to tbc Cbilcan j unta, wbicb is
implcmcnting bis cconomic policy. ) But tbis policy is not
limitcd to tbc Cbilcan junta. It is now bcingimplcmcntcd in
ArgcntinaandLruguay.InPcru,tbcrcwasasignibcantsbiftto
tbc rigbt during tbc summcrwitb tbc climination oftbc so-
callcdlcft-wingclcmcntsintbcmility j unta.(Tbcrciswidc-
sprcadagrccmcnttbattbiswasdoncinparttbrougbblackmail
by LS banks. ) Tbis was dcnounccd cvcn by tbc Ne York
Times (scc tbcInternational Herald Tribune for August and
Scptcmbcr5, I 976).WbcntbcPcruvianrcgimcwasinscrious
balancc-of-paymcnt difbcultics and askcd for crcdits, itwas
told tbatitwouldbavctocliminatcitslcftwingandcbangcits
intcrnal cconomic policy in ordcr to gct tbcsc crcdits. Lvcn
Mcicodcvalucditscurrcncy aboutsi wccksago,wbilcstill
undcr tbc outgoinggovcrnmcnt ofPrcsidcnt Lcbcvcrriaa
dcvaluationtbatmcansadcclincintbcstanddoflivingoftbc
masscsoftbcpopulation.
In tbis disturbing panorama of tbc Tbird World, Africa
sccmstobcancccptionbyvirtucoftbcrcvolutioninLtbiopia,
tbc victory oftbcMP!AinAngola,andingcncraltbclibcra-
tionoftbcc-Portugucsccolonics,Mozambiquc,Angola,and
Guinca-Bissau. Tbc situation in tbc soutbcrn part ofAfrica
addstotbcoptimism.tbcSmitbrcgimcinKbodcsiaisvirtually
ccrtain of bcing topplcd and tbc Vorstcr rcgimc in Soutb
Africa, tbougb not in dangcr of disappcaring, is baving its
difbcultics. I am not quitc sc optimistic on tbc basis oftbcsc
succcsscs as somc may bc. In tbc casc ofLtbiopia, tbcrc bas
alrcady bccn asignibcantsbiftbacktotbcrigbt,andwbattbc
bnalconscqucnccsofcvcntsintbcsoutbcrnpartofAfricawill
bcwcdonotknow.WccanscctbatKissingcr,Callagban,and
otbcrs arc making scrious cfforts to savc tbc situation, from
tbcirpointofvicw,and tbcymaysuccccd
Soutbcrn Luropc migbt pcrbaps bc rcgardcd as anotbcr
cccption, in tbat tbcrc is an incrcasc in popular and labor
mobilizationinPortugalaltbougbIwouldsaytbattbcPortu-

42
Andre Gunder Frank
gucsc rcvolution bas alrcady bccn dccatc, a

lca

t in tis
particular round. Tbcrc bas bccn a h

bcraltzatt

n tn Spatn,
incrcascd inhucncc for tbc Communist Party tn Italy, tbc
possibility ofanclcctoralvictoryofMit

crand inFrancc,ctc.
Again,wbatispromiscdbysu

bcv

ntstsb

dtoknow.Ib

d
tbc fcclinginSpainofcupborawbicb rcmindcd mcofCbtlc
during tbc Allcndc ycars, but wbicb sccms to

o bc

ot
quitcrcalistic,givcntbcobj cctivccircumstanccsinstdcSpain,
inLuropc,andintbcworldasawbolc.

I nNorthcrnLuropc, inNortbAmcrica,andtn)apantbcrc
ismorcorlcssunanimousagrccmcnttbatapoliticalsbifttotbc
rigbt ismanifcsting itsclftbrougbclcctions. for instancc, tbc
rcccntdcfcat(aftcrfortyycars)ofsocialdcmocracyinSwcdcn
and tbc marginal clcctoral sbift D tbc ri

bt

in tbc r

ccnt
Gcrman clcction. Public opinion survcys indtcatc a sundar
sbiftintbcLnitcdStatcs.Morcimportant,pcrbaps,iswbatlics
bcbind tbcscI batc to say supcrncial, tip-of-tbc-iccbcrg~
politicalmanifcstations.n)uly I 9, I97, V
:
S. N
e
vs ,c World
Report, oncoftbctbrccmajorLSncwswcctcs,said, L

pcrts
cpcctbusincsstoclimbforycarsto comc. Tbcytbc

intc

-
vicwcd a numbcr ofpcoplc to tbc cffcct tbat busmcss ts
cpanding and will continuc to do so. !bcy

cvcn q

otcd
Lawrcncc Klcin wbo isprincipalcconomicadvtscrto)tmmy
Cartcrand bcad ofonc oftbc tbrcc major cconomctric busi-
ncss forccastingscrviccsintbc LnitcdStatcs. Klcinsaidtbat
witb propcrgovcrnmcntpolicicstbispolicyofcpansionand
rccovcrypursucdsinccmid- I 97 couldlcadtoarcplayoftbc
I 90sboom. Tbc funnytbingistbatifyou rcad notonly tbc
opcningprcdictionbuttbcanalysis oftbcsituation,yougcta
vcry diffcrcntpicturc. Furtbcrmorc, sincc tbcn tbc rccovcry
bas faltcrcd and tbcrc bavc bccn two or tbrcc montbs of
rcduccdratsofgrowtb andrcncwcd incrcascsintbcratcof
uncmploymcnt. Tbat may ormay not bc rcsponsiblc for tbc
survcyintbclatcstissucofV.S. News & World Report ,ct
'
b

r
2 I 97) wbicb said tbc oppositc ofwbat bad bccn said tn
)uiy. No tbc magazinc survcycd wbat it callcd `businc

s
cconomiststbat is to say, cconomists wbo work for btg
busincsscssucbas banksandmajorcorporationsand askcd
World Crisis and V nderdevelopment
43
qucstionslikcbowlongtbcrccovcryislikclytolastandwbcna
rcncwcdrccc

sioncouldbccpcctcd.vcrbalf4pcrccnt-
of tbcsc busmcss cconomists said tbat tbcy cpcctcd a rc-
n

wcdrcccssionin I978, 2pcrccntsaid I979,andpcrccnt

said I 977. Indccd,tbcrc isalrcadydiscussionofwbctbcrtbc

cncwcddownturnintbcgrowtbratcandtbcrcncwcdupturn
tnuncmploy

cnti

tbcLnitcdStatcs,wbicbbcganlastspring

.
ndb

continucdintotbcflmontbs,issimplyamomcntary
j i_lct

tbc curvcofcpansionorwbctbcritsignibcstbattbc
cpansion, tbcrccovcry,isalrcadyn nisbcd.ncoftbctbings
tbat Klcin obscrvcd is tbat tbc post- I97 rccovcry bas bccn
almost cclusivcly bascd onconsumcrdcmandand tbc nccd

o rcplcnisb invcntory, it bas not bccn bascd on productivc

invcstmcnt anywbcrenot in)apan, tbc Lnitcd Statcs,Gcr-
many, or any oftbc majorindustrializcd countrics. Tbis bas
also bccnrcmarkcduponbysucbpoliticiansas)acqucsCbirac
bcforc,andI tbinkalsoaftcr,bcrcsigncdasprimcministcrof
ra

cc. It sccms to mc tbat tbis is pcrbaps tbc most bigbly

tgi:tbcantoftbcsc obscrvations,bccauscwitboutanincrcasc
tnproductivcinvcstmcnttbcprospcctsfortbcmaintcnanccof
tbc rccovcry arcvcry dim. I agrccwitb tbosc oftbcbusincss
cconomistsquo

tcdnU. S. News & World Report wbocpccta

rcncwcd rcc

ssion tn I978orcvcn carlicr. I also agrcc witb

tboscwbosaid tbattc I978rcccssionislikcly to bcdccpcr
tban tbconctbatwc justwcnttbrougbin I 974I 97, wbicb

as tbc dccp

st, tbc most coordinatcd in tbc scnsc ofbcing

stmultancous tnall tbc major industrializcd countrics rcccs-
sionsincctbcdcprcssionoftbc I 930s.

Anotbcritcmintbisrcgard. tbcrganizationofLconomic
CoopcrationandOcvclopmcnt(LCO),acollcctivccconomic
body of tbc industrializcd countrics from Nortb Amcrica
Luropc,and)apan wbicb basbcadquartcrsinParis issucs tb
Eco
,
omic Outoo twicC a ycar, in Occcmbcr andjuly, wbicb
rc

vicws tbc

major cconomic dcvclopmcnts of tbc past and

trcstoprcvtcwtbcprospcctsfortbcimmcdiatcfuturc. Intbc
Occcmbcr I 97issuc,tbcmagazinctalkcd aboutamodcratc
rccovcry and a modcration in tbc rccovcry, wbicb it said
govcrnmcntsoftbcindustrializcdcountricswclcomcd,bccausc
44 Andre Gunder Frank
it was bopcd tbat tbc modcration in tbc rccovcry, including
rclativclyrcstrictivcmonctaryandnscalpolicics,wouldavoid
tbc rcncwcd takc-offofinnation. In aspccial supplcmcnt ot
)uly I 97, on growtb sccnario to I 980,`wbicb tbc LCO
takcsgrcatcarctoqualifyasa`rcalisticprospcct`notaprcdic-
tion or goal, tbc LCO announccd `a dccclcration oftbc
growtbtrcnd,comparcdtotbcprcviousdccadc,to4pcrccnta
ycar bcginning in I97 3. ` Tbis `is intcndcd to indicatc tbc
difnculticsandproblcms againstwbicb all cconomic policy is
likclytocomc upintbccoursc oftbcsc ycars. ` Tbcn, spccin-
cally tocncouragc and rcndcrncwcapitalinvcstmcntpolicy,
tbc LCO sccnario cnvisagcs tbc ncccssity of `important
modincationsoftbcintcrnaldistributionofincomc,fromtbc
carnings oflabor to tbc carnings ofcapital . ` According to
Le Monde uly 29, I97), political dccisions oftbis sort can
alrcady bc sccn in opcration, particularly in Britain, Italy,
lrancc, and Portugal, all ofwbicbbavc announccd austcrity
mcasurcs. In Britain, tbcactionbassupposcdlybccntakcnin
rcsponscto tbcbalanccofpaymcntscrisisandtbcdcclincof
tbcpound.Miltonlricdman,tbcNobclPrizcwinncr,saystbat
tbc Britisbgovcrnmcnt is spcndingtoo mucb and bas to cut
down its cpcnditurcs in ordcr to cnd tbc slipping of tbc
poundandoftbc Britisb cconomyingcncral.Tbc Andrcotti
govcrnmcntinItaly,witbtbcsupportoftbcCommunistParty,
isalsoimposingdrasticaustcritymcasurcsKaymondBarrc,a
profcssional cconomist wbo j ust bccamc primc ministcr of
lrancc,basalsotricdtoimposcanaustcrityprogram,altbougb
so far it is mcctingwitb considcrablc
,
csistancc. as you may
rccall, about tcn days ago tbcrc was a onc-day nationwidc
gcncral strikc inoppositiontoBarrc`splan. Accordingto tbc
cstimatcsinLe Monde, tbcplanwouldtakc bctwccn and I
pcrccntoftbcincomcaway fromparticularincomcgroupsin
lrancc.Iftbatistbccasc,tbcnitiscasytosccwbytbcrcsbould
bc rcsistancc not only cprcsscd tbrougb a gcncral strikc,
but also tbrougb otbcr political mccbanisms. And nnally, in
Portugal, tbc Soarcs govcrnmcnt is cngagcd in undoing tbc
rcforms tbat bad occurrcd sincc tbc so-callcd rcvolution of
April 2, I 974, byimposingavcryscrvcrcaustcrityprogram.
World Crisis and Underdevelopment 4
Llscwbcrc, wbcrc sucb austcrity programs arc notyct bcing
imposcd bccausc tbccconomicsarcnotinsucbscriousdifn-
cultics, tbcrc is nonctbclcss cvidcncc ofpolitical and nscal
attcmptstocutbackonnnancialassistancc, cducation,bcaltb,
andsimilarscrviccs.
Tbcsc arcsomcoftbc manifcstations oftbcprcscntcrisis.
Butwbatisbcbindtbcscmanifcstationsandbowdocsitrclatc
to tbc undcrdcvclopcd countrics! It sccms to mc tbatworld
capitalismisgoing tbrougb, orbas cntcrcd into, anotbcrgcn-
cral crisis ofaccumulation, analogous to tbat oftbc pcriod
bctwccn I 9I 4and I 94, wbicbincludcstbctwowarsandtbc
dcprcssionandwbicb produccd tbcriscoffascismas adircct
political and cconomic rcsponsc to tbat crisis. Tbc adjust-
mcnts tbatwcrcacbicvcd tbrougb fascisminGcrmany, Italy,
and)apan,andtbcrclatcddcstructionoftbclaborunions,tbc
dcprcssionoftbcwagc ratc, tbcdcfcato
[
GcrmanyinWorld
WarII andtbcvictoryoftbcLnitcd Statcs,wbicbmadcittbc
dominantpowcr in tbc world,wcrc csscntial to tbc postwar
rccovcry ofworld capitalism. Tbc longpostwar boom lastcd
untiltbcmiddlcoftbc I 90s,wbcnitsccmcdtofaltcrandtbc
ratc ofpront in tbc major industrializcd countrics bcgan to
dcclinc again. Tbcrc was a rcccssion in scvcral countrics in
I 97, tbctcmporarilysucccssfulattcmpttostavcofftbcrcccs-
sionintbc\nitcdStatcstbrougbtbccpcnditurcsconncctcd
witb tbc war against Victnam nnally gavc way to tbc I 970
rcccssion. In I 97 I tbcrcwastbccurrcncycrisis,tbcdcvalua-
tionoftbc dollar,and tbc climinationoftbcpaymcnt ofgold
against tbc dollar. Tbcn in I97 3 tbcrc was tbc pctrolcum
crisis,andtbc I97 3-I 97rcccssion,wbicbwasblamcdontbc
sbcikbs,altbougbitbadactuallybcgunscvcralmontbsbcforc
tbat.Bymid- I97 4itwasnolongcrpossiblctoblamctbcArabs
fortbcrcccssion,andKissingcr,Wilson,andScbmidtbcganto
admit a bit morc rcalistically tbat tbcrc was in fact a scrious
cconomicrcccssionaninvcstmcntcrisis.Sotbcybcgantotalk
in tcrmsofI 929-I 930andtbcdangcrofagrcatdcprcssion.
Tbc I 97 3-I 97rcccssionwas,infact,tbcmostscrioustbat
tbccapitalistworldbadknownsincc I 930.fncialuncmploy-
mcnt,wbicb isofcourscalwayslcsstbanrcaluncmploymcnt,
4 Andre Gunder Frank
rosc to ovcr I 7 million in tbc industrializcd countrics. Al-
tbougb it bas in somc placcs again dcclincd, itbas not bccn
climinatcd anywbcrc and in somc placcs bas continucd to
incrcasc, particularly inGrcatBritain. In tbc Lnitcd Statcs,
tbcmaimumuncmploymcntratcof 9. 2pcrccntwasrcacbcd
in May I 97 , it tbcn dcclincd to about 7 pcrccnt, but bas
rcccntly bcgun to incb up again, and is now 7. 8 pcrccnt.
Kcmcmbcrtbattbcscarcalloffcial rates andnational averages,
wbicbmcans tbat in manymajorcitics uncmploymcntis still
morc tban tbc I 0pcrccntofncialngurc, andinmanyscctors
uncmploymcnt rcmains vcry mucb bigbcr (20 pcrccnt for
wbitcyoutband40pcrccntfornonwbitcyoutb).Toaddtotbc
gloomypicturc,tbcrcisncarlyunivcrsalagrccmcnttbattbcrc
arc no prospccts for climinating tbis uncmploymcnt in tbc
forcsccablc futurc. n tbc contrary, if wc facc a rcncwcd
rcccssion in a ycar or so, possibly lcss, uncmploymcnt will
ncccssarilyriscagain,buttbis timcbcginningfromanalrcady
bigb lcvcl. At tbc samc timc, continucd innation mcans tbat
ortbodo or bourgcois cconomic tbcory and policy cannot
offcr asolution, sinccncitbcrcontcmplatcs tbcpossibilityof
simultancousuncmploymcntandinnation.IntbisrcgardIcan
offcratbcoryofinnationwbicbmaybcsimplisticbutwbicb I
tbink is morc rcalistic tban tbc cost-pusb and dcmand-pull
argumcnts tbat wc usually bcar. Tbat tbcory, wbicb is also
supportcd by tbc cvidcncc and cvcn by somc busincss statc-
mcnts, is simply tbat wbcn pronts dcclinc, or tbrcatcn to
dcclinc,busincsscsraiscpriccsinordcrtodcfcndtbcirratcsof
pront. and tbatiswbywcbavc innation. Tbatcanbcdcmon-
stratcdtosomcdcgrcc. ( I ) intbccountricsinwbicbtbcratcof
prontbasdcclincdtbcmost,tbcratcofinnationistbcbigbcst,
and ( 2)in tbc industrics tbat arc tbcmostmonopolizcd, and
tbc ability tosctpriccstbcgrcatcst,priccriscsbavcbccntbc
bigbcst, wbilc in tbc most compctitivc industrics tbcy bavc
bccntbclowcst.
Wcarclivingin,orcntcringinto,anotbcrmajorworldcrisis
ofcapitalaccumulationinwbicbtbcratcofprontbasdcclincd
andinwbicbprontablcinvcstmcntopportuniticsarc smallcr,
ornolongcrcist,particularlyintbcscctorsandgcograpbical
World Crisis and Underdevelopment 47
arcasinwbicbtbcrcbadprcviouslybccncpansionbylcading
industrics. In ordcr to rcpcat a long boom, sucb as tbat of
tbc postwarpcriod, many transformationsand
.
dcvclopmc

ts
arc ncccssary. lirst, tbc ratc ofpron t bas to mcrcasc again.
Sccond,capitalnccdstbcdcvclopmcntofncwtccbnologyin
Scbumpctcrian tcrminology, innovation, not simply invcn-
tionin major arcas, sucb as cncrgy, tbc scas, and so fortb.
Kissingcrbasproposcdaninvcstmcntprograminncwsourccs
ofcncrgytbatwould cost S I trillion. Butbcforctbiscanta

kc
placc, tbc conditions ofprontability bavc to cba
'
g

. old m-
dustrics bavc to bc rcplaccd by ncw oncs and cxistmglabor
proccsscs bavc to bc cbangcd. Tbc intcrnati
'
al division of
laborbastobcsignincantlymodincd.IntbccrsisoftbcI 870s
and I 880s, tbc risc of classical impcrialism was onc oftbc
ma|ormanifcstations oftbis ncccssary cbangc in tbcintcrna-
tional division oflabor. Now, as tbcn, tbc undcrdcvclopcd
countricstbcmisnamcdTbirdWorldwillofcourscplay a
vcrysignincantrolc.

Ibavcalrcadyrcvicwcdsomcoftbcpolucalmamfcstauons
oftbis ncwparticipationintbcintcrnationaldivisionoflabor,
but I must still caminc wbat lics bcbind tbcm
lirst ofall,
tbcrc is an incrcasing diffcrcntiation botb among and within
countrics of tbc so-callcd Tbird World. Tbc intcrmcdiatc
cconomicsandrcgimcsalsocallcdsubimpcrialistcconomics
or powcrsarc ablc to takc advantagc oftbis crisis in ordcr
to n nd a ncw placc in tbc intcrnational division of labor.
Tbcy bccomc produccrs and cportcrs ofcapital

oods and
macbincry,aswbcnBrazilcportsVolkswagcncngmcstotbc
Lnitcd Statcs

Somc ncw ccnters can aspirc to an analogous

subimpcrialistrolc. TbisisparticularlytbccascforIran,wbicb
is using its pctrolcum carnings in a

ignin

ca
'
t attcmpt

at
industrialization. Howcvcr, tbcsc subimcralist cconomics
bavcalsobccnfaltcring
TbcBrazilianmiraclccndcdin I 974,
andsincctbcpctrolcumcrisisBrazilbasbadscriousbalanccof
paymcntsproblcms. Lvcn Iran, dcspitc tbcmassivc amounts
offorcign ccbangc tbatitbas rcccivcd from pctrolcum, bas
bcgun to borrow again and bas cut back on its

bitious
invcstmcntprogram. SoutbAfrica,anotbcrofthcmajorsub-
48

Andre Gunder Frank

impcrialistpowcrs,isinsignincantcconomicdifnculticsinpart
bccauscoftbcdcclincintbcpriccofgold,wbilc sucbpotcn-
tiallysubimpcrialistpowcrsArgcntinaandIndiabavcalrcady
clcarlyfailcd,andbyvirtucoftbcirfailurcbavcbadtoimposc
rcgimcstbatwillcomctotcrmswitbtbisfailurc-aswcsccin
tbc so-callcdstatcofcmcrgcncyinIndiaandtbcncwmilitary
govcrnmcntin Argcntina.Tbcn tbcrc arc lcsscrpowcrs. also
bascdprimarilyonpctrolcum,tbcycananddoaspirctosomc
kindofintcrmcdiatcrolcintbcintcrnationaldivisionoflabor.
lorinstancc,Vcnczucla,Nigcria,andIndoncsiadisplaybopcs
tbat alrcady appcar csscntially frustratcd and will probably
continuctobcso.
Anotbcrdcvclopmcntistbc transfcroflabor, tbcrcscttlc-
mcnt of labor-intcnsivc industrics from tbc industrializcd
ccntral cconomics to somcoftbcundcrdcvclopcdcountrics,
Korca,Taiwan,HongKong,andSingaporcwcrctbcnrstmajor
camplcs. Tbc transfcrrcd industrics bavc includcd tctilc
manufacturing,clcctroniccomponcntsproduction,andsoon.
Tbis practicc bas sprcad to otbcr countrics. Malaysia, tbc
Pbilippincs,Tunisia, Morocco, cvcn Haiti. Tbcrc, instcad of
import substitution, you now bavc a policy ofwbat migbt
bc callcd cport substitution, or cport promotion of so-
callcdnontraditionalindustrialormanufacturingcports.Somc
undcrdcvclopcd countrics aspirc to do tbc samc tbing, but
cannotcompctc andmustbccontcnttocontinuc to producc
rawmatcrials fortbcworldmarkct. In still otbcrcountrics-
particularly Cbilc-tbcrc is a conscious dcindustrialization
takingplacc. Witb tbcapplicationoflricdmans sbocktrcat-
mcnt in tbc middlc of I 97, industrial production basgonc
down 2 pcrccnt (according to tbc Cbilcan Association of
Manufacturcrs).Itwouldbavcdcclincdcvcnmorcifitbadnot
bccn for tbc rclativc succcss ofcporting a signibcant and
incrcasingly largc proportion ofdomcstic industrial produc-
tion to tbc so-callcd world markct. But tbc Cbilcan military
rcgimc bas not bccn succcssful in attracting ncw invcstmcnt
into manufacturingforcportand instcad nndsitsclfobligcd
torclyontbccpansionofmincralandqriculturalrawmatcriaI
cports.Tbcrcarc quitcanumbcrofotbcrcountrics tbatfall
World Crisis and Underdevelopment 49
intotbiscatcgory,andtbcWorldBank,wbicbuscdtonnancc
onlyinfrastructurcforccrtainkindsofindustrialdcvclopmcnt
by tbc multinationals in tbc undcrdcvclopcd countrics, bas
markcdly sbiftcd its invcstmcnt program to support morc
agriculturalproductionandagriculturalproductionforcport.
Wbat is signincant in tbis dcvclopmcnt from tbc political
standpointistbatwbcntbcrcwasapolicyofimportsubstitu-
tion,itwasncccssarytomaintainorcpandtbcintcrnalmarkct
fortbcsccommoditics,and todotbis itwasncccssarytobavc
an incomc distributionpolicytbatwouldcnablc tbc working
class to purcbasc at lcast a portion oftbc commoditics tbcy
produccd. Tbis ncccssity providcd an cconomic basis for a
rclativclymorccqualdistributionofincomc.Itmadcpossiblc
anallianccbctwccntbcbourgcoisicandtbcworkingclassina
varictyofpopulistrcgimcs.Tbcsituationintbcprcscntworld
crisis,inwbicbtbcrcisatransfcrofindustrialproductionfrom
ccntcrtopcripbcry, is notonlydiffcrcnt, but-toca_cratc
a bitis prcciscly tbc oppositc. Sincc industrial production
is now incrcasingly for cport, and raw matcrial production
rcmainsforcport,tbcproduccrsarcnolongcrtbcconsumcrs
of tbc products tbcy producc. Tbcrcforc, it is not in tbc
intcrcsts ofcapital tbat tbc working class in tbcsc countrics
bavc an incomc sufn cicntlygrcat to providc alocal cffcctivc
dcmandfortbcscproducts,ontbccontrary,fromtbcpointof
vicwofcapitaltbcproduccrs arc only tbat,andarc notcon-
sumcrs.Tbcyarcacost,awagccost,anditisintbcintcrcstof
capital tbat tbis bc as low as possiblc

Ifproduccrs cannot
purcbasc commoditics outoftbcirwagcs, itdocs notmattcr
bccausctbcyarc nottobcsoldintbcnationalmarkctanyway.
Lport promotion tbus rcmovcs tbc cconomic basis for an
allianccbctwccnlocalcapitaI,tbcworkingclass,andtbcunions
in tbcsc countrics, and tbcrc is cconomic prcssurc to rcducc
tbc wagc ratc as mucb as possiblc. Tbcrc is compctition by
tbcsc countricsby local capital, wbicb associatcs itsclfwitb
tbcproccssaswcllasamonggovcrnmcntstorcccivcaslargc
a sbarc of tbc production as possiblc, or to maimizc its
participationintbcintcrnationaldivisionof laborbyrcducing
tbc cost ofproduction to tbc minimum

Tbis in turn mcans

J 0 Andre Gunder Frank
rcducingtbcwagcsoflaborinordcrtoattractproduction.Tbis
iswbat tbcoppositionlcadcroftbcMalaysianparliamcnt, to
wbomIrcfcrrcdcarlicr,mcantwbcnbcdcnounccdtbcrcccnt
rcvision oftbc laborlaws and tbcccmptionofccrtainnrms
from compliancc witb tbcm. First ofall you makc tbc labor
laws morc favorablc to capit ingcncral, and tbcn, bc says,
youccmptccrtainbrmsfromcompliancc.Tbisispartciularly
tbc cascintbcso-callcdfrcctradcorcportpromotionzoncs,
wbcrc tbc govcrnmcnt scts up a sort ofcnclavc in wbicb it
providcscbcap labor and public utilitics-clcctricity, watcr,
and transportation. No customs dutics arc cbargcd for tbc
importationofrawmatcrialsand componcnts, and tbcirpro-
ccssing and rcsbipmcnt outward to tbc world markct takcs
placcwitbintbcsczoncsinwbicballstrikcsarcforbiddcnand
laboristotallyrcprcsscd.
Tbisisa ncccssary componcntoftbcncwdcvclopmcntin
tbcintcrnationaldivisionoflaborandimplicstbcncccssityto
rcprcsstbcworkingclassandtbcpcasantry.Italsoimplicstbc
ncccssity of incrcasing collaboration bctwccn tbc statc and
intcrnational capital tbrougb tbc dcvclopmcnt of a statc
capitalismtbatwillcollaboratcwitbintcrnationalcapital,witb
tbc multinationals. Tbis in turn implics tbc nccd to rcly on
corporativcforms,andparticularlymilitarycorporativcforms,
of social organization. Tbat is wby it is no accidcnt tbat
practicallycvcrycountryin!atinAmcricaisnowintbcbands
oftbcsoldicrs.Morcovcr,tbcscarcnotmilitaryrcgimcsoftbc
I 950s or tbc ninctccntb ccntury, wbcrc somc gcncral scts
bimsclfup andmakcsabananarcpublicdcalwitbtbcBritisb
orLSimpcrialists.Tbcyarcrcgimcsbuiltuponinstitutionalized
collaboration bctwccnlocalcapital,tbcmilitarystatc,tbcmulti-
nationals,and,ofcoursc,tbcgovcrnmcntstowbicbtbcmulti-
nationalsaligntbcmsclvcs.TbcrcarctwomorctbingsIsbould
undcrlincintbisrcgard.ncistbataspartoftbiscconomica|ly
dctcrmincd dcvclopmcnt oftbc military corporatist statc, it
isncccssarytodcvclopancwidcologytolcgitimizctbcrcprcs-
sion. Tbat ncw idcology can bc summarizcd in tbc words
national sccurity,` wbicb is tbc nqtbatis bcingwavcd by a
numbcroftbcscrcgimcs.Nationalsccurity, as itisnowuscd,
World Crisis and Underdevelopment J I
nolongcrmcanssimplymilitarydcfcnscagainstsomcrcal or
tbrcatcncd invasion from a ncigbboring country. it mcans
cconomicdcvclopmcntandtbcsccurityofcconomic,political,
andsocialarrangcmcnts.Tbcotbcraspccttbatsbouldpcrbaps
bc undcrlincd in tbis rcgard is tbc likclibood-I would say
ccrtainty-ofincrcasingwarsbctwccnmany oftbcsc undcr-
dcvclopcdcountricsintbcTbirdWorld.Tbcscarcparticularly
likcly undcr tbc stcwardsbip of tbc subimpcrialist powcrs
wbicbbavcbccnarmingtbcmsclvcstotbctcctb.
Toconcludc,tbcscpoliticalmanifcstationsarconlytbcnrst
rcpcrcussionsofaworldcapita|istcconomiccrisis.Tbcundcr-
dcvclopcdcountricsarcdcstincdtoplayncwrolcsintbiscrisis
tbrougb tbc intcrnational division oflabor, and tbc crisis is
bound to involvc tbcm in tbc n rst instancc tbrougb tbcir
balanccofpaymcntsdifbcultics and tbcir1crriblc dcbt prob-
lcms.Tbcinabilitytopay offtbcirdcbtsbaslcdtotbcnccdto
gototbcIntcrnationalMonctaryFund,tbcClubofParis,and
tbcbanksintbcindustrializcd countricstoaskforassistancc,
wbicb, ifrcndcrcd, tbcnimposcs obligations tbatncccssitatc
scvcrc austcrity mcasurcsoftcngoingconsidcrably bcyond
tbosc tbat bavc so far bccn imposcd in countrics sucb as
BritainandItaly.
Tbc undcrdcvclopcd countrics bavc to do tbcir sbarc in
bclpingintcrnationa|capitrccovcritsprontabilityandlauncb
amajorncwwavc ofinvcstmcntinordcrto producc ccrtain
commoditics in tbc Tbird World. Tbis will, in turn, makc it
possiblcfortbcindustrializcdcountricstogoontoaso-callcd
ncwtccbnologicalrcvolutionandproducctbcmorcsopbisti-
catcdproductsintbc`dcvclopcdcountrics.Inotbcrwords,
capital nccdstotakctbcinvcstmcntoutoftctilcs and auto-
mobilcs and put it into ncw tccbnology. Wc bavc to ask

oursclvcs to wbat ctent is tbc Tbird Worlds contribution

to tbc cmcrging ncw intcrnational division of laboror if
youwisb,tbcncwintcrnationalcconomicordcrsufncicntto
ovcrcomc tbc crisis of capital accumulation! And to wbat
ctcnt,ifitisnotsufbcicnt(asI tbinkitisnot),isitncccssary
forvcryfar-rcacbingcconomic,political,andsocialcbangcsto
takcplaccintbcindustrializcdcountricstbcmsclvcs !Wbatwc
J 2 Andre Gunder Frank
nowsccinBritainandItalyarconlytbcvcrynrststcpsoftbc
imposition ofaustcrity mcasurcs, tbrougb rccoursc to social
dcmocraticparticssucbastbc!abourParty,wbicbissupposcd
to bc ablc to disciplinc tbc labor unions, or rccoursc to tbc
coopcrationtactics oftbcCommunistPartyofItalyingctting
labor to acccpt tbc austcrity mcasurcs tbat capital rcquircs.
Tbismaybcinsufncicnttostcmtbctidcoftbccrisis.Towbat
ctcntmayotbcrpoliticalformstbcnbcncccssaryforcapital !
Towbatctcntwillcapitalalsobavctonndancwidcologyto
rcplacctbatoftbc`Amcricanwayoflifc andgrowtbtbatbas
bccn dominant in tbc postwar world, but is no longcr sufn -
cicntly convincingwbcn wc scc uncmploymcnt and innation
incrcasingand noprospcctsofcliminatingtbcm!Nopolicics
sccmtoworkandccrtainlymosttbcoricsarcunablctocplain
wby not. Tbus tbcrc is in botb tbc industrializcd and tbc
undcrdcvclopcd countrics tbc bcginning ofa scrious idco-
logical crisis, in wbicb capital will bavc to nnd an altcrnativc
idcologytolcgitimizcitsrulcandtbcvariousdrasticaustcrity
mcasurcstbatitwilltrytoimposconlabor.
5. IMPERIALISM, CRISIS, AND SUPERELOITATION
I THE THIRD WORL
An cconomiccrisis,acrisisofcapitalaccumulationonaworld
lcvcl likc tbc onc wc arc cpcricncing today, rcquircs tbc
rcstructuringoftbcworldcconomy.Tbiskindofrcstructuring
is not limitcd to tbc cconomy but also ctcnds to social,
political, and idcological structurcs at tbcworld and national
lcvcls.KcstructuringisundcrwayinLuropcforcamplc,bc-
twccntbc nortbcrnLuropcancountrics(cspcciallyGcrmany)
and soutbcrnLuropc. Lngland, wbicb incrcasinglyrcscmblcs
soutbcrnLuropc, isapossiblccccptionbccausc frombcing
tbc bcgcmonicpowcritdcclincd rclativclyduringtbc I87 3-
I 89Jcrisisandlostitsworldpositionabsolutclyduringtbclast
crisis, from I 9I 3 to World War II. Intbc currcnt cconomic
crisis, it appcars tbat Grcat Britain will ccasc to bc a `grcat
powcr,` and tbat tbc Lnitcd Kingdom will probablyccascto
bcunitcd,asScotlandandlatcrprobablyWalcsscccdc.
Tbus a diffcrcntiation proccss is occurringwitbin Luropc
itsclf, and it implics tbc substitution of ncw industrics for
tbosc tbat wcrc tbc lcading oncs up until now. for instancc,
tbrougbtbcdcvclopmcntofncwcncrgysourccs.Tbisiswbat
Kissingcrbadinmindwbcnbcproposcdancpcnsivcplanto
crcatc ncwcncrgy sourccs,for sucb alargcinvcstmcntto bc
robtablc, tbc ratc ofpront, wbicb bas bccnfallingsincc tbc
mid- I 90s,wouldbavctogoupagain.
ncoftbcmccbanismsforacbicvingtbatistbcapplication
ofaustcrity mcasurcs ofprcciscly tbc kind tbatarccurrcntly
This essay is based on a lecture that was delivered in Spanish at the
University of Barcelona in May 1 977. It was translated by Mimi Keck.
3
Andre Gunder Frank
bcingputintocffcctinmanyLuropcancountricsPortugal,
linland,Swcdcn,Ocnmark,Lngland,lrancc(wbcrcaprofcs-
sional cconomist is in cbargc oftbc Barrc plan), and Italy,
wbcrc tbc austcrity plan is bcing imposcd witb tbc PCI dc-
cidcdlyandopcnlysupportingtbcAndrcottigovcrnmcnt,not
only ingcncral, buton tbc plan itsclt Tbc Lurocommunists
arc bcing callcd upon to bclp tbc bourgcoisic imposc tbcsc
mcasurcsandsaytbattbcyarcdcdicatcdtodoingso.Isu_cst
tbat cvcn in Spain tbcrc will bc an austcrity plan aftcr tbc
clcctions(of)unc I , I977)infact,tbcclcctionswillprobably
bcamajorinstrumcntfornndingapoliticalsolutiontbatwill
allowanaustcrityplantobcimposcdinSpainaswcll.
Wbat will bappcn aftcr tbc imposition ofaustcrity plans
rcmainstobcsccn.Iamsurctbattbcyarcdoomcdtofailurc,
sincctbcyarcnotcapablcofsolvingtbcproblcmsposcdbytbc
cconomic crisis at tbcworld or national lcvcl, citbcr for tbc
bourgcoisic orfortbcworkingclass. Bcyond tbc attcmpt to
imposcaustcrityplans tbrougb tbcmcdiationofsocaldcmo-
cratic typcs ofpartics orgovcrnmcnts, itwill probably bc a
mattcrofimposing cvcnmorc austcrc policics tbrougbgov-
crnmcnts ofso-callcd national unity or national salvation. In
a ccrtain scnsc, tbcrc arc alrcady tbc bcginnings of sucb a
govcrnmcnt in Italy, wbcrc tbc Communist Party, aftcr tbc
`bistoric compromisc, supports and maintains a Cbristian
Ocmocratic govcrnmcnt and its austcrity plan ,as it did in
tbcpostwarycars).
Abi tofbistoricalpcrspcctivci snccdcdbcrc.Wcknowtbat
in tbc past cconomic criscs bavc bccn tbc occasion for pro-
foundcbangc.lorcamplc,asPaulSwcczyandHarryMagdoff
bavc notcd, tbc I 87 3 crisis was tbc antccbambcr for im-
pcrialism, I wouldgo cvcnfurtbcrand say tbattbc crisiswas
tbc immcdiatc causc ofimpcrialism wbicb, in turn, was tbc
formcapitalismdiscovcrcdinordcrtogctoutoftbcaccumula-
tioncrisisitwasundcrgoingandwbicbrcsultcdinimpcrialism
ontbconcbandandinmonopolycapitalismontbcotbcr
Tbat
is to say, during tbat crisis a major qualitativc cbanc was
alrcadytakingplaccintbcintcrnationalandintcrscctoraldivi-
sionsoflabor.Anotbcrsucbcbangcoccurrcddurintbcgrcat
Imperialism, Crisis, andSuperexploitation
crisisof tbisccntury,intbc I 930sand I 940s.itwas tbistbat
wfundamcntallyrcsponsiblcforsbarpcningtbc

classstru

lc
inawaytbatlcdtopopularfrontsinsomccountrcsandfascist
rcgimcsinotbcrscitbcrbccauscoftbccmcrgcnccofpopular
frontgovcrnmcnts,orbccauscpopularmobli

zationsb

ganto
go bcyond limits tolcrablc to tbc bourgcoisic. All tbis o

ly
sbowstbatccrtainkindsofpoliticalcvcntsarcproduccddurng
timcs ofcconomic crisis, impcllcd by tbc problcms tbat tbc
crisisgcncratcsintbc politicalarcna. uta

tbcroot
'
ftbcsc
politicalcbangcs istbcnccdforamodin

ionoftbcintcrna-
tionaldivisionof labor,likctbconctbatisinproccsstoday.

AltbougbIwillprincipallybcdiscussingtbso-callcdTbird
World, I initially rcfcrrcd to tbc mctropohtan part of tbc
impcrialist world. I bclicvc tbat it is ndispcnsiblc to undcr-
stand wbat is bappcning in onc part in ordcr to undcrstan

d
wbat isgoing on in tbc otbcr. In cffcct, tbcworld cconomic
crisis is affccting tbcintcrnational division oflabor, notonly
among tbc dcvclopcd countrics bu

al

ong tb

ndc

-
dcvclopcd countrics. A rapid qualtauvc diffcrc
'
uauon is
taking placc in tbc undcrdcvclopcdworld, tbcTbird World.
Tbcprcssalrcadycallstbcctrcmcsoftbisproccsstbcfourtb
world nftbworld,andsofortb.
lor

camplc,tbcTbirdWorldcountrics,wbicbundcrwcnta
ccrtainkindofindustrialdcvclopmcntbascdonwbatbasbccn
callcdimportsubstitution,rcsultingfromtbcp
'
cviouscrisisand
postwardcvclopmcnt,bavcbc

omc,to ccrtnct

cnt,

ccono-
micstbatcouldbcclassincdasintermcdiatc,orscmipcrpbc

al.
AftcrtbcBraziliancpcricncc,tbcscbcgantobc

allcdsuin:-
pcrialist.Tbcsccountricsalrcadyparticipat

intbcintcrnauonal
divisionoflaborinadiffcrcntway,cporngnotsomucbraw
matcrials or simplcmanufacturcdgoods butindustrialgoods
comingfrombcavyindustry,cnginccrin,andsinincandy~
fromtbcarmamcntsindustry.TbisistrucforBrazil,wbc

cfor
alongtimccapitalaccumulationbasnotbccnbascdon simplc
consumcrgoods,butratbcrontbcscctorwbicbproduccs

bc

mcans ofproduction ,Scctor I, inMarist tcrms), and wbicb

alrcady participatcs in tbc cport ofsucb prducts to
'
tbcr
partsoftbcworld. Lptoapoint,tbisalsoapphcstoMcico.
J Andre Gunder Frank
Tbcrc arc otbcr morc or lcss industrializcd intcrmcdiatc
cconomics wbicb bavc tricd to bccomc part ot tbc intcr-
national division otlabor by tollowing tbc Brazilian moocl.
Argcntinaisancamplc,buttbcrcitbasnotyctbccnpossiblc
to imposc tbis modcl bccausc tbc bourgcoisic bas not bccn
ablc to brcak tbc powcr ottbcworkcrsmovcmcnt. Consc-
qucntly, producing tor tbc world markct bas bccn ncitbcr
probtablcnorcompctitivc.TbisisalsotructorIndia,wbicbbas
adcvclopcdbcavyindustryscctor,butwbicbbasnotbccnablc
toimitatctbcBrazilianmodcl.And,witbotbcrparticularitics
tbcsamcistructorSoutbAtricaandinaccrtainscnscIsracl.

ncaspcctottbcscintcrmcdiatcandsubimpcrialistccono-

ics

tbatIwouldlikctocmpbasizcistbcirgrowingspccializa-
tion 10 arms production. I am not talkingabout submacbinc
guns and pistols, but bcavicr and morc modcrn armamcnts.
bg

btcrplancs, rockcts, andadvanccdclcctroniccomponcnts.

ItiswortbmcntioningtbatSpainalsostandsoutintbisrcspcct.
Andwcarc talkingaboutproductiondcstincdtorcport, not
mcrclytortbcdomcsticmarkct. IntbccascotIsracl,approi-
matclybtotallindustrialcportsarcmilitarycquipmcnt.
Tcrc is anotbcr sct otcconomics tbat aspirc to an intcr-

cdiatc an

d subimpcrialistposition. Iran intcnds to dcvclop

ndustry witb tbc incomc trom oil cports. Tbis will not bc
importsubstitution,butcportproductionotpctrocbcmicals
an stccl, tbc lattcr bascd on tbc most modcrn tccbniqucs,
usinggas turnaccs (cmployinglocalgas, amctbod wbicb bas
onlycomcintouscrcccntly).Tbcrcareotbcrundcrdcvclopcd
cconomicswbicb, likc Iran, aspirc to asubintcrmcdiatclcvcl
i ntbc intcrnational divisionotlaborby invcstingtbc torcign
ccbangc carncd trom oil cports, tbcy includc somc PLC
countrics-Vcnczucla, Indoncsia, Nigcria, Algcria. Tbis in-
dustrialization is alsooricntcd toward tbcworld markct not
onlytortbcintcrnalmarkct.

Anotbcr group otundcrdcvclopcd cconomics, wbicb bas

bccngrowingrapidlysincctbcbcginningottbc I970s baswon
itsplaccintbcintcrnationaldivisionotlaborbyspccilizingin
tbcproduction otmanutacturcdgoods tor tbcworldmarkct
bascdoncbcaplabor.Tbisproccssbcganintbccarly I90sin
Imperialism, Crisis, and Superexploitation J7
Soutb Korca and latcr i nTaiwan. Tbc initial impctus was
undoubtcdlypolitical,givcn tbc stratcgicimportanccotbotb
countrics. In tbcbordcrarca,bctwccnMcicoandtbcLnitcd
Statcs, asscmbly plants wcrc also sct up, tollowcd by otbcr
kinds otproduction, tbis took advantagc otMcico`s cbcap
labor to produccgoodsdcstincdtortbcAmcricanandworld
markcts.Latcron, tbistormotspccializationwasdcvclopcdin
HongKongandSingaporcandisnowcpandingtoMalaysia
a
_
d tbc Pbilippincs. lrcc zoncs arc bcing cstablisbcdnot
trcc tradc zoncs, wbicb bavc bccntamiliartorccnturics, but
ratbcrproductionzoncswbcrctbcmultinationalsprovidctbc
rawmatcrialsandindustrialcomponcnts,wbicbarcasscmblcd
and tbcn rccportcd. Tbis bas bccn donc in Soutb Korca,
Taiwan, and Malaysia, and is now sprcading to Haiti, LI
Salvador, Tunisia, Morocco, and many otbcr countrics. I
rcccntly saw a listotbtty-bvc countrics wbcrc tctilcs, clcc-
tronics, andotbcrlabor-intcnsivccommoditicsarcproduccd
tortbcworldmarkct.
TocontinuctbcrcvicwottbcdittcrcntwaysinwbicbTbird
World countrics arc inscrtcd into tbc world markct, it is
cnougbtocitctbatgroupotcconomicswboscprincipaltorm
otinscrtionistbrougbtbccportotrawmatcrials,mincrals,or
agricultural products. Tbcrc bas bccn aboom in production
torcportin tbcsccconomics,butitistakingadittcrcnttorm
today trom tbc torms tbatprcdominatcd duringtbc postwar
pcriod. In particular, `agribusincss` multinationalsarcgoing
into various countrics in tbc Tbird World to producc agri-
culturalproducts, botbtood and industrial, torcportto tbc
worldmarkct.CountricslikcCbilc,wbicbbadrcacbcdaccrtain
lcvclotindustrializationbascdonimportsubstitution,arcnow
dcindustrializing. A policy analogous to tbc Cbilcan onc is
bcingputintopracticc inArgcntinaaswcll. Inotbcrwords,
tbcy arc passing ovcr torty ycars ot import substitution to
rcturnto ancconomicandpoliticalmodcltbatdatcsbackto
tbc ycars prior to tbc crisis ottbc I 930s,wbcnArgcntina`s
cconomy was bascd on two raw matcrial cports, livcstock
and wbcat. Buttwopbcnomcnasccm to bcsupcrimposcdin
Argcntina. nrst,participationintbcincrcascotcportstotbc
J 8
Andre Gunder Frank
world markct, and sccond,an attcmpt todisciplinctbcwork-
ing class by bringing industry to sucb a standstill tbat tbcir
politicalpowcris brokcn.ncc tbisbas bccnaccomplisbcd~
ifitisaccomplisbcd-tbcnArgcntinamayalsobcablctotakca
placc in tbc intcrnational division oflabor as an cportcr of
manufacturcd goods. Itcannotdo tbis nowbccausc itslabor
forccistoobigblypaidandbccauscnocompanywouldinvcst
inArgcntina,orinCbilc,tocportmanufacturcdgoodsundcr
prcscntconditions.
nclastcatcgoryofundcrdcvclopcdcconomytbatIwould
likctomcntionincludcstboscscctorstbatsccmtoplayvirtually
no rolc in tbc intcrnational division of labor. Tbc camplc
mostoftcn givcn is Bangladcsb, tbougb it applicsjustaswcll
to largc arcas ofIndia, and parts ofotbcr intcrmcdiatc sub-
impcrialistcountrics,likctbcBraziliannortbcast.Tbcsccas
arc bcingaskcd to acccptalifcboat`policy. iftbclifcboatis
fullandmorcpcoplctrytogctintoit,cvcryoncwilldrown,so
itisbcttcrtbatsomcdrowninordcrtbatotbcrsmaysurvivc.
Tbisargumcntis uscd to j ustifyapolicyofabandoningtbosc
pcoplcwbo cannotplay anyrolcintbcintcrnationaldivision
oflabor. lct tbcm go undcr, litcrally, tbrougb discasc, war,
faminc,and sofortb. Itisnoaccidcnttbatdiscascissprcading
again in largc arcas of Soutb Asia. In India, for camplc,
malaria,wbicbbadbccncontrollcdaftcrtwodccadcsofcffort
followingWorldWarII, isrampantqain.tbcrcsccmstobcan
i ntcntionalpolicytolcttbcscpcoplcgoundcr
I bavc tricd to outlinc bricny tbc diffcrcntiation proccss
taking placc in tbc so-callcd TbirdWorld. I would nowlikc
topointouttbccommontbcmcstbattransccndtbisdiffcrcn-
tiationproccss.
Bcyond imposing austcrity policics in Wcstcrn capitalist
countrics tobringtbcratc ofprobt,andlatcrtbcinvcstmcnt
ratc, up again, capital is calling upon tbc undcrdcvclopcd
countrics to collaboratc to tbc samc cnd by contributing
morc surplus valuc tbrougb grcatcr cploitation, and, cspc-
cially, tbrougb supcrcploitation. Lconomically, tbis dcmand
translatcs into a balancc of paymcnts crisis, an incrcasc in
austcrity mcasurcs and cploitation, and tbc supprcssion of
Imperialism, Crisis, and Superexploitation
J9
tbosc domcstic policics dcsigncd to confront tbc

c criscs
Politically,tbcaccumulationcrisislcadstoasbpcmngoftbc
class and national libcration stru_lcs In somc parts oftbc
TbirdWorldtbclattcrbasmctwitbagrcatdcalofs

ucccss,as
inIndocbina,or(rclativcly)inAngolaandMozambtquc,and,
morc doubtfully, inLtbiopia. But up to now, t?csc arc morc
tbc cccption tban tbc rulc. Tbcrulcin

tbcTbtrd World, or
tbc momcnt, is a turn towd tbc rcactionary

and rcprcsstvc
rigbt. I would say tbat asidc from tbc sbarpc

tn

oftbc class
strugglc, tbc most important r

ason or tbts

ts tbc

rld
cconomic crisis and tbc cbangcs tntbc tntcrnational dtvisi

r
oflabor, wbicb I rcfcrrcd to prcvious!y. Scc

from aTbtrd
Worldpcrspcctivc, tbis cbangc at tbc tntcrnation lcvcl and
tbisproccssofdiffcrcn

iation appcars as acampaign

forpro

motion and intcnsibcation ofcports ottbc folowtng t

/
pc.
mcans ofproduction (capital goods) from tbc tntcrmcdtatc,
subimpcrialist cconomics, manufactu

cd goods from outb

Korca, Taiwan, Hong Kong, Malaysta, and clscw?crc, and
agriculturalandmincralproductsfromothc

countrcs.

Lport promotion is justibcd by tbc claim tbat

bcrc t

a
balancc ofpaymcnts crisis wbicb must bc dcalt witb by tn-
crcasing cports. But itis also j

stnc by anarg

mcnt tb

t
sucbproduction lcads to industraltzation and an tncrcasc tn
tccbnicalcapacity.

Tbcrcisclcarlyabalanccofpaymcntscrisis,mostnotablytn
prccisclytboscundcrdcvclopcdcountristbat

bavcbccnmost
activcly promoting cports, likc Brazil (wbicb tod

y bas

a
forcign dcbtofS50 billion), Soutb Korca, and Mcico. Tbts
policy, tbcn,docsnotinanywayrcso

lv

baan

cofpaymcnts
problcmsratbcrtbc oppositc. Spccialtzationtntbcproduc-
tionandcportofmanufacturcdgoodsrcquircsancvc

grcatcr
incrcascin tbc importoftbccomponcnts,rawmatcrals, and
tccbnologynccdcdtomakc tbcproduct

Tbispolicyisclcarlydiffcrcntfromcarlicrtmpo

t-substttu-
tion policics, cvcn tbougb in tbis casc

tbc rcsult ts

tbc sub-
stitutionofoncimportforanotbcr,tbattstos

ay,tbctmportof
tctilcsisrcplaccdby tbcimportoftbcmacbmcrytoprodu

c
tbcm).Tbosctctilcs,bowcvcr,wcrctobcsoldontbcdomcstic
Andre Gunder Frank
markct, which rcquirco a ccrtain lcvcl otcttcctivc ocmano
anothcrctorcaoistributionotincomcallowingsomcotthosc
who prooucco manutacturco gooos to buy a part ot thosc
gooos.ThisproviocothccconomicbasctornationaIist-populist
p

oliticalallianccsamongthcbourgcoisic,thcpctty bourgcoi-
sic, ano at lcast apart otthc organizco workcrs movcmcnt.
Thc p

olicy otpromotinggooos tor cxport oocs cxactly thc

oppositc.oomcsticcttcctivcocmanoisotnointcrcsttorcxport
proouction,whatisotintcrcstistorcignocmano,anothcrctorc
thc

only important consiocration is thc cost otproouction,

which mustbcaslowaspossiblc.Thcrciscvcncompctition
amongunocrocvclopcocountricstorcouccproouctioncosts.
hisrcsultsinarcouctionotwagcsanoanincrcascincxploita-
tion ano supcrcxploitation-shcltcrco by aoittcrcnt kino ot
P
oliticalallancc.A scctorotthclocalmonopolybourgcoisic,
intcgratcointointcrnationalcapital,incrcasinglyproouccstor
thctorcignmarkct,cithcrwithoutocvclopingcapitaltowork
tor thc oomcsticmarkctorbycliminatingit(as inChilc).To
oo this, it rclics cspcciaIly on thcsupcrcxploitationotlabor.
Tus thc cc

onom
c basc tor thc kino otnationalist-populist
alliancc, wichcxistco unocr thc import-substitutionpolicy,
oocsnotcxist.Instcao,thcrcisanccotoopprcssthcworking
classanocvcnapartotthcbourgcoisicitsclt.
Supcrcxploitationtakcsmanytorms.Intstplacc,capital
o
'
csnotpay thc workcrawagc allowing thc rcproductionot
hisorhcrlaborpowcr,whichsomctimcstakcsplaccwithinthc
so-callcononcapitalistscctor.Suchlaborpowcrthusbccomcs
i

tcgratco into thc accumulationcyclcviathc classiccmigra-

tion moocl, as in thc casc otSouth Atrica ano to a ccrtain
cxtcnt Luropc, whcrc Spanish, Italian, ano othcr workcrs
cmigratc to thc ccntral cconomics. Thcsc workcrs can bc
cxpcllcowhcnthcbusincsscyclcsoocmanosanocancvcnbc
thrownoutwhcnthcyarcnolongcrsutn cicntlyprontablc
InthccascotcconomicslikcSouthKorca,HongKong,ano
othcrs, ano cspccially in thc trcc proouction zoncs which
spccializc in tcxtilcs ano clcctronic componcnts ork is
primarily oonc bywomcnbctwccn thcagcs ottoutccnano
twcnty-tour, who comc trom thc countrysioc ano who, attcr
Imperialism, Crisis, and Superexploitation 6I
working tor a short timc, arc thrown out otthc proouctivc
proccssagain.
.
Supcrcxploitationalsotakcsplaccwhcrcthcrcisanintcnsi-
ncation ot proouctivc labor through cxtrcmcly long work
schcoulcs. In Gcrmany,torcxamplc, thc avcragc numbcr ot
hoursworkco pcrycarisbctwccn I , 700ano I , 800,in South
Korea it is 2, 800, in Malaysia it is 2, J00. I want to strcss,
howcvcr,that2, 800hourspcrycarisanavcragctoracountry
likcSouthKorca,itiscommontonnopcoplcwhoworksixty,
scvcnty, ano cvcn cighty-tour hours awcck (twclvc hours a
oay, scvcn oays awcck) until thcy oic or losc thc ability to
work. Thcn thcy arc thrownoutano rcplacco by othcrswho
canworkatthatpacc. nthcothcrhano,intcnsincationinthc
strictscnscotthcworo alsotakcsplacc. thcpushtoincrcasc
hourlyoutput.
This obviously has an cttcct on thc acciocnt ratc, which
in a ccrtain scnsc is both an inocx otsupcrcxploitation ano
apartotit. In I97 I inBrazil,torcxamplc, I 8pcrccntotthe
cconomically activc population suttcrco trom work-rclatco
acciocnts,inI972thisngurcwcntupto I 9pcrccnt,inI97 3it
was 20 pcrccnt, ano in I974 almost 22 pcrccnt ot insurco
Brazilian workcrs hao somc typc otacciocnt at work Fatal
acciocntsroscat anincrcasingly rapioratc Anavcragcot2J
pcrccntwork-rclatcoacciocntsmcansthataworkcrwhoworks
tour ycars can cxpcct to havc an acciocnt at work which is
scriouscnoughtobcrcgistcrcobythcgovcrnmcntsstatistical
scrviccs. Thcrc arc various inoications that thc rcal acciocnt
ratciscvcnhighcrThcscwork-rclatcoacciocntsoccurbcca

sc
capitalists oo not takc sccurityprccautionsmcasurcswhich
arcclcarly notinthcirintcrcstsano bccauscthclonghours
ano intcnsityotthcworkissuchthatthcworkcrisnotsutn-
cicntlyrcstco,tco,orattcntivc
Finally, supcrcxploitationcanbc sccn inthcocclincotrcal
wagcs. This is happcning in Brazil, whcrc thc rcal w
.
agc has
tallcn 40 pcrccnt sincc thc military coup In Argcnuna, thc
rcouction in rcalwagcs sincc I97Jhas bccn bctwccn60ano
70pcrccnt,inlcssthanaycarsinccthccoup, thcrchasbccna
40pcrccntorop. InChilcrcalwagcshavctallcnmorcthanJ0
?
Andre Gunder Frank
pcrccntsinccthcmilitarycoup,tobctwccn28ano30pcrccnt
otthcir I 972valuc.
To carry out this kino ot supcrcxploitation, it is clcarly

cccssarytohavcapoliticalrcgimcthatallowsit.Forcxamplc,
mOcccmbcrI 97 I thcgovcrnmcntotSouthKorcaintrooucco
a scrics otcmcrgcncy mcasurcs, incluoing a prohibition ot

trik

s, sinccthcnthcpcnaltytorstrikinghasbccnscvcnycars
mpnson.ThccascotthcPhilippincsisalsoimportant. Inhis
own
^
oros. I,FcrnanooMarcos,prcsiocntotthcPhilippincs,
by

irtuc otthc powcr invcstco in mc by thc Constitution,

occiocanooccrccthctollowing. Scction I. Itisthcpolicyot
th
.
c tatctosupporttraocunionismanocollcctivcbargaining
withm thc tramcwork otcompulsoryarbitration. . . thus, all
tormsotstrikcs,pickcts,anolockoutsarcstrictlyprohibitco.`
Rcprcssivc laws ot this typc arc appcaring in most unocr-
ocvcl

pcoountrics.Thcnrstmcasurcthcncwmilitary} unta
tookmTh lanoattcrthcctobcr I97coupwastoprohibit
all strikcs ano imprison thc union lcaocrs. Lvcn in Lgypt
tollowinghis ncwpro-Wcstcrnstancc attcr I972, Saoatoc

crccolitcimprisonmcnttor anyoncwhotookpartinastrikc
ano o magco public or privatc propcrty. In Inoia, thc nrst
mcasurc that Inoira Ganohi took attcraoopting thc statc ot
cmcrgcncy in]unc I 97was to occlarc all strikcs illcgal. thc
numbcrotwork hours classinco lost tor strikcs tcll by 83

crccntascomparcotothcprcccoingycar.thcrsuchprovi-
sionscanbctounoonthcAtricancontincnt whcrcstrikcsarc

rohi

bitco in morc ano morc countrics and political rcprcs-

sion is on thc ris

. For cxamplc, in its I97-I97 rcport,

AmncstyIntcrnationalgavc octailsotpolitical rcprcssion (in
oncor

orcotthctourcatcgoricsthcyoistinguish)intwcnty-
twoAtncancountrics.ThcLatinAmcricancascsarcsutncicntly
wcll known. Thc rcprcssivc laws otthcmilitary } untasinthc
SouthcrnConcarcotthcsamctypc.
.
Lvcnthoughinoncscnscallthisrcprcssioniscon}unctural,
m an

thcr scnsc it is incrcasingly structural. It rcquircs thc

crcctionotapoliticalanocconomicstatcapparatus,bascoon
an lia

cc ot

lasscs, that can cstablish arcgimc capablc ot

makmgitpossiblctorthcunocrocvclopcocountrytontinto
Imperialism, Crisis, and Superexploitation 3
thcintcrnationaloivisionotlabor.Wcmightcallthistormot
statc a tcchnocratic-military statc (othcrs call itpostcolonial
or burcaucratic-capitalist ano, I think incorrcctly, scmi- or
ncotascist statc). Thc military } untas otPinochct and Viocla
arc thc bcst known, but ccrtainly not thc only, cxamplcs.
It is a tcnocncy which is sccn across thc unocrocvclop

o
worlo. arcprcssivcstatcbascoprincipallyonmilitarytorcc,IH
whichmilitarycommanosbccomcalmostthcbackboncotthc
bourgcois statc, prooucingan almostcomplctcmilitarization
otthcsocicty.
Thcvcryocvclopmcntotthis typc otstatcrcquircsancw
lcgitimating iocology-thc national sccurity iocology. I
quotchcrcthctollowingnotcwhichthcBolivianncwsagcncy
tooktromthcEstado de Sao Paulo otAugust, I97.
Tbc Brazilian military rcgimc bas scrvco as tbc moocl |or a
ncw gcooliticalconccto|tbc statc, wbicbbasalrcaoybccn
aootco in variousLatinAmcrican countric. Itis
P
rincially
basco on tbc iocas o| Gcncral Costa c Silva, cbic| o| tbc
rcsiocnts civilian cabinct. Tbis ncw moocl bcgins wi

t tbc
militarizationo|tbcowcrswbicbcbaractcrizcotbctraoitional
statc intbcWcst,mcaningtbclcgislaturc,wbicbisoccorativc,
ano tbcj uoiciary, wbicb isnotimortant. . . Tbccolcisa
mytb, tbcrc arc only nations ano tbc natio

is tc s

atc . .
Warisarto|tbcbumanconoitionanoallnationslivcIastatc
o|war All cconomic,cultural, ano otbcractiviticsarcactso|
war |or or against tbc nation. As a conscqucncc, wc m

ust
strcngtbcnmilitary owcras aguarantcc o|nationalsccurty
Tbc citizcn must unocrstano tbat sccurity ismorcimortant
tbanwcl|arc,anotbatitisalsoncccssarytosacrinccinoivioual
libcrty.Tbc armco |orccswoulo bc tbcnationalclitcrcs

n-
siblc|orrunningtbcstatc,anotbisisjustincoinLatinAmcrca
by tbcvolatilityo|tbcocmagogicanocorrutciviliansanoby
tbcrcquircmcntso|war.
In aooition, I quotc Augusto Pinochct, a sutncicntlywcll-
knownworloauthority.
ationalsccurityi s tbcrcsonsibilityo| cacbanocvcryCbilcan,
tbcrc|orc,tbisconcctmustbcinculcatcoatallsociocco
'

omic
lcvcls tbrougb knowlcogc o|gcncral civic outics Sccincally
4 Andre Gunder Frank
inrclationtotbcdomcsticarcna,wcmustcncouragcatriotic
valucs bydisscminatingourownculturalacbicvcmcntsintbc
varicgatcdgamutofnativcart,and bytcacbingandconstantly
commcnting on bistorical traditions and tbc rcscct for tbc
astwbicbtbcfatbcrlandrcrcscntsforus.
All this scrvcs to inculcatc thc ncw `national sccurity`
iocology,whichisnolongcrsolclythcpatrimonyotBrailano
Chilc. Now it is applico in a oozcn Latin Amcrican statcs,
whcrc national sccurity` provisionsalrcaoycovcraoivcrsc
rangcotactivitics-as Pinochctsays,cconomic,political,ano
culturaI activitics. Ano this is happcning not only in Latin
Amcrica,butincrcasinglyinAsia,thcMioolcLast,anoAtrica.
Tcchnocratic-military statcs vcst thcmsclvcs in thc ncw na-
tional sccurity` iocology ocsignco, insotar as is ossiblc, to
lcgitimatc thc rcgimc oomcstically ano givc it intcrnational
crcocncc as wcll. Thcsc strong-arm rcgimcs, thcir national
sccurityiocologics, thciroomcsticallyrcprcssivcanocxtcrna|ly
bcllicoscpolicics, thcir subscrvicncc to impcrialism bccomc
ncccssary in orocr to put into cttcct thc ncw intcrnational
oivisionotlabor, which, in turn, wasprovokco by thcworlo
capitalaccumulationcrisis currcntlyunocrway.
Inconclusion,Iwoulo likctogobackanorctcrtothcma}or
inoustriaIizcoWcstcrncountricsAlthoughthcystillhavcnot
rcachcothisocgrccotrcprcssionanooonotycthavcgovcrn-
mcntsotnationaIunityornationa|salvation, thciraustcrity
policics sccm to bc lcaoing in thc samc oircction. Thcy arc
calling upon cvcryonc to sacrincc tor thc national common
gooo in orocr to covcr up what capital is imposing on thc
workingclassThissituationtcnostocrcatcthcconoitionstor
thc cstablishmcntotincrcasingly rcprcssivcpoliticalrcgimcs.
Thc ocgrcc to which capital will succcco in imposing thcm
clcarly ocpcnos on thc oircction thc class stru_lcwill takc,
ano on thc bourgcoisics ability tomakc thcworking class,
through its rctormist political organizations, allow, or cvcn
collaboratcin,thcbourgcoisicsaustcritypolicy
n thc othcr hano, this cvolutionwill bc oittcrcnt itthc
workingclassoocsnotacccptthisaustcritypolicyanooocsnot
Imperialism, Crisis, and Superexploitation

allow capital torcstructurc itscltano rccovcr, thusimp

in

thc ncw intcrnationaIoivisionotlaborthatthcbourgco:s:

:s
octcrminco to imposc on us. This ocpc

os on thc worktng
classsoccisiontostru_lcuntilthcnnalvtctory.
6. TH ECONOMICS OF CRISIS
A TE CRISIS OF ECONOMICS
Economic Astrolog: The Crstal Bal Is Clouded
Thcproblcmolinnationhasbccndclcatcd . . . thcdangcrol
anyrcccssionis nil.
GcraIdFord,March I 7, I970
Lctusplcdgctogcthcrtomakcthcscncxtlourycarsthcbcstlour
ycarsinAmcrica`shistory,sothatonits200thbirthdayAmcrica
willbcasyoungandvitalaswhcnitbcgan,andasbrightabcacon
olhopctothcworld.Lctusgolorwardlromhcrcconndcntin
hopc,stronginourlaithinoncanothcr,sustaincdbyourlaith
inGodwhocrcatcdus,andstrivingalwaystoscrchispurposcs.
Richardixon,!nauguralAddrcss,]anuary20, I 97 5
olaw olthc markct compcls a markct cconomy to sullcr
lromrcccssionsorpcriodicinnations.
Lyndon]ohnson,Economic Report 0/the President, I 9
ThcationalBurcauolLconomicRcscarchhasworkcditscll
outoloncolitsnrstjobs,namclybusincsscyclcs.
PaulSamuclson,obclLaurcatcinLconomics,
Scptcmbcr24, I970
ApublicopinionpollshowcdthatAmcricansrankcdthclor

-
casting ability ol cconomists just about on a par with that
olastrologcrs.
-Fortune, ]anuary I 97
This is a revised version of an article that appeared in Critique 9: 85-1 1 2,
1 978. I t UorIginally drafted i n 1 976 U the opening chapters of Crisis: I n
the World Economy.

Economics 0/Crisis and Crisis 0/Economics

Historyiswitncsstothcmoralworthanoscicntincaccuracyot
thcpioushopcsanoprcoictionsotpoliticallcaocrs ano thcir
cconomicaovisors.Itisharolyncccssarytorccallthataslatcin
his rcign as April I94RicharoNixonprcoictcothat I9
will bca vcry gooo ycar, ano I9thc richcst in Amcrican
history. `Followingitsnrstoctcatinawaratthchanosotthc
Victnamcsc,anothcnrstrcsignationotoncotitsprcsiocnts,
withncarly I0 pcrccntuncmploycoanoaratc otinbationot
ovcrI 0pcrccnt,thcLnitcoStatcslcothc"trccworlointothc
mostscvcrccconomiccrisisotagcncration.
Nothingcompclsamarkctcconomytosuttcrrcccssionano
inbation, claimco Lynoon]ohnson, but it was only his own
cscalation ot thc war against Victnam that postponco thc
rcccssion in thc Lnitco Statcs (though not inGcrmanyano
clscwhcrc) until thc cno otthc I 90s, ano itwas]ohnsons,
ano subscqucntly Nixons, policyotglobal ocncit nnancc
crcatingtcnsotbillionsotunrcquitcooollarsthatthcrcstot
thcworlocamctoholoattcrsupplyingthcLnitcoStatcswith
matcrialsanoscllingthcmthcirinoustricsthatlaunchcothc
worlowioc inbation. Inavain attcmpt to kccp thccconomic
ano politicalwolttromthcooor, thcworlocconomybccamc
saturatco with moncy,thcbalanccotpaymcnts octcrioratco,
torcign ocbtsincrcasco oangcrously,ano thcprivatcscctor`s
ocbt-cquity ratio rosc cvcn morc oangcrously. A classical
ovcrproouction crisis ot accumulation ocvclopco, ano thc
gcncral ratc otpront occlinco. Thc valuc otthc oollar ano
thc stability otthcworlo monctary systcmwcrc sacrincco to
thc scramblc tor sharcs in a occlining markct, amio mutual
rccriminationsaboutcconomicirrcsponsbility.Thusthccapi-
talistworlotcllintoitsscvcrcstpostwarrcccssion,withocclincs
otproouctionup to I 0ano I pcrccntin I94I9(rcally
bcginning in mio I 93, be/ore thc oil crisis). Thc rccovcry
in I 9 has not climinatco uncmploymcnt ano oocs not,
accoroingtocapital` smostauthorizcopoliticalanocconomic
spokcsmcn,promisctooosobctorcthccnootthcoccaoc,by
which timc wc may cxpcctarcccssion morc scvcrc than thc
onc j ust past. In othcr woros, ocspitc thc pious hopcs ot
politicallcaocrshipano thcprcoictionsotcconomicaovisors,
68
Andre Gunder Frank
thcworlocapitalistcconomyisagainvisitcobyama}orcrisisot
accumulation,anosuchpoliticallcaocrsasHcnryKissingcr(at
thc Lnitco Nations Gcncral Asscmbly on Scptcmbcr 2 3,
I 974) ano Harolo Wilson havc now turnco (or oio ouring
thc I 974-I 97rcccssion) totorcbooing shaocs otthcgrcat
ocprcssionotthc I 930s.Lvcnitthistorcbooingmaybcmorc
appropriatc thanthccarlicroptimism, thcbasisotsuchlattcr-
oayprcoictionsis, at lcastastar as thcirscicntincaovisorsarc
conccrnco,asuntounocoanoshakyascvcr.
Paul Samuclsonprotcssorotcconomicsat thcMassachu-
scttsI nstitutcotTcchnology,authorotthcmostwioclyusco
tcxtbook in cconomics, co-author ota biwcckly column in
Newsweek, aovisor(byhisownaccount)tosomclargcinstitu-
tional invcstors,`aovisorto LSprcsiocnts (whoottcrco him
thcchairmanshipotthcCouncilot LconomicAovisors),winncr
ott?c NobclPrizc tor cconomicsis notalonc amongpro-
tcssional cconomistsinhavingclaimco(as rcccntlyas I970' )
that thc most prcstigious scicntinc institution tor busincss
cyclcrcscarchinthcLnitcoStatcsanopcrhapsthcworlohao

orkc? itsc
.
ltoutotajob. Norishcaloncamongcconomists
m pattinghimscltonthcbackwhcnrctcrringtothcsupposco
obsolcsccnccotthc busincss cyclcano thc ncco torcocnnc
. .
.
. thcprc-waroinosaur[as| apost-war lizaro. `Iprcoictco
thiswoulohappcn,`hcstatco. ' AlcxanocrLckstcin, scicntinc
boaromcmbcrotthcNationalBurcauotLconomicRcscarch
(NBLR),otrcothcopinionthatgivcnthcvalucsotsocicty,
thcprobability otatraoitionalrcccssionwithuncmploymcnt
ot 7 pcrccnt is tairly low. ` nly nvc ycars latcr otncial
uncmploymcnt in thc Lnitco Statcs hao riscn to ncarly I0
pcrccnt(anobysomcunotncialcstimatcstoooublcthatngurc).
I n]uy I 976itstoooatmorcthan7pcrccntanoiscxpcctcoto
rct

ainabovcthatlcvcltorycars'Amorccautiousopinionwas
voicco at thc samc colloquium by Solomon Fabricant an
cxpcrt in long-tcrm growth ano proouctivity trcnos. Thc

auscsotthcbusincsscyclchavcnotvanishco+ . = .A tigcrcagc
is notthcsamcasatigcrlooscin thcstrccts,butncithcrisita
papcrtigcr. AcccptingFabricant`ssinophylism,wcmay ask
who hascagcothctigcrwhichin I91lcavcs I 1 millionworkcrs
Economics 0/Crisis and Crisis 0/Economics 69
otncia|ly(anoinrca|ity),uncmployco,withmanymorcthanthat
loosconthcstrcctsotrganizationtorLconomicCoopcration
ano Ocvclopmcnt (LCO) mcmbcr countrics alonc! What
kinootcconomic scicncc`lcaosto suchpicturcsqucprcoic-
tionsanosupportssuchincttcctual,cagcy,cconomicpolicy!
Thc AmcricanLconomic Association (ALA), at its annual
mccting in Occcmbcr I 973, invitco a numbcr ot its most
prcstigiouscconomiststoparticipatcinapancltoponocrthc
`majorcconomicproblcmsotthcI970s

thcclouococ
'
ystal
ball . `ThclistotproblcmsottcrcobyKcrmitGoroon,prcsiocnt
otthc Brookings Institution, incluoco ( I ) intcrnational cco-
nomic problcms, (2)innation, ( 3) pcrtormancc otthcpublic
scctor, (4) oistributivc cquity, ano ( ) cnvironmcnt, cncrgy,
rcsourccocvclopmcnt,growth. Thoughthc I975I97rc

cs-
sionhaoalrcaoystartco,uncmploymcntlctaloncrcccssion
orocprcssionorcconomiccrisisoionotappcaronthislistot
problcmsatall.Thccrystalballwasclouocoinocco'
GcottrcyMoorc,vicc-prcsiocnttorrcscarchotthcNBL
anoarcnowncocxpcrtinthcstuoyotbusincsscyclcsanothcir
history,comparco thcpattcrnotrcccs

ioninth

I 948 9?0
pcrioowiththatinthc I 920I

938
P
croo(bu

withoutgivmg
anypcrsuasivcrcasontorsclccttngthislattcrpomtot

ctcrcncc)
ano camc to thc conclusion that busincss rcccssions havc
bccomclcsstrcqucnt, shortcr,ano milocrouc to thc shitin
inoustrialcompositiontomorcstablcscctorssuchasscrvtccs.
Thcrctorc,hcarguco,tuturcrcccssionsarcmorclkclytob

in thc naturc otslowoowns inthc ratc otcconomic growth

rathcrthan oownturns,anothctrcnooocsnotsccm toshow
upinthclcvclotthcuncmploymcntratc. :

RobcrtHcilbroncruscothcsamcoccasiontostrcngthcnhis
torcsightwith hinosight. Rccallingpro

inc

nttcaturcsot

thc
prcccoingtwooccaocs,suchas

hcmultt

attonalcor
l
orat

on,
]apan, cconomic ocvclopmcntH thcThiroWorlo, mnauon,
cnvironmcnt,anosotorth,Hcilbroncrobscrvco.
Every one 0/these problems was invisible in the 1 950's . Inointo|
|act baoIrcallybccnboloing|ortbontbcoutlook1 tbccarly
l 9

0 s, I ooubttbat I woulo bavc mcntioncoa singlc onc o|

tbcm. For in tbosc ycars, itwas notgrowtb but tbc tbrcato|
0
Andre Gunder Frank
chr

nic rcccsson that still absorbcd thcattcntionolthcpro-

lcss:o

Inanon was a mattcr on which no scssions wcrc

organizcd,bccauscwckncwthatit could notoccuras longas
uncmploymcntwas4or pcrccntolthclaborlorcc."
And such uncmpIoymcnthasbccomc"obsoIctc sinccthcn'
HciIbroncrcontinuco.
Likc cvcryonc clsc, I havc my list olcxpcctcd policy issucs
o thc I 970
.
s-a `surprisc-lrcc` list, inHcrman Kahn`s tcr-
minology
.
I t in

cludcsthcvcryproblcmsIhavcjustcnumcratcd.
gr

owth, innanon, thc cnvironmcnt, thc multinationals, thc

lailurc oldcvclopmcnt, thcintcrnationalmonctary situation.
ButI mo

c toask,rcncctingonthcpast,whcthcrthislist
olproblcmsislikclytobcasmisconccivcd.
SoHciIbroncr,whohasalwaysbccnabitotamavcri

k, pro-
cccocoto

makcsomc
T
rcsumabIynotsosurprisingprcoictions
ot

thcmajorccon

micp

robIcmsotthc I90s. ( I ) incrcasing

mtcrobreakdown, otstunctton, cvcn nontuction otparts otthc
syst
'
m rathcr

thanotitsmainmacro rcgatcs, (2)incrcasco

te

Ston

r i

com

distribution ano thc rcappcarancc ot

Oisr

acIis vanishco

warotthc richagainstthcpoor,ano( 3)
occI

n

t ncocIas

icaI thcory, morc institutional [ccrtainIy

mimiz:ng|bchaviorasthcob}cctotthcthcoryotcconomic
poIicy.Notsosurprisinginocco'
Ncithcr

i srcbcctionsonthcpast,norhiscxpcricnccotthc
currcnt crisis, Ico HciIbroncr to makc any mcntion at alIot
uncmpIoymcnt, IctaIonc otchronic rcccssion that hc saio
hao oncc absorbco thcprotcssion. CIouoco crystal baIIThc
augustmcmbcrs

tthcALA,Icaocrsotthcprotcssion,cannot
cvcn scc thc rcaIity bctorc thcm. oistunction otmicroparts
ccrtainIynototIargcmacroa_rcgatcs,IctaIoncotthcsystc
as a whoIc. Who cIsc wouIo bc tooIco by this protcssionaI

obbIcoygookthanothcrcconomistsTcnsionovcroistribu-
t:o

but no cIass struggIc ovcr powcr Ano what is on thc

horizontor thcp

otcssion

thcory otcconomicpoIicyThc
rcpI

ccmcntotmicroanalysisbyinstitutionaIocscription'Goo
torbi?

monopoIycorporationstosccktomaximizcpronts
orm:nimizcIosscs. LntortunatcIy, thcyoonotIistcntoGoo
butonIy to thcringingotthc cashrcgistcr, thc tickcr olthc
Economics 0/ Crisis and Crisis 0/Economics
I
tapc, ano thc hum ot thc computcr, which spcII out thc
baIancc shcctotpront ano Ioss. Norccognitionhcrc that it
is thc monopoIy structurc otthc cconomy thatpcrmits thc
impossibIcinbationwithuncmpIoymcntIctalonchctact
that thc proccss ot accumuIation ano oisaccumuIation now
rcquircs I 0pcrccntinnation ano I 0pcrccntuncmpIoymcnt
(pcrhapscvcn 20pcrccntotoncorthcothcrorboth.Britain,
ltaIy,ano]apanhavcaIrcaoyrcachcoannualIcvcIsotinnation
ot 2 J pcrccnt). Thcrc is no probIcm hcrc, no calI tor thc
rcvisionorrcoircctionotncocIassicalmicro- anootKcyncsian
macrothcorytoanaIyzcintcrnationalmonopoIystatccapitalism
on thcmicroanomacro,ormacro-micro,IcvcI.
Thc protcssors otcconomics arc not alonc in thcir total
taiIurc to prcoict thc luturc, or cvcn to rccognizc thc past.
Busines Week coitorializco in its spccial issuc otScptcmbcr
I 4, I 94.
Fivcycarsago, thccditorsol Business Week lookcdahcadtothc
dccadcolthc I 970 sanddcvotcdaspccialissuctoananalysis
oI thc lorccs that would bc shapingthc L. S. cconomy. Thcy
lorcsaw apcriod olvigorous cconomicgrowth. . . . Thc nrst
nvcycarsolthcscvcnticshavcconnrmcdthcsclorccasts. Itis
indccdasupcr`dccadc.
NoncthcIcss, thc coitors now obscrvc tour `untorcsccn oc-
vcIopmcnts . . . whcrc thc torccastcrs unocrcstimatco thc
magnituocotthcocvcIopmcntsatwork .thcocvcIopmcntot
acartcIotoiI-prooucingcountrics,innationarycxpansion,thc
scalcotinoicativcgovcrnmcntintcrvcntion,anothccnormous
totalotcapitalocmano.
Thcmoststrikingcharactcristicolthcworldcconomytodayis
its innationary bias . . . [thc| morc important rcason is thc
worldwidc commitmcnt to lull cmploymcnt and maximum
production . . . . Thc industrial nations . . . rcsolvcd that thcy
would ncvcr againgo throughamajorcconomiccontraction.
Cvcrthcycars, thcy dcvclopcd apattcrnolrcspondingauto-
matically to any sign olwcakncss with hugc doscs oldcncit
spcndingandcasymoncy.Thcrcsponschasworkcd.
LitcralIyunbcIicvabIc'AtthctimcotthisissucuncmpIoymcnt
in thc inoustrializco nations had alrcaoy riscn by scvcral
2 Andre Gunder Frank
million,anolcssthantwclvcmonthslatcritrcachco I m ll
What Io o
ion.
wor wi c

commitmcnt to tull cmploymcnt! Whcrc

wcrc thcautomaticrcsponscstoanysignotwcakncss!What
rcsponscs havc workco-ano tor whom Ano th

ScptcmbcrI 94'
. at was m
J
?
rtune, th

mostprcstigiousanoauthorativcbusincss}our-
U thc Lnitco Statcs, in itsmonthlyBusincssRounoup`
for]uly I 94stillprcoictco.
By comparisonwiththcpastcightccnmonths,thcncxtcightccn
will sccm almostsunny. . . I ndustrialproduction will risc at
a

avcragc ratc ol a bit undcr 4 pcrccnt ovcr thc coming

cightccnmonts. . thcworlddocsntsccmtobcmovinginto
scv
b
crcrcccssion . . . uncmploymcntwiutcnd toincrcascto
j ust clowpcrccnt.

By ctobcr I 94, a month attcrBusiness Week hao givcn

hc

co

omyaclcanbillothcalth, Fortune cautiouslyrcvisco

its Busmcss Rounoup`

stimatc. Thc risk ot thc unusual

orunc
^
pcctcosuchasmightproouccascriousorprolongco
rcccssion

arc pcrhaps grcatcr than at any othcr timc in

pos

ar
H
ry. Ano thcy havc to bc takcn morc scriously
'
ow.

y through thc most prolongco LS rcccssion

n 1os;ar history, Fortune was only } ust bcginning to pull

its ca

out

tthc sano. Novcmbcrs Busincss Rounoup,`

now

ntitI

o ThcRcalRcccssionIsYcttoComc,`obscrvco
tha

t thcoi

agrccmcntbctwccnPrcsiocntForo,whosaysthat
wcrc not in a rcccssion, ano Fcocral Rcscrvc Chairman
Arhur urn

, who says that wc arc, rcnccts thc pcculiarity

o ou

si

ation . . . wc havcn t thus tar hao thc feel ot a

rcccssion.

But,rcpo

tcoFortune inthcsamcarticlc, tthc

2:0bx

cutivcsrcportingtoFortune's scmi-annual samplingot

t c us

ncssmooo,twooutotthrce-but thcylookco toran

u
h
turn
I
m I ?? arcnotworrico,rathcrthanconnocntabout
t coutook.
Accoroing toNewsweek, ctobcr 28, I94, aGallup poll
rcportco

I
T
crccnt ot thc Amcrican pcoplc thought thcy
crcmovmgintoaocprcssion.Finally,atthccnootNovcmbcr
t c L Tr

asury Sccrct

y ao

ittco that this was thc worst

rcccssionsmccthcwar(FmanCtaI Times, Novcmbcr30, I 94).
Economics s/Crisis and Crisis s/Economics
5
Noncthclcss,Foreign A//dirJ thcmostauthoritativcoraclcot
thc LS politicalcstablishmcnt, publishco articlcs in]anuary
I 9 in which Harolo Clcvclano ano Brucc Brittain, thc
monctaristoisciplcsotMilton Fricoman, answcrco thcqucs-
tion, Aworloocprcssion!withalargcNo,assuringusthatthc
Grcat Ocprcssion otthc I 950swascauscoby acontraction
otthc moncysupply, thatthc currcnt rcccssioncanbcman-
agcosucccsstully,anothatthckcyqucstionstooayarcworlo
inhation anoworlomoncy. By that timc uncmploymcnthao
riscntosomc I 0million. InthcsamcissucotForeign Afairs,
HollisChcncry,vicc-prcsiocntotthcWorloBankanooircctor
ot its ocvclopmcnt planning, publishco an articlc cntitlco
RcstructuringthcWorloLconomy,`inwhichthconlyprob-
lcms mcntioncowcrc incrcascs inpriccsotoilano tooo, thc
rcstructuring implicit in, ano ncccssitatco by, thc crisis ot
capitalaccumulationwcntwithoutmcntion.
Notcvcnthcshortcstotshort-tcrmprcoictionisanymorc
rcalistic. ByFcbruary I 9, thcotncia|uncmploymcntratcin
thc Lnitco Statcs haoriscn to 8. 2pcrccnt. Thcgovcrnmcnt
claimcoitwoulonot pass8. pcrccnt,butwoulohovcrarouno
8pcrccntuntilI9.nlytwomonthslatcrthcuncmploymcnt
ratchaoriscnto8. 9pcrccnt,anothcn9. 2pcrccntinMay.
thcr govcrnmcnts, intcrnational organizations such as
LCO,cconomicanocyclc`rcscarchinstitutcs,aswcllasthc
major organs otthc prcss (cxccpt tor thc Economist) oo not
havc abcttcrrccoro.Tnuson]uly I , I 94,thcLonoonTimes
prcoictco that thc Lnitco Statcs, Gcrmany, Francc, Britain,
Italy, ano]apantogcthcrwouloshowagrowthot0. pcrccnt
tor I 94anothatthcywoulogoontogrowby 5. pcrccntin
I 9 . In tact, in that pcrioo proouction in thcsc countrics
decined byovcr I 0pcrccnt.ThcHWAInstitutcinHamburg
prcoictcothatworlotraocwoulogrowby6 pcrccntinI 94ano
pcrccntin I 9. Intact,it sa//ereda real decline s/I 0 percent in
I 9 . Thc Frcnchnational plan tor I9 II9 , whichtraoi-
tionally is littlc morc than an cxprcssion ot thc nccos ano
ocsircsotbusincss,pro}cctcogrowthratcsot. 9pcrccnttor
GNP, . 8pcrccnt tor productivc invcstmcnt, ano 3 pcrccnt
torvaluc aoocotor I9 II9 . Thcrcalratcsachicvcowcrc
5. pcrccnt, 5. pcrccnt,ano0. 9pcrccntrcspcctivcly.
74 Andre Gunder Frank
Lvcnprcoictions ottuturcratcsotinnationhavc notbccn
cvcnmoocratclyaccuratc.Tablc givcsthcratcsotinnation
prcoictcocachycartorthcncxtbythcLSCouncilotLconomic
Aovisors,comparcowiththcactualbgurcs.
Table 1. Predicted and actual rates ofinfation, 1968-1 974
Year
Predicted
infation
1 968 3. 1
1 969 3. 0
1 970 4. 8
1 97 1 * 3. 0
1 972 3. 2
1 97 3 3. 0
1 974 7. 0
1 968-1974 average
Real
infation
3. 9
4. 8
5. 5
4. 5
3.4
5. 5
1 2. 0
Difference
0. 8
1 . 8
0. 7
1 . 5
0. 2
2. 5
5. 0
*During part of 1 97 1 and 1 972 there Uprice control.
% excess of
real over
predicted
26
60
14
50
6
73
7 1
43
Butatlcastcontcmporary cconomists arc truc to torm. It
tooay`spractitioncrsotthcoismalscicnccarcaoismaltailurc
atprcoiction,thcyarconlytollowinginthctootstcpsotthcir
prcocccssors.Thusas]oscphS. Oavisrccalls.
Poor visionwas cxtrcmcly prcvalcnt in tbc latc I 920 s and
pcrsistcd in tbc I 950`s, in agrcatmany rcspccts, olwbicb !
only sclcct onc. Kcyncs wrotc in August I 95 I . Banks and
bankcrs arc by naturc blind. Tbcy bavc not sccn wbat was
comin

. Tbiscxtrcmcstatcmcnt,wbatcvcritsdcgrccoltrutb,
was pointcd too narrowly. Tbougb bc bad bcttcrvision tban
most,c
"
cnKcyncslailcdtosccwbatwascoming.SodidLinzig,
a wcll-inlormcd and pcrspicacious nnancial writcr. . . . Timc
a

d again rcspcctcd analysts ovcrlookcd or undcrwcigbtcd

sig

s olwcakncss or dangcr, wcnt wrong in tbcir lorccasts,

ommcd or mutcd timcly warnings, and cvinccd ill-loundcd
bopcs. . . . IlKcyncsscnscdtbcmcnaccolHitlcrandazism
!bavclookcdinvainlorcvidcnccolit.
+
tthcstockmarkctcrashot)!), hcwrotc.
Economics 0/ Crisis and Crisis 0/ Economics
Cntbc otbcr sidcoltbc Atlantic, Amcricas most rcspcctcd
cconomist, !rvingFisbcr,onCctobcr l [ l
9
29|bad ass

rtcd
tbat stock priccs wcrc on apcrmancntly bigb platcau. Cn
Cctobcr 2 5 bc assurcd tbc Oistrict ol Columbia Bankcrs
Association tbat tbc markctdcclincwas only tcmporary. Cn
ovcmbcr5bccxprcsscdtbcvicwtbatuncxamplcdprospcrity
bad j ustihcd tbc stock markct boom, tbat loolisb panic was
rcsponsiblclortbcrcccnt crasb,andtbatpriccswcrcabsur
?
ly
low andbclorcsawnobrcakintbcnation`srccordprospcrty.
Cn

ovcmbcr)obn O. Rockclcllcrwasrcportcdas saying

tbattbcdcstructionolsccurityvalucswasunjustincdandtbat
bcandbis sonwcrcbuyingsubstantialamountsolstock.
In9!s ano9!9 thcNBLRanoothcrpromincntcconomists
prcparco3 cxhaustivcrcport,cn

itlcoRecent Econo
"
ic Changes,
tor thc LS govcrnmcnt. Ocspttc somc rcscrv

t:ons abo

t
tuturcprospcctsbyNBLROircctorWcslcyC.Mttchcl latcm
9)u arcvicwcrlookcobackanoobscrvcothatnowhcrcin
thc94) pagcsisthcrc anystrongsucstionthatthccrisisot
latc 9!9 wasblowingup. "
A occaoc latcr,]oscph Schumpctcr woulo look back oc-
tcnsivcly.
!t is oltbc utmostimportancc to rcalizc tbis.givcn tbc lacts
wbicbitwastbcnpossiblclorcitbcrbusincssmcnorcconomists
toobscrvc tbosc diagnoscs . . . wcrcnotsimplywrong.Wbat
nobody sa, tbougb somc pcoplc may bavc lclt it, was tbat
tbosclundamcntaldatalrom wbicb diagnoscsandprognoscs
wcrcmadc wcrctbcmsclvcsinastatcolHux. . . . Pcoplc,lor
tbcmostp;rt,stoodtbcirgroundnrmly.Buttbcgrounditscll
wasabouttogivcway. ' "
Whilcthccconomicanopoliticalgrounowasgivingwayun

cr
hi:tcct PrcsiocntHoovcrcontinucoto insistthatprospcrty
wasgrctcranobrmcrthancvcranohcputpoliticalprcssur

c
on cconomiststrom thcNBLRano clscwhcrc to rcncct this
ill-tounoco political optimism in thcir scicntib c oiagnoscs
anoprcoictions.
1 1
.
In thc tacc ot this oismal prcoictivc rccoro thc mnoccnt
laymanano othcr `protcssional` cconomists as wcllmay
76
Andre Gunder Frank
bctcmptco tosupposcthatmuchotthismisplaccocmphasis,
ill-tounoco optimism,anosccmingly countcrproouctivcprc-
oictionisthcrcsultotmixingimmcoiatc,politicalconvcnicncc,
busincssrationalc,orcvcn} ustplaingooohumanspiritswith
haro,positivccconomicscicncc.Morcovcr,ourrcvicwabovc
isaomittcolyamixcobagotnonranoomsamplcsotallkinosot
prcoictivc tcchniqucs ano nontcchniqucs. In that casc, onc
mightinnoccntlycxpcctthatthcncw,haronosco,protcssional
cconomctric moocl-builocrs (backco up by computcrs ano
armics otgraouatc stuocnts to oo all thc cmpirical oirty
work,hanosomclypaiowithrctaincrsanocontractstromcor-
porations ano govcrnmcntocpartmcnts that ncco haro tacts
ano notn imsywishcs) woulo bcsignincantlymorcsucccsstul
with thc prcoictions that thcir computcrs ocrivc trom thcir
thousanosotcquations. But inMarch l 9 ,p. l ),Fortune
writcs,unocrthcsubtitlc,ButOocsItRcallyWork`.
Givcnthcvastprcstigcandcommcrcialsucccssof cconomctric
modcls, it might bc assumcd that thcir supcriority ovcrcon-
vcntional forccasting mcthods is nrmly cstablishcd. Cddly
cnough, it isn tat all cstablishcd. Considcr, for cxamplc, thc
rccord of thc cconomctric modcls in forccasting last ycars
cconomy. At thc cnd ofI 97 5,Whartonwas projcctinga0
pcrccnt incrcasc in rcal growth for I 974 and a . 2 pcrccnt
incrcascinGPpriccs. Chascwcighcdinwithaforccastof0.7
pcrccntrcalgrowth and a. pcrccntincrcasc inpriccs. OR!
hadaI . 2pcrccntgrowthinoutputanda.pcrccntpriccrisc.
Infact,rcalGPactuallydcclincdby2. 2pcrccntlastycarand
priccsrosc by l 0. 2pcrccnt.Thus Whartondid thc bcstofthc
thrcc modclswhich still wasn t vcry good. . . . But whcn
Mcccs comparcd thc forccasts of thc modcls with thosc
madc in thcsamcpcriod ( I 970I 97 5) by 5 cconomists who
rclicd primarily on thcir judgmcnt, hc found that ncithcr
mcthodwasprovcdsupcrior.
Anowhat} uogmcnt, `itany,ourcconomistshavcanomcrit,
wchavcalrcaoysccnabovc.
Lnocr thcsc circumstanccs, wc shoulo not bc in tor any
surpriscsitwctakcacloscr,timcly,anopoliticallyintcrcsting
lookatthcprcoictionsotthcocsigncranooircctorotWharton,
Economics 0/ Crisis and Crisis 0/Economics
whichoiothc bcstotthc thrccmoocls. ` Hci s LawrcnccR.
Klcin, who hcaos a task torcc aovising r. Cartcr on tc
cconomy,[anowho|isintrcqucnttouchwiththcOcmocratic
canoioatc. ` In thc August 2 3, I 96, issuc ot U.S. News &
World Report, hcanswcrcothisqucstion.
Q.ProfcssorKlcin,isthccconomicrccovcryinthcL. S. nzzling
out!A. o. Wcarc in thcmiddlcofthcrccovcryand nota
bad rccovcry. Lconomic growth slowcd a bit in thc sccond
quartcr, butitwillpickup againlatcrth ycar. Q.

Howlong
will thc cxpansion last! A. Ifyoumcan Whcnwillwc scc a
dcclinc in cconomic activity` nothing likc that can c forc-
sccnatthispoint. Butlcss-than-normalgrowthscc

sinstorc
for I 97S. By that ! mcan wc can look foranatural invcntory
adj usmcnt, and industry will bc bu

ping up against somc

capacity ccilings, rcsulting in a frcsh inbationary thrust. Cal-
culations madc by somc cconomists also allow for a ra

hcr
slow rccovcry in thc rcst ofthc world, but thc projcctions
! vc sccn rcccntly say that, for thc rcst of thc world, I 977
looks prctty good. And for thc rcst ofthc world at lcast,
I 97Slookscvcnbcttcr.
AmonthcarlicrulyI 9,I 96)thcsamcmg

inc

citco

Klcin
assayingthatwithpropcrgovcrnmcntpohc:cstht

pcroo

t
cxpansioncouloturnouttobcarc

layot

th

I 960sboom
Klcin was not alonc in his bullish optrmism. Thc]uly I 9
issuccarricoanothcroptimisticarticlcunocrthctitlcLxpcrts`
Vicw.BusincsstoClimbtorYcarstoComc`.
Thc busincss rccovcry undcr way for I months will bc a
hcalthy onc thatwillrun into I977, at thc lcast, and pcrhaps
wcllbcyond that. Thc torridpaccofrcccntgrowthwill slow.
But its notuntillatc I 977orcarly I97Sthatthccxpcrts scc
any bigproblcmsat all. . . . B

t most cconomists cxpcct that

any corrcction that folIows will bc short

d modcst. And
manyanalystsarcplacingbctsthatthcL S.isinthccarlystagcs
ofan cxpansion that could strctch ncarly to thc cnd of tc
dccadc, a long upsurgc much likc thc boom of th

I 9s.
Lconomists at cwYork Citibankhavcrcachc this bu|lish
conclusion. hc currcnt cxpansion is most likcly

to last
through I 97Sandprobablylongcr,and. . . anyrcccssionthat
78
Andre Gunder Frank
mayoccurbclorc thccndolthcdccadcislikclyto bcmildcr
thanthconcthcL. S. cconomyisnowshcdding. `
I t shouIocomcasnosurpriscthatthisbuIIishoptimismwas
notwarrantcocithcrintactorinthcory. Intact,uncmpIoymcnt
in thc Lnitco Statcs bcgan to risc in ]unc I 97 (trom 7. 2
pcrccntinMay)anohascontinucotoriscupuntiINovcmbcr
(whcn it stooo at 8. I pcrccnt). Sincc Iatc summcr I97 3, un-
cmpIoymcnthasaIsobcguntoriscagaininGcrmany,Francc,
ano ]apan, not to mcntion LngIano ano ItaIy, whcrc it has
continucoitsupwaropaththroughoutthcrccovcry. `Forthc
LuropcanLconomic Community as awhoIc, uncmpIoymcnt
aIso stoppco occIining ano bcganrisingin]unc I97(Inter
national Herald Tribune, August I 7, I 97). By Scptcmbcrit
haorcachco. 7pcrccntinHoIIanoano8.7pcrccnti

BcIgium
(Le Monde, NovcmbcrI 3, I 97),upto9. 4pcrccntinNovcm-
bcr (Frank/urter Rundschau, Occcmbcr I 3, I 97).tcoursc,
maintainingcmpIoymcntis notthcmostsignincantcritcrion
tor capitaI. ButoutputanothcIcaoingcconomicinoicators`
gcncraIIy aIso sIowco oown or tcII by summcr I 97. In thc
LnitcoStatcsthcinocxotIcaoingcconomicinoicatorsdeclined
i nAugustano Scptcmbcrano taiIcotoriscin ctobcr I 97.
Morcovcr, as U. S. Nes & World Report (August I , I 97)
points out about this compositc inocx ot twcIvc cconomic
scrics ocsignco tor cconomic prcoiction, Somctimcs thc
inoicat

s arc Ia_aros, notIcaocrs. ` InGcrmanyano]apan,

whcrc:noustria|proouctiontcIIinAugustanoScptcmbcr,thc
rccovcrypctcrcoout.ThisiswhatthcLCOEconomic Outlook
(p. I 3),pubIishcoinOcccmbcr I 97,saio.
ThcrccovcrywhichbcganinorthAmcricainmid- I975and
thcn srcad to Luroc and]aan . . . was always cxcctcd to
loscaccinthcsccondhallolI 97 Inlact,thclatcstindicators
sucstthatthcslowdownnotonlybcgansooncr,buthasbccn
arcciablygrcatcr,thansucstcdinthc]ulyEconomic Outlook.
Thc slowdown is widcsrcad, allccting virtually all CLCO
countrics,andthccxansioninthcLnitcdStatcsand]aanin
articulari slcssthancxcctcd. LxansioninLuroccanbcst
bc dcscribcd as modcst. . . In thc scvcn major cconomics
takcn togcthcr, industrial outut has stagnatcd sincc Aril
Economics 0/ Crisis and Crisis 0/Economics
79
InthcLnitcdStatcsi tcontinucdtoickuuntilSctcmbc

,
but in)aan, Gcrmany, thc Lnitcd Kingdom a Canada tt
hasbccnaboutnatsinccmidycarand Francc ithas slowcd
down markcdly sincc thc nrst quartcr. . . . Aggrcgatc GP
lorthcscvcnma|orCLCOcountricsiscstimatcdtohavcbccn
cxanding in thc sccond hall ol I97 at an annual lcvcl ol
3. 5 crccnt,substantiallylcssthantclorccastol4.7 5 crccnt
containcdinthc)ulyissucolEconomic Outlook. Totaluncmloy-
mcnthas,accordingly,startcdtoriscagain.
By ctobcr 2 , I 97, U.S. News C: World Report, whichi

]uIy hao announcco busincss to chmb tor yc

s to c

mc
accoroingtothc cxpcrts,`pubIish

o survcy

t topbusincss
cconomiststorma|orL. S. compantcs. Accoroingtopcrcc

t
otthoscsurvcyco,thcncxtcconomicoo

nturnwouIocg:n
in I 977 in I 978accoroingto4 pcrccnt, inI979 accoro:ngto
2 pcrcnt, in I 980 accoroin

to

pcrccnt, ano attcr that

accoroingto8pcrccnt.Lxpcrt opitvtonschangctast,butnot
astastascvcnts|

Yct thcrc arcgooo rcasons inthcthcor

/
otbusincsscycIcs
ano in thc anaIysis ot capitaI accumuIatton tht couI?

no
shouIo`havcIcotoscriousooubtsaboutthcbuIhshopttm

sm
(or thc cquaIIy unana|ytic subscqucntgIoom!. Thc mo

t im-
portanttactsrcIatingtothis thcoryanoanaIys:swcrcavarIabIc
atthc timc thcscoptimistictorccastswcrcmaoc, anosomcot
thc abovc-citco torccastcrs cvcn mcntionco so

c ot thcsc
tacts apparcntIy withoutrcaIizing,or at Icast takmg account
ot, thcirsignincancc.Thcmostimpo
'
ta

totthcsc

tactsrctcr
to invcstmcntano tosuchsignincantmotcat

rsot

nvc

tmcnt
as thc ocmano torstccI.Thus,inhisAugustmtcrvicwmU. S.
News & World Report, KIcinnotco,
Ilyouanalyzcthcrcscntrccovcry, itsdcnnit

ly consumcr-
lcd. Thcrcs a lot ol. . . rcbuilding olinvcntorcs, and thcsc
lorccs arc somcwhat transitory. . . You havc to

rcm

cmbcr
that a lot ol invcstmcnt, instcad olraising caacity, ts now
dircctcdatcncrgy roblcms, and thcyrcg
'
in

to takc along
timc to solvc. And a lot ol invcstmcnt ts dircctcd toward
rotcctingthccnvironmcnt.
Inocco, in thcvcry]uIyarticIcwhichconnocntIy announcco
80
Andre Gunder Frank
thc climb tor ycars t

comc, u.s. News & World Report

obscrvco, apparcntly wtthout unocrstanoing its signincancc
thcabscnccot

a widcly

rcdictcd
?
urst olbusincss scndingon ncw lants
a

d cquimcnt

[wbicb| sbould sustaincconomicgrowtblora

still longc

rcrod. Sucb asurgc in caital invcstmcntislong

ovc

duc,

ilast

turnsarc

anaccuratcguidc.Altcradjusting
lor innatio

, tbis tyc olinvcstmcnt is considcrably lowcr

today tba

twas wbcn tbccconomy toucbcd bottomincarly
I91

Tbisistbcnrsttimcintbcostwarcratbattbatbasbccn
trucintbcadvanccdstagcolrccovcry.
In Britain, proouctivc invcstmcnt occlinco absolutcly in
I 974, I 97,
.
ano

I 97, an

is now JI . 6 million comparco
toJ2. I 5 milhontn I970(Financial Times, ctobcr 5, I 97).
Thc]apancscrccovcrywascxport-lco (ano thcrctorcocpcn-
ocnt

on

rc

ovcryclscwhcrc). As to thc invcstmcnt-scnsitivc

ano tnotcativc

stccl inoustry,Financial Times rcportco, Thc

Frcnch stccl tnoustry. A occp ocprcssion. . . W. Gcrman
rollcostcclo

ocrsshowturthcrtall(NovcmbcrI9, I 91).
Thc poor tnvcstmcnt picturc is in part ouc to rclativcly
ocprcsscoprontsanolowc

pcctationsotprontability,although
t

anks

o rccc

rt cconomtc managcmcnt, pronts arc on thc

tsc ag

n,particularly tor big monopoly busincss. Thcmorc

tmm

otatcrc

sons

ccx

cssinstallco,orunocrutilizco,pro-
ouctivc capactty, wtth cstimatco utilization ratcs otbctwccn
74 p

rccnt

o 82 pcrccntin thc Lnitco Statcs ano 80pcr-

ccnt tn Brtatn, Italy, ano]apan (Lrncst Manocl in Inprecor
P
taly|,Nov

mbcr I I , I 97,p ),ano thcoircctionotncw

t n
'
cstm

cnt

tn thc major inoustrializco cconomics towaro

ratio

izationo

csigncotorcoucc(labor) costs otproouction

atcxtsttngcapacttyrathcrthantoincrcasccapacity.
Yct wc may vcnturc

o
:
prcoict that it is prcciscly this
slackr

hcr than l

gin tnvcstmcnt that is thc signincant

an occtstvc t

ctor tn t

c prcscnt wcak cyclical rccovcry. I

bch

vcthat

htslackottnvcstmcnt, withoutwhichconsumcr
buytn

ano tnvcntory builoups cannot sustain a boom, is

rcncction

ott

c occpgoing crisis ot accumulation that has

bccnbrcwtngstnccthcmio- I 90sanootwhichthc I 90I 910
Economics 0/ Crisis and Crisis 0/ Economics 8 I
anothc I97 5I97rcccssionswcrconlycarlystqcs,withmorc
anooccpcrrcccssionstocomc. Bc thatasitmay,clscwhcrcin
thc capitalistworloitis clcarthatmajorinvcstmcntisnotso
much ovcrouc as unlikcly until tar-rcaching political ano
cconomic changcs havc occurrco. Thus Economic Outlook tor
Occcmbcr I 97obscrvcoanoprcoictcomorcrcalistically.
TbccnormousamountolslackbuiltuintbcCLCOarcasincc
tbc bcginningoltbcdownturnwillnotstartbcingrcabsorbcd
ovcrtbclorcctcriod,tbcmarginolunuscdrcsourccswould
at bcststabilizc in tbc courscolI916 . . . . Wbat is sbown isa
rccovcrylromrcccssionwbicbrcsultslargclylromanscalboost
to dcmand andan cnd to tbc run-downolinvcntorics. Botb
lactorsarclorccasttolosclorccintbccourscolI96 . . . .Busi-
ncssbxcdinvcstmcntsccmsunlikclytobccomcama|orlactor
olstrcngtb. . . crsonalsavingsratcisnowcxtrcmclybigb. . .
tbcrccovcryiscnvisagcdaslaltcringlorsomccountrics.
tncialsourccs,busincsscconomists,cconomicrcscarchinsti-
tutcs,anocvcnsomcpoliticiansinGcrmany,Francc,Britain,
ano]apanallsucstthatthcrcisnoimmcoiatcprospccttora
rccovcryotinvestment anothatthcuncmploymcntcrcatcoby
thc rcccssionotI972I 97is notlikcly to bccliminatco by
thc rccovcry otI 97or I 977or I978, cvcnititlaststhat
longwhich is vcry unlikcly itinvcstmcnt oocs notpick up
ano uncmploymcntpcrsists.
Lnocrthccircumstanccs,itisoitnculttonnoanythingmorc
than misplacco protcssional prioc in thc cx-chairman otthc
CouncilotLconomicAovisors,WaltcrHcllcr,whcnhcaskco,
Whats right with cconomics! ano assurco himsclt ano his
auoicnccthatwccconomistshavcmanysins,noncocaoly,to
contcss,butthcscarc tar outwghco bythcvirtucs, allquitc
livcly,thatwccanlcgitimatclyprotcss.' YctHcllcrobscrvcs
what Gunnar Myroal ano Robcrt Hcilbroncr chargc, that
bcingbchinothctimcsisthcrcgularmcthooologicalwcakncss
otcstablishmcntcconomists AnoHcllcrnotcsthatinnation
may no longcr bc thc Public Lncmy Numbcr nc now that
scvcrcrcccssionisuponus,butitissurclyLconomistsLncmy
lumbcrnc. Noncthclcss,Hcllcrmakcssoboloastoclaim
that in a vcry rcal scnsc cconomists havc bccn victims ot
82 Andre Gunder Frank
tbcirownsucccss.Macrocconomicpolicywastbcmajorforcc
boldingtbcpostwarcconomyonavastlybigbcrplanctbantbc
prcwarcconomy. nlyVictnamblcwtbccconomyoffcoursc
anditisafaulttbattbccconomicsprofcssionbasnotsatisfac-
torily cplaincd [or cagcd| stagdation. ' ' Sbadcs ofSamucl-
son scongratulationstotbcNBLKcccpttbatHcllcrbastbc
tcmcrity tocongratulatcbiscollcagucsandbimsclfforbaving
cagcd tbctigcrtbrougbmacrocconomicpolicy,citingVictnam
asonlyanctrancousgalc ontbccourscbiscconomists bavc
stccrcd' And tbatintbcfaccofbavingcscalatcdtbcwarqainst
Victnamandbnanccditastbcmacroeconomic policy,spccibcally
to cagc orat lcast cport tbc tigcroftbc dccpcning crisis of
capitalaccumulationwbilc itwas still ayoungcubintbcmid-
I 90sandbcforcitbrokcouttoroamtbcstrccts,alIcys,and
countrylancsoftbcworldintbc I970s.Butbcforcprocccding
tocinctbiscrisisitsclf,wcmaypcrbapsappropriatclycvalu-
atc tbc claim tbat onc oftbc livcly virtucs ofcconomistsisto
bavcinvcntcdandinvokcdmacrocconomicpolicy,andtbatit
wastbispolicytbatkcpttbccconomyridingbigb,atlcastuntil
now.!ikctbccconomists`prcdictions,itwillbcsccntbatnonc
oftbcsccplicitandimplicitclaimsbavcanybasisinrcality'
Economic Management: Keynesian Class Policy
WaltcrHcllcr`sstatcmcnttbat`macrocconomicpolicywas
tbcmajorforccboldingtbcpostwarcconomyonavastlybighcr
planc tban tbc prcwar cconomy is bclicd by any objcctivc
camination oftbc cconomic rccord bcforc and aftcrWorld
War II. Tbc proposition, implicit in tbis claim and cplicit
in many similar statcmcnts, tbat class-ncutral govcrnmcnt
cconomic policy, bascd on Kcyncsian tbcory, can and docs
assurc stcady cconomic growtb witbout uncmploymcnt or
indationin tbccapitalistindustrialcountrics(andthatitcould
do tbc samcintbcundcrdcvclopcdcountrics)iscontrarybotb
to tbc visiblc cvidcncc and to any acccptablc tbcory oftbc
capitalistproccssofcapitalaccumulation
J
Economics 0/Crisis and Crisis 0/Economics 83
Similarly, Paul Samuclson wrotc in tbc fourtb cdition of
bisEconomics:
HcrcatthccndolPartTwo sanalysisolarcgativccconomics
ormacrocconomics,itisn ttingtolormulatcanimortanttcnct
olmodcrn cconomics.Neoclassical synthesis: by means ofappro
priately reinforcing monetar and fscal polcies, our mixed-enterprise
system can avoid the excesses of boom and slump and can look
. forward to healthy progressive growth.
Tobcginwitb,Kcyncsian,public,countcrcyclical,macro-
cconomic stabilizationandgrowtb policy bas bccn practiccd,
as Kcyncsbimsclfobscrvcd, tbrougboutbistory,anditncvcr
assurcd sustaincd noncyclical growtb bcforc. Morc particu-
larly, asMarcBlaugbasnotcd.
Thc lcadcrs olthc Amcrican rolcssion strongly suortcd
a rogrammc ot ublic works and sccibcally attackcd thc
shibbolctholabalanccdbudgct.Alonglistolnamcs,including
Slichtcr, Taussig, Schultz, Yntcma, Simons, Gaycr, Knight,
Vinr,Oouglasand).M. Clark, conccntratcdmainlyatthcuni-
vcrsitics ol Chicago and Columbia but with allics in othcr
univcrsitics,rcscarchloundations,andgovcrnmcntandbanking
circlcs, dcclarcd thcmsclvcs in rint wcll bclorc I 95 [thc
ycarinwhichKcyncsGeneral Theor wasublishcd|inlavour
ololicics that wc would today call Kcyncsian. Similarly, in
Lngland,asHutchisonhasshown,namcssuchasPigou,Layton,
Stam, Harrod, Gaitskcll, Mcadc, L. A. G. and ]. Robinson
camcoutubliclyinlavourolcomcnsatoryublicscnding. . . .
A lair way olsummarizing thc cvidcncc is to say that most
cconomists, at lcast in thc Lnglish-scaking countrics, wcrc
unitcd in rcscct olractical mcasurcs lor dcaling with dc-
rcssion, butwcrc uttcrly disunitcd in rcscctolthc thcory
that lay bchindthcscolicyconclusions. . . . In ascnsc,thcn,
thcKcyncsianthcorysuccccdcdbccauscitroduccdthcolicy
conclusionsmostcconomistswantcdtoadvocatcanyway,butit
roduccdthcscaslogicalinlcrcnccslromatightlyknitthcory'
Tbc application ofKcyncsian macrocconomic rcmcdics
botb bcforc Kcyncs and aftcr did not bcal tbc cconomic
paticntorpcrmititsbcaltbyprogrcssivcgrowtbbcforcWorld
WarII, soitisnotclcarwbysucbapolicy sbould bccpcctcd
84 Andre Gunder Frank
(andimmcdiatclyaftcrtbcwaritwasnot' ) toproducc,ornow
bc crcditcd witb producing, bcaltby growtb on abigb planc
sincctbcwar. Indccd,intbcLnitcdStatcsitwastbcwaritsclf
tbat climinatcd tbc I0 millionuncmploycdandbcalcd` tbc
cconomy.InGcrmany,Italy,and)apanitwastbcKcyncsian`
plus fascistpolicics ofHitlcr, Mussolini, and Tojo, bascd on
rcprcssionat bomc-cspccially oftbcwagc ratcandcpan-
sionabroad, tbatspurrcdcapitalaccumulationonagain

nly
Britain, wbicb bad prcccdcd tbc rcst oftbc world into dc-
prcssion in tbc I920s, cnjoycd an carlicr cyclical rccovcry,
altbougb clcarly not bccausc ofKcyncs or macrocconomics,
wbilcsuffcringfromcvcrincrcasingstructuraldcprcssionand
tbclossofitsworldlcadcrsbiptotbcLnircdStatcs.Indccd,it
was LS acccssion to world cconomic, political, and military
dominancc, assistcd by tbccffcctsoftbcdcprcssion (and tbc
incffcctivcncssofKcyncsianmacrocconomicsinovcrcoming
it) and tbc war on rival powcrs tbat liftcd and bcld tbc LS
cconomy to a rclativcly bigbcr planc aftcr tbc war, and not
postwarKcyncsianmacrocconomicpolicy.
Bcyonditstcmporaryabilitytosupportbca|tbyprogrcssivc
growtb during tbc postwar ycars, largcly dcrivcd from its
positionofdominanccovcrrivals in tbc rcstoftbc capitalist
world, botb dcvclopcd and undcrdcvclopcd, LS capital bas
prospcrcdfromtbcbigblyfavorablcrclationtolabortbatbad
bccnwrougbtby tbc samcdcprcssion,fascism, and war. Tbc
dcprcssion oftbc wagc ratc and tbc dcstruction ofunions in
Gcrmany andItaly,andtbcsocialdcmocraticcontainmcntof
tbc labormovcmcntinItaly,lrancc,andBritainaftcrtbcwar,
affordcd cnormous bcncnts nrst to LS capital, during and
aftcr tbc Marsball Plan, and tbcn to national capital (and still
indircctly to LS capital) in tbcsc countrics

It was tbc con-

j unction oftbcsc rclationswitb working-class and intcrcapi-
talist impcrialist rclations, bclpcd along by tbc cconomic
andpbysical dcstructionofcapital by tbc dcprcssionandtbc
war and tbc pcrmancntwarcconomy, tbat sincc tbcwarbas
bccn supportcd by tbc artin ciallystimulatcdanti-Communist
bystcria and tbcn tbc arms racc, tbat bavcpcrmittcd amas-
sivc ncw wavc ofcapital invcstmcnt and accumulation on a
. 1
Economics 0/ Crisis and Crisis 0/ Economics 8
bigbplancintbcpostwarcconomyandnotKcyncsianmacro-
cconomicpolicy
Tbctbcsisofbigb-lcvcl,bcaltby,progrcssivcgrowtbtbrougb
macrocconomicpolicy in tbc postwarpcriod isbclicdbyfact
and tbcory on scvcral otbcrgrounds. lor tbc Lnitcd Statcs,
Stcindl argucdpcrsuasivcly in tbc I90s tbat prolongcd c-
pansionwasnolongcrpossiblc, '"andBaranandSwcczysougbt
tocxplainbowtbctcndcncicstowardstagnationbcgantoasscrt
tbcmsclvcs in tbc I90s and wcrc only bcing bcld at bay by
wastcful,cspcciallymilitary, cpcnditurcoftbc cconomicsur-
plus. `' ' Sincctbcmid- I90stbcKcnncdy)obnsonboomwas
prolongcd and rcccssionavcrtcd or postponcd only tbrougb
cscalation of tbc war against Victnam and an cpansionary
monctary policytbat noodcd tbcworldwitbLurodollars and
lcnt tbc ncccssarymonctary supportto tbc subscqucnt inna-
tions of tbc I970s Howcvcr, tbis boom and innation lcd
capitalanditsrcprcscntativcsingovcrnmcnttoacccptindccd
topromotc-rcccssion,supposcdlytongbtinnationaspublic
cncmynumbcronc
Lvcn tbc supposcd `stabilizing` capacity and cffccts of
macrocconomic policy arc morc tban doubtful. Kigbt-wing
cconomists, sucb asMilton lricdman, wboopposc tbcuscof
cpansionary nscalpolicybccauscitinvolvcspubliccpcndi-
turc tbat may bcncnt not only capital but also labor, bavc
argucd all along tbat nscal policy cannot stabilizc, and tbat
bccausc oflags bctwccn its implcmcntation and its cffcct it
oftcndcstabilizcs tbc cconomy. Monctary policy, tbcy claim,
bcncntscapitalmorcdircctlyandcclusivclyandwillscrvcnot
only to stabilizc tbc cconomy but also to climinatc busincss
cyclcnuctuations.Tbcycvcngosofarastoclaimtbatonlyan
inappropriatcandill-timcddcclincintbcmoncysupplycauscd
tbc GrcatOcprcssion.
_
utanincrcasingnumbcrofstudicsby
lcft-wingandbourgcoiscconomistssbowtbatmacrocconomic
nscalandmonctarypolicydonotandcannotstabilizc,lctalonc
climinatc,tbccyclicalductuationsintbcproccssofaccumula-
tion

Tbcso-callcdbuilt-inautomaticstabilizcrs(sucbastacs
tbatgoupintimcsofcpansionanddownintimcsofcontrac-
tion) bavc morc dircct cffccts on consumption cpcnditurcs
8 Andre Gunder Frank
tban on invcstmcnt, wbicb is tbc morc important unstablc
factorinaccumulation. Morcovcr,astbccontcmporaryattack
on wclfarc cpcnditurcs sbows, somc of tbcsc automatic
stabilizcrs arc automatically built out of tbc systcm qain
wbcn tbcintcrcstsofcapitaldcmanditand tbc nonmilitancy
oflabor allows it. Oiscrctionarymacrocconomicstabilization
policyisj usttbat.itisccrciscdattbcdiscrctionoftbcpowcrs
tbat bc and as a function of tbcir cconomic and political
intcrcsts. As longas cconomistsbavc bccnunablc to forcscc
tbcamplitudcoftbccyclicalswings mucblcsstoprcdicttbc
cyclical turnsit is not surprising tbat tbcy bavc also bccn
unablcto su_cstpolicicstorcstrain tbatamplitudc andprc-
vcnttbcdownturns. At bcst, tbcswingsbavcbccndampcncd
insomccascsinsomccountrics,butmorcoftcntbcstabilizing
cffcctsofmacrocconomic policy bavc bccnmarginal or non-
cistcnt, and somctimcs tbcy bavc a_ravatcd tbc cyclical
swings. lorinstancc, in cvcry rcccssion in tbc Lnitcd Statcs
sincc I 948fcdcralcmploymcntdcclincd,andintbcintcrvcn-
ingcpansionsitincrcascd.Morcovcr,tbcstop-gopolicy,long
practiccd in Britain, wbicb must accompany or dampcn tbc
ductuationsintbcaccumulationproccss,rcstrictstbcfrccdom
ofcapital and discouragcs domcstic invcstmcnt, particularly
wbcrc itisrclativclycasyforcapitaltomovcovcrscas.
Tbc failurc ofmacrocconomic stabilization policy is not,
bowcvcr, duc only to problcms ofprcdiction and tccbnical
cffcctivcncss.ntbccontrary,tbougbcapitalandtbccapitalist
statc undoubtcdly wisb to usc discrctionary macrocconomic

olicy toprcvcnt indationand uncmploymcntcccsscs, class

intcrcstsarc far from unambiguous, and indation and uncm-
ploymcntarcasmucbwcaponstoscrvccapitalasproblcmsit
mustavoid.Tbisbasclcarlybccntbccascwitbindation,wbicb
capitalbasrcquircd andgovcrnmcntsbavcbccnprcparcd to
support-uptoapoint.LvcntbcvoiccofAmcrican bigbusi-
ncss,Fortune (August I974,p. 2) rccognizcdtbatinrcccnt
montbs,bowcvcr,tbcrcalpusbbcbindtbcscpriccsbascomc
from busincssmcn straining to rcstorc tbcir pront margins.
I n fact, tbc cvidcncc sbows tbat tbc grcatcr tbc tbrcat to
probtsand tbc bigbcr tbcdcgrcc ofmonopolizationbctwccn
Economics 0/Crisis and Crisis 0/Economics 87
industricsorcountrics, tbcgrcatcristbcindationinduccdby
tbc formcr and madc possiblc-witb statc acquicsccncc or
supportbytbc lattcr.
Tbus, tbcrcccntworldwidc indationbas bccnmostscvcrc
prccisclyintboscindustrializcdcountricsinBritain,Italy,and
)apanindationrcacbcdaycarlyratcof2pcrccntinwbicbtbc
ratc ofprontdcclincd tbc most. Among tbc undcrdcvclopcd
countrics also tbc most scvcrc indationary takcoffs bavcoc-
currcdwbcrccapitalbassuffcrcdtbcgrcatcstdcclincinpronts
andtbccrisisofaccumulationbasbccomcmostscvcrc. Simi-
larly, as bctwccnindustricsinparticularcountrics,priccriscs
arc most markcd in industrics tbat arc most monopolizcd.
SbcrmansbowstbatintbcLSrcccssionycarsofI9 3, I98,
and I 99, compctitivc priccs rosc I . 9pcrccnt, 0. pcrccnt,
and . 9pcrccnt rcspcctivcly. In I948, wbcn tbc dcgrcc of
monopoIzationwasnotyctas strong, compctitivcpriccsbad
fallcn 7. 8 pcrccnt and monopoly priccs also wcnt down,
altbougb by mucb lcss only I . 9 pcrccnt. Tbis indationary
bcbaviorofmonopolypriccscomparcd to compctitivcpriccs
bas occurrcd dcspitc tbc fact tbat in tbc rcccssions bctwccn
I 947 and I 9 pronts in monopolizcd industrics only dc-
clincd 2. 7 pcrccnt on tbc avcragc, wbilc in compctitivc
industrics tbcy dcclincd I .7 pcrccnt, and in tbc smallcrin-
dustricswitblcsstbanS20, 000inassctstbcyfcllonavcragc
by 82. 7pcrccnt.
Z0
)obnM. Blairwrotc intbcJournal 0/Economic Issues unc
I974).
Thcwcightcdavcragcriccchangci nthcrcccssionol Occcm-
bcr I 99Occcmbcr I 90by conccntration catcgory lor thc
29roducts. . . [showsthat|thcavcragcincrease lorroducts
with conccntrationratiosol0crccntandovcr( . 9crccnt)
was ncarly asgrcatas thc decrease lorroducts with ratiosol
undcr 2 crccnt ( . I crccnt). Thoscin thc intcrmcdiatc
grou (lor cxamlc, with ratios ol lrom 2 to 49 crccnt)
rcgistcrcdanintcrmcdiatc changc, dcclining I . 0crccnt. . .
Cbviously, thc conccntratcd industrics wcrc morc succcsslul
in translating highcr costs (and crhas othcr lactors) into
highcrriccs.
88 Andre Gunder Frank
In tbc

ranklurter Rundschau (Marcb, I97)HcrbcrtSbui

sunmartzcdbtsstudyottbcmostrcccntrcccssioninGcrmany.
I ndus

rics inwbicb a lcw bignrmsbavc alargc sbarc oltbc

salcs incrcascd tbcirpriccs signincantly morc in I 94-I 9`
tban industrics in wbicb tbc largcst nrms do not bavc any
abovc-

avc

agc sbarc oltbc markct. Tbc mirrorimagc oltbc

orcgoi

gistbatproductiondcclincsintbcbigblyconccntratcd
industralbrancbcs(tboscwitb tbcbigbcstratcsolinnationin
tb

c rcccssion)signincantlymorc tbanintbcindustrial scctors

witbonlybttlcconccntration.
Jnd writing on Argcntina, Victor Tcsta bas obscrvcd in
bisAspectus economicos de la coyuntura actual, 1973-1975:
'
Full

mplo

`
cnt

contributcdtotbc abilityolmanygroupsto
obtainadditionalincrcascsinwagcsandsalaricstbrougbtbcir
oncllorts,anditcontributcd tospurringontbclaborunion
muitancy tbat was born out oltbc political proccss oltbcsc
rcccntycars. Attbcsamctimc,witboutdoubttbispositionol
orcc

oltbcworkingclass drivcs tbcbourgcoisictorcncwtbc

innationary

pro

css in ordcr to rccupcratc tbcirpront lcvcls

tbrougb prcc rscs. Innation as an answcr to salaryincrcascs
was clcly

applicdpolicyinFranccin I 9S,inItalyin I 99,

andin<bucin I 90I 95,anditcouldnotbutturnupalsoin
Ar

cn

tina.WbatmakcsArgcntinarcscmblcFranccmorctban
Cb

lcis tbattbcwagcincrcascswcrcobtaincdtbrougbworkcr
action and not tbrougb olncial policy, wbat is similar in tbc
tb

cccascs istbattbcanswcroltbc bourgcoisicis tbcriscin

prccs and tbc innation, wbicb translcrs tbc bid lor incomc
lromtbclactoryintcriortotbcgcncralconomiclront
KogcrUratcnstcinwritcs.
! t sccmsrcmarkablctbatnoncoltbc[ I I dcvclopcd|countrics
wit a stcady uptrcnd oltbc national product in tbc rcvicw
pcrod . . sullcrcd lrom prolongcd scvcrc innation. In con-
trast, tbc countrics wbicb cxpcricnccd largc pricc incrcascs
(Argcntina,

Bolivia, Brazil, Cbilc, Lruguay) wcrc witbout

cxccptionbitbyscvcrcsctbacks. '
KcmarkabIc ind

cd

tbat bc supposcs sctbacks ingrowtb

to bc causcd

by i

dati
'
n and stcady uptrcnds to bc possibIc
onIy wbcrc mdation is abscnt. His correct corrcIation is
Economics 0/Crisis and Crisis 0/ Economics
89
not rcmarkabIc at a|I, bccausc tbc `sctbacks in growtb bc
rcgistcrsarcassociatcdwitbrcccssionarydcclincsintbcratcot
pront to wbicb capital and its dutituI govcrnmcnts (cvcn in
AIlcndc`sI970-I97 3Cbilc)rcspondbyincrcasingpriccs-and
poIiticalrcprcssion.
Uuttbc `surcst curc tor indationis ascvcrcrcccssion,as
Koyal Littlc, a Iiving mcmbcr otFortune's Uusincss HalI ot
lamcandtoundcrotTcxtronIndustrics,rcccntIyobscrvcd.
Insotastbctbrcattopronts-wbicbcapitaItricstorccupcratc
byraisingpriccs-wasducinparttoanincrcascintbcwagcsot
Iabor, tbc surcst curc is a rcccssion. Howcvcr, it invariabIy
nccds a Iong rcccssion, sincc wagcs usualIy Iag bcbind tbc
turn in tbc cycIc (and tbc rcaI wqc ratc, tbougb not totaI
wagc paymcnts, go up at tbc vcry bcginning ota rcccssion
unIcssitiscoupIcdwitbsubstantiaIindation).Tbus,attcrtbc
Iong Kcnncdy-)obnson boom in tbc Lnitcd Statcs, capital
dcmandcd arcccssionary attackonwagcs. Prcsidcntixon`s
administrator ot tbc wagc trcczc, ArnoId Wcbcr, admittcd
tbatbusincss`bad bccnIcaningontbcadministration `todo
somctbingaboutwagcs. . . . Tbc idcaottbc trcczcandPbasc
II was to zap labor and wc did. ' Morc particuIarIy, ixon
rcplaccd tbc S I 2 biIlion budgct surpIus in I97 by a SI 2
bilIionbudgetdcnciti nI99,cuttingwcItarccxpcnditurcsas
part ot tbc dcIibcratcixon-Moynibanpolicyotdismantling
tbc Kcnncdy cw lronticr and tbc)obnson Grcat Socicty
wcItarc programs. Tbcrc sccms IittIc doubt tbat tbc I99
I 970LSrcccssionwas in Iargc part dclibcratcIy induccd by
ixon, tbougb at tbat timc bc did not bavc tbc couragc to
pcrsistwitbitlongcnougbtorittodoits jobotrcducingwagcs
and discipIining labor and torcign compctitors. Tbus hc rc-
sortcdto tbccw Lconomic PoIicyotAugust I , I97 I, ano
tbc scvcrc intcrnational dcprcssion tbat capital rcquircdwas
dcIaycduntiI I975I97.
OcIibcratcrcccssionasotnciaILabourgovcrnmcntstratcgy
wasalsocvidcntintbcrcccntrcccssioninUritain,wbcrctbcF i
nancial Times (lcbruary2, I97andApriI I, I97) obscrvcd.
Tbccruxoltbc mattcris simply tbistbatuncmploymcntis
risingquitclast. andtbat[Cbancclloroltbcxcbcqucr|Mr.
9u Andre Gunder Frank
Hcalcy scommitmcnttoollsctcxccssivcwagcincrcascswitb
rcstrictionsondcmandwouldtcndtomakcitriscstilllastcr. . . .
Tbc Cbanccllorbascboscntointroduccamildlydcnationary
budgct . . . . Itwillbcsaid-andnotaltogctbcrwitbout|ustinca-
tioninvicwolLaboursrcsistancctodircctcontrolsovcrwagc
ratcs-tbattbcGovcrnmcntbas lostlaitbintbcclncacyoltbc
socialcontractandis rclyinginstcadonbigbuncmploymcntto
kccpwagcclaimsdowntoarcasonablclcvcl.TbclacttbatMr.
Hcalcy cxprcssly and absolutcly rc|cctstbc usc olmass un-
cmploymcntasaninstrumcntolpolicymaywcllsccmtotbosc
on tbclcltolbimtobcnomorctbanscmanticquibbling.
Pcrbapsitisabitmorctbanquibb|ing,bowcvcr,sinccHca|cy
no doubt a|so kcpt in mind tbc warning ot Tradc \nion
Congrcss (TLC) Gcncra| Sccrctary Lcn Murray (Financil
Times, )anuary 22, I 97) tbat`bigbuncmp|oymcntwou|d kn|
tbc socia| contract and witb it tbc TLCs abi|ity to sccurc a
mcasurc of vo|untary wagc rcstraint. Cn tbc otbcr band,
as tbc Economist ( Scptcmbcr 2 I , I974 and Occcmbcr 28,
I974) notcswitbsatisfaction, strikcs arc corrc|atcd invcrsc|y
witbuncmp|oymcnt-asuncmp|oymcntincrcascsby Ipcrccnt,
strikcs dcc|inc by 8 pcrccnt-but arc positivc|y corrc|atcd
witb wagc dcc|incs, tbougb contro||cd incomc po|icics can
apparcnt|ybrcakuptbiscorrc|ation.Accordingtotbc

conomist
( Scptcmbcr 2 I, I974), `lt is a popu|ar misconccption tbat
wagc contro|s producc morc strikcs. Tbc rcvcrsc i

usu|y
truc. Wagccontro|sandincomcspo|icy,tbcEconomISt pornts
out bavc in tbc \nitcd Statcs and Uritain rcsu|tcd infeer
strikcs. Uutotcoursc,as Murray pointsout,tortbat tbcsocia|
contractmustbc prcscrvcd. ltit is not, or ittbc bourgcoisic
|oscstaitbinitsctncacy,tbca|tcrnativcisapo|icyotdc|ibcratc
rcccssionanduncmp|oymcnt.
Kcvicwingrcccntmacrocconomicpo|icyinscvcra|iudustria|
capita|istcountrics,CscarUraunwrotc.
Tbis dclibcratcpolicyolrcccssion bas somctimcsbccnmadc
cxplicit. Inovcmbcr I94, tbc Cbancclloroltbcxcbcqucr
inGrcatBritaindcclarcd.`Ilwagcsriscbcyondtbclimitssctby
tbcTLC,tbcgovcrnmcntwillbccompcllcdtotakcollsctting
stcpstocurtaildcmand. Andtbc cllccts. . . arcbound to lead to
Economics 0/ Crisis and Crisis 0/ Economics
9I
unemployment. " I n otbcrwords, iltbc workcrs asklorbigbcr
wagcs, tbcgovcrnmcntsball takc carc to lcavctbcmwitbout
|obs. . . . Tbc policy ol`dclibcratc rcccssion`was notcxclu-
sivcly Britisb. it was worldwidc. In tbc Lnitcd Statcs `tbc
scvcrity ol tbc currcnt rcccssion can to a largc cxtcnt bc
attributcdtorcstrictivcmonctaryandnscalpolicics. InFrancc,
by autumntbcgovcrnmcntsmid-ycaranti-innationary mca-
surcs-combincd witb tbcworscningintcrnational cconomic
climatc-rapidlyrcduccdtbcpaccolcxpansion.`InGcrmany,
` cconomic policy . . . last ycar singlcmindcdly locuscd on
cconomic rcstraint. ` InItaly, industrialproductionlcllback
dramatically largcly bccausc oltbc drastic mcasurcs takcn to
corrcct tbc bigb balancc olpaymcnts and to slow down tbc
innation ratc. ` In )apan, `tbc crcdit rcstrictions wbicb wcrc
introduccdattbc cnd olI 9 5 . . . contributcdsignincantlyto
tbc subscqucntlallinoutput.
Tbcintcrnationa|organizations,attbc scrviccotcapita|, sup-
port po|icics otdc|ibcratc rcccssion no |css cntbusiastica||y.
`Morc)ob|cssandCutbackinGrowtb\rgcdinlMlKcportas
lnnation Kcmcdy rcads a bcad|inc in tbc London Times
(Scptcmbcr I , I974). ln Occcmbcr I97 , at tbc bcginning
ot tbc rccovcry, tbc CLCO Economic Outlook (pp. , 7) rc-
portcdapproving|y.
A ratbcrmodcratc rccovcry . . . migbtnotbcanunwclcomc
prospcctlortbccountricsconccrncd. . . . Tbcycannotignorc
tbc continuing bigb ratc ol innation and tbc risk olgiving
itancw boost. . . . Policicsappcarmorccautioustban during
prcvious rccovcry pcriods witb govcrnmcnts dctcrmincd to
avoidrcpcatingtbcmistakcsoltbc I 972I 95pbascolcxccs-
sivcdcmand.
Tbis `not unwc|comc modcration ot rccovcry was taking
p|accincountricswbicbattbattimcsti||badaround I mi||ion
uncmp|oycd-cxccptntbc\nitcdStatcs,wbicbbadabout8
mi||ion.Sixmontbs|atcr,attbctimcotwriting,tbcFrank/urter
Rundschau u|y I 3, I97)rcportsundcrtbc subtit|c`Wcak-
cningofLxpansionls Supposcdto AvoidCvcrbcating-tbat
tbccconomicministcrottbcUundcsrcpub|ikGcrmany,Hans
lricdricbs,basobscrvcd`accrtainwcakcningintbctcmpoot
92
Andre Gunder Frank
cxpansionattcrtbcstartingpbasc,buttbattbisdcvcIopmcntis
intota|accordwitbthcgrowtbstratcgyot[bis|Ministry,wbicb
scckstoavoidcarIyovcrbcating. McanwbiIc,uncmpIoymcnt
cxcccdcd 700,000(andbasriscnto I miIIionsincc tbcn), not
counting tbc `gucst workcrs wbo bavc rcturncd to tbcir
countricsotorigin.
StiIImorcominouscvidcnccottbccontcmporarypoIicyot
dcIibcratc uncmpIoymcntbascomc toIigbt sincc mid- I97.
Asrcprcscntativc sampIcs, I notc tbc toIIowing two. !n)uIy
I 97 tbc CLCO pubIisbcd a Special Supplement: A Growth
Scenario to 1980, wbicbittookgrcatcarctointroduccbysaying.
Tbc ngurcs sbown, tbougb tbcy arc bascd inpartonnational
work onmcdium-tcrmprospcctsandproblcms, sbould inno
way bc intcrprctcd as rcprcscnting citbcr national or CLCO
Sccrctariat cstimatcs ol most likcly dcvclopmcnts ovcr tbc
cominglourycars. Tbcaimoltbis cxcrcisc,asindicatcdbyits
titlc, is simply to prcscnt an intcrnationally consistcnt sct ol
ngurcsillustratingoncolarangcolpossiblcoutcomcs.
onctbcIcss,tbcwcII-intormcdLe Monde uIy 29, I 97)dis-
cusscdtbispubIicationinancditoriaIcntitIcd`TbcOangcrous
SccnarioottbcCLCOandobscrvcdtbat.
Alltbcscprccautionsarcnotcnougbtorcmovclromtbiswork
its bigblypoliticalcbaractcr Itis[tbisdocumcnt|wbicbscrvcd
astbc basis oltbcdiscussionintbcmcctingoltbcministcrsol
tbc 24 mcmbcrcountrics oltbcorganization . . on)unc 2 I
and22 inParis.Altcrtbisconlcrcnccadcclarationwasadoptcd.
Tbis unusuaIattcntionandcarcbytbcCLCOitscItismcritcd
bccausc,astbcdocumcntitscItsays(pp. I2-I28).
I t

is, ra

bcr, oncpossiblc sccnario dcsigncd topinpoint tbc

dilnculticsand problcms likcly to bc cncountcrcd in tbclor-
mationolcconomicpolicyovcrtbcscycars.Tbissccnario.
idcntincsanumbcrolunwelome features wbicbwillbcolma|or
conccrn ovcrtbcpcriod, namclyratcsolinnationanduncm-
pl

oymcnt notably bigbcr tban in tbc I 90s, and signicant

dIvergences in economic performance between Member countries
wbicb could run tbc risk ol bccoming scll-pcrpctuating . . .
Lndcr tbis sccnario, output would, on avcragc, grow lrom
I 9 to I 980bysomc [pcrccntcrannum . Tbcpcriod
Economics 0/ Crisis and Crisis 0/ Economics 95
lrom I 9 5 t o I 980 i s i nmany rcspccts a morc appropriatc
intcrvallorconsidcringtbcundcrlyingtrcnd . . at|ustundcr
4 pcrccnt pcr annum. . . . For a numbcr olcountrics uncm-
ploymcntislikclyto rcmain ascrious issuc ovcr tbc ycarsto
comc. . . . Tbcsamcis, olcoursc,truclorinnation. . Tbcrc
isindccdadangcrtbattbcrangcoldcvclopmcntsinindividual
countrics could bc widcr tban tbat sbown in tbc sccnario. !t
would, olcoursc, bctcmpting toconsidcr amorc lavorablc
sccnario in wbicblullcmploymcntolrcsourccswasacbicvcd
morcrapidlywitboutascriousrcsurgcnccolinnationandwitb
lcss divcrgcncc inpcrlormancc bctwccn countrics. Lnlortu-
natcly,tbcrcarclcwgroundslorbclicvingtbattbisisarcalistic
altcrnativc unlcsscconomic policics provc mucbmorc cllcc-
tivc tbanintbcpast. Attcmpts topursucasignincantlylastcr
growtbratcwouldalmostccrtainlylcadtbcworldbackintotbc
I 9 5I 9 cxpcricnccs ol innation lollowcd by rcccssion.
Tbcccntralproblcmlorpolicycommontoallcountricsistbc
ratcolinn ation. . . [nottbcuncmploymcnttbatrcmainssincc
I 95-I 9 ' | . . . arclativclymodcratcrccovcry. . wouldbc
prclcrablctoasbarpupturn.
Tbcdocmcntcontinucs(pp. I 54I 58).
Analysisoltbcprcscntsccnariopcrmitsidcntincationolsomc
oltbckcypolicyproblcmstbatmigbtarisc. . . . Aspccialcllort
willbavctobcmadcinmanycountricstorcstraintbcmcdium-
tcrmgrowtbratcolconsumption, botbprivatcandpublic,in
ordcr to mccttwo main dcmand rcquircmcnts in tbc pcriod
covcrcdbytbcprojcctions.Tbcscarc(i)anincrcascintbcsbarc
olinvcstmcntinoutput. . . . (i) Anincrcacdsbcolcxports . . . .
Tbcprcscntpro|cctions[nolongcrsinglcsccnarios` ' | cnvis-
agcimplicitly asizcablc sbilt in incomcdistributionlromtbc
CLCOtotbcCPLCarcaintbcintcrnationalspbcrcandlrom
labortocapitalatbomc. Tbis is,olcoursc, tbccountcrpartto
tbc sbilts in rcsourcc allocation toward cxports and invcst-
mcnt . . . . Intbcnrstinstanccarcvivalolinvcstmcntdcmand
dcpcnds on strcngtbcncd conndcncc in tbc likclibood ola
sustaincd risc in salcs and pronts. In tbc longcr run, somc
actionmaybcncccssarytocnsurctbattbcrcvivalolbusincss
invcstmcnt is not cbokcd oll lor lack olpront or olcquity
capital . . Tbcrc sccms, bowcvcr, to bc, at lcast in somc
countrics,astrongapprcbcnsiontbatinsulncicntprontability
and/or bigbly gcarcd nnancing ol tbcsc invcstmcnt nows
94 Andre Gunder Frank
may | copardizc tbciracbicvcmcnt. . . . Tbisimplics arcduc-
tion intbcgrowtbratcsolrcalwagcsandbcnccconsumption
oltbcpopulationoltbcarcaasawbolc,rclativctotbcgrowtb
oloutput. . . atlcastovcrtbcmcdium-tcrm. . . . Aslowdown
inpubliccxpcnditurcisplanncdinanumbcrolcountrics.
owondcrtbcCLCOcxcrciscstbccautionsotitsintroductory
discIaimcrs, ittbis is tbc sccnario ottbc probIcms to bc cn-
countcrcdintbctormationotcconomicpoIicyovcrtbcscycars.
Tbc CLCO cIarincs tbc issuc turtbcr in its ncxt Economic
Outlook, pubIisbcdinOcccmbcr I 97(pp. ).
Tbclacttbattbcrccovcrysccmstobavctapcrcdollsignincantly
andsosoonintbccountricswbcrcstrongbomcdcmandwould
bcappropriatc,basbccnrcgardcdbysomcobscrvcrsasamark
ollailurc. . . . Sucb| udgmcnt,witbitsundcrtoncsolpcssimism
lortbcluturc,sccmsbigblyqucstionablc. Itwouldbctrucrto
say tbatpolicicsbavcproduccdvcrylargclywbattbcirautbors
cxpcctcd oltbcm. . . . Wbcn it camc to rcnationary actionin
1 975 , govcrnmcntswcrcintcntionallycautiousinbandingout
hscalstimulus,dcspitctbccxistcnccollargcslack . . . . Govcrn-
mcntswcrc, in mostcascs, similarlycautiousin tbcmonctary
policytbataccommodatcdtbisrccovcryasitdcvclopcdbccausc
tbc lcssons ol tbc prcvious rcvival pbasc wcrc plain to scc.
Lndcr tbcsc circumstanccs itwas not surprisingtbat, astbc
cllccts olnscal stimulus worc olland tbc cbangc in tbc in-
vcntorycyclcworkcd itsclltbrougb, rccovcryslackcncd. . . .
Givcnwbatwasatstakc,itcanbcconsidcrcdamarkolsucccss,
not lailurc. . . . Vcry quick rcturn to lull cmploymcnt and
capacityuscisconsidcrcdalruitlessaim.
A stiIImorc rcvcalingsampIc otdclibcratc uncmpIoymcnt
poIicy is tbc major articIc by Santord Kosc inFortune (Scp-
tcmbcrI 97)cntitIcd`Wc`vcLcarncdHowtoLicklndation.
TbccditorsintroducctbcarticIcastoIIows.`TbisarticIcistbc
nrstinaFortune scrics, `An AgcndatortbccwAdministra-
tion. ` . . . ToaconsidcrabIccxtcnttbcarticIcsintbcscricswiII
bcprcscriptivc. TbisarticIcwaspubIisbcdatatimcwbcnLS
uncmpIoymcnt bad j ust riscn trom its post- I 974 minimum
`Iowot7 . 5 pcrccnt,inMayI 97,to7. 8pcrccnti nScptcmbcr,
and wouId continuc to risc to 8. I pcrccnt in ovcmbcr. I t
rcadsi npart(pp. I 00-I 0) .
Economics 0/ Crisis and Crisis 0/ Economics 9
Ycttbcrciscvcryrcasontobclicvctbatanunrcmittingwaron
innationsbouldbcourma|ornationalpriority. . . . In 1 969 it
wasgcncrally bclicvcd attbc Council olconomic Advisors
tbat aIl wc nccdcd to lick innation was abitolold-lashioncd
mcdicinc.arcccssion.Wcgotarcccssionin1 970 andanotbcr
in 1 974-1 975, butpriccs kcptmovingup. Many cconomists
bccamcdiscouragcd. . . . Tbcratcolinnationisrougblycqual
totbcincrcascincarningslcsstbcincrcascinproductivity. . .
.
Tbus,ilwcwisbtopusbtbc basic innationratc down . . . tbc
onlysurcwaytoacbicvctbisistomaintainagrcatcrdcgrccol
slackncssintbclabormarkcttbanwcbavcbadduringmostol
tbclasttcnycars. Itisclcartbatoncctbcuncmploymcntratc
lalls bclow a ccrtain point, it bccomcs incrcasingly dilI:cult,
il not impossiblc, to control inn ation. But lor many ycars,
cconomists tbougbt tbat tbis pointwas around 4 pcrccnta
hgurc

tbat got to bc callcd tbc lull cmploymcnt` ratc ol

uncmploymcnt. ow it turns out tbat 4 pcrccnt is lar too
low. In fact, it has been too low for the past .Oyears. According
to an analysis donc by MIT`s ProlcssorRobcrt Hall, onc ol
our lcading labor-markct cconomists, tbc sustainablc ratc
ol uncmploymcnttbc ratc bclow wbicb innation starts ac-
cclcratingwas around 5 pcrccntas lar back as 1 948 and bas
gradually riscn to bctwccn 5. 5 and 6 pcrccnt in tbc last lcw
ycars. . . . Calculations madc by Franco Modigliani, also ol
MIT morcorlcssconnrmHallsnndings.
Thc sustainablc or natural` ratc ol uncmploymcnt, as it
isnowcallcd isrcacbcdwbcntbcrcisanapproximatcbalancc
bctwccn tb; supply ol and dcmand lor bigbly productivc
workcrs(c.g. ,primc-agc malcs). attbispoint,tbcrcwouldbc
an cxccss supply ollcss productivcworkcrs(i.c. , tccnagcrs).
Wbcn tbc uncmploymcnt ratc is pusbcd bclow its natural
lcvclsbyovcr-cxpansivcmonctaryandnscalpolicics. . . wagcs
arc bid up tomucbbigbcrlcvcls. . . . From 1 95 1 to 1 95 3 . . .
uncmploymcntlcllwcllbclowitsnaturalratc. . . . From 1 964 to
1 970, tbcuncmploymcntratcagainlcllbcIowtbcnaturalratc,
to4. 9 pcrccnt,tbcriscincompcnsationcscalatcdto7. 8 pcrcc

t.
Tbcscngurcsmakc itclcartbat uncmploymcntmust rcmain
at mucb bigbcr lcvcls tban convcntional political rbctoric
dcmands. . . . Idcally tbcwbolcopcrationsbouldbc sotimcd
tbat . . . tbc uncmploymcnt ratc lalls to bctwccn 5
.
5 and 6
pcrccnt . . . . Howcvcr, itwould bcimprudcntto aim lortbis
idcal situation. In practicc, it is ncxt to impossiblc lor tbc
9 Andre Gunder Frank
govcrnmcnt to accomplisb any sucb nnc-tuning. !t would bc
bcttcrtocrron tbc sidcolconscrvatism,and tostopnudging
downtbcuncmploymcntratcwbcnitgctscloscto6 pcrccnt.!l
wcadoptcdtbisposturc,tbcratcolincrcascinbourlycarnings
wouldcontinuclalling.Tbcrcisnodoubttbattbcratcbasbccn
pusbcd down by tbc bigb uncmploymcnt ratcs ol tbc last
couplcolycars.
InaboxaccompanyingtbisarticIc,Fortune aIsorcports`Tbc
Cood cwstromProtcssorWacbtcr.
Among cconomists wbo spccializc in tbc problcms olwagc
inn ation, onc ol tbc most optimistic tbcsc days is Micbacl
Wacbtcr, tbat young man (bc is 33) at tbc rigbt. Wacbtcr, a
prolcssor at tbc Lnivcrsity olPcnnsylvania, bas donc somc
calculationsindicatingtbattbctradc-ollbctwccowagcincrcascs
anduncmploymcntbasrcccntlybccomcmucbmorclavorablc,
i. c. , a givcn dcgrcc oluncmploymcnt bas agrcatcr cllcctin
bolding down tbc ratc ol wagc gains. . . . Tbc slack labor
markctsprcvailingsincclatc 1 974 bavcrcduccdlabors ability
to command any sucb wagc risc. !n cllcct, tbccntirc Pbillips
curvc bas bccn pusbcd `soutbwcst. ` . . . As uncmploymcnt
continucslalling,wccouldloscsomcoltbisbcncnt.
Uutanxictywas unncccssary sincc uncmpIoymcntwasrising
at tbat timc, and bas sincc gonc up turtbcr' Tbus Fortune
proudIygivcs its account otbow cconomists on tbcrigbtarc
busiIycngagcd in rcvising tbc `naturaI Iaws ot`naturaI un-
cmpIoymcnttosuittbcnccdsotbusincsstorapscudoscicntinc
idcoIogicaIngIcatto covcrtbcirnakcd poIiticaIprcscriptions
`tortbcncwadministration. LawrcnccKIcin,wboiscmcrging
as )immy Cartcr`s principaI cconomic advisor, bas rcccntIy
su_cstcdtbata7pcrccntindationratcin I977sbouIdnotdis-
turbus-cvcntbougbinAugust I 97(nodoubtmistakcnIy' )
bc stiII rcgardcd anytbing ovcr 4 pcrccnt uncmpIoymcnt
as rcaI uncmpIoymcnt, wbicb bc wantcd to cIiminatc morc
tbanindation.
AttbctimcottbcpubIicationottbcFortune articIc,)immy
Cartcrwas campaigning tor thc prcsidcncy with tbc convcn-
tionaIpoIiticaIrbctoricotngbtinguncmpIoymcnt.InScptcm-
bcr, bowcvcr, according to aNew York Times (Scptcmbcr S,
Economics 0/Crisis and Crisis 0/ Economics
97
I 97)bcadIinc,`CartcrSbittsHisLmpbasis

nL Spcnding,
Strcsscs Indation Curbs, UaIanccd Uudgct, saymg tbat bc
wouIddcIaytbcstartot`costIyprogramsitcI

tcdprcsid

'
`in wbatappcarcdto bc adistinctsbitt otpoI

ticaIcmpbasi

.
InIatcrstatcmcnts,particuIarIysincctbccIcctionwbcnotnciaI
uncmpIoymcnt was ovcr 7 pcrccnt, Cartcr announccd tbc
appointmcntota`conscrvativcasdircctorottbcCtnccottbc
Uudgct.ow( U.S. News & World Report, Occcmbcr I 5, I 97)
bc aims tobring tbc growtb ratcuptrom 4topcrccntand
pcrbaps to cut tbcratcotuncmpIoymcntto pcrc

ntbytbc
cnd ottbis tour-ycar tcrm and to rcgard tbis as a notabIc
acbicvcmcnt inmcctingbis goaI otbringinguncmpIoymcnt
down I . J pointsinI 977, trom7. 9 pcrccnt to . 4 pcrc

nt'Uut
byovcmbcrtbcotnciaIratcotuncmpIoymcn

bad j

d
to8. I pcrccntandtbcNew York Times rcportcdmancditor
tbat`somccconomistsarguc tbat8pcrccntuncmpIoymcntts
now`normaI,` oronIysIigbtIyabovcanacccptabIcratc(l

ter
national Herald Tribune, ovcmbcr I 0, I 97). As tbc citc

d
articIc in Fortune corrcctIy notd, `lasbions in cconomic
tbougbt cbangc witb rcmarkabIc s

dcnncss

pcciaIIy
wbcn tbc cycIicaI impcrativcs otcapitaIs

cconomtc mtcrcs

s
and its poIiticaI cxccutors suddcnIy rcquirc a

cw ccono

ic
idcoIogy. LittIcwondcrtbatin tacc ottc rcaI

ty otmasstvc
uncmpIoymcntandtbisidcoIogicaIottcnsivcdcstgncdtomakc
it `naturaI, `aIargcmajority-pcrccnt-tccItb
.
at
.
tuIIcm

pIoymcnt in tbc Lnitcd Statcs is no I

gcr

a
'
caIistic goaI.
CnIy somcwbat Icss cxpIicabIc is tbat j assig

ing bIamc and

rcsponsibiIity tor tbis uncmpIoymcnt, accordmg to tbc samc
survcy and sourcc, 9 pcrccnt bIamc tbc govcrnmcn

, J
pcrccntbIamc tbc Iaborunions, and 58pcrccntsay busmcss
must takc somc rcsponsibiIity ( U.S. News & World Report,
Scptcmbcr I 5, I 97).

.
! n tbc mcantimc Uritisb Primc Mmistcr)amcs CaIIagban
addrcsscdaLabourPartycontcrcncconScptcmbcr28, I 97,
andtoIdbisIistcncrs.
Wc uscdtotbinktbatyoucould justspcndyourway outola
rcccssionandincrcasccmploymcntbycuttingtcsaodboost-
ing govcrnmcnt spcnding ! tcll you, in all candor, tbat tbc
98 Andre Gunder Frank
otion nolongcrcxists, andtbatinsolarasitcvcrdidcxist,it
only workcd by injccting bicr doscs olinnation into tbc
cconomy, lollowcd by bigbcrlcvcls oluncmloymcnt as tbc
ncxt stc.Tbatistbcbistoryoltbcasttwcntyycars. (News
week, Occcmbcr6, 1 976)
TbusintbcmotbcrcountryotKcyncsandKcyncsianism,
Britain` sLabourgovcrnmcnttodayabandoncd tbirtyycarsol
Kcyncsian olicy and announccd a still 1 . 9 billion ($ 3. 4
billion)dcnationaryackagcatatimcolbigbandrisinguncm-
loymcnt . . . . Tbcdccisiononsucbatougbsctolmcasurcsis
sccn bcrc as a triumb lor LS Trcasury Sccrctary William
Simonandconscrvativcintcrnationalnnancicrs. !nublicand
rivatc, tbcy bavc bccn warninp Mr. Hcalcy tbat bc could
cxcct nomorcbcllortbcailingound unlcssbctigbtcncd
Britains bclt. . . . Mr. Hcalcy and Mr. Callagbanbavc turncd
tbisdoctrinc[convcntionalKcyncsiancconomics|onitsbcad.
. . . Tbc oosition Conscrvativcs bavc bccn callinglorjust
sucbmcasurcsandso alaudcdMr.Hcalcy today. (Interna
tional Herald Tribune, ]uly2 3, 1 976)
Tomakcsurc tbat CaIIagban and HcaIcy kccp up tbc good
work and bavc tbc poIiticaI couragc to ovcrcomc rcsistancc
witbintbcLabourPartyandtradcunionmovcmcnt,tbcIMFis
kccpingtabsontbcmandtbrcatcningtowitbboIditsIitcsaving
S3. 9 biIIionIoan.
LconomicadvisorstomajorSwissbankssayBritainnccds. . .
tbcaskcd-lorloanol$ 3. 9 billionlromtbc!ntcrnationalMonc-
tary Fund, and tbc rcquircmcnt tbatastablcLabourgovcrn-
mcnt stay at tbc bclm, bccausc it alonc can ursuc tbc con-
scrvativcolicicstbatarc ncccssary toroutbccconomy.
. . . Wbatisnccdcdisasolidconscrvativcgovcrnmcnt,`says
LnionBankolSwitzcrlandcconomistMr.Wylcr.Hccbucklcs
and adds. And Labour rigbt now arc tbc bcttcr cbancc ol
rovidingtbat. `(International Herald Tribune, ovcmbcr 1 3-
1 4, 1 976)
I nFrancc,intbcmcantimc,tbcncwprotcssionaIcconomist
Primc Ministcr Kaymond Uarrc proposcd an austcrity pIan
tbat, accordingtoancstimatcinLe Monde, wouIdcostFrcncb
workcrs bctwccn pcrccnt and I pcrccnt otthcirincomc,
Economics 0/Crisis and Crisis 0/Economics 99
dcpcnding upon tbc scaIcotitsimpIcmcntation. owondcr
tbat tbcworkcrsparalyzcd tbccountryinagcncraIstrikc. In
ItaIy, ontbcotbcrband, tbcCbristianOcmocratsarcaIrcady
appIying Andrcottis austcrity program, witb tbc support ot
tbc Communist Party. Ctbcr sucb austcrity programs wcrc
bcingimpIcmcntcd, ontbc basis otvarious dittcrcntpoIiticaI
coaIitions in Iatc 1976 in Luropcan countrics as varicd as ,
.
PortugaI, Spain,IrcIand,Ocnmark, Grcccc,Turkcy,andFin-
Iand.LittIcwondcrtbcntbatsomc
WallStrcctanalystsbavcbcgunlocusingon somctbingmorc
basictban aausc oralull. . . . Cncsays,Tbcgrowtbolmost
Lurocan cconomics during 1 977 will bc, at bcst, sligbtly
worsctbanin 1 976 and, atworst,ncarlydisastrous. ` Tbccrux
olbotbanalyscsistbcunccrtainimactontbcworld`scconomy
oldcnationaryolicicsbcingundcrtakcnbyscvcralcountrics.
Tbcsc olicics arc aimcd at rcducing, ratbcr tban surring,
totaldomcsticdcmand. . . . `Considcringtbattbcscdcnation-
ary mcasurcs bavc bccnadotcd in aclimatc olbigb uncm-
loymcnt and slowing cconomic growtb, onc must conccd

c
tbcyarcatlcastwcll-intcntioncd, `bcsays. Butbcbclicvcsitis
still qucstionablc wbctbcr tbcy canacbicvc intcndcd rcsults
witbout a scvcrc rctrcncbmcnt in cmloymcnt, or tbat tbc
oliticalclimatcabroadisstrongcnougbtocrmittbcirimlc-
mcntation.(International Herald Tribune, ovcmbcr4, 1 976)
WbatIittIcdoubtrcmainstbatnationalgovcrnmcnts`macro-
cconomicpoIicyinindustrializcd-IctaIoncundcrdcvcIopcd-
countrics is a cIass-bascd poIicy to usc statc powcr in tbc
intcrcstsottbccapitaIistcIassinaccordwitbtbcIong-,middIc-,
andsbort-runcxigcncicsottbcncccssariIyuncvcnproccssot
accumuIation tbrougb tbc cxpIoitation ot Iabor shouId bc
nnaIIy dispcIIcd by rcccnt cvcnts. Tbc cIaim tbat nationaI
macrocconomicpoIicyisdcsigncdto,andcan,produccbcaItby,
progrcssivcgrowtb on abigb pIanctortbc pcopIc atIargc, is
notbingbuttbcruIingcapitalistcIass` sidcoIogicaImytb.

Lvcnittbis idcoIogicaImytbwcrcorcouId bctrucwbicb

itis notandcannotbcontbcnationalpIanc,itbasabsoIutcIy
no ctncacy at aII on an intcrnationaI pIanc. I n an intcrvicw
givcn to Time (May I 0, 1976) Gcrman CbanccIIor and cx-
I 00 Andre Gunder Frank
MinistcroflinanccHcImutScbmidtwarncd,`Lvcrybodybas
to bcar in mind tbat it is tbc worId`s cconomy tbat must bc
puIIcdoutoftbcmcss,and not justoncsownnationaIccono-
my. Tbis boIds truc to somc dcgrcc cvcn for tbc Lnitcd
Statcs. Tbc `cconomic summits at KambouiIIct CastIc in
lranccin I 97andinPucrtoKicoin I97tcstifytobigb-IcvcI
poIiticaIconccrnfor-andattbcsamctimctbcinabiIitytodcaI
witb-tbcprobIcmofstabiIizingandguidingtbcintcrnationaI
cconomytbrougb nationaI statcpoIicics. In an intcrvicwwitb
Business Week anuary I 5, I97) aftcr tbc nrstoftbcscsum-
mits, HcnryKissingcradmittcd tbat `oncintcrcstingfcaturc
of our rcccnt discussions witb botb tbc Luropcans and tbc
)apancsc bas bccn tbc cmpbasis on tbc nccd for cconomic
coordination. . . . Howyou, infact,coordinatepoIicicsisyct
an unrcsoIvcdprobIcm.
TbcrcnowncdcconomistGottfricdHabcrIcrbasobscrvcd
tbc obvious. `Indationis anintcrnationaIpbcnomcnon, butit
can bc stoppcdonIyby nationaIpoIicics. Tbcmainrcsponsi-
biIitycIcarIyIicswitbtbcIargcstcountrics. . . . SmaIIcountrics
bavcIittIccboicc.'LcssobviousbutnoIcsstrucisbisobscrva-
tiontbat`tbcworId isnoIongcrontbcdoIIarstandard. . . but
it is stiII truc tbat LS indationwiIIbavcan indationary indu-
cnccinotbcrpartsoftbcworId.Morcovcr,tbcLnitcdStatcs
is capabIc of`cxporting` indation to somccountricscvcn ifit
basnoindation. . . atbomc.Tbatistosay,worIdindationwas
madcintbcLnitcdStatcs.TbatisprcciscIywbattbcLnitcd
Statcs did during tbc dcncit-nnanccd, LurodoIIar-gcncrating
war against Victnam. kccping indation undcr a mcasurc of
controIatbomcbutcxportingitabroad,andIcttingtbcdcviI
takctbcbindmost.lromadiffcrcntpointofvicw,Swcczyand
Magdoffwrotcin I 970.
Sincc tbc Amcricanization oltbc Victnam War, arobustcx-
portsurplusolapproximatcly $6 billionin 1 964 largclydisap-
pcarcd by 1 969. Tbcrcsultbasolcourscbccnadrasticwcak-
cningoltbc LS balancc-ol-paymcntsposition.onan intcrna-
tional scalc tbc Lnitcd Statcs is now living far bcyond its
mcans. . . . Lptonowtbcotbcrcapitalistcountricsbavcbccn
willing to acccpt morc and morc LS dollars on tbc implicit
Economics 0/ Crisis and Crisis 0/ Economics I 0I
assumptiontbattbcyarc alorm ol!CLwbicbcanc
"
cntually
bc casbcd in. . . . Tbc qucstion . . . is bow |
'
ng tbis can g

on. . . . But onc tbing docs sccm surc. tbcpuingupol!CLs

cannotgoonlorcvcr.Tbcrcmustcomcatimc,soo
'
crorlatcr,
wbcn tbc crcditors will say o morc' and bcgin to try to
collcct on wbat tbcy alrcady bavc. And tbat would mcan t

c
brcakdownoltbcprcscntintcrnationalmonctarysystcm,witb
conscqucnccs pcrbaps cvcn morc prolound and

widcsprcad
tban tboscwbicblollowcdtbc brcakdownoltbcintcrnational
monctarysystcmin 1 93 1 .
26
Soonaftcrtbis,onAugust I , I97 I, tbcLnitcdStatcsstopp
.
cd
ofn ciaIIy convcrtingtbc doIIarintogoId. tbc

doIIarwas twicc
dcvaIucd, tbc major currcncics do

tcd agnst c

c

otbc

,
aftcr scvcraI spccuIativc currcncy crscs bad ma

c itimp
,
ossi-
bIc to maintain pc_cd ratcs, and thc wboIc mtcrnationaI
monctary systcm buiIt up at Urctton Woods attbccn
?
oftbc
war crumbIcd. Ocspitcrcpcatcdattcmpts topatcbtbmgs up,
so far aII tbc kings mcnbavc not bccn abIc to put Humpty
Oumpty togctbcragain.

A rcpcatoftbc I 95I monctary brcakdownisstiIIpossibI

,
and tbc rccurrcncc, aIbcit in diffcrcnt forms, oftbc I 929(m
many rcspccts rcaIIy I928or

cvc

I927) to I 955(or rcaIIy

I 940)dcprcssionis aIso possibIc, ifnotprobabIc. Tbcpro

-
Icmofbow,ifataII,tocoordinatcnationaIstatcmacrocconomic
poIicicsisasunrcsoIvcd
.
nowasit

astb

n
.

Kcprcscntingtbc dcsirc ofLS impcr

a
ismtodo

mmatc its
Luropcanand)apancscrivaIs,nottomcntiontbcTbirdWorId,
CbarIcs KindIcbcrgcr, inarcccntbookontbcGrcatOcprcs-
sion,argucdtbatitbadnotbccnp

'
ssibIctoprc
"
cnttbcsIump
bccausctbcrccxistcd noone dommantcconom

cpowcrattbc
timc. Uritain bad aIrcady dccIincd and tbc
l
mtcd

tat

swas
not yctwiIIing or abIc to asscrt itscIfsufncicntIy. Witbout
accompanying KindIcbcrgcr so far a to agrcc

tbat a supcr-
impcriaIist powcr can, or sbouId, cxist or tbat it couId bavc
prcvcntcd tbc Iast dcprcssion
,
an

co

Id prcvcnt any futurc

onc, I agrcc tbatintcrimpcriaIistrvaIrc

, tbcnand now, rc

-
dcrtbccoordinationortbcsucccssofnationaImacrocconomic
stabiIizationpoIicicswcII-nigbimpossibIcwbcnputtotbctcst
Andre Gunder Frank
ofscvcrc dcprcssivc strain. lor sucbdcprcssions convcrtall
nato
.
nal macrocconomic policics into bc_ar-my-ncigbbor
policics to cport national production and uncmploymcnt.
Tbus,sbortlybcforctbcI 929crasbtbcY oungPlanforGcrman
warrcparationswassigncd,dcspitcGcrmancomplaintstbatit
was tbcn unablc to pay tbc rcpations assigncd it. lndccd,
formal acccptancc of tbc Young Plan did not comc until
)anuary I 950,after tbc crasb, tbus a@avating tbc cconomic
dcprcssionary and politically cplosivc trcnds by trying to
cportproblcmsfromonccountrytotbcnct.Hoovcrdidnot
proposcamoratorium onGcrmanrcparations until)unc20
I 95 I , aftcritbad bccomcclcarnotonlytbatGcrmanycould
notpaybuttbattbcattcmpttoforccittodosoburdcncdtbc
world capitalistcconomyasawbolc,andcvcntbcnacccptancc
ottbc moratorium was dclaycd by lranccs rccalcitrancc. ln
)unc I 950, tbc LS Congrcss passcd tbc bigbly protcctivc
Hawlcy-SmootTariff, inan attcmptto cport tbc burdcnof
tbc crisis. ln tbc mcantimc bnancial crisis rockcd Austria
Gcrmany, and Britain, wbicb suddcnly abandoncd tbc bal

lowcd gold standd in Scptcmbcr I 95I , only a fcw wccks

aftcrtb

bigb-lcvclMacmillanCommission(includingKcyncs
alcadmgmcmbcr)badannounccdtbatBritainsbouldnotand
wouldnottakctbisdrasticstcp.Tbiswasfollowcdbytwcnty-
nvc
.
otbcrcountricsalsoabandoningtbcgoldstandardtosavc
tbcirownmacrocconomicpolicicsasfarascircumstanccsstill
allowcd,wbicbwasnotfar.TbccconomicsU itoftbctimc
was tbc World Lconomic and Monctary Confcrcncc, wbicb
aftcrscvcralpostponcmcntsnnallymctin!ndonin)uncand
)uly I 955. By tbat timc Hitlcr and Kooscvclt bad comc to
ofn cc,anditwastbclattcrwbototallywrcckcdtbcconfcrcncc
andtb

rcby

tbclastbopcofanycoordination, by bisintransi-
gc

ccin tryingtocollcctforcign-owcddcbtsand bypursuing

unilatcralmonctary and bscalpolicicsand tbcnsuddcnlyand
uncpcc

cdly rcfusing to acccpt tbc rcsolution agrccing on

coopcrativc currcncy stabilization wbicb tbc LS dclcgation
bad bclpcd

draft and wbicb bad carlicr bccn proposcd by

Koos

vcltbimsclt PrcsidcntNion`s Ncw Lconomic Policy

andb

sabandonmcntof goldonAugustI , I97 I, bisblackmail

ofallics,cspccially)apan-wbicbsuffcrcd tbcmostfrom tbc
Economics 0/ Crisis and Crisis 0/Economics
I05
`Nionsbockoftbc I 0pcrccntsurtasbowstbatnotbing
basimprovcdinfortyycars.Tbisbardlyrcprcscntsapromis

f
bcaltby,progrcssivcmacrocconomicpolicyfortbcnctc

isis.
Wc may agrcc witb Scbmidts obscrationat tbcIational
Prcss Club in Wasbington (asrcportcd inFrank/urter Rund
schau, )uly I 7, I 97) tbat tbc timc of sclf-sufn

cicntnational
cconomics is forcvcr pasttbougb ofcoursc it was alrcady
'pastintbc sitccntb ccntury, bcforc tbc nationalstatcwas
cvcnborn.WcmustalsoqrccwitblrcdBlock.
Tbc point is simplc. tbc grcatcr tbc opcnnc

s oltbc worl

d
cconomy, tbc grcatcr tbc cxtcnt ol intcrnatio

nal

cc

nomic
intcrdcpcndcncc and tbcgrcatcr tbc nccd lor mstitutions to
managc tbc intcrnational cconomy in tbc samc

way ccnt

al
banksand nationalgovcrnmcntsmanagcdomcsticccono

cs
[Godlorbi d' |. Tbcproblcm,olcoursc,isbowonccstabbsbcs
sucbanintcrnationalinstitutionalstructurcinaworldolcom-
pcting nation statcs. Tbrcc basic solutions to tb

problcm
cxist. tbc cxcrcisc oltbis coordinatingand managmg rolc by
onc dominant and rcsponsiblc powcr, tbc dcvclopmcnt ol
supranationalinstitutionstowbicbnationalgovcrnmcntsccdc
importantclcmcntsolcconomicsovcrcignty,andtbcdcvclop-
mcnt ol an cllcctivc joint partncrsbip among a numbcr ol
ma|or nations tbat would coordinatc tbc world cconomy in
tbcircommonintcrcst.Tbcintcrnationalmonctarysystcmbas
workcd bcst in tbosc pcriods wbcn onc nation bad tbc cco-
nomic and political powcr to assurc gcncral acccptanc

ola
codcolintcrnationalcconomicbabaviorandcouldprovidcby
itsclladcquatcquantitics olintcrnationalcrcditan? li

ui?ity.
But tbc continuing LSbalancc olpaymcnts dcncits mdicatc
tbattbcLSnolongcrbastbcabsolutccconomicsupcriorityto
luln ll tbatcoordinatingrolc. And iltbc LS lacks tbatpowc

,
ccrtainly nootbcrcountryorrcgion can cvcnprctcnd tba

it
could play tbat rolc. Tbis lcavcs only tbc sccond or tbir

d
solutions as possiblc mcans toward intcrnational cconomic
coordinationtoday. . . . Govcrnmcntswouldbccxtrcmclyrc-
luctant to turn ovcr to an intcrnational agcncy tbc rigbt to
dclcndor improvc tbcircountry`s intcrnation

osition. .

. .
)ointmanagcmcntwoul?

ostli

kclyinvolvcsi

nincn

tslts
in LS(andotbcrcountrcs)lorcignand domcst:cpobcics.
Jbis tbcy would bc lcast likcly to undcrtakc,pticully in
timcsofcrisis.
7. EQUATING
ECONOMIC FORECASTING
WT ATROLOGY IS A INSULT
TO ASTROLOGERS
Aubli coinionollsbowcd b

castingability ofcconomist

t at1mcrcansrankcdtbcforc-
astrologcrs.
s just a outon aar witb tbatof
-ortune, ]anuary 1 976
`b
cAdmit:istrationsstatcmcntsb d b
badtbccbaractcrof aGrcckora l `
ccn

so
vaguctbattbcy
bankcr
`Pcolc wcrc b

cc, c
'
mla:::soncNcwYork
bad inmind. `
ccomit:g cyn:cal about wbat it rcally
.
-Business Week, ]anuary 1 6, 1 978
Lics,damn dlicsandforccasts.

.
- manetal Times, Occcmbcr 1 9, 1 978
WbcncvcrI gctworricdabouttbccco
oftbcmountaintoscctbcG
L al
nomy,!goutotbcto
Gur b
rcat x tcdLcono

"BI u,w atistbcanswcr``W

mist
csscd
tbc ruddcr until tbc stom bl
cmustboldour

bandnrmlyon
ocncvcnifi tmcanstigbtcnin
o:
r
vr,

cing all otions

bavctbcanswcr,LxaltcdCnc ' I said
c

ts. !kncwyouwould
turncd togo into bis
,
witbtcarstnmycycs.Hc
Tb
cavc. . . . Tbc last word b d wcrc,
cnagain I co ldb
s c sai to mc
A B
, u cwrong `
- rt ucbwald,Interational He;ald T b
]
rt une, unc 8, 1 978
Kcccntcconomicforccastin i

oracIc of OcIpbi is tc d

g sonaparwitbastroIogyandtbc
cIiminatctbcncgativcwi:
to acccntu

tc tbc positivc
and
cvcryonc makc tbcir

apparcntIyintcntionaIIy-Ictting
d
own it:tcrprctatio
f b accor anccwitb tbcirint
d
n

O t c torccasts in
crcstsan
cpcrcncc If tb

.
crc:sany
This essay d frst published in Contemporar Crises, vol. 4, no. 1 , 1 980.
! 04
Equating Economic Forecasting with Astrofr I 0
otbcrmctbodin tbc forccastcrs` madncss, itismorc obscurc
tban tbc provcrbiaI cIoudcd crystaI baII and ccrtainIy morc
irrcsponsibIc tban tbat oftbc astroIogcrs, wbo at Icast con-
tradict tbcmscIvcs Icss. Insofar as tbcy canbc cbcckcd ataII,
anddcspitctbcirvagucncss,mutuaIcontradictions,andband-
wagoncffccts,tbcwortboftbcprcdictions`accuracyis niI,as
wcbavcsbowncIscwbcrc.
SurvcyingbcIowtbccconomicforccastsandstatcmcntsof
bigbgovcrnmcntofnciaIs,prcstigious cconomicand poIiticaI
rcscarcbinstitutions,Icadingbusincssngurcsandcconomists,
cconomctric forccasting organizations, opinion survcys, and
IastbutnotIcasttbc busincssanddaiIyprcss,wcnndovcrtbc
courscofI 977tbcmosttotaIconfusion,combiningignorancc,
wbitcwasbing, contradictory statcmcnts, arbitrary scIcction
andtcndcntiousintcrprctationofstatcmcnts,cvcnts,anddata,
aswcIIas j ustpIainirrcsponsibiIityintbcmost`rcsponsibIc
organsofcconomic prcdiction. Lquatingtbcsc `rcsponsibIc
sourccswitbastroIogyisaninsuItindccd-uastroIogcrs.
TbougbouroracIcs,oftcnapparcntIyintcntionaIIy,arcsomc-
timcs ambiguous, wc may cIassify tbcm into `bad ncws and
`goodncws-andsccbowoncisintcrprctcdastbcotbcrand
bowtbcoracIcscontradictcacbotbcr,andcvcntbcmscIvcs,at
ncarIytbcsamctimcandpIacc.( LnIcssotbciscnotcd,al cita-
tionsarcfrombcadIincsorquotationsintbcInteational Heral
Tribune in I 977, modincdonIyto idcntifytbcpcrsonquotcd.
MicbacIUIumcntbaIwasLSsccrctaryoftbctrcasury,CbarIcs
ScbuItzcwascbairman oftbcCounciIofLconomic Advisors,
andUcrtLanccwaspastdircctoroftbcCfn ccoftbcUudgct. )
Bad News Good News
BLUMENTHAL SAYS UPTURN WONT
LAST. SCHULTZE SEEMS TODISAGREE
(Mach 3)
BLUMENTHAL ADMITS US IN
SLOWDOWN. BUT WE ARE NOT
CONCERNED IT IS A REAL RECESSION
(September 2 3)
BLUMENTHAL: AHEAD ATLEAST 3
YEARS OF PROSPERITY ( U.S. ^c1 &
WorldReport, April 4)
US ECONOMIC GROWTH SEEN GOOD
THROUGH 78CHARLES SCHULTZE
(September 14)
I 0
Andre Gunder Frank
Bad News
BLUMENTHAL SA YS RECOVER Y AT
STANDSTILL
GoodNews
SCHULTZE SA YS UPTURN WILL
CONTINUE (September 14)
WASHINGTON FORECASTS
SURPRISINGLY DARK-OFFICE OF THE
BUDGET (May 2)
CARTER'S BUDGET CHIEF ON US
ECONOMY: LANCE "PLEASED BUT NOT
SATISFIED" (uly I I )
OOUBTS PERSIST ABOUT STRENGTH
OF RECOVERY, ONLY 200 SURVEYED:
"GOOD"-CONFERENCE BOARD
SURVEY (March 28)
MODEST EXPANSION-CONFERENCE
BOARD ECONOMIC FORUM
(August 1 2)
ONLY SMALL PROFIT GAINS SEEN FOR
US FIRMS (May 3)
WALL STREET FIRM CUTS PROFIT
OUTLOOK (une 29)
I NVESTMENT STRENGTH STILL
MISSING (April 29)
WASHINGTON MOVES DIM BUSINESS
OPTIMISM (May 1 6)
US HEADING FOR RECESSION IN ' 7B.
SOME ECONOMISTS SA Y.CHASE
ECONOMETRIC_GNP GROWTH ZERO
FIRST HALF ' 78 (September 9)
CHASE ECONOMETRIC EXPECTS REAL
GROWTH 1 . 601 DURING 1 978
(September 2)
US GROWTH SEEN BALANCED.
HEALTHY-CONFERENCE BOARD
(une 20)
US PROFITS SURPASS FORECASTS
(April 30)
AN AL YSTS SEE RAPID GROWTH IN ' 77
(April 4)
CONFIDENCE WILL WARM UP
(Fortune, March)
EVEN BETER TIMES COMING AS TOP
BUSINESS ANALYSTS SEE IT FOR 1 977
AND BEYOND ( U.S, NeJ & World
Report, April 8)
FOR US ECONOMY: A SUNNY
MIDYEAR OUTLOOK ( U.S, NeJ &
World Report, July 4)
ONLY FEAR OF INFLATION MARS
OPTIMISTIC MOOD (May 9)
Equating Economic Forecasting with Astrology I07
Bad News
SLOW US GROWTH SEEN OVER NEXT
YEARS-SLOW TOABOUT 4, Y I N
I 97B,-LAWRENCE KLEIN. WHARTON
ECONOMETRIC FORECASTING
(September 2 1 )
US GROWTH SEEN SLOWING IN '78-
NATIONAL ASSOIATION OF BUSINESS
ECONOMISTS (October 1 1 )
SLOWER US GROWTH PREDICTED
CONFERENCE BOARD FORUM
( November 29)
US ECONOMIC SCENE: PESSIMISM
CONTINUES TO DARKEN OUT
(October 1 7)
US BUSINESS CONFIDENCE HAS
CRACKED, THE SURVEYS SAY SO
(November 1 9)
GoodNews
CONFIDENCE ONEXPANSION IN
US-EXECUTIVES EXPECT ECONOMIC
GROWTHTO CONTINUE
(September 1 7/ 18)
US ECONOMIC SCENE: MIDWEST
BUSINESS OUTLOOKREFLECTS
OPTIMISM (December 5)
BLUMENTHAL SA YS US MA Y BOOST
ECONOMY IN ' 78 (November 2)
Luropcanandotbcrlcadcrs,institutions,and`rcsponsiblc
sourccs otcconomic torccasts sccm, onbalancc, to bc morc
pcssimistic tban tbcir LS collcagucs, tbougb tbcyarc no Icss
trcc otwisbtul tbinking(orat lcasttalking), suddcncbangcs,
bandwqoncttccts,andoutrigbtcontradictions,as tbctollowing
tcwscIcctcdannounccmcntsandpronounccmcntssu@cst.(Tc
sourcc bcrc is aIso tbcInterational Herald Tribune in I977,
unIcssotbcrwiscnotcd.HclmurScbmidtwasprimcministcrot
VcstGcrmanyandHanslricdricbswasministcrotcconomics.)
Bad News Good News
Wc arc aroacbing a bac SCHMIDT MINIMIZES MAIN
similar to tbcWorIdOcrcs-
PROBLEMS: "I DONOT SEE ANY KIND
sion,inwbicbtbcintcrnation-
OF CRISIS ATALL" (March 2 1 , 1 977)
al division ollabor could bc
disturbcd-indccd, dccly
dcstroycdand tbis basc
may last not twclvc montbs
I 08
Andre Gunder Frank
Bad News
but several years . .
.
. We are today
on the high road thereto. (Helmut
Schmidt, Die Zeit, February 1 5, 1 974)
FRIEDRICHS' PROPHETS SEE BLACK IN
FUTURE: UNEMPLOYMENT.
I NFLATION, PROTECTIONISM
(Frank/urter Rundschau,
September 20)
NEW WEST GERMAN DATA CONFIRM
POOR OUTLOOK (September 2)
BUNDESBANK SAYS RECOVERY AT A
STANDSTILL. LAGGING EXPORTS,
LOW I NVESTMENT CITED
(September 9)
EEC PESSIMISTIC ON FIRM RECOVER Y
(March 1 1 )
OECD REVISES FORECASTS DOWN.
OUTLOOKGLOOMY (November )
OECD STAKES LOWER SIGHTS ON ' 78
GOALS (November 2 3)
GLOBAL ECONOMY CALLED
"UNSATISFACTORY" BY IMF.
OUTLOOKGLOOMY (September 1 2)
UNCTAD WARNS OF NEW SLUMP
NEXT YEAR ( August 1 8)
BRITISH REPORTMORE PESSIMISTIC.
LOW GROWTH PREDICTED FOR
WORD ECONOMY (November 30)
GoodNews
FRIEDRICHS PREDICTS REAL GROWTH
OF 9 TO U PERCENT FOR 1 977
(Frank/urter Rundschau, March 2)
Herbert Giersch, president of

he Institute of World Economy

I Kiel and formerly chief
economic advisor to the West
German government, predicted
E
.
urope's
.
recovery probably
VIgOrous 1 977 ( U.S. News &
WorldReport, ]uly 19, 1 976)
GERMAN MANUFACTURING
INDUSTRYEXPECTS 1 1 PERCENT
INCREASE IN SALES IN 1977,
ACCORDING TO ECONOMIC
RESEARCH INSTITUTE SURVEY
(Frank/urter Rundschau, March 1 2)
Tbis rcgrcttabIc, itnotdisgracctuI ] umbIc ot`
.

d `

,
opttmistic
an pcssimistic torccasts and prcdictions is appropriatcI
com
P
Icmcntcd

b
'
s

atcmcnts tbat arc IitcraIIy impossibIc t

Iassity, unIcssitissimuItancousIyundcrtbccatcgo "h d

IH tbcsandand`bcadintbccIouds.
rcs ca
Equating Economic Forecasting with Astrology I 09
BLUMENTHAL REASSURES BUSINESSMEN ONCARTER
Mr. Blumenthal acknowledged the "troubling paradox" of "on
the one hand, good economic recovery in 1 977 and reasonably
good prospects for 1978 and, on the other, the lowest level
of business confidence in a long time. " (Interational Herald
Tribune, October 2 1 , 1 977)
Fartottbc `paradoxmigbtbcrcsoIvcdtor UIumcntbaIi tbc
acknowIcdgcdtbcdisgracctuIrccord otbisowncontradictory
andirrcsponsibIcpcrtormanccas LSsccrctaryottbctrcasury
(asrcvcaIcdinpartinournrstandIastquotationsabovc).
Uut tbc prcss is not tobcoutdonc bytbc poIiticians, not
cvcninitsbard-noscd,tcct-on-tbc-groundnnanciaIpagcs.
LSECONOMISTS SEE SLOWDOWN.
BLJTHEY WERE WRONG BEFORE
(International Herald Tribune, July 7, 1 977)
THE US ECONOMIC SCENE:
COMFORT IS FOUND IN THE IMPRECISION OF STATISTICS.
NEWS GOOD AND BAD
When consideration is given to the recent array of unsettling
economic statistics, it becomes quite diffi cult for even the most
rabid optimists to remain highly confident about fairly strong
growth in the months immediately ahead. There is, however,
one major comforting factor: the belief that much of the cur
rent data, whether negative or positive, may be somewhat
misleading because of faulty seasonal adjustments or other
problems. (New York Times, August 7, 1 977)
Comtorting indccd-cspcciaIIy wbcn wcconsidcr tbc prcss
rcportagcandintcrprctationottbcscdatatoboot!
WbiIc rabid optimists may

takccomtort intbcmisIcading
imprccisionottbc cconomic astroIogy, poIiticaIsootbsaying,
and journaIistic oracIcs citcd abovc, morc pcdcstrian rcaIists
mayconsidcr-andordinaryworkcrsmustsuttcrtbcimpIica-
tions and conscqucnccs ot-tbc toIIowing probIcms tbat do
not sccm to bc subjcctto scasonaI adj ustmcnt (and arc vari-

sIyaIsorcportcdintbcprcss). TbccapitaIistworIdsuttcrcd
its
most scvcrc rcccssion sincc tbc I950s in tbc two ycars
bct
vccnmid- I975(be/ore tbcoiIcrisis! ) andmid- I97 , during
v

bicb timc worId capitaIist production and tradc dccIincd.

Sincctbcn,tbcrcbasbccnacycIicaI`rccovcrybascdonsaIcs
I I 0
Andre Gunder Frank
to consumcrs and cxports, cspcciaIIy to thc MiddIc Last and thc SovictbIoc.Uutdcspitc thisso-caIIcdrccovcry,investment hasnotrccovcrcdandatthccndotI977stiIIrcmainsbelow its I 97 5 IcvcI, and aII `prcdictions torccast (in this casc morc accuratcIy and rcsponsibIy) that invcstmcntwiII not incrcasc
substantiaIIyinthctorcsccabIctuturc.Morcovcr,muchotthc
invcstmcnt to datc has not bccn uscd to cxpand productivc
taciIitics,butto`rationaIizcproductivcmcthodstocIiminatc
jobs. Ouringthcrcccssion,otnciaIIyrcgistcrcduncmpIoymcnt
(which is widcIy acknowIcdgcd to bc tar Icss than truc un-
cmpIoymcnt) in thc Ctncc ot Lconomic Coopcration and
OcvcIopmcnt(CLCO)industriaIizcdcountricsroscto I miI-
Iion,otwhichabout9miIIionwasinthcLnitcdStatcs

Ouring
thc rccovcry, uncmpIoymcnt in thc Lnitcd Statcs has taIIcn
back to about 7 miIIion, but in Wcstcrn Luropc, Canada,
AustraIia, and)apan, it has rtsen to about I 0miIIion. TotaI
rcgistcrcdCLCOuncmpIoymcnttoday is thcrctorc about I 7
miIIion, ormore thani t was at thcdcpthotthcrcccssion

For
somc catcgorics-womcn, tccnagcrs, and thosc who arc ra-
ciaIIy and cthnicaIIy discriminatcd against, and particuIarIy
among thosc whocombinc two orcvcn thrcc otthcschandi-
caps-uncmpIoymcntratcsrisctrom I 0pcrccntto 0pcrccnt
andmorc

AndthcscuncmpIoymcntratcshavcbccomcstruc-
turaIIysochroniccvcnat I97-I 977`rccovcrygrowthratcs
thatthcrchasbccnnopossibiIityotcIiminatingorcvcnhaIting
thc turthcrgrowth otthcsc ratcs, cvcn with thc most rabid
optimistic projcctions. Uut thc taiIurc otinvcstmcnt to rc-
covcrand cxpand, which aIrcady manitcsts itscItin dccIining
growthratcs-andsucccssivcotncialdownward`adj ustmcnts
ottuturcgrowth-ratcprcdictions-nottomcntionaIIprudcnt
cconomicthcorybascdonthchistoricaIcxpcricnccotcapitaI-
istgrowth, portcnd thc approach otanothcr rcccssion, pos-
sibIywithastiIIgrcatcrdccIincinproductionandtradcthanin
I 97 5I 97. ThcrcsuItingdccIincotcmpIoymcntfincrcascot
uncmpIoymcntwiII notstarttrom thcIowcr`normaI ` uncm-
pIoymcntbctorcthcIastrcccssion,butwiIIbcaddcdontothc
aIrcadycxistinghighratcotuncmpIoymcnt

WORL CRISIS THEORY A IEOLOGY

8.

d Cnthccontrary, crisis rctcrsto

Crisisdocs

otmca
'
thc
? h

h cndwiIIbcavoidcdthrough
thc criticaIti

cdurng
s tI docs thc cnd bccomc

n-
ncw adaptations,

Iy l t
dcnncs crisis as a `turnin

poin

,
avoidabIc. Th

d
l
ctio

cntotdangcr or suspcnsc lP
o

cspcciaIIy otdiscasc.
n al l om Grcck krisis, dccision. b nct nanci . r

d
tics, ct

c.

ca l

hadiscascdsocial,cconomic,a

Th

rsisisapcrodif

wh
asbctorcand isobIi
F
cd,
.
onpain
poImcaI body cannot ivc
ations that wiII givc it a ncw
d h dcrgo transtorm
.

h

al
ot cat , to un
h

d ot crsis is a istorc
Icasc on Iitc. Therctorc, t is pcro
d ring which thc crucial momcnt ot dangcr and s

spcnsc u
dc that wiII dctcrminc

d f rmations arc ma
al
dccisions an trans O
t h stcm and its ncw soci ,
thc tuturc dcvcIopmcnt O t c sy
cconomic,andpoIiticalbasc.
t h I 97 5I 97rcccssion Thcunsatistactoryr

covc
al
r
)
r
'
mt
h
c
tthcncwworIdcrisisis

bI rc izationt a
' 11
hasIcdtogrowlngpu lc

d phcnomcnon that wi
I oralIy rcstrictc

not a Iocaly or tcmp

d h prcsshavc drawnincrcas-
soonpass. PoI

itical Icadcrsan
crhapssuchcomparisons ingparalIcIswiththc I 950s,th
d
o g
1
P
mcntottascismandwar

tthc cvcop

arcinsutncicnt,invicwO
tthatcrisis. lncrcasingIycconomic thatwcrcpartandparccIC
b thcdcvcIopmcntotthc

d alogics ctwccn historans

n rawan

d bctwccn thc two worId w

s,as prcscntcrsis and thc pcrio

h hwasassociatcdwiththc wcIIasthccrisisota ccnt

urya
1
O
'7I 89

Thc Iattcr crisis

so-caIIcd grcat dcprcssion O
.
f he fndings in 1L recent books by the
This essay summanzes many L t
d C
.
. . In the T hird V0Hd, published
V 0m an r1StS.
k d
author, Cr1S1S: In the 0rt con
H imes Meier in New Yor an
in 1 980 and 1 981 , respectively, by L
Heinemann in London.
I I I
I I 2
Andre Gunder Frank
rcsuItcd in tbcrisc otmonopoIy capitaIismandimpcriaIism
but aIsotbccndotPaxUritannica,asUritainbcganitsdccIin
tromworIdcadcrsbipintbctaccotcbaIIcngcstromGcrmany
and

bc Ltitcd Statcs. Tbc prcscntworId crisis sccms to bc

spcIItng tbc bcginning

ottbc c

d otPax Amcricanaand may

b

I? untoId otbcr major rcadjustmcnts in tbc intcrnationaI

dtvtstono

tIaborandworIdpowcrinstorctortbctuturc.
ln tbc intcrnationaI capitaIistcconomy accumuIation on a
worIds

caIccan
.
noIongcrprocccdasitdidintbcpostwarcraot
cxpanston, unti! andunIcssuncquaI dcvcIopmcntanddcpcn-
?cntaccumuIationarcputonancwtooting.Amongtbcmost
i
"
portantcIcmcnts ottbc ncw, cmcrging intcrnationaI divi-

ionotIaborarctbc rcintcgration ottbc sociaIistcconomics

nto tb

worId markct, tbc transtcr otccrtainworId markct

itdustrcs botb to tbcm and to scIcctcd parts ot tbc Tbird
WorId,

bc

c w

gcs

ar

Io

crand
.
Iabor discipIinc isbigbcr,

ndtbc ratio

aIization otindusnaIproductionintbcWcst
itscIttbrougb invcstmcnt inIabor-savingtccbnoIogy, uncm-
pIoymcnt,anddcprcsscdwagcs. Itwasnoaccidcnttbatwbcn
tradc among tbc i

ndustriaI capitaIist countrics dccIincd by

ncarIy

I pcrccntU I 97, industriaIcxports to tbc sociaIist

countrcs and tbc Tbird WorId incrcascd sutncicntIy so tbat
totaI worId tradc onIy dccIincd by pcrccnt. Pronts trom
cxp

rts to and work donc in tbc Last and tbc Soutb bavc
contitucd to

providc asignincantsatcty nct tor busincssand

go
"
crn

cntU tbc Wcstsincc tbcn, wbiIc tbc tocus otstag-

nating

nvcst

: t bas sbittcd trom tbc crcation ot ncw

producttonaciIiticstotbcrationaIizationotcxistingoncswitb
cxccsscapacity.
Tbc concomitant sociaI and poIiticaI transtormations tbat

cccssariI

cc
'
mpanytbisncwintcrnationaIdivisionotIabor
iti

cIudcmiIitarism, war, Last-Wcstcompctitionin tbc Soutb

dctcntc a

d a Wasbington-Pcking-Tokyo axis witb tbc Last

tccbnoIogicaI

|
ati
'
naIiz

tion and cconomic austcrity poIicic

bascd on tbc

nati
'
naI tntcrcst. WbiIc tbcsctactics Iack tbc
crsiIc Icgitimaion ota Kcd scarc, tbcrc is nonctbcIcss a
ncw dctcnscgap -rcmini

ccntottbc pbony missiIcgapot

tbc I 90s, butapparcntIywitboutconsidcrationottbcsubsc-
World Crisis Theor and Ideolog
I I 5
qucntcrcdibiIityga
[
intbcW

t. ltis to bccx
F
cctcdtbatI
thcsccconomic,sociaI,andpoIiticaItranstormationsposcscr-
ouscbalIcngcstocxistingpoIicyandidcoIogy.

Tbc ncwpoIiticaI cconomic crisis tbrougbout tbc worId is

aIso producing a crisis-or ratbcr,

criscsot

idcoIogy a

d
tbcory, wbicb cry out tor aItcrnativc appIications ot soc

ial
tbcory to poIitical practicc. ln tbc nrst worId ot

bc iti-
d
ustrializcd, capitaIist Wcst (incIuding)apan, Australia, and
cw ZcaIand),tbcdccpcstcconomic crisisinovcragcncra-
tion is rcvivingIongtorgottcnmcmoricsottbcGrcatOcprcs-
sion, itnotyctottbctwoworIdwarstbcmscIvcs.Tbcpusbot
cconomicandpoIiticalcrisisintbcsccondworId

ottbcL

ast
andtbcpuIIottbcWcstincrisisarcincrcas

iny
'
cintcgr

ting
tbcsociaIistcconomicsintbccbangingcapitaIistit:tcrnational
divisionotIabor. Uotb ottbcsc criscs,aswcIIastbctaiIurcot
two dccadcsotdcvcIopmcntintbc tbirdworId,arcimpos-
ingcbcapIaborandpoIiticaIopprcssionontbcpcopIcsinmost
ottbccountricsottbcSoutbandraisingtbcirdoubtsabouttbc
vaIuc ot nationaI Iibcration and tbc prospccts tor socialism.
TbcvariouspartsottbcworIdarcincrcasingIyintcgratcdinto
asingIccconomicsystcmtbrougbtbcintcrvcntio

otincrcas-
ingIypowcrtuIandrcprcssivcstatcs.Yct,paradoxicaIIy,a

cw
wavc ot nationaIism is tbrcatcning intcrnationaI rcIations
bctwccn,and cbalIcnging autboritywitbin, nationaI statcs aII
around tbc worId. Tbcsc rcaI sociaI criscs in various parts ot
tbcworId-orarc tbcy rcdcctionsotacrisisinasingIcworId
systcm-arc aIso producing criscs in tbcory and idcoIogy
tbrougbouttbcworId.

.
Tbc manitcstIy incrcasingand incrcasingIy manircst-

-
adcquacy otpartiaI tbcorics to anaIyzc tbis worIdwid

crsis
crics out tor aItcrnativc tbcory and idcoIogy. Tbc titIcs ot
manyrcccntpubIications-Tb:Crisis 0/ Democracy, Kcport
'
n
tbc GovcrnabiIity otOcmocracics to tbcTriIatcraICommts-
sion, The Alterative, bytbcLastGcrmanCommunistKudoIpb
Uahro, The Limits to Groth and Reshaping the International
Order, bytbcCIubotKomcaswcIIastbcdcmand incitcdby
thc TbirdWorId countrics otthc Lnitcd ations toracw
!ntcrnationaILconomicCrdcrarcsomcotthcvisiblcmanitcs-
I I 4
Andre Gunder Frank
tations
'
tcrisis and tbc rcsulting scarcb tor ncwtbcorctical
pcrspcctivcs.Tbougballottbcscsccktoprcdictandsbapctbc
t

turc, not onc ottbcm draws onabistoricalpcrspcctivcor

v

cws

tbc past, prcscnt, and tuturc as scqucnccs in a singlc

btstoncal proccss. Morcovcr, witb tbc notablc cccption ot
abro,tbcscidcologicalcttortsbavcbccnundcrtakcn-somc-
timcs vcry sclt-consciously-on bcbaltottbc alrcady ruling
clas

csordominantgroupsintbcWcstandSoutb.
Likcprcvious majorcpansions,industrial cpansiontcr
World War ll produccd an cccss otcapital rclativc to tbc
laborus

? (inM

isttcrminology,anincrcascintbcorganic
com
P
osttion

otcapital), particularlyinindustry.Togctbcrwitb
rclativco
'
crinvcsti
"
cntincapitalcquipmcntinindustry,tbcrc
w

rclativc u

dcnnvcstmcnt inproductivc capacity in tbc

mint

ndqcultu

scctorsinmostottbccapitalistworld.
Not in

idcntally, tbis is substantially rcsponsiblc tor tbc oil

a

d qcult

al criscs ottbc I 970s and pcrbaps tbc I980s.

incctbc

id- I90sintbcindustrialcconomicstbcincrcasc
in

bc ca
P
ital-labor ratio and productivity, as wcll as tbc as-
sociatcd incrcasc inworkcr bargainingpowcrand militancy
bav

lcd to

dcclincin tbcratcotprobt, tbcratcotgrowtb:

and

nsom

instanccstoanabsolutcrcductionintbcdcmand
torindustnalcommoditics,particularlycapitalorinvcstmcnt
F
oods. T?c prcvious imbalancc may now lcad to a rclativc
incrcasc in tbc

[
rovision ot raw matcrials and agricultural
products. dditionally, productivity and production bavc
grown

t dtttcrnt ratcs in tbc major industrial capitalist

cconomics. Ln

il rcccntly, productivity in Wcstcrn Luropc

basgrown attwicc tbc LSratc, and)apan`sattourtimcs tbc
LSratc.
nc conscqucncc ot tbcsc dcvclopmcnts bas bccn tbc
attcmpttopostponc,rcstrain,or-insomcmonopolizcd scc-
t

r
)
prcvcnttbcdcclincintbcratcotprobtandtbcrcstric-
ttonintb

arkcttbrougbmassivcintusionsot printcdmoncy
and crcdit into tbc cconomy. Tbis cttort took its most spcc-
taculartormin

bcL

itcdStatcstbrougbtbcdcbcitbnancing
ot tbc war qainst Victnam, wbicb doodcd tbc world witb
dollars. Sccondly, compctition incrcascd, particularly among
World Crisis Theor and Ideolog
I I
nationalscctorsotcapitaltromonccountrytoanotbcrtortbc
rcmaining markct. Tbis compctition manitcstcd itsclt m
'
st
particularly intbcrcpcatcd dcvaluations

ot

bcd
'
llar,wbicb
bavcbccncarricdoutinanattcmpttomaintainorincrcasctbc
ovcrscasmarkcttorLScportsandprotccttbcmandtbcLS
bomc markct against tbc incursions otGcrmany a

d)apan,
wbosc currcncics bavc bccn rcvalucd and bavc nscn vcry
markcdlyagainsttbcdollar. Sotar,bowcvcr,tbcbalanccbas
notturncdintavorottbcLnitcd Statcsontbcworldmarkct.
Tbc dcclinc ot tbc dollar bas, ncvcrtbclcss cbcapcncd LS
wagc and propcrty costs rclativc to tbosc in L

ro

c and
]apan and bas tbcrctorc rcvcrscd tbc dow ottorcign inv

st-
mcnt wbicb is now going trom tbcsc arcas to tbc Lnitcd
Statc.Slackdcmandandincrcascdcompctitionbasaccclcratcd
bankruptcics and monopolization

tio

ally an a_rcssivc
cportdrivcsandrcncwcdprotcctionismintcrn

ationall

.
Anotbcrmajormanitcstationotovcrproductionandinac-
quatc dcmand bas bccn an incrcasc in u

utilizcd

rod

ctivc
capacityinindustry.Tbisproblcmisparticularlyvisiblcintbc
stccl industry,wbicbbasbccninaworldwidcslumtor

so

c
ycars and, attcrsbuttingdownanumbc

o stccl
.
mills,isstill
only workingat 0or 70pcrccntcapacity invariouspartsot
tbcindustrializcdworld.Inconscqucncc,tbcrcbasalsobccna
markcdslumpininvcstmcnts.Witbcccssbutunuscdcapaci

and low probts, busincss sccs no good rcason

to cngqc

n
mammotb ncw invcstmcnt. Tbc I97 3 lcvclotinvcstmcnt in
tbcindustrializcdcconomicswasnotrcgaincduntil I978, and
still not inBritaintoday.Tbus,tbcrcwasagapinginvcstmcnt
bolctrom I97 3to I978, andnowinvcstmcntisdccliningoncc
again, bccausc ota ncw rcccssion. Morcovcr, tbc n

turc ot
invcstmcntbascbangcd.Lpansivcinvcstmcntto

rovidc

ncw
productivccapacitytormorcand ncwgoodsb

incrcasingly
bccn rcplaccd by rationalizing invcstmcnt dcsigncd to pro-
duccgoodsatrcduccdcost,particularlylaborcosts.Tbcrcbas
bccnalot ottalk about ncwtccbnology intbccncrgy supply
and inanumbcrototbcrbclds.Ocspitctbctacttbattbcpricc
otcncrgysbotuprapidlyattcrI97 3,anddidsoqainin

cccnt
montbs tbcrc bavc bccn no major ncw invcstmcnts in tbc
,
I I Andre Gunder Frank
cncrgy n cId. Prospccting and driIIing tor pctroIcum bas in-

rcascdmar

kcdIysinccI 975,buttbcrcbasbccnnomajorncw
invcstmcntinpctroIcumrcnning,andtbisisamajorrcasontor

bc rcccnt ottIcnccks. AIso, tbcrc bas bccn no major ncw

invcstmcnt in aItcrnativc sourccs otcncrgy trom sbaIc oiI
c

al, or

ticIcar tucI. L

onomi

alIy, tbc nucIcar industry i

virtualIy in sbambIcs, tbis cxpIains mucb ottbc drivc to scII
nucIcar

actors

tbomcandabroadandbasIcdtotbcstrong
compctitivcrcactionsandsquabbIcsintcrnationaIIy(torcxam-
pIc,bctwccntbcLnitcdStatcsandWcstGcrmanyovcrUraziI
and bctwccn

tbcLnitcdStatcsandFranccovcrPakistan)and
tbcstongantinucIcarrcactioninmanypartsottbcworId. AII
tbcscal

crnativcsourccsotcncrgy,incIudingsoIarcncrgyand

yntbctictucIs,bavcbccntbcsubjcctotmucbtalk,butsotarit
isalItalkandnoaction.Tbcmainrcasonistbattbcgcncralratc

tprontand

prospcctivcmarkctsdo notyct justityanymajor

invcst

cnt

in cncrgy or in any otbcr ncId. Tbc apparcnt

c
^
ccptio

n is tbc computcr industry, particuIarIy tbc usc ot

mic

ocbips, so tar it is primariIy a rationaIizing invcstmcnt

dcsi

ncdto
'
cduccIaborcostsotproduction,andnotamajor

cwinnovationtbatputsproductiononancntircIyncwtoot-
ing.Uctorcsucbaninvcstmcntprogramwitbmajorncwtccb-
noI

gy can bc undcrtakcn, tbc prontratcbas to bc cIcvatcd

agn,andtatwouIdentaiIvastcconomic,sociaI,andpoIiticaI
transtormationsonaworIdscaIc.
InstrumcntalinbotbtbcdccIincandpossibIctuturcrccovcry
otpr

nts

a
'
c anotbcrsct otconscqucnccsandmanitcstations
ot tbis crsis. Sincc tbc mid- I 90s, rcccssions bavc bccomc
morc trcqucnt, Iongcr, dccpcr and morc coordinatcd trom
onc major industriaI country to anotbcr. An indcx ot tbc

rowtb ottbcsc rcccssons is tbcirimpacton uncmpIoymcnt

in tbc m

mbcr countrcs ottbc Crganization tor Lconomic

Coopcration and OcvcIopmcnt (CLCO). Inortb Amcrica
Luropc,)apan,AustraIia, and cwZcaIandrcgistcrcduncm

pIo
)
mcnt ros

to miIIion during tbc rcccssion ot I97, in

wbicbtbcLn:

tcdStatcsbarcIyparticipatcdbccauscitkcpttbc
woItotrcccs

iontromtbcdoortbrougb tbcwaragainstVict-
nam.UytbctimcottbcrcccssionotI99-I97 I, wbicbaIsobit
World Crisis Theor and Ideolog
I I 7
tbc Lnitcd Statcs, rcgistcrcd uncmpIoymcntbad riscn to I 0
miIIion in tbc industrializcd countrics. LncmpIoymcnt tbcn
fcIIbackto8miIIionintbcsubscqucntrccovcrytrom I 972to
]97 5. I n tbc ncxt rcccssion, wbicb bit aImost tbc wb
'
Ic
capitaIistworIdsimuItancou

Iytrom I 975to I 97 , andwbicb

was tbcdccpcstonc sotar sincc tbc I 950s,rcgistcrcdun

m-
pIoymcnt rosc to I miIIion in tbc industrializcd countrc

s,
incIuding9miIIion(orrougbIy9pcrccntottbcIab

rtorc

)in
tbcLnitcd Statcs. Sincctbcn, uncmpIoymcntq

ndccIin

d
toIcsstbanmiIIionintbcLnitcdStatcsbutcontinucdtorsc
in tbc capitalist countrics ot Luropc and )apan, as wcII
Canadaand AustraIia. Indccd,tbc numbcrotuncmpIoycdin
tbcsc countrics rosc so mucb during tbc so-calIcd rc

ovcry
from l97 to tbc prcscnt day tbat total CLCO rcstcrcd
uncmpIoymcntincrcascdtrom I miIIionattbc bottomottbc
Iastrcccssionto I 7 orI 8 miIIionin I979.
A ncwrcccssionbcganin I979-I980intbc Lnitcd Statcs
andUritainandisvisibIytbrcatcningcIscwbcrc.oonckn

s
for surc bowIongtbc rcccssionwiIIIast.Tbcartcradminis-
tration was talking about a so-calIcd sott Ianding and bopc?
tbattbcrcccssionwouIdbcrcIativcIymiIdandnotvcryIong,it
onIybccauscI 980isancIcctionycar.Totbccxprcssdismay
'
t
Prcsidcnt Cartcr, a conn dcntial documcnt Icakcd out otbis
administration tbatobjcctivcIyprojcctsamucbdccpcrrcccs-
sion Iastingint I 98 I , witbuncmpIoymcntrisingtoat Icast8
pcrccntagn.

.
TbcrcarcvcrysubstantiaIrcasonstoanticipatctba

tbccur-
rcntrcccssionmaybccvcnmorcscvcrctbantbconc

n I 97 3
I 97 . Tbis rcccssion is mucb morc wcIcomc and

cccd
tbantbcprcviousonc,wbicbdidnotdrivccnou

bcapital in

o
bankruptcytocIcanuptbccapitaIistbouscsutncic
'
tIy

anddid
not succcsstuIIy brcak tbc back ot Iabor organization and
miIitancy. Tbcrctorc, tbc capitalist statcswiIId

cn Icss to
combat tbis rcccssion domcsticalIy tban tbcy did in tc Iast
onc. Tbc `dcbtcconomy, asBusiness Week aptIy calIsi

t, bas
grownsospcctacuIarIytbatanotbcrturtbrac
.
ccIcrationintb

growtbotdcbttbrcatcns toincrcasctbchkcboo otapossi-

bIccrasbottbcaIrcadycxccssivcIyunstabIcnnanciaIbouscot
I I 8 Andre Gunder Frank
cards, tbisbasmadcworricdbankcrscvcnmorcprudcntand
bas rcinforccdcconomicconscrvatism. At tbcsamc timc,tbc
prcviouslyavlablcnnancialandinstitutionalbulwarksqnst
tbc sprcad ofrcccssion, sucb as tbc dcvclopmcntofspccula-
tivc Luropcan and Asian currcncymkcts, tbccountcractivc
ncxiblc cxcbangc ratcs, intcrnational coordination tbrougb
cconomic smmit confcrcnccs, and so fortb, bavc alrcady
bccnsubstantially cxbaustcd orbavcfailcdoutrigbt. Intcrna-
tionally,morcovcr,tbcsafctyvalvctbattbcsocialistandCPLC
countricsoffcrcdcapitaltbrougbincrcascddcmandforWcst-
crn cxports is alrcady signincantly cxbaustcd and mucb lcss
likclytobcavailablcduringtbisncwrcccssion.Aftcrtbcirlast
cxpansion,and bccausc oftbcirlimitcdcapacitytopay,tbcsc
cconomics bavc alrcady bad to rcs

rict imports and c not

likcly to comc to tbc rcscuc ofWcstcrncapitalagainas tbcy
did aftcr I 97 5.Tbus,tbcrcwouldsccmtobcsignincantlimits
toconsumcr,invcstmcnt,andcxportdcmandduringtbisncw
rcccssion.Tbusincrcascdmilitaryspcnding(andpossiblyotbcr
statc-nnanccd capitalcxpcnditurcsto dcvclopncwsourccs of
cncrgy) arc tbc only otbcrsourccsofadditional dcmand,and
tbc I ran and Afgbanistan criscs sbould bc rcgardcd morc as
j ustincationtbanascauscsforsucbcxpcnditurcs.
Uc tbat as it may, tbc ncw rcccssion bcgins at a lcvcl of
uncmploymcnt,particularlyinLuropcand)apan,tbatisvastly
bigbcrtbantbclcvclpriortotbc I97 5-I97rcccssion,anda
lcvcl ofinvcstmcnttbatbasonlyj ustrcgaincdtbc I97 5 lcvcl.
Scrious `scicntincprojcctions fromofncialand institutional
forccastcrssccmtobcunablcorunwillingtotakcducaccount
of tbcsc factors in tbc prcparation of tbcir gcncrally ovcr-
optimisticforccasts.Tbcuncxpcctcdturnofcvcntsin I979and
I 980basobligcdoncintcrnationalinstitutionaftcranotbcrto
undcrtakc agonizing rcappraisals and makc downward rcvi-
sionsoftbcir cconomicprojcctions. Forinstancc, tbc CLCO
wasobligcdtoaddanunnumbcrcdpagctoitsEconomic Outlook
aftcritwcnttoprcssin ordcrtolowcr itsgrowtbratcprojcc-
tions by I pcrccnt. Tbc annual rcport of tbc Intcrnational
MonctaryFundprcparcdforitsI979mcctingprcdictcdalong
andbardworldwidcrcccssionstartingincarly I980asaconsc-
World Crisis Theor and Ideolog
I I9
qucnccoftbcwcakn

ssoftbcLScconomy.Ouringitsann

al
mcctingin UclgradcmScptcmbcrI 979,tbc IMFam

ndcdits
I 980forccastdownwardandsaidtbat`worldcconomicgrowtb
willbclowcrtbantbcprcccntagcsbownintbcannualrcport.
Sincctbcn, aftcrtbclargcstcvcrmontbl

cli

nc-m
'
rctba

4 pcrccnt-in tbc LS indcx

'
fcconomic mdicators m

Apr

l
I 980 Prcsidcnt Cartcr admmcd tbat tbc ncw rcccssion ts
morc

suddcn, dccpcr, and apparcntly longcr lastng

tban

c
andbisadvisorsbadforcsccn. Lconomicrcscarcbi

sututcsm
GcrmanyandUritainnnallyissucdrcports

cxprcssmg

fcarsof
slump conditionsat bomc and abroad lasnngatlcastmto tbc
mid- I 980s. Morcovcr, tbis ncw rcccssion comcs on top

fa
wcak rccovcry in wbicb tbc cconomic, social, and polmcal
conscqucnccsoftbclastrcccssion-i

cludi

ga

lcgacyof

ovcr
I 7 millionuncmploycdintbcindustrial capitalistcountrc

bavc not yct bccn ovcrcomc. Tbis sobcring circumstancc ts

itsclfamarkoftbcdccpcningcrisis.

+
Anotbcr manifcstation-indccd an cscnnal part-of tbis
proccssofdccpcningcrisis tbrougb succcssivcrc

cssionsbas
bccn tbc attcmpt to rcducc tbc cost ofproducnon tbrougb
austcritypolicics,wbicbbavcrcsultcdinincrc

cdunc

ploy-
mcnt. Morcovcr, itcan bc dcmonstratcd tbatm most mdus-
trialcapitalistcountricstbcrcbasbccn dclibcratcunc

loy-
mcntpolicy. Kcccssions arc an csscnnal partoftbc cr

is
'
f
accumulation, wbicb isanintcgralaspcctofuncvcncapttalist
dcvclopmcnt. Uut tbcsc rcccssions

c dcm
'
nstrably furtb

r
promotcdbypolicicsmadcnotonlymWasbmgtonb

talsom
London, Uonn, Paris, Tokyo, and clscwbcrc. For mstancc,
wbcn Paul Volckcr, tbc ncw bcad of tbc Fcdcral Kcsc

c
Uoard was intcrvicwcd by tbc Scnatc, bc said tbat bc did
not kow iftbcrc was a rcccssion yct, but comc wbat m

ay,
tbc principal task is notcomba

ingrccsson, but combatmg

innation. Wbat bc mcant inplnLnghsb istbatbcproposco
to pursuc, and would ask govcrnmcnt to pursuc, scal poh-
cicsdcsigncdtorcstrainwagcsanddccrcascpurcb

ngp
'
wcr
in ordcr to combat uncmploymcnt. Tbcrcforc, tt ts ncitbcr
incidcntal nor accidcntal tbat Volckcr`s appointmcnt was
grcctcd witb grcat jubilation in Uonn, Paris, and Tokyo,
I 20 Andre Gunder Frank
and in all otbcr major bnancial and political capitals ottbc
Wcstcrnworld.
lndccd,world capitalistpolitical lcadcrs, sucbas Prcsidcnt
Cartcr(wbowasclcctcdonangbtuncmploymcntplattorm
butprcdictably soon switcbcd to making indation tbc Pub-
lic Lncmy Numbcr nc instcad),PrimcMinistcrKaymond
Barrc, Britisb Labour ministcrs Callagban and Hcalcy, tol-
lowcd bytbcirconscrvativc succcssorsTbatcbcr, Howc, and
)oscpb,andmanyotbcrslikctbcmclscwbcrcbavcrcpcatcdly
dcclarcd tbat tbcy wouldprctcr topursucconscrvativc, dc-
dationarybscalpolicicstocombatinnationcvcnattbccostot
risinguncmploymcntandgrowingindustrialsbutdowns(asin
tbclrcncbstcclmills,wboscworkcrsrcactcdvocitcrously).
Tbc samc argumcnt is advanccd cvcrywbcrc.c nccd to
bold downindationbccauscitburtsallotusatbomccqually
(altbougbinnationcbaractcristicallyrcduccsrcalincomctrom
work and raiscs tbc rcal valuc otpropcrty) and particularly
bccausc innation at bomc would pricc us out ottbc world
markct, cut ourcport capacity, and tbcrctorc crcatc uncm-
ploymcnt.Tbcprincipalcauscotinnationis,supposcdly,bigb
publicspcndingandbigbwagc dcmands (altbougbwagc costs
arc a small and dcclining componcnt ot sclling priccs, and
tbc cvidcncc sbowstbatpriccs arc pusbcdup by tbcattcmpt
to protcct pronts in monopolizcd industry). Tbcsc samc ar-
gumcnts arc uscd cvcrywbcrc to dctcnd tbc imposition ot
austcrity policics, and to dcmand political rcstraintin public
spcnding-cccpttordctcnscandotbcrbusincsscpcnditurcs,
otcoursc-andinrcsponsibilcunionwagcdcmands,wbicb
arc to bc kcpt bclow tbc ratc otinnation, witb a rcsultant
dcclincinrcalwagcsandincomc,cspcciallyattbclowcstcnd
ottbcincomc scalc. ln addition, bowcvcr,to rcstingonvcry
doubttulscicntibcgroundsdomcstically,tbcscargumcntssut-
tcr trom tbc logical tallacy otcomposition. wbcn cvcrybody
pursucs tbcsamcpolicy, aswbcncvcrybodystandsontiptoc
to scc apassingparadc, orwbcncvcryonccuts backoninna-
tion, tbcn nobody n nds tbcir rclativc position improvcd by
tbcircttorts-and cvcrybodycndsup worsc otttban bctorc.
Tbc analogy, bowcvcr, onlygocs so tar. diminisbcd comtort
World Crisis Theor and Ideolog
I 2 I
maybc3 cntirclyunintcndcdconscqucnccotcrowdbcbavior,
butlowcrwagcs dcnnitclyarc not unintcndcdco

scqucnccs
otbcrdingpcoplcagainstinnation. lndccd,tbcrcisrcas

to
bclicvc tbat tbc principal cconomic purposc ottbc polmcal
slogantongbtindation (wbicbburtscvcrybody)

attbcc
'
stot
uncmploymcnt (wbicb only bitssomcpcoplcdircctly) is not
only tolowcrwagcsbutalso towcakc

labors
)
owcrcv

ry-
wbcrctodctcnditswagclcvclandworktngcondmons.lnvicw
ottbcscotn cialpronounccmcntsandpolicics,itsbouldcomc
as no surprisctbat tbcworldcapitalistprcss basblitbclysum-
marizcd tbcm in plain Lnglisb by saying Tbc world nccds
arcccssion.

.
Austcrity policics bavc bccn imposcd in all tbc c

pitalist
cconomicsinanattcmpttogctworkcrstotigbtcntbcirbclt

s.
Tbisattcmptbasbccnmorc succcsstulinsom

laccstbantn
otbcrs.Ccrtainly intbcLnitcd StatcsandBrtnrcalwq

s
bavcgoncdown,wbilc inotbcrindustrialcconomcstcrc is
condictingcvidcncconwagcratcs.Howcvcr,co

sidcrtngtbc
incrcascintbcnumbcrotuncmploycd,wborcccivcnowagcs
at all, tbcn rcalwagc rcccipts bavc tallcn sincc I 97 5. Attbc
samc timc, tbccapitalistworldbasmadcaconccrtcd

cttort

o
cutwcltarc.Tbcmottointbccapitalistworldtodayisto sitt
trom`unproductivc to productivccpcnditurcs,includi

ng
armamcntsotcoursc,as torwcltarc.tarcwcll. Anothcrmajor
attcmpt to cut production costs is to rcorganizc tbc work
proccsscs on tbc sbop noor and intbc otn cc. ingcnc

al, tbc
ncw work proccsscs involvc spccdup and downgradtng tbc
workcrsskills.

Tbcsc policicsbavc bccn implcmcntcdwbcrcvcrpossiblc,

and ccrtainly in most parts ot tbc Wcstcrn world, tbrougb
social dcmocratic govcrnmcnts, ottcn witb tbc support ot
labor-oricntcdandCommunistpartics.Communistsupportot
allkindsotcapitalistaustcritymcasurcsbasbccnvcr

visibc
inItalyandSpain. ltispcrbapswortbpointingouttba

tnSpn
it was cvcn tbc sccrctary gcncral ot tbc Communist Party,
Santiago Carillo, wbo took tbc initiativc in proposing tbc
Spanisb austcrity policy in tbc Pact ot Moncloa

attcr tc
clcction otPrimc MinistcrAldolto Suarcz. Austcrty andtn-
I 22 Andre Gunder Frank
comcs policicsarc alsoimplcmcntcdinmanyplaccstbrougb
tbc dircctcollaborationotlaborandcvcnCommunistunions
as in Italy. Tbc argumcnt is to pursuc a sort ot lcsscr-cvii
policy, according to wbicb itis bcttcrto tigbtcn bclts volun-
tarilytbantobctorccdtodosobysomcrigbt-wingor,astbc
CommunistsinItalywould say,tascistgovcrnmcnt. In somc,
indccd many, placcs tbcsc policics bavc lcd to considcrablc
militancyontbc sbop doorandrcvoltottbcmass basc.Tbis
rcvoltbas bccnparticularlyvisiblcinItalyandBritain,wbcrc
workcrsbavcrcjcctcdaustcritypolicicswbicbtbcunionlcad-
crsbipbadimplcmcntcd. (TbcSpanisbCom
g
unistPartyand
itsunionsbavcsuddcnlydccidcdtoopposctbcaustcritypolicy
tbcrc as wcll, bur to wbat ctcnt!) In Britain, tbis vcry con-
sidcrablc militancy on and ott tbc sbop noor bas madc tbc
ncwlyclcctcdConscrvativcgovcrnmcntdctcrmincdtoputa
tigbt rcin onlabormobilization and tbcpowcrottbc unions
tbrougb all kinds otlcgal action againstpickcting and otbcr
union organization, as wcll as tbrougb cplicit policics to
incrcasc and usc uncmploymcnt to disciplinc labor. In tbc
past-and tbcrigbtwingbopcs tbatitwillalso bctruc intbc
tuturc--asignincantincrcascinuncmploymcntmakcsmilitant
union action incrcasingly ditn cult. Indccd, itcapitalism is to
rccovcr adcquatc lcvcls ot pront and launcb a rcncwcd
invcstmcntdrivctobringitoutotitsprcscntcrisisotaccumu-
lationandintoancwpcriodotcpansion,notonlywillitbavc
toinvcstin ancwtccbnological basc, but botb tbc prontablc
introductionotncwtccbnologyandsucbinvcstmcntwillbavc
to bc bascd on amajorpolitical dctcat otlabor, sucb as tbc
dctcatbctwccntbc I 920sand I940s.
Tbcsccircumstanccs bavc lcd tovcrymarkcd sbittstotbc
rigbtinmostindustrializcdcountrics.Tbclibcralcandidacyot
Ld
^
ard Kcnncdy in tbc Ocmocratic Party`sprcsidcntialpri-
mtcswasroundlydctcatcdintbcLnitcdStatcswbilc Prcsi-
dcntCtcrswungsbarply to tbcrigbtonbotbdomcsticand
torcign issucs. Lvcn tbcindcpcndcntcandidatc)obn Andcr-
sonisvcrymucbotaconscrvativconbscalandotbcrdomcstic
qucstions,wbilctbcKcpublicancandidatc,KonaldKcqan,is
an arcbconscrvativc. Tbccvcnmorcrigbt-wingFranz)oscpb
World Crisis Theor and Ideolog I 23
Strauss is tbc conscrvativc candidatc tor cbanccllor inWcst
Gcrmany. In)apantbcrcbasbccnamarkcdsbitttotbcrigbt
and accclcratingprcparations torrcarmamcntat tbc national
lcvclwbilc SocialistsandCommunistsbavcbccnallbutclimi-
natcdtrommunicipalandrcgionalgovcrnmcnts.Tbcmarkcd
sbitts to tbcrigbtarc notonly manitcstontbispoliticallcvcl
but in a wbolc varicty ototbcr bclds sucb as in cducation,
bcaltb,immigration,andcivilrigbtslcgislation,ingcncral,tbc
ncwrigbtisadvancingbylcapsandboundsontbcidcologi-
callcvclinmostindustrialcapitalistcountrics.
Tbc Amcrican drcamotbi_crand bcttcrand continuous
prospcrityi nnisbcdintbcLnitcdStatcsandclscwbcrcintbc
Wcst. Inbis)uly I J , I 979,spcccbontbccrisisotconndcncc,
PrcsidcntCartcrsaidthattbcvastmajorityotAmcricanstbink
tbc nct bvc ycars will bc worsc tban tbc last nvc. Cartcr`s
appraisalisquitcrcalistic,butbcmigbtbavcaddcdtbattbclast
nvc ycars bavcalrcady bccnworsctbantbcprcvioustwcnty-
bvc. Tbis crisis otconndcncc contronts tbc cntirc political
spcctrumwitbagrowingidcologicalcrisisotwbattoottcr.Tbc
Cartcrspcccbisitscltamanitcstationotcomplctcidcological
bankruptcy.Tbconlyunivcrsalagrccmcntintbccommcnty
onCartcr`s spcccbwastbatbcottcrcdabsolutcly no solution
totbccrisisotconbdcncc(wbicbrcncctstbcdcclincotAmcri-
can cconomic and political-in a word, impcrialist-powcr)
or cvcn to tbc cncrgy crisis wbicb bc said is a byproduct ot
tbiscrisis.
Tbc currcnt situation bas also brougbt on acrisis in cco-
nomics,wbicb,accordingtoBusiness Week, iscomplctclybank-
ruptasasourccottorccasting,analysis,orpolicy. ntbconc
band, tbis bankruptcymanitcsts itscltmostvisiblyinstagna-
tion-simultancousuncmploymcntandinnation-orin I 97J
i nslumpnationincvcryWcstcrncapitalistcountry.ntbc
otbcrband,tbcgrowtb,indation,andccbangcratcsnuctuatc
trom onc country to tbc nct and rcpcatcdly cbcckmatc all
attcmpts to analyzc, lct alonc to rcgulatc, tbc intcrnational
monctaryandcconomicsystcm.Tbcpcriodiccconomicsum-
mits bcld in Francc, Pucrto Kico, London, Bonn, and now
Tokyoamongtbc lcadcrs ottbc principalWcstcrnindustrial
I 2

Andre Gunder Frank

po

crs ar

no morc tban an opcn admission of tbis failurc

ofi

ntc

nation

al

cconomiccoordination-andcvcnanalysis
wbicb is

rcmii:tsccnt of tbc complctc failurc of tbc World

LconomicConfcrcnccbcld in!ondonin I 93I durintbclast
rcatdcprcssion.

Kcyn

sian

conomic tbcory only offcrs dcnationaryrcmc-

dicsf

rindationorrcdationary oncs for uncmploymcnt.Tbc

csscntial rcason for tbc failurc ofKcyncsianism is tbat it is
bascdon

tbcassumptionofcompctitionwbilctbcincrcasinly

on

polizcdstructurcoftbccconomycncratcssimultancous
indation

nd uncploymcnt. Morcovcr, Kcyncsian policics

arc csscntiallya
P
plicablctonationalcconomicsinwbicbov-
crnmcnts

an wicld substantial rculatory inducncc. Buttbc

worl

d capitalist crisis is intcrnational and, sincc thc rclativc

dcclinc ofLS powcr, no sinlc nation-statc can stabilizc tbc

orldcconomy.Supranationalinstitutionsarccquallyusclcss
intbcfacc oftc s

cculativc,privatcbankin,Lurocurrcncy
markct

n natio

aiststatccconomicpolicics

Itisironictbat
Kcyncsiai:ism oriinatcd as awcapon to combat dcprcssion
butbccamc univcrsallyacccptcdand`succcssfulonlydurin
(and bccausc of' ) tbc
)
ostwar cpansion. At tbc nrst sinof
rcncwcdworldrcccssion,Kcyncsian tbcorybasprovcditsclf
to bc a snarc and a dclusion tbat basonc into immcdiatc
bankruptcy
.
Tbc rcsultin`post-Kcyncsian syntbcsis isalso
tc tc

rcttcal rcasonfortbc rcactionary cbumation oftbc

simplistic,

ncoc!assical,andmonctaristcconomictbcoryoftbc
I 920s. Tb

isrc

ivalofoldtbcoryisbihlibtcdbytbcawardof
Nobcl
P
rizcs in cconomics to Fricdricb von Hayck, wbosc
tborctic work was donc bcforc tbcGrcatOcprcssion,and
MiI

onlricdman, wbosc loncvoiccccbocd in tbcwildcrncss

unt

iI tbc

ncw wo

ld cconomic crisis put bis unpopular and

antipopulist tbcorics on tbc acndaofbusincss boardrooms
andovcrnmcntcabinct roomsinonccapitalistcountryaftcr
anotbcr. bc

rcal rcaso

for tbc rcccntintcrcst in nfty-ycar-

old tbcorics is tbat capital now wants tbcm to lcitimizc its
attack

n tbc
^
clfarc

tatc and `unproductivc cpcnditurcs

n
'
cial scrvtcc

bicb capital claims to nccd for produc-

tivc invcstmcntintndustry,includinarmamcnts

World Crisis Theor and Ideolog

I 2J
Tbconsctof cconomiccrisis,witblowandsomctimcsnca-
tivcrowtb ratcs, pcrmancnt indation, and structural uncm-
ploymcnt, and tbc rcinstatcmcnt ofoutworn cconomicpoli-
cics datin fromtbc I920s (andindccd I 890s)ascmcrcncy
mcasurcs in tbc facc oftbc bankruptcy ofKcyncsianism, as
wcll as tbc drivc to bid wclfarc farcwcll bavc cncratcd a
scriousidcoloical crisis intbcWcst. Kibt-winandccntrist
political partics can no loncr plausibly offcr tbc bi_cr and
bcttcrAmcricanway oflifc,andlcft-winparticsarcatraidto
offcrafundamcntalcballcnc to tbcformcr, lcst tbcpolitical
ccntcr ofravity sbift cvcn furtbcr to tbc ribt or toward
fascism in rcsponsc. Tbus, tbroubout tbc political spcctrum
in tbc Wcstcvcrybody s bcst offcris tbc lcsscrcvil. Inotbcr
words, a amc of musical cbairs dcvclops in wbicb cvcry
politicalparty andfactionrusbcstositintbcjust-vacatcdcbair
to tbc ribt, cccpttbat afcwoftbcm violatc tbc rulcs oftbc
amc by movin two or tbrcc scats to tbc ribt at onc jump,
sowin confusion and makin tbosc wbo sbift ribt morc
slowly appcar to bc almost radically lcft by comparison. But
offcrin and cboosin tbc lcsscr cvil can only bc a stopap
mcasurc in tbc facc of dccpcnin crisis, until tbc political
forccs bnd a ncw, positivc-soundin idcoloy witb wbicb to
lcitimizc tbcirrctroradc and incrcasinly rcactionary crisis
policics. So far, sucb a ncw (national socialist!)idcoloy bas
not yct bccn dcvclopcd, oratlcastbasnotfoundwidcsprcad
rcccption. Butwbatwillbappcnaftcrtbcnct,pcrbapsdccpcr,
rcccssion, say by I 984! Will Gcorc rwclls Bi Brotbcr
bcwatcbin!
Ocvclopmcntandmodcrn

zationtbcorybavcprovcninap-
propriatcintbcTbirdWorld,tbcapbctwccnricbandpooris
rowinbylcapsandboundsandcvcntbcnumbcrofpoorand
tbc dcptboftbcirpovcrty isincrcasin. Tbcfailurcsoftbcsc
tbcorics and modcls bavc now bccn publicly rcconizcd by
tbcir stroncst advocatcs, likc !conticffor tbc Lnitcd Na-
tions,WorldBankPrcsidcntKobcrtS.McNzara,andformcr
LS Sccrctary ofStatc Hcnry Kissincr. Inbis I977addrcss
to tbc board of ovcrnors of tbc World Bank, Prcsidcnt
McNamarasobcrlyobscrvcd.
16 Andre Gunder Frank
cvclomc

+t, dcsitc all tbc cfforts oftbcast twcnty-nvc

ycars,bascdtoclosctbcgaincrcaitaincomcsbctwccn
dcvclocd and dcvcl
.
oing countrics. . . . Tbc roosition is
truc. Buttbcconclusiontobcdrawnfromitisnottbatdcvcl-
omcnt cfforts bv

fail

d, utratbcrtbat closing tbcga`

as ncvcr a rcabstic ob}cctivc in tbc nrst lacc. . . . It was

simly

ot a fcasi

blc goal. Nor is it onc today. . . . Lvcn if

dcvclo

ngcou

ntHcs

anagctodoublctbcircrcaitagrowtb

atc

wbdctbcindustHalworldmaintainsitsbistoricalgrowtb,
itwill takc ncarly accntury to closc tbc absolutc incomcga
b

twccn tbcm. Among tbc fastcstgrowingdcvcloingcoun-

tHcs, only scvcn would bc ablc to closc tbc ga witbin a
bundrcdycars,andonly anotbcrnincwitbinatbousandycars.
Howcvcr, sincc tbc I97I97Jrcc

ssion,tbcgrowtbratcin
tbcdcvclopcdcapitalistcountricsbdcclincd,andtbcgrowtb
ratc ot tbc non-pctrolcum cporting countrics in tbc Tbird
Worldbbccncutinbalt.
lor tbc world` s poor tbc past bas bccn dismal and tuturc
prospcctsarcdim. Tbc I978Word Development Report ottbc
WorldBankobscrvcsonitsbrstpagc.
Tbca

tquartcrccnturybassccngrcatrogrcssindcvcloing
countr

cs. . . . But mucb rcmains to bc accomlisbcd. Most

countHc

s bavc not yct comlctcd tbc transition to modcrn

cco

nomics and s

cictic

s, and tbcirgrowtb is bindcrcd by a

varict

o
.
fdomcsticandintcrnationalfactors.Morcovcr,about
800 m

llioncolc still livcinabsolutcovcrty.Tbcsccolc

arc bving at tbc vcry margin ofcxistcncc-witb inadcquatc
sbcltcr,cd

cation,an bcaltb carc. . . . Manyoftbcsc colc

bavc

cxcHc

ccd no imrovcmcnt in tbcir living standards,

n incountHcswbcrccconomicgrowtb basbccnslow, tbc
bvingstandardsoftbcoormaycvcnbavcdctcrioratcd.
Btas rcccntcvcntsinIranandtbccndottbcmiraclcin
Brazil s

st, cvcn witb rapio growtb bcrc and tbcrc, onc

cconomicmiraclcandtakc-ottintodcvclopmcntattcranotbcr
turns tobcasnarcandadclusionrcallybascdonrutblcss

ploitation, c

ucl opprcssion, and tbc marginalization trom

dc

clopmcn

t t
'
r tbc majority ottbc population. Tbis c-
pcricncc, wbicb is only sbarpcncd by tbc prcscnt crisis, bas
World Crisis Theor and Ideolog I 27
nowraiscdtbcmostscriousdoubtsabouttbcvcry conccptot
dcvclopmcntas aprogrcssivc, intcgral, and intcgratingsocial
proccss in tbat part ot tbc world wbicb uscd to bc callcd
backward, poor, or colonial and tbcntbrougb succcssivc
cupbcmismsundcvclopcd,undcrdcvclopcd,dcvcloping,ncw,
cmcrging, and lcss dcvclopcd. At tbc samc timc, tbougb
structuralimpcdimcntstodcvclopmcntanddcpcndcnccccr-
tainly rcmainrcalintbcTbirdWorld,tbcusctulncssotstruc-
turalist,dcpcndcncc,andncwdcpcndcncctbcoricsotundcr-
dcvclopmcnt as guidcs to policy sccms to bavc bccn undcr-
mincdby tbcworld crisis ottbc I970s. Tbc Acbillcsbcclot
tbcscconccptionsotdcpcndcnccbasalwaysbccntbcimplicit,
andsomctimcscplicit, notionotsomcsortotindcpcndcnt
altcrnat:vc tor tbc Tbird World. Tbis tbcorctical altcrnativc
ncvcrcistcd, in tactccrtainly noton tbcnoncapitalistpatb
and now apparcntly not cvcn tbrougb so-callcd socialistrcv-
olutions.Tbcncwcrisisotrcalworlddcvclopmcntnowrcndcrs
sucbpartial dcvclopmcntand parocbial dcpcndcncc tbcorics
andpolicysolutionsinvalidandinapplicablc.
Tbc rcccnt call tor nationalor collcctivc sclt-rcliancc (but
witbout autarcby) witbin a capitalist ncw intcrnational cco-
nomic ordcr appcars to bc tbc conscqucncc otidcological
dcspcration. lor instancc, Angola still rclics bcavily on tbc
paymcntsottorcignccbangctbattbcLSGultilCompany
makcstorpctrolcumproduccdinCabindaundcrtbcprotcc-
tion ottroops trom Cuba. In tbc mcantimc, witb rcgard to
Tanzania, tbc modclotsclt-rcliancc in Atrica, Busines Week
(Occcmbcr2J , I 978)statcstbatitscconomyis ontbcbrinkot
collapsc,wbilctbcInterational Herald Tribune (May 7, I979)
rcports. Amid cconomic ditncultics, Tanzania [is| sccn im-
proving tics to LS [and| is taking a ncw look at Wcstcrn
nnancc and cpcrtisc. Nowondcr tbatTanzanianprcsidcnt
Nycrcrc commcmoratcd tbc tcntb annivcrsary otbisprocla-
mation ottbcgoal otsclt-rcliancc and ujamaa intbc Arusba
Occlaration by sobcrly obscrving tbat Tanzania is ccrtainly
ncitbcr socialist nor sclt-rcliant. . . . ur nation is still cco-
nomicallydcpcndcnt . . . . [Tbcgoalotsocialism|isnotcvcnin
sigbt(International Herald Tribune, April2 I , I977).
I 28 Andre Gunder Frank
TbcTbirdWorldwasandisanintcgralandimportantpart
of tbc world capitalist cconomy Lnlcss tbcworking class in
tbc Wcstand in tbc Soutbcanprcvcntit, tbcTbirdWorld is
dcstincdtocarrytbcmajorpartoftbcburdcninintcrnational
capitals attcmpt torcvcrsctbc tidcoftbcgrowingcconomic
crisis. ln tbc brst placc, sincc tbc Tbird World is an intcgral
part o tbc capitalist world, tbc crisis bas bccn immcdiatcly
transmittcdfromtbcccntcrtotbcTbirdWorldtbrougbgowing
balanccofpaymcntsdcbcits. As dcmandin tbc industrializcd
countrics dcclincd or grcw morc slowly, so did priccs for
cportcd raw matcrials otbcr tban pctrolcum At tbc samc
timc, tbc vastworldinnationintbcindustrializcd cconomics
incrc

cd priccs otmanutacturcd commoditics importcd by

tbcTbirdWorldTbcrcforc,dcspitcatcmporaryraw-matcrials
pricc boom in I97 3 (wbicb was complctcly rcvcrscd aftcr
I 974), tbctcrmsoftradcbavcbccnsbittingonccagainandtbc
non-pctrolcum cporting Tbird World countrics bavc faccd
incrcasingly scrious balancc ot paymcnts problcms and a
musbrooming forcign dcbt. Morcovcr, it is no accidcnt tbat
trom I974to I978tbcPLCsurpluswasmorcorlcsscquiva-
lcnt to tbc incrcasc in tbc balancc otpaymcnts dcbcit ot
tbcTbird World, su_csting tbatmostottbcincrcascintbc
priccs otpctrolcum sincc I97 3 bas ultimatcly bccn born by
tbcTbirdWorld.
AsignibcantportionoftbcPLCsurplusbasbccnrccyclcd
tbrougbtbcbanksintbcmctropolitanimpcrialistcountricsto
tbc Tbird World to covcr tbcir balancc otpaymcnts dcbcits
tbrougb privatc loans at incrcasingly oncrous costs. Tbcir
growingdcbtis tbcn uscd as apolitical instrumcnttoimposc
barsb austcrity policics in tbc Tbird World. Tbis blackmail
tbrougbdcbtrcncgotiationandctcnsionbasrcccivcdconsid-
crablcnc

spapcrcovcragcintbccascsotTurkcy,Pcru,Zairc,
and )amaica, but it bas also bccomc standard Intcrnational
Monctary lund (lMl)andprivatc bankopcratingproccdurc
tbrougbout tbcTbird World. Tbus, tbc IMlwill sct ccrtain
conditions.ittbcgovcrnmcntdocsnotdcvalucitscurrcncyto
makc cports and torcign invcstmcnt cbcapcr, lowcrwagcs,
cut tbc govcrnmcnt budgct cspccially tor wcltarc cxpcndi-
World Crisis Theor and Ideolog
I29
turcs, and takc otbcr unpopularmcasurcs, and itit docs not
rcplacc Ministcr A witb Ministcr B, wbo is morc likcly to
institutctbclMl-supportcdpolicics,tbcntbccountrywillnot
gcttbclMlccrtibcatcofgoodbcbavior,andwitboutitncitbcr
otbcialloansnorloansfromprivatcbankswillbcfortbcoming.
Tbis political-cconomic club bas bccn uscd to bcat govcrn-
mcnts into sbapc and forcc tbcm to adoptpolicics ofsupcr-
austcrity tbrougbout tbc Tbird World. Howcvcr, tbc samc
tbingbas also bappcncd inPortugal andGrcatBritain.wbcn
tbc lMl, lcd by tbc Lnitcd Statcs, otfcrcd Britain a S 3. 9
billion loan i n I 97, i t gavc Britainvirtually tbc samc trcat-
mcntas badprcviously bccn rcscrvcdforbananarcpublics-
pcrbaps tbatisanindicationtbatBritainisbccomingasortot
pscudo-TbirdWorldcountry. Again, bowcvcr, justas uncm-
ploymcntandrcccssionarcnotsimply,orcvcnprimarily,duc
togovcrnmcntpolicydccisions,ncitbcrarcaustcritymcasurcs
in tbc Tbird World simply tbc rcsult ofprcssurc trom tbc
industrializcdcapitalistcountrics.Tbcscctcrnalpoliticalprcs-
surcs arc simply rcinforcing tcndcncics tbat bavc anotbcr,
mucb broadcr, cconomicbasc, namcly, tbccapitalistattcmpt
tomaintainorrcvivc tbcratcotprobtbyproducingatlowcr
costs in tbcTbirdWorld (and intbc socialist countrics),witb
nationalpoliticalsupporttortbcscrcprcssivcmcasurcs
Costs ofproductionarc rcduccd mainly by movinglabor-
intcnsivc industrics, but also somc vcry capital-intcnsivc in-
dustrics,sucbasstcclandautomobilcs,totbcTbirdWorld It
ispcrbapssymbolictbattbc VolkswagcnBcctlcisnowmadc
in Mcico, not Gcrmany, for cport to otbcr parts ot tbc
world.lromtbcpointotvicwottbcworldcapitalistcconomy,
tbis is a transfcr ofa portion otindustrial production trom
bigb-cost to low-cost arcas. lrom tbc point ot vicw ot tbc
Tbird World, tbismovcrcprcscntsapolicyotcportpromo-
tion, particularly of nontraditional industrial cports. Tbird
Worldcportpromotionbastwosccminglydittcrcntorigins.
ntbconcband,tbccconomicstbatbadadvanccdmostintbc
proccss ofimportsubstitution,likcIndia,Brazil,andMcico,
bavcturncdtbcscimportsubstitutcsintocportmanutacturcs,
tromtctilcstoautomobilcs,somcproduccdbymultinational
I 50

Andre Gunder Frank

nrms. ntbcotbcrband, torcigncapitalwcnttootbcrTbird
WorldcountricstosctupmanutacturingtaciliticsD producc
solcly tor cport, ratbcr tban tor tbc domcstic markct. Tbis
movcmcntstartcdintbc I 90switbMcico(wbicbcombincd
botbkindsotindustry butindittcrcntrcgions),SoutbKorca,
Taiwan,HongKong, andSingaporc. In tbc I970sitsprcadto
Malaysia,tbcPbilippincs,andincrcasinglytromIndia,Pakistan,
Sri Lanka, Lgypt,Tunisia,Morocco,tbcIvory Coasttovirtu-
ally cvcry country in tbc Caribbcan. Tbcsc cconomics ottcr
cbcap labor, and tbcycompctcamongoncanotbcrwitbstatc
subsidcstoprovidcplanttacilitics,clcctricity,transportation,
tarchct,andcvcryotbcrkindotinccntivctortorcigncapital
toproducctbcrctortbcworldmarkct. IntbccascotCbilc tbc
military j untawcntsotar as toottcrtopypartottbcothcr-
wisc starvation wqcs, so tbat torcign capital could kccp its
costsdown.
In ordcrtoprovidc tbcsclowwqcs,andindccdtorcducc
tbcwqcstromonccountrytoanotbcrintbccompctitivcbid
to ottcr morc tavorablc conditions to intcrnational capital,
tc

cg

vcrnmcntsnccdDdcstroytbclaborunions,andtopro-
btbttstrikcsandotbcrunionactivity.Systcmaticimprisonmcnt,
torturc, and assassination otlabor and political lcadcrs tbc
imposition otcmcrgcncy rulc, martial law, and militaryov-
crnmcnt is uscd in onc Tbird World country attcr anotbcr.
I ndccd, tbc wbolc statc apparatus bas to b adaptcd to tbis
TbirdWorldrolcintbcncwintcrnationaldivisionotlabor.
Tbis rcprcssivcmovcmcntbasswcptsystcmaticallytbrougb
Asia,Atrica,andLatinAmcricaintbccourscottbc I970sand
dcmonstrablyisnot simply duc tosomckindotautonomous
political torcc to combat Communism (wbicb bas bccomc a
ratbcrdoubttulpolicyanyway,atatimcwbcncvcntbcLnitcd
StatcsbassocialistaIlicsandsomcsocialistcountricscollabo-
rat witb tbcsc rcprcssivc rcgimcs). Tbis rcprcssivc political
polcy bas vcry clcar cconomic purposcs and tunctions-to
makctbcsccconomicsmorccompctitivcontbcworldmarkct
bylowcringwqcs andtosurprcsstboscclcmcntsottbclocal
bourgcoisicwboarcticdtotbcintcrnmarkct.Tbisscctorot
tbcbourgcoisicprcssurcdtorccrtainkindsotmildrcstrictions
Worl Crisis Theor and Ideolog I 3 I
ottbcopcrationsotmultinationalcorporationsinanumbcrot
TbirdWorldcountricsduringtbclatc I90sandcarly I970s.
Sincctbcn,tbcscrcstrictionsbavcincrcasinglybccnrcmovcd,
andoncgovcrnmcntattcranotbcristallingovcritsclttoottcr
tavorablcconditionstointcrnationalcapital.
Tbcmottonowistoworktortbcworldmarkctratbcrtban
tor tbc intcrnal markct. Lttcctivc dcmand on tbc national
markctis not,andisnotintcndcdtobc,tbcsourccotdcmand
tornationalproduction, dcmandontbcworldmarkctis,andis
intcndcd to bc, tbc sourcc ot markct dcmand. Tbcrctorc
tbcrc is no rcasontoraisc tbc wagcs ottbc dircctproduccrs,
bccausctbcyarc notdcstincdtopurcbasctbcgoodstbattbcy
producc. Instcadtbcgoodsarcsupposcd to bcpurcbascdon
tbcworldmarkcttaraway.Animportantcccptionistbcsmall
local markctottbcbigb-incomcrcccivcrs,wbicb issupposcd
tocpand.Tbus,tbcrcisapolarizationotincomc,notonlybc-
twccndcvclopcdandundcrdcvclopcdcountricsontbcglobal
lcvcl but also on tbc national lcvcl, witb tbc poor gctting
poorcrand tbcricbgcttingricbcr. In somc cascs, as in Brazil
until I 974, tbc attcmpt to dcvclop abigb-incomcmarkcttor
part ot local industry bas bccnvcry succcsstul. Howcvcr, in
Brazil as clscwbcrc in tbc Tbird World, tbis dcvclopmcnt
modcl is bascd on tbc dcprcssion ottbc wagc ratc~wagcs
bavcbccncutbyaboutbaltinBrazil,Lruguay,Argcntina,and
Cbilcandarcbcingtorccddown in Pcruandclscwbcrc~and
tbctorccdmarginalizationanduncmploymcntotlabor.Botb
ottbcsc proccsscsarcrapidly incrcasingtbc immiscrationot
tbcmasscsandtbcpolarizationotsocictyintbcTbirdWorld.
Morcovcr, sincc ingcncral tbcintcrnal markct is bcingrc-
straincd and rcstrictcd, tbc scctor ot tbc bourgcoisic tbat
dcpendsontbcintcrnalmarkct,asinCbilcandArgcntina,also
bas to bc rcprcsscd. Tbcrctorc, big capital must institutc a
militarygovcrnmcnttbatwillrcprcssnotonlylaborbutalsoa
scctor ottbc bourgcoisic and ottbc pctty bourgcoisic. Tbc
govcrningallianccis bctwccntbc scctorotlocalcapitalallicd
witbintcrnationalcapitalandtbcirmilitaryandpoliticalcccu-
tors. Tbis arrangcmcntinvolvcsavcrysubstantialrcorganiza-
tion ottbc statc in tbc Tbird World, andottcnitsmilitariza-
I 32

Andre Gunder Frank

tion,sotbattbcTbirdWorldcanmorccttcctivclyparticipatc
in tbcintcrnationaldivisionotlabor.
Now insomc placcs sincc latc I 97, inotbcrs sincc I977
and I978, tbcrc appcars to bavc bccn arcvcrsalottbis tcn-
dcncy toward military coups, cmcrgcncy rulc, and martial
law. TbcrcbavcbccnclcctionsinIndiaandSriLanka,pscudo-
clcctionsinBangladcsbandtbcPbilippincs,clcctionsinGbana
andNigcria,clcctionsortbcirannounccmcntsinvariousparts
otLatin Amcrica, andsomcpcrbapssignincantlibcralizationin
tbc militaryrcgimc inBrazil. Somc pcoplc attributctbcscdc-
vclopmcntstoPrcsidcntCartcrsbumanrigbtspolicy,tbougb
it is a bit ditncult to sustain tbc ctn cacy otbis buman rigbts
policywbcninquitcatcwcrucialcascsicitbcrwasabscntor
wasrcstraincdintbc bigbcrnationalintcrcst. `tbcrpcoplc
attributc tbclibcralization to incrcingmassmobilizationin
many parts ottbc Tbird World. Still otbcrs attributc tbcsc
apparcnt cbangcs to a supposcd tailurc ottbc ncwpolicy ot
cport promotion and-ccrtainly according to many Brazil-
iansto tbc rcncwcd importancc otapolicy otimport sub-
stitutionandtbcwidcningottbcintcrnalmarkct.Howcvcr,at
tbistimcanysucbrcdircctionottbcTbirdWorldcconomicsis
bardly noticcablc. Kcncwcd importsubstitutionintbcTbird
Worldwouldbcobjcctivclyaidcdandabcttcdbyatar-rcacbing
protcctionistdrivcandtbcsubstantialbrcakdownottbcsystcm
otintcrnational tradcand nnancc clscwbcrcintbcworld. As
tbc world cconomiccrisis dccpcns, tbis cvcntuality is admit-
tcdlyadistinctpossibility,butsotaritbasnotcomctopass. In
tbcTbirdWorld,progrcssivcimportsubstitutionot consumcr
goodstbougb lcss sootcapitalgoodsproduccd tor tbc c-
portmarkct-would rcquircarclativclymorccqualdistribu-
tionotincomcandapoliticallymorcbcnignrcgimctopcrmita
broadcr coalition ot classcs In otbcr words, tbcsc pcoplc
arguctbattbcdarkdaysottbcmid- I970sarcovcr,andtbatwc
arcagaintacingtbcprospcctotarcdcmocratization,oratlcast
limitcd dcmocracy, in many parts ottbcTbirdWorld. Lvcn
tbis mcasurc otdcmocracywould ottcrbcttcrconditions tor
popularmobilizationandtortbccontinuationoraccclcration
otnational libcration movcmcnts and otsocialistrcvolutions
inonccountryattcranotbcrintbcTbirdWorld
World Crisis Theor and Ideolog I 33
ntbcotbcr band, itmayalsobcargucdwitbconsidcrablc
cvidcncctbattbcscrcccntdcvclopmcntsdonot rcprcscnttbc
rcvcrsalottbc cmcrging ncwmodclotcconomic intcgration
ot tbc Tbird World in tbc intcrnational division otlabor in
rcsponsctotbcdcvclopmcntottbcworld crisis, buttbattbis
apparcnt rcdcmocratization is simply tbc institutionalization
ottbisncwmodclotcconomicgrowtb bascdoncportpro-
motion. Scvcrcpoliticalrcprcssionistbcmidwitctotbisncw
modcl,butoncctbcmodclisinplacc,itispossiblctocascotta
bitonpoliticalrcprcssion.Tbcn,indccd,itisnotonlypossiblc
butpoliticallyncccssaryanddcsirablctogctawidcrsocialbasc
tor tbc political rcgimc and to institutc a kind ot limitcd
political dcmocracy by banding ovcr tbc govcrnmcnt trom
militarytocivilianrulc. buttbcscpoliticalmodincationswould
not bcmadc inordcrtoovcrturntbcprcscntcconomicordcr
and again promotc import substitution, lct alonc so-callcd
noncapitalistgrowtb or somc varicty otsocialism. Instcad,
tbcir purposc would bc to maintain and institutionalizc tbc
inscrtionottbcTbirdWorldintotbcintcrnationaldivisionot
labor as low-wqc produccrs during tbc prcscnt world cco-
nomic crisis. Itwc lookrcalistically at wbat is bappcning in
Asia, Atrica, and Latin Amcrica, tbcrc is vcry considcrablc
cconomicandpoliticalcvidcncctortbislattcrcplanation.
A political countcrpart ot tbis cconomic altcrnativc is a
rcncwcdpopulistallianccotlaborandbourgcoispopulartorccs
and partics. Tbis alliancc wouldprcsstor tbcamcliorationot
politicallyrcprcssivcrcgimcsandtbcirgradualrcplaccmcntby
supcrncially morc dcmocratic, but csscntially tccb
'
cratic,
oncs to implcmcnt tbc sc tundamcntally cclusivist and
antipopulist cconomic policy In tbc pursuit otsucb unboly
allianccsaroundtbcTbirdWorld,itnowsccmsopportuncto
rcsurrcctall kindsotbygoncpoliticians.Tbcscpoliticiansdid
notbavclctt-wingsupportintbcirbcyday,anddidnotpursuc
vcry progrcssivcpolicics, but tbcy nowrcccivcsupporttrom
tbc lctt to implcmcntpolicics tbat arc tar morc rigbtisttban
tbcirprcvious oncs. Tbcscrigbtistpolicicsnowappcarastbc
lcsscr cvil comparcd to tbc policics ot tbc currcnt (ottcn
military)govcrnmcnts Tbcrctorc, tor lack otbcttcr altcrna-
tivcstbcoppositionisnowrallyingbcbindpoliticalngurcslikc
}4
Andre Gunder Frank
Lcaa:co i:ei ia C|ile, siles saa:ez ia olivia, ie:aaaco
elauace Ie::; ia re:a, Aoloo aac Azi|e ia rige:ia,
eaigao Aaiao ia :|e r|ilippiaes, r:auo, ia I|ailaac, laci:a
Gaac|i ia iacia, aac evea :|e g|os: oi Ali |a::o ia ra|is:aa
:o leac p:og:essive` uoveuea:s :|a: a:e li|el; :o uaia:aia
:|e essea:ials oi :|e s:a:as ao aac ce::a:al; ill ao: oiie: aa;
:eal cevelopuea: al:e:aa:ives.
Io :|e ex:ea: :|a: :|ese policies aac poli:iciaas a:e a :ealis:ic
poli:ical al:e:aa:ive a:oaac :|e I|i:c vo:lc, o::|ocox ce
velopuea: :|eo:; aac iceolog;, as ell as p:og:essive cepeac
eace o: evea ae cepeaceace :|eo:;~ao: :o uea:ioa :|e
C|iaese I|:ee vo:lcs :|eo:; aac :|e sovie: aoacapi:alis:`
a; :o aa:ioaal liee:a:ioa, ceuoc:ac;, aac va:ie:ies oi social
isu-a:e all couple:el; eaa|:ap:. U ace: :|ese ci:ca:ns:aaces,
:oca; aoae oi :|ese :|eo:ies aac iceologies caa oiie: aa;
:ealis:ic polic; al:e:aa:ives aac p:ac:ical poli:ical ecoaouic
gaiceliaes io: :|e pa:sai: oi ecoaouic cevelopuea: o: aa
:ioaal lieera:ioa, le: aloae oi socialis: coas::ac:ioa. lacepeac
ea: aa:ioaal cevelopuea: ia :|e I|i:c vo:lc |as p:ovec :o ee
a saa:e aac a celasioa, aac seli:eliaace, collec:ive o: o:|e:
ise, is a u;:| :|a: is sapposec :o |ice :|is sac iac: oiliie ia :|e
o:lc capi:alis: s;s:eu. I|ese poli:ical coup:ouises oi :|e
avoecl; :evola:ioaa:; socialis:, aac pa::icall; :|e Cou
uaais: ra::;, lei: a:oaac :|e I|i:c vo:lc e aao:|e: uea
sa:e oi :|e iceological c:isis oi :|e lei: ia :|e iace oi :|e p:esea:
o:lc c:isis.
s:aliais: :|eo:ies oi lis:o:ical p:og:essioa e; iaevi:aele s:ages
:|:oag| ieacalisu, capi:alisu, socialisu, aac Couuaaisu,
:|e ::aasi:ioaal exis:eace oi :o o:lc ua:|e:s, oae capi:alis:
aac :|e o:|e: socialis:, aac :|e os:s:alia sovie: aueacuea:
p:oposiag a aoacapi:alis: pa:|` ia :|e ::aasi:ioa :o socialisu
|ave ce::aial; eeea :elega:ec :o :|e cas:eia oi |is:o:; e;
expe:ieace K|:as|c|evs |ope oi ea:;iag` :|e ves: |as i:seli
eeea ea:iec, aac :|e sovie: U aioa is ::;iag :o coupeasa:e io:
i:s coupa:a:ive ecoaouic, poli:ical, aac iceological ea|aess
,evea uo:e evicea: ia :|e popala: ceuoc:acies oi Las:e:a
La:ope; :|:oag| iac:easiag uili:a:; s::eag:|, :|as :|:ea:eaiag
ao: oal; i:s po:ea:ial eaeuies ia :|e ves: |a: also i:s sapposec
World C risis Theor and Ideolog }
allies ia :|e Las:. I|e maois: :|eo:; aac p:ac:ice
'
i ae
ceuoc:ac;, ` al|iag oa :o legs, ` Cal:a

al kev
9
l

:.oa, aac
I|:ee vo:lcs ,:o sape:poe:s, :|e o:|e: .acas:nal.zec

oaa
::ies aac :|e I|i:c vo:lc iaclaciag C|iaa; |ave eeea senoasl;
c|alleagec e; evea:s iasice aac oa:sice C|iaa aac |ave

e
cead; eeea ceaoaacec evea e; :|e e:s

|ile iai:

ial Aleaa.aa
Vo:|e:s ra::;. I|e ia:e:aa:ioaal ,al|e.: ao: aa.ve:sal; s;u
pa:|; i:| :|e uocels oi Caoaa gae::illa

ac popala:

ove
uea:s Ko:eaa juche seli:e|aace, aac V.e:aauese aa:.oaal
liee:a;ioa |ave givea a; :o sea:c|iag c:i:ia

es

ac |ea::iel:
coae:s auoag uaa; oi :|ei: p:evioasl; ea:|as.as:.c sappo::e:s
a:oaac :|e o:lc. I:o:s|;is: aac ae lei: u

oveuea:s o aa;
va:ie:ies |ave lei: a ::ail oi cisillasioaec o: c.saiiec:ec u.|:aa:s
:o ee :eiateg:a:ec ia:o :|e es:aelis|uea:. ro, ai

e: :|e
la:gel; seli-ia1ic:ec elec:o:al ceiea:s oi :|e Couuaa.s
(
a:
:ies ia i:aace, spaia, l:al;, aac evea )apaa oa :|e uaa.c

pal
level, oese:ve:s i:ou lei: :o :ig|: a:e

i:iag

a:
'
couuaa.su
oii as aei:|e: La:opeaa ao: Couuaa.s: |.le .: las:ec. I|e
sec:e:a:; geae:al oi :|e i:eac| Couuaa

s: a::;,

eo:ges
ma:c|ais, issaec ceaials` oi La:ocouuaa.su s ceu.se a: :|e
ma; 99 pa::; coag:es

|ic| also celee:a:ec :|e

c oi :

e
lei: alliaace i:| :|e soc.al.s:s aac iolloec ma:c|..s s leac .a
aao:|e: aeoa::a:a :oa:c mosco.


l a :|e ueaa:iue, Leag Xiaopiags :|ea:ncs oa |.s 9
?
:oa: oi :|e U ai:ec s:a:es :o ge: ves:e:a :ec|aolog; aac c:ec.:
io: :|e c:ive :o ua|e C|iaa a o:lc iacas::ial poe: e; :|e
;ea: !uuu oal; |ig|lig|: C|iaese cevelopuea:s

ve: :|e las:

cecace siace :|e ceiea: oi :|e Cal:a:al kevola:.o

aac :|e
coaiall oi Lia iao ia 9 ,appa:ea:l; io: i

vo:.ag a

ap
p:oc|euea: i:| :|e sovie: Uaioa ias:eac o

| :|

a.:e
s:a:es;, :|e a; as clea:ec io:

|
`
a

al.. s c

oac.|a:o

;

liae oi piagpoag ciplouac;, :|e .av.:a:.
`
a

o r.xo

:o v.s.:
C|iaa, :|e laaac|iag oi :|e ioa: moce:a.za:.oas ,agncal:a:e,
iacas::;, scieace aac :ec|aolo

, a
^
c ceiease;, a
'
loage:
:|:oag| seli:eliaace as i:| io:e.ga ..c aac ::ace ,

.c

u

:e
:|aa aac:aplec ia :|e 9us

-c

pe:c

a: oi

.c| .s

:|
capi:alis: coaa::ies;, :|e :e|a|.|:a:

o

oi L. s|ao., aac :e.a
s:a:euea: oi :|e capi:alis::oace: v.c:.us oi :|e Cal:a:al kevo
I 5 Andre Gunder Frank
lution, lcd by OcngXiaoping. Now bc is taking Cbinaon a
grcatlcapbackwardtoI 9J7, tbcycarbctorctbcGrcatLcap
lorward, in ordcrtogct abcttcrrunningstarttortbclcap to
grcat-powcrstatusintbctwcnty-brstccntury.
Jn tbc wakc ot tbcir own cconomic and rclatcd political
problcms, tbc socialistcconomics ottbcSovict Lnion and
Lastcrn Luropc arc implcmcnting a dctcntc witb tbc Wcst
(albcit in compctition witb Cbina) to import Wcstcrn tccb-
nology and pay tor itwitbcportsproduccd bycbcaplabor
tbrougbtbousandsotbipartitcandtripartitcproductionqrcc-
mcntswitbWcstcrnnrmsandTbirdWorldcountrics.Lvcnso,
tbcLastLuropcanandSovictdcmandtorWcstcrntccbnology
isgrowingsorapidlytbattbcircumulativcdcbttotbcWcstbas
grown trom S8 billion in I 972 to ovcr S0 billion in I 979,
dcspitc tbc Lastcrn balancc ot paymcnts surplus witb tbc
Soutb,wbicbtbcLast uscs inparttoottsctitsdcncitwitbtbc
Wcst.Morcovcr,asBrczbncvbascorrcctlyobscrvcd,bccausc
ottbcbroadcconomiclinksbctwccncapitalistandsocialistcoun-
trics, tbc ill cttcctsottbc currcnt crisis in tbc Wcstbavc also
bad an impact on tbc socialist world. And tbcrctorc, bis
collcagucandcbairmanottbcBulgarianStatcCouncil,Todor
Zbivkov,adds,itmaybcbopcdtbattbccrisisintbcWcstmay
comc toarapidcnd. Tbccrisiscontinucs,bowcvcr,and tbc
Luropcan socialistcconomicsgrcwonlybaltastastas tbclast
bvc-ycarplanscallcdtor,andinsomcottbcmoutputactually
dcclincd in I 979. Not only do tbc Lurocommunist ptics
bopctbccrisiswillgoaway,tortbcirparttbcyalsobclpcapital
to ovcrcomc tbc crisis cconomically by imposing austcrity
mcasurcs on labor, as in Spain and Italy, and ovcrcomc tbc
crisis politically by strcngtbcning tbc statc and its rcprcssivc
powcr,wbicbtbcCommunistPartyotItalyisnowtbcnrstto
dctcndandcpand.
ncwondcrsbowtbcotncialpronounccmcntsotsclt-stylcd
Communist and rcvolutionary socialist ccntcrs, partics, and
movcmcntscancontinuctoclaimtbat tbc situationiscccl-
lcnt (Bcijing), socialism is advancing strongcr tban cvcr
(Moscow),andrcvolutionarypossibiliticsarcaroundtbccor-

ncr atlcastinsoutbcrnLuropc(Trotsk
/
ists).Tbisispticu-
Worl Crisis Theor and Ideolog
I 37
larly surprising in tbc tacc ottbc domcstic and torcign poli-
cicsrcprcssion at bomc and wars ab

oad

bat mark con-

tcmporarysocialistcountrics

Commu

istpartics,andr

olu-
tionary movcmcnts caugbt m tbc grp

o a gravc crsis ot
Marism tbat is costing tbc causc otsocialismcountlcss mil-
lionsotsupportcrsaroundtbcword
`
.

Tbc currcnt idcological and political dilcmmaotsocialism

dcrivcstrom,andmaybcsummarizcdby,tbccomplctcaban-
donmcntottbc tamousmcans andcndottbcManifesto of the
Communist Party: Workcrsottbcworld,unitc!Botbtbctbcory
and tbc practiccotprolctarianintcrnationalism a

ns

o
tbc goal otcommunismbavc bccn rcplacc by socialism H
onc countryminc. Morcovcr, commum

m bas bccn rc-

placcd by socialism 8 tbc cnd goal ot social dcvclopmcnt.
TbougbtorMar,Lngcls,andLcninsocialismmcantno

orc
tbananunstablctransitionalstagcontbcroadtocommumsm,
itbasbccnconvcrtcdintoancndstationorstcadystatc.S

c
socialistsclaimtobavcarrivcdalrcady,andotbcr,morcrcalistic
oncs(ironicallycallcdidcalistsbytc!ormcr,
.
sucbasao
Zcdong,onlyclaimtbattbcircountryis mtransitiontosocial-
ism.InprcrcvolutionaryCbilcitwascustomarytotalko tbc
transition to tbc transition to socialism, bctorc tbc milnary
coupviolcntlydcstroycd tbcsc illusions and
)
laccd only rc-
strictcd dcmocracy on tbc agcndaas tbc distantgoal to bc
acbicvcd. Inanattcmpttocscapcasimiltatc,tbcLurocom-
munists proposcd a bistoric compromisc as

b
.
cir goal. t
coursc it socialism no longcr mcans tbc transition to com-
munis tbrougbprolctarianintcrnationalismbu

bccomcs an
cstablisbcdstatcinonccounttyandadistantgoal mot?cr

s,tb

dcn nition ot a socialist statc and tbc mcans otacbicmg it

bccomccndlcsslydcbatablc. Tbus, socialists bccomc|ikctbc
pcrson wbo looks tor bis lost watcb only un?cr tbc nc

cst
strcctligbt, bccausc bcclaimstbatbcca

ccittbcrcquickcr
and bcttcr, altbougb tbc watcb tor socialism was lost

somc-
wbcrc clsc down anotbcr road and bas madc tbc timc ot
communismrcccdcback intoinnnitcdarkncss.

TbcmorctbcMaristtbcorytbatis supposcdtogui

dcnd
j ustity tbissocialistpracticc iscamincd undcrtbcpain|igbt
Andre Gunder Frank
ofday,tbcmorcindistinguisbablcdocsMarxismbccomcfrom
tc ort

od

x,cvcryday,bourgcoiscapitalisttbcory and prac-

uccof nauon dcvclopmcnt. Itisironicinvicwoftbcstatcd
goals
'
fMarxts

-butpcrbaps notsurprisingin tcrms ofits

analysts

tbatsmc

tbcstatc-promotcdcapitalistasccnsionof
non

olomal)apanmtotbccbarmcdcirclcofindustrialpowcrs
outstd

tbcWcstonly tbc`socialistcountricsbavcbccnabl
toa

cv

,or
.
asnowintbccascofCbinarcalisticallyaspircto,
parttctpauonmtbcworldcapitalistcconomyonabasistbatis
c

cnrcmotclycqua to tbatoftbcdcvclopcdcapitalistcoun-
tncs.N
.
one
.
oftbcTbtrdWorldcountricsbavccscapcddcpcnd-
cntcapttaltstundcrdcvclopmcnt,nordoanyoftbcmsbowany
p

ospccts ofdoings

intbc forcsccablc futurc, dcspitc Ura-

ztlian, Korcan, Iraman, or Mcxican miraclcs or oil booms
Cnlysomc `socialistcconomicscannow knockontbcdoo;
oforcbalcngctccaptalistinncrsanctum,bccausctbcywcrc
t

orarilyrclauvclytsolatcdfromtbccapitalistintcrnational
dtvtsto

noflabor .
.
Tbcirisola

ionwasnot-ob,doublcirony-
by tbct

own cbotcc,b

tmatnly bccausc tbc capitalistpowcrs

for

c tt on tbcm durmg tbc Cold War in rcaction to tbcir

soctaltst
.

ransfor

ations of domcstic propcrty, productivc,

and polmcal rclattons, wbicb is tbc otbcr rcason for tbcir

uccc

s.Lvcntbcmost

ationalist,dcpcndcnt,andstatccapital-
tstTbtrdWorld

oun

ncslicasscr`sLgyptncvcrattcmptcd
tbat. Iowcvcr, tfCbma, Vtctnam, Yugoslavia, Hungary,Po-
la

d, and pcrbaps

lastb

t notlc

t tbc SovictLnionarcany
gutdc,tcfurtbcrtronytstbat,dnvcnonbytbcirownintcrnal
cco

mt

nd

olitical criscs, tbcsc countricsdo notwant to

usc soctatsm to cballcngc tbc Wcst in its timc of crisis
r

tbc

, tbcy want to join tbc capitalist world systcm as na

ttontst com
P
ctitivc partncrs on as ncarly cqual tcrms as
pos

st
.
blc and m tbc proccss lcnd tbc capitalists an cconomic
polmcal

ndtbcr

alsoidcologicalbandinovcrcomingtb
worldc

ist
.
sofcapttalts

. SomconcinLastGcrmanysu@cstcd
tbatsoctaltsts
"
o

ldwmtbcraccwitbtbcWcstassoonastbcy
sto

pcdrunnmgm

tb

samcdircction.Uutaslongastbcyplay
tag

tcad
'
tbcsoctaltstcountrics,andwitbtbcmtbccauscof
soctaltsm tn much of tbc world will rcmn c b , aug t tn a
World Crisis Theor and Ideolog
I 39
dilcmmaofdamncdiftbcydoanddamncdiftbcydon`t.Cris
tbisCatcb-22simplytbcincvitablccndoftrcadingtbcpatbof
`socialisminonccountry,wbilcconfrontingtbccruclironics
ofanancicnttriplcGrccktragcdyintbcguiscoftbcmodcrn
worldsystcm!
Anumbcrofqucstionsprcscnttbcmsclvcsabouttbcfurtbcr
dcvclopmcntand rcsolution oftbc world crisis or criscs and
abouttbctbcorytoguidctbcirintcrprctationandtbcidcology
toinhucncctbcirpracticc. Hcrc andnowitisonlypossiblcto
poscsomc oftbcscqucstionsandtolcavctbciranswcrs opcn
tofurtbcrrchcctionintbcncarfuturc,andpcrbapstorcsolu-
tionorrcformulationbybindsigbtintbcmorcdistantfuturc.
Currcntdcvclopmcntsposctbcfollowingqucstionsintccb-
nicaltcrmsforbistorians,sociologists,cconomists,andMarx-
ists, and in morcgcncral tcrms forpoliticalpolicymakcrsand
tbc public. Arc tbcrc numcrousparticular criscs inmany so-
cictics or aspccts oflifc, or is tbcrc a gcncral crisis-in tbc
scnscoftbc dcnnitionquotcdinouropcningparagrapb-ina
singlc world systcm! Arc tbc criscs rccurrcnt occasional or
cyclicaloncs,subjccttopossiblcrcsolution,ordocstbcdcvcl-
opmcntofcrisis rcprcscntastcp cvcntbclaststcptoward
a gcncral crisis tbat spclls tbc cnd of tbc capitalist world
systcm! Implicit in our obscrvations and formulations is tbc
sugcstionofasinglcworldcapitalistsystcm,wbicbisundcr-
goinganotbcrinascricsoflong,cyclicalcriscs,fromwbicbit
wiU likclyrccovcrtbrougbfar-rcacbingandfundamcntalcco-
nomic, social, political, and cultural rcadjustmcnts, but tbis
crisis and its rcsolution also contributcs to tbc cumulativc
dcgcncrationand, aftcrsucccssivccriscs,tbcultimatcdissolu-
tionofworldcapitalismintbcstillunforsccablcfuturc.
Oocs tbc prcscnt crisis posc tbc cconomic altcrnativc bc-
twccn incrcasingmarkct dcmand to cxpand prontability and
rcducing costs ofproductiontbrougbincrcasingcxploitation
todccpcnprontability (inMarxisttcrms, rcalizationofvaluc
vcrsusraisingsurplusvaluc)!Oocstbccrisisposctbisaltcrna-
tivc in sucbaway as toobligc capitaland labortooptfor tbc
sccond altcrnativc ofgrcatcr cxploitation witb lcss cmploy-
mcntandpublicdcmand,be/ore tbcnrstaltcrnativcofrcncwcd
I40
Andre Gunder Frank
cpansioncan again bccomc arcalisticpossibilityasarcsult
prcciscly,oftbc prior rationalizationandcploitation! Ooc

bis option oor impcrativc forworld capitalist rccovcry

implyorrcquircatcmporaryincrcascincapitalistcploitation
or ctractionofsurplus valuctbrougb rcduction oftbcwork
forcc, rcorganization and spccdup of tbc work proccss at
lowcr rcal wagcs for tbc rcmaining workcrs, and rcduccd
wclarc

for tb

popuation in gcncral in favor ofmonopoly

capital m tbc mdustnal capitalist countrics! Oocs tbc samc
rcsolutionoftbc capitalistcrisisalsoinvolvc tbcrclocationof
so

c i

ndu

trial pro

csscs bascd on tbc incrcasc in supcrc-

ploitation m tbc Tbird World! Oocs tbc samc rcsolution of
tbc world crisis ofcapital accumulationimplyorrcquirc tbc
accclcratcd rcintcgration of tbc socialist cconomics and
f
'
udalPLCcountricsandvirginlandsintotbcworldcapi-
talistcconomy,botbassourccsofadditionalsurplusvalucand
as sourccs of dcmand, in part to compcnsatc tbc dcmand
rcstrictionsintbc dcvclopcd and dcvcloping scctorsoftbc
worldcconomy!Anddocstbisproccssimplytbcctcnsionor
intcnsihcationoftbcopcrationofworldmarkctforccs(and of
tbclawofvalucinMaristtcrms)fromtbcccntcroftbcworld
c
^
pitalistcconomyinto tbcsocialistcconomicsandtopopula-
tions and

spaccs (in tbc Middlc Last, Amazonia, Sibcria, tbc

polar rcgions, tbc scabcd, and cvcn outcr spacc) tbatprcvi-
ou

lywcrccffcctivcly bcyond tbcfronticrsoftbcworldcapi-

talistsystcm!Oocs tbis proccssrcprcscntancpansionoftbc
intcrnal fronticrs ofcapital, analogous to tbc cpansion of
tbc

ctcrnal fronticrs in rcsponsc

,
o cacb oftbc prcvious

ajorworldcriscsofcapitalaccumulation!Oocstbisprogrcs-
sivccbangcfromcpandingtodccpcningcapitalimplyfurtbcr
dcvclopmcntortbcbcginningoftbccndofcapitalism!Wbatis
tbctmcscalcofthisproccssofdcvclopmcntanddcgcncration!

ltistoocarlytoanswcrtbclastqucstion,ifonlybccausctbc
nsc andfallofcapitalismdcpcndsinpartontbc social rcsis-
tancc t

its dc

lopmcnt and tbc gcncration ofcontrary or

altcrnativc pohtical forccs and dcvclopmcnts Tbc political
proccssbasnotyctrunitscoursc,cvcnintbcrcsolutionoftbc
prcscnt crisis, lct alonc in tbc subscqucnt dcvclopmcnt or
World C risis Theor and Ideolog
\4\
dcgcncrationofcapitalismanditsaltcrnativcs. lowcvcr,

tbis
politicalproccssalrcady raiscsan

bcr
'
ffurtbcrqucstions
aboutprospcctsandpolicyfortbcimm
cdiatcfuturc.
Wcbavc alrcady su_cstcd tbat tbcpolitically rcactionary,
conscrvativc and social dcmocratic forccs in tbc
Wcst and
Soutb(andprbapsintbcLast)facccriscsofcconomicthcory,
politicalidcology,andsocialpolicyforwbicbtbcytbc

sclvcs
bavcasyctfoundnosolution.Prc-Kcyncsianncoclassicaland
monctarist cconomic tbcory, fascist political idcology, and
nintccntb-ccnturylibcralsocialpolicysccmtooffcrrcncwcd
framcs of rcfcrcncc and points of attraction (dcspitc tbcir
mutual contradictions) in tbc abscncc ofaviablc altcrnativc
totbcgrowingunrcalityoftbcAmcrican-cum-Kcyncsanway
oflifc. lowcvcr, ncw situations will cvcntually rcquirc ncw
propositions,
and wbo knows wb

combin

tion of ctant
libcral, tccbnocratic, and corporativist doctrincs, as w

ll

as
totally ncw oncs,willwintbc day! Tbcrcsistancct

apitali

t
rationalizationand rcorganizationfrom labor, socialist,cnvi-
ronmcntal, fcminist, ctbnic and nationalist,rcligious and rc-
| cctionist forccs is considcrablc, butbigbly dividcd andvcry
confuscd. So far,tbcy bavc notbccnablc to formulatc sufh-
cicntlyattractivcidcologicalaltcrnativcs.Viablcr

si

stancc,l

t
aloncrcalisticaltcrnativcs,fromtbclaborandsocialistopposi-
tion to contcmporary capitalist rcorganization sccms to bc
dccrcasing ratbcr tban incrcasing. Ccrtainly tbr

+ugbout tbc
worldsocialdcmocraticand
Maristtbcoryand idcology and
labor socialist,andCommunistpartypolicyfaccscvcrccriscs
ofdi;cctionandoflcgitimacy. Altcrnativccnvironmcntaland
fcministforccsarcgrowing,buttbcmorctbcygrow,tbcmor

do tbcir dcmandssccm to bccomc compatiblc

witb tbc cxi-
gcncics ofcapital and tbc morc is tbcir lcadcrsbip co-optcd
intotbcpoliticalcstablisbmcnt.

Byfartbcstrongcstandmostmassivcsocialmoilzat

onm
tbcworld today basbccntakingplaccundcrctbmc,national-
ist, and rcligiousbanncrs. Many oftbcsc

cmcntsar

c
^
-
prcssions ofrcsistancc to tbc prcscnt ca

itali

t a

d sociali

t
ordcrs and to tbc attcmpts at tbcir rationalization. Ltbnic
rcgionalist and nationalistmovcmcnts bavc acbicvcd grcatcr
I 42 Andre Gunder Frank
uass

u
9
e:l:

a::oa aac ex:ess:oa oi c:scoa:ea: ::| :|e eco

aou.c s.:aa::oa :|aa aa; c::ec: ecoaou:c o: ol:::cal c|al
leages :o :e s:a

:as ao. I

uaacs io: aa:oaou; o: sove:e:ga

:;, a

ac

a::oa:s:, c|aavu:s:, aac , :ago:s: aeals, |ave eeea

aacug uc:eas

ag uass sao:: Ye: uaa; oi :|ese uove

uea:s a:e uaaala:ec e; :|e ca::al:s: ::g|: aac c:v:ce :|e
laeo: lei:, i

oi :|e

c|leage s:a:e oe: e: se, aac aoae
oi :|eu :e;ec: a:::c:a::oa :a :|e :a:e:aa::oaal c:v:s:oa oi
laeo: ? :|e o:lc ca::al:s: ecoaou:c s;s:eu.
e|g:oas coav:c::oa coue:aec ::| aa::oaal:s: sea::uea:
as u rolaac, l:aa, aac Aig|aa:s:aa |ave e:u:::ec :|e Ca:|ol:
ro

e)o|a ra

ll aac :|e masl:u A;a:olla| ka|olla| K|o

ueu: :o ue:lze

ill:oas oi eole :o a ia: g:ea:e: ex:ea:

:|a

o:|e: :ceolog.es aac leace:s, al:|oag| ar:s oi As:a
Ainc

, aac :

C

:eeeaa |ave also eeea exe::eac:ag :o

g:ess:ve uoeil:

a::oa a

ace: soc:al:s: eaaae:s. All oi :|ese

uoveuea:

, |.c| a:e l

:|el; :o :a:eas:i; :a :|e cou:ag ;ea:s,

a:e ex:ess:oas
.
oi g:o

ug oala: i:as::a::oa ::| :|e ol:::

cal aac ecoaou.c o|c:es eaac:ec :a :esoase :o :|e c::s:s. Io
:|a: ex:ea:, :|ese uoveuea:s :e:esea: aa::s;s:eu:c :es:s
:aace :
9
:|e :eo:gaa:za::oa oi :|e o:lc s;s:eu e; ca::al aac
io: caual accauala::oa. la all oi :|ese uoveuea:s :|e :e
o

:aa: io:

e :a

|e uix:a:e seeus :o ee easec less oa

soc::s

, :|a: :s, aa:

ca::al:s:, ol:::cs o: evea oa :el:g:oas

coav.c::oas oi :a:egm; o:

e,ec

:oa oi coue::ag :ceolog:es,

aac

s: s::oagl

o

aa::oaal:s: sea::uea:s oi :cea:::; :a
oos:::oa :
9
io:e.ga u:e:es: aac :aaaeace. Ho cea:::iagal
:ese oos:::oa uve

ea:s :eall; a:e :eua:as aa oea aes

::oa. H

:|e ca::al:s: s;s:eu :ll :esoac :o eiio::s :o

ces

:o

::~aac |e:|e: :|e:e a:e aa; al:e:aa::ves :o :|e
ca::al:s: o:lc s;s:eu~:euaias :o ee seea.
9
. LT' S NOT WAIT FOR 1984:
DISCUSSION OF TH CRISIS
Andre Gundr Frnk and Smir Am in
I!s..rs.o Yoa |ave :eac |a: e |ave ::::ea oa :|e ae
c|a:ac:e: oi :|e c::s:s aac :|e s::a:eg:c o::ea:a::oa e a:e
:oos:ag. Io o:gaa:ze :|e c:scass:oa, e s|oalc i:s: oi all
s:a:e ::s a:ose i :s:, aa aaal;s:s oi :|e c::s:s, aac secoac,
|a: a val:c :esoase u:g|: ee.
ve i ac :: aseial :o :a:se seve:al aes::oas :ega:c:ag :|e
c::s:s i::s:, :s :|e ca::ea: c::s:s, |oeve: se::oas :: ua; aea:,
oae oi :|ose coa, aac:a:al o: c;cl:cal c::ses i:ou |:c| ca::al
:su caa eue:ge e; ueaas oi :es::ac:a::ag |:c| coes ao:
:ul; saes:aa::al uoc:aca::oa oi ::s ol:::cal aac soc:al i:aue
o:| secoac, coes :|:s c::s:s, l:|e :|e oae :a I929,ueaa :|a:
:|e:e :ll ee a loag e::oc oi ecoaou:c aac soc:al :as:ae:l::;,
iasc:su, aac coa1:c: auoag s:a:es I|::c, caa oae :ec:c: :|a:
ca:::su :ll ea:e: a ae as:ag :|:oag| c|aages :a :|e
:a:e:aa::oaal c:v:s:oa oilaeo:, :a :|e soc:al ea:l:e::au, aac :a
:a:e:aal ol:::cal :ales, as :: c:c ai:e: vo:lc va: II,evea :|oag|
:|:s ua; occa: ::| a g:ea: ceal oi ag::a::oa aac coaa:c:;
v|ea e e::ag a :|:s las: |;o:|es:s, e a:e oev:oasl; ao:
:|:a|:ag :a :e:us oi l:al; ea: :a:|e: aeoa: :|e oss:e:l::; oi
:es::ac:a::ag oa a o:lc scale. I|e :ue:as io: sac| :es::ac
:a::ag oalc coue i:ou :|e La::ec s:a:es, aac :: oalc oea
a ae i:oa::e:s io: ca::al:s: cevelouea: :a :|e I|::c vo:lc
aac a:oaac :|e sov:e: La:oa. I|e ioa::|, uo:e geae:al, aes
::oa :eie:s :o oa: :ceas aeoa: :|e sec:ic::; oi :|e ca::ea:
c::s:s, |:c| e see cevelo:ag as a uouea: :a a |:s:o::cal
This is an English translation of an interview that was originally published
in the Italian j ournal II Manifesto in February 1 974. It was translated
by Mimi Keck.
I 45
I 44
Andre Gunder Frank and Samir Amin
pbasc, cbaractcrizcd by a morc gcncral crisis ot tbc wbolc
capitalistsystcm. By tbatwc mcan tbisbistorical tormations
currcntinability-cvcninmomcntsotprospcrity-tosatisty
pcoplc`s bistorically dctcrmincd nccds and to ccrciscbcgc-
monyovcrtbcmasscs,atlcast tboscintbcindustrialrcgions.
Tbcpoliticalimportanccottbisbypotbcsislicsintbctacttbat
onc candcrivctromtbisspccibcitytbcrclcvanccotarcvolu-
tionarypcrspcctivcnow,cvcnattbcccntcrottbcsystcm.Tbis
wouldconstitutcanimportantdittcrcncctromprcviouscriscs,
wbcrctbcsystcmswcaklinkswcrcinpcripbcralorrclativcly
pcripbcralarcas.Tbislastqucstiontoucbcsontbcproblcmot
tbccapitalistsystcm sbistoricity,andtbcrctorconitsdcgcn-
crationandtbccbaustionotitsbistoricaltunctionovcrtimc.
Wcwould add, tortbcsakcotclarity,tbattbissccmstousto
bavcvcrylittlctodowitbbrcakdowntbcorics.
ANDRE GUNDER FRANK: Tbcrc basbccnagrcatdcal otdiscus-
sionamongSamir,mysclt, andotbcrcconomistsonall tbcsc
problcms,andwcwilltrytosummarizcit.Pcrsonally,Ibavca
lot otdoubts about tbc cbaustion ot capitalisms bistorical
tunctionandabouttbcbcginningotapbascotdcgcncration.I
tbinktbattodaytbccapitistsystcmbastoscckncwtronticrs
tor its dcvclopmcntin tbcTbirdWorldand intbc countrics
wbicb gravitatc around tbc LSSK. Tbc problcm consists in
knowingwbctbcrtbis scarcb canrcsultinanytbing, and tbc
ctcnttowbicbsucb an outcomccouldbclp tbcsystcmovcr-
comctbcprcscntlyinsurmountablcproblcmswitbinitsccntcr
arca.I notbcrwords,tbcctcnsionotcapitalismtoarcasintbc
pcripbcry and in tbc so-callcd socialist world would bc a
natural stratcgy tor tbc systcm. But tor a morc organic
contribution,itwouldbcbcttcrtorSamirtosumuptbcscnsc
ot ourrcccntdiscussionsaroundtbcqucstionsyouarcasking.
ILMANIFESTO: Butwbatdoyoutbinkistbcmostsalicntcbarac-
tcristicottbcprcscntcrisis!
FRANK: Itbinktbatitisaclassicaccumulationcrisis,tbougbit
migbtbcanaccumulationcrisisgrattcdontoadccadcntpbasc
Let's Not Wait/or 1984 I4
ottbcsystcm,somctbingwbicbbccamcvc
'
yvisiblci nI 9I}.
TbccrisisappcarcdatanintcrnationallcvclinI
/
7, wbcntc
ratcotpronttcll,and incvitablygotworsc,notin

I 974b

n
tbctollowingycars. Incttcct,Icnvisagcalongpcrodotcrtsis,
analogousto,butnottbcsamcas,tbconctbatwcnttrom I 9I 4
to I 94, witballtbcdisordcrtbatitbrougbt.
.
nccanalsond
analogics totbc I 87 5-I 89 crisis,wbicbwitncsscdtbcbirtb
otimpcrialism.
ILMANIFESTO: Towbatcanwcattributctbctallingratcotprobt!
SAMIR AMIN: In avcry scbcmaticway,wbicbprcsag

s qrcc-
mcntwitb somc otyour bypotbcscs,itcould bc attributcd to
tbc cbaustionotonc modcl otaccumulation and, tbcrtorc,
tbc nccd tor anotbcr modcl, wbicb is ditbcult to dclincatc
clcarlywitbintbc capitalistsystcm. But

lctmc try torcspond

toyourqucstionsinamorcordcrlytasbion.
.

lirst otall I must cmpbasizc tbc tact tbat tor mc tbis is a

structural cr{sis in tbc rcal scnsc ottbc tcrm. It is ncitbcr a
conjunctural crisis, nor a normal rcccssivc pbas

or a dc-
mand tor simplcrcadj ustmcntsto tbc cncrgyprccinc

casc,
norcvcnapurcdcmandcrisistorrcstrictionsotcpcnditu

cs
witbin tbc tramcwork ottbc systcm. Tbis is a crisis wbicb
attcctstbccurrcntaccumulationmodcl,itsbascotsocials

p-
port,tbcbalancc bctwccntbcc

pitalistmodcot
[
ouction
andtbcintcrnalandctcrnalpcrpbcralarcas.Acrsis,insum,
wbicbputsmodcsotproduction,tbcpoliticaltramcwork,and
systcmsotsocialallianccontrial.
IL MANIFESTO: In otbcr words, a crisis tbat capitalism

nn
'
t
gctoutotbyrcducingwqcsori

sti

utingrcprcs

ivcpolicicsin
somcarcasottbcworld,butwbicbimplicsconctsanalogous
totbosctbattookplaccintbcpcriodbcginningintbc I 950s,
wbicbcndcdupcttcctingacbangcintbcaccumulationmodcl!
AMIN Wbcn tbcdcvclopmcntottbc productivc to

rccs c

-
tcrs into contradiction witb tbc rclations otproduction,

bis
tcndstoimposc anoveral rcstructuring, notonlyintccbnical
I4 Andre Gunder Frank and Samir Amin
an cconomicarcasbutalsointbcsocialandpoliticalallianccs
wbicb corrcspond to tbc cisting accumulation modcl. Tbc
datcswitb wbicb wcmigbtcomparc tbccurrcntcrisisbistori-
callyarc I 848, I 87 I , and I 9I 7. Butwbatwcarcintcrcstcdin
cmpbasizingistbctacttbatinsucbpcriodsotcrisis tcnsion
imbalancc, and attcmpts to rcadjust, tbcrc is a rbirtb of
political litc, and spacc opcns up tor rcvolutiony activity.
Tbus I 848 p

roduccd tbc Mani/esto 0/ the Communist Party,

I 87 I tbc PartsCommunc, I 9I 7tbc ctobcrKcvolutionand
latcr, tbcvastcbangcsinCbina.
ILMANIFESTO: Howcvcr, I929didnotopcnuparcvolutionary
brcacb.
AMIN: It`s not tbcycar I929tbatwc bavc to bc conccrncd
witb,buttbcwbolcpcriodtrom I 9I 4to I 94. WorldWarI a
worsc

ban notbing stylc cconomic rccovcry, tbc ctobr

Kcvolution, tascism, andWorldWar II,wbicb tbrusttbc LS
modcl, witb its

twcnty

bvc ycars otctraordinary dcvclop-

mcnt, onto tbc mdustral world. Tbc criscs indicatc tbc dit-
tcrcnt

pcriodsin tbcbistoryottbccapitalistsystcm,cacbonc
otwbicb bas a
F
iv

nsystcmotsocial allianccs. Witboutgoing

ba

ktotbcbcgmnmg, I 848markstbcctcnsionotcapitalism,
wbicbup

otbat

ointwaslimitcdtoLngland,nortbcrnFrancc,
and Bclgtum.

Witb I 848 and tbc Mani/esto, tbc prolctariat

bccamc conscious tor tbc brst timc. Tbis was quickly ovcr-
co

cbytbctantticcpansionotcapitalisminLuropc.Italian

mty,tbcAustro-Hungariancmpirc,railroads,corporations
m sum, a morc advanccd stagc in tbc dcvclopmcnt ot tbc
productivctorccs.
FRAK: And

al

tbis ontbc basisotcbangcs tbattookplacc

durngtbcc

tstsitsclt, tbc acbicvcmcntotncw tccbnological

lcvcls, ncw

mtcrnal rclations among tbc bourgcoisics and

amongtbcdtttcrcntproductivcscctors.
AMIN: Attcr I870wcbadimpcrialism,tbcmonopolics,world
cpansion,tbcn tbc longpcriodtrom I 9I4to I94and attcr
Let's Not Wait/or 1984
I47
tbat tbcLSmodcl.Tbc basistor capitalistdcvclopmcntovcr
tbc last twcnty-bvc ycars bas bccn Luropcan and )apan

sc
rccovcry witb rcspccttotbcLnitcd Statcs, arccovcrywbicb
brougbtwitbitawbolc scrics ottbings. tbc cballcngc to tbc
!nitcdStatcs,tbcmytbsottccbnocracyandotLuropc,

dso
tortb andall tbis inapbasc cbaractcrizcdby adccp crisisot
Maism and ot tbc workcrs movcmcnt. Tbis is a typc ot
dcvclopmcntwbicbbasnowcntcrcdintocrisis.
FRANK: Tbis was a typc otdcvclopmcnt bascd on particu-
larlydynamicandtccbnologicallyspccncind

stricslikcpctro-
cbcmicals clcctronics, and cybcrnctics, wbicb now do not
appcar to

ottcr long-tcrm dcvclopmcnt potcntials, tbat i

, a
satistactoryrcturnoninvcstmcnt.Fortbcsamcrcason,Itbink
tbatinordcr torcncwitsdcvclopmcnt,tbc systcmcurrcntly
nccdstodiscovcrncwtccbnologicalbascs,aswcllassocialand
politicaloncs.
AMIN: A ncwtccbnologicalbascprcsupposcscbangcsinin-
tcrscctoral rclations and, tbcrctorc, in rclations among tbc
dittcrcntcapitalistpowcrs.Tbatis,itassumcsamodbcationot
tbcintcrnationaldivisionotlaborandotcorrcspondingdomcs-
ticsocialallianccs.
FRANK: Tbctacttbati ti ssociallyandtccbnologicallyimpossi-
blctogoonintbcoldwayiswbatprcscntscapitalismwitbtc
opportunitytorcstructurc itsclt, and tbcpopulartorccswitb
tbcopportunitytoprcvcntittromdoingso.
IL MANIFESTO: Howimportantdoyouconsidcrtwocbaractcr-
istics ottbc currcnt accmulation modcl wbicb wc tbink arc
important. ( I ) tbcctrcmc conccntrationotdircctlyp

od

c-
tivcscctorsandproductivityingcncral,and(2)tbcapplication
ot scicncc to an incrcasingly rcstrictcd arca ot socicty! In
crudcr tcrms, tbcrcstriction ottbc productivc arca and tbc
ctcnsionottbcnonproductivconc.
AMIN:
I cananswcrtbatrigbt away. Ltsnottorgcttbattbc
I48 Andre Gunder Frank and Samir Amin
p

riod from I 9I 4to I 94Jwas onc oftbc longcst and most

v

olcnt pcriods

f crisis. Tbc cnsuing pcriod prcscnts vcry

smgul randlimttmgcbaractcristics.tbcaccumulationproccss
was not yct dominatcd by asimplc balancc bctwccn ScctorI
(production ofcapital goods) and Scctor II (production of
consumcrgoods), but ratbcr rcquircd tbc ctraordinary dc-
vclopmcntofactorIII, nonproductivcconsumption,wbicb
ran
=
cd from mtlit ry spcnding to tbc parasitic naturc oftbc
tcrnaryscctor,torcalcstatcspcculation,andsoon. Infact,tbc
balanccbctw

ccnsuppyanddcmand-orrcalization-rcquircd
tbct

aordmaryrapidgrowtbofanarcaofp rasitism,wbicb
bas hmttcdtb
"
caningofdcvclopmcntovcrtbclasttwcnty-
hvc ycars. Tbis ts tbc hrst cbaractcristic. Tbc sccond cbarac-
tcristicistat

vcrtbclasttwcnty-hvcycarsdcvclopmcntbas
brougbt wttb tt aprogrcssivc rcduction ofcapitalisms social
basc,forwbic

b tbc dominantgroupsinWcstcrnLuropcand
)apan bavc trcd to compcnsatc by intcgrating tbc working
class. But tbat isprccisclywbcrc tbcgrcatcstproblcms bavc
sb
.
ownup,
.
sucbtba

WcstcrnLuropcand)apan, aftcrbaving
lcd attbisopcra
.
non,bavc

oncintocrisisbcforctbcybad
rc l

ly

augbtup witb tbcLnitcd Statcs, cvcnintcrmsofpcr

capttamcomc.

vc

tbc last twcnty-bvc ycars it bas provcn difhcult or

tmpossiblcforcapitalismtoadaptitssocialbasctotbcrcquirc-

cnts ofdcvclopmcnt. In tbis wc can scc a rcal dccadcncc

tn tbc bistorical formation, ccadcncc not in tbc frcqucntly
ncbulousscnscofavaluccrsts,butratbcrintbcspccibcscnsc
tba

tc dcvclopmcnt of tbc productivc forccs makcs tbc

capttaltst systcm cvcr morc conccntratcd and abstract and
tbcrcforc rcstricts its social basc. Tbc systcm trics to om-
pc

satcortbis tbrougbncwpolicicsbutdocsnotsuccccdin
domgsomastablcfasbion.Tbisisadccadcncctbatisdiffcrcnt
frompastmanifcstations,intbcscnsctbatcapitalismnccdsto
undcrtakc spccibc subjcctivc initiativcs to broadcn its social
bascbutalwayslqs bcbindnccds.
ILMANIFESTO: Wbatarcyourcfcrringto,spccihcally!
Let's Not Wait for 1984
I49
AMIN: I mtbinking,forcplc,abouttbcItalianCommunist
P rty` sbistorical compromisc in Italy, wbicbcamc-wbicb
bccamc possiblc-not in I 94, wbcn itwould bavc avcrtcd
I 98, but witb a lag of almost tcn ycars, and wbicb was
tbcrcforc dcstincd to failurc and to a_ravatc tbc capitalist
crisis. To takcancamplcfromtbcpast, Iamtbinkingoftbc
Kom ncmpcrorswbobccamcCbristians,butatlcastaccntury
toolatctosavctbccmpirc.
IL MANIFESTO: Oo you mcan tbat its a mattcr ofsalvaging
somctbingand notofccrcisingbcgcmony!
AMIN: Lactly.Wcarcinasituationwbcrccapitalismbaslost
itscapacityforinitiativc,butwbcrctbcworkingclassdocsnot
currcntly bavc tbc initiativc citbcr. All tbis docs not mcan
Zusammenbruch, automatic brcakdown, andso fortb bccausc
capitalismcanalwaysgctoutofitscriscs.
IL MANIFESTO: Wcagrcc ingcncraltcrmsabouttbccrisis, but
bow,inwbatform,bywbatmcansdoyoutbinktbatcapitalism
cancmcrgcfromit!Wbatarctbcsystcmsprcdictablcrcsponscs!
FRANK: Intbc discussiontowbicbwc rcfcrrcdattbcbcgin-
ning, wc arrivcd at bypotbcscs about altcrnativc modcls of
latcrcapitalism. Lacb oftbcsc modclswould bc tbcrcsultof
tbccvolutionoftbcclassstrugglc,oftbcsystcmsspontanc-
ous tcndcncics, ofits subjcctivc rcactions,andsoon. bvi-
ously,capitalismcouldalsotrypurcrcsistancc. forcamplc,a
ccrtain dcgrcc ofdcvclopmcntofsocial consumption could
possiblyscrvcasapalliativc,butonly asapalliativc.Iamtbink-
ing, forcamplc, aboutpublic transportationandrcstructur-
ingurbanfacilitics. somctbinglikctbiswasdoncintbcLnitcd
Statcs aftcr tbc I 920s, and it is no accidcnt tbat Fiat and
Volkswagcnarcinvcstinginsubwayprojccts.
IL MANIFESTO: Butcollcctivcconsumptioncouldnotbccomca
ncwmotorforccforcapitalistdcvclopmcnt.
I J0
Andre Gunder Frank and Samir Amin
FRANK: Ccrtainlynot. Inaddition,wcmustmakcitvcryclcar
tbat our tbrcc altcrnativc modcls for capitalist cmcrcncc
fromtbccrisisarclocatcdintbccontctofrwcll`sI 9S4-wc
bavccvcncallcdtbcm`I984,Numbcrsnc,Two,andTbrcc.
AMIN: Lctusbcinwitbtbcnrstoncanddcscribcwbatastatc
ofcquilibrium mibt bc fortbc ncw accumulation modcl. It
willcauscadccptransformationoftbcintcrnationaldivision
oflabo

,witbatransfcroftbcmassofproductivcacti
|
iticsto

bcpcrtpbcryand tbcdcvclopmcntoftbcncwlcadinscctors
1' tbcccntcr. tccbnoloy, atomicandsolarcncry,appropria-
tionofmarinc,biocbcmical,andcncticrcsourccs,andsoon.
IL
.
MANIFESTO: In sum, intbc Lnitcd Statcs tbcrcwillonlybc
btbly qualincd tccbnicians and tbc workcrs will bc conccn-
tratcdintbcCono!
AMIN: Tbcrc arc many intcrmcdiatc positions bctwccn tbc
! nitcdStatcsandtbcCono,andtbismodclofsubimpcrial-
tsm-wouldlcadtoctrcmcacccntuationofuncqualdcvclop-
mcnt. But all tbis rcquircs alonparcntbcsisaboutwbatwc
mcanbysubimpcrialism.
FRANK: urtwomain tbcscsinvolvcdcvclopmcntbascdon
submpcrialism and dcvclopmcnt bascd on tbc caccrbation
oftbccurrcntsituation.Tbctbirdtbcsislicsbctwccntbcsctwo.
AMIN: Bccausc of its monopoly of tccbnoloy, tbc ccntcr
would bavcaconccntrationofkcyindustricsandovcrlcon-

rol of tbc productivc systcm. As a corollary, tbc classical

ndustrialapparatuswouldbctransfcrrcdtotbcpcripbcry,but
it would bc an uncqual transfcr, polarizcd at scvcral points.
Tbccountricsinwbicbtbcclassicalindustrialapparatuswould
bcconccntratcdwouldcportindustrialproductstotbcccntcr
and to otbcrrcionsoftbcpcripbcry, wbilc importintccb-
noloyfromtbcccntcrandrawmatcrialsfromotbcrcountrics
on tbc pcripbcry. Wbcn tbcsc mccbanisms bavc rcacbcd a
ccrtainquantitativclcvcl,tbcrcwillsobcqualitativccbancs
Let's Not Wait/or I 9S4 I J I
witbinindividualnations. Individualbourcoisics,submissivc
to outsidc tccbnoloical domination, will nccd to dcvclop
tbcir own stron social basc and, tbcrcforc,

nationalst tc

-
dcncicsvis-a-visotbcrundcrdcvclopcdcountrcs.ntbisbasis,
tbcywouldtrytowinallianccswitbsocialstratatb

t
^
ouldb

c
potcntial allics ofarcvolutionary movcmcnt. Tbis is wbat is
takinplaccinsubimpcrialistarcas,andwcsb

uld

notu

cr-
cstimatcit. Inthiscontctitisclcartbattbcsubjcctivcpolmcal
aspcctsofindividualbourcoisicsbccomcsimportant.
IL MANIFESTO Tbis subimpcrialist dcvclopmcnt scbcmc, and
tbcmodcloftbcintcrnationaldivisionoflaborwbicbitimplics,
lctstbccountricswitbpostwarmiraclcsWcstcrnLuropcand
]apan-bccomc tbc ncrvc ccntcrs o!

tbc crisis. Tbcy arc

tbc
oncs tbat will suffcr from compctition from dcccntralizcd
industrialproduction,witboutbavintbcstrcntbtobccomc
mctropolcs.
AMIN: Bcforccttintotbatpoint,wcmustfocusourattc

-
tion on tbc kindofcquilibrium tbatis possiblc bctwccn tbis
modclofaccumulationandtbcsystcmofclassallianccswbicb
couldbcformcdattbcnationalandintcrnationallcvcls.Itisin
tbis dclicatcbalanccandtbccontradictionsitimplicstbatwc
canidcntifytbcspaccforpossiblcrcvolutionaryadvancc.lirst
ofall,tbcrcwillbcanotablcrcductioninproductivccmploy-
mcntintbc ccntcr, altboubfor tbc momcntwc cann

scc
wbo willbc bcttcroffandwbowillbcworscoff. (Inaddmon,
tbcrcbasalrcadybccnadccrcascintbcrclativcwcibto tbc
workinclassintbcclassical scnsc intbcca

italistcountrics. )
Tbis mcans astac wbcrctbcrcwillbc tcnsion ovcrcmploy-
mcntandwacproblcms.Buttbisdccrcascindircctlyproduc-
tivccmploymcntimplicsstroncrprcssurcontbccmploycd
cspccially tbosc cmploycd in cl

ssical industry

and c

sc-
qucndyintbcpcripbcrytoobtn

csurpluswit wbtcbto
support,indivcrscways,tboscparasmcal laycrswbicbtcndto
bcmorcnumcrous.Tbisisnotcquallycasycvcrywbcrc.
In tbc sccond pbasc, for tbis modclto functioniti

ncccs-
sary tbat tbcrulinclass in tbc subimpcrialist countrics (tbc
I J2 Andre Gunder Frank and Samir Amin
burcaucratic or privatc bourgcoisics) succccd in broadcning
itsbascotsupporttoincludcstratatbatarcsociallyopposcdto
submissiontoimpcrialism,and tbis isnotcasycitbcr. Finally,
tbismodclimplicsacountcrcoupinamucbmorcprolctarian-
izcd pcripbcry and intbc ccntcr aswcll (in tbctorm otgucst
workcrs),andtbcrctorctbcctcnsionotasortotapartbcidin
botbtbc ccntcrandtbcpcripbcry-tbccrcationotncwslavcs
ottbcsystcm.Typicalottbissystcmwouldbcancquallybigb
dcgrcc ot productivity, but tbis cquality would nonctbclcss
corrcspondtoanctraordinydivcrsityottrcatmcnt.
FRANK It would bc tbc Soutb Atricanization ottbc world
wbicbwc call I984 Numbcr nc, witbgcncrLizcd racis
andavcrystrongsocialandpoliticalbicrarcby.
Ii MANIFESTO Accordingto tbis SoutbAtricanizationmodcl
wouldlargc-scalcparasitismintbcadvanccdarcasprovidctb
markctoutlcttorindustrialproductionintbcpcripbcry!
AMIN: Ycs. Tbcrc would bc an apparcnt upbcaval in tbc
currcntdivision otlabor, witb bigb tccbnology and pcrbaps
cvcnrawmatcrialsorpscudo-rawmatcrials-atomicandsolar
cncrgy, tbc pctrolitcrousslatcinCanada, alltbckindsotraw
matcrials wbi

b up to now tbc industrializcd arcas bavc pro-

curc bysackingtbcnaturalrcsourccsottbcpcripbcrybcing
providcd by tbc advanccd arcas. A sort ottranstormation ot
tbcmccbanism.
FRANK And tbc production ottbcsc pscudo-raw matcrials
bccomcs tcasiblc and possiblc prcciscly bccausc ot tbc oil
priccrisc.
AMIN Itcouldpcrbapstunctiontbrougb tbismccbanismI
am morc optimistic tban Gundcrbut only in tbc two c-
trcmcs ot tbc systcm, among tbc grcat powcrs ano in tbc
poorcstarcaswbicblackanykindotpoliticaldctcnsc.Fortbc
wbolc intcrmcdiatc arca, wbicb is cnormous and includcs
almost all ot Luropc and a good balt ot tbc Tbird World,
Let's Not Wait/or 1 984 I J 3
conditions would bc ctrcmcly tcnsc and unstablc. Tbat is
wbcrctbcwcaklinksottbccbainarclocatcd.
Tbcy arc wcak links bccausc in tbosc arcas tbc kind ot
rcstructuring otsocial allianccs wbicb would bavc to bc im-
poscdis onc wbicbtbc rulingclasscsbavc notacbicvcdcvcn
duringpcriodsotrapidgro
"tb. In tbis arca,violcntstru_lcs
would bc unlcasbcd among tbc dittc;cnt national bourgcoi-
sics, cacb onc ot wbicb "uld attcmpt to compcnsatc at
tbc cpcnsc ot its own prlctariat. Major tcnsions and tbc
possibility ot rcvolutionar
) brcaks would linc tbc patb ot
Soutb Atricanization. Tbc rcncwcd strcngtb ot tbc Lnitcd
Statcs, as a rcsult ot tbc
il crisis and tbc antiprolctarian
rcaction ot tbc wcakcst industrializcd countrics, migbt bc a
torcsbadowing ot major cuhict. Morcovcr, in tbcsc intcr-
mcdiatcarcastbcdittcrcntburgcoisicsarcbavingcvcnmorc
troublc rcstructuring tbcir
o
"
n social bascs bccausc ottbc
currcntcrisis. undcrprcscutconditionsit sccmscrazyto tbc
rulinggroupsottbcItaliau
burgcoisictoabandontbcurban
allianccinccbangc tor t

vlcss-tban-sccurcncutralityottbc
prolctariat and Communis| Iarty. In addition, tbc potcntial
subimpcrialisms must clc
t
cwaytbcmsclvcs, tbusproduc-
ingncwconn icts.
]vcn at tbc top, tbis"illut bc ancasyopcration. In tbc
!nitcd Statcs, a violcnt cuhict bas alrcady bcgun bctwccn
multinationals (wbicbwvlcbc tbc victors in tbc Soutb At-
ricanizationmodcl)andt
svindustricstbatproducctor tbc
domcstic markct and wvlc bc tbc loscrs. (In my opinion,
Watcrgatcwasawarning
t|bis. ) Tbiskindotproblcmcbar-
actcristicallysbowsupbctrvtbcmodclbcginstunctioning.A
truly rcvolutionarypcricist
_
usbcginning, witb ncrvc ccn-
tcrssprcadtbrougboutt
viutcrmcdiatcarcas. Intbiscontct
onccancitctbccamplctIudia,wboscbourgcoisicwasablc
tobroadcnitsbascts
[[urtprccisclybccauscotitsintcgra-
tionintotbcworldmarkv|,uwitisbcingstranglcdbccauscot
tbcoilcrisisanditscttcctatbcbalanccotpaymcnts
FRANK According to vs|iatcs wbicb sccm cagcratcd to
mc, I ndia would bavc | spcnd 80 pcrccnt ot its torcign
I J4 Andre Gunder Frank and Samir Amin
currcncy-opposcd to I0I I pcrccntattbismomcnttoas-
surcoilimports.
AMIN: Tbcsituationisbcingturncdaround.Intcgrationottbc
worldcapitalistsystcm,wbicbwastbcconditiontorbroadcn-
ingtbc social basc ottbc Indian bourgcoisic, iswbatis now
provokingtbisbrutalrcstriction.
FRANK: Lctsmovcontotbcotbcrmodcl.Togctbcrwitbtbc
oncbascdonancwdivisionotlaborandtbcgcncralizationot
racism, tbcrc is tbc possibility ota sccond modcl wbicb, in
substancc, is an caccrbation ot tbc currcnt situation. No
racism, and notbing ncw otimportancc intbc intcrnational
divisionotlabor,intbcscnsctbatancwintcrnationaldivision
otlaborwould notdcvclopalongsidcarcalignmcntbctwccn
ncwandoldindustrialscctors. Inplaccottbattbcrcwouldbc
tbcgrcatcstpossiblcconccntrationottbcproductivcapparatus
in tbcLnitcdStatcs,Luropc,and)apan.Tbiswouldbcmodcl
I 984NumbcrTwo. I 984NumbcrTbrccwouldbavctbis
conccntrationintbcccntcr,witbsomccrumbstortbcpcripb-
cryandtbccstablisbmcntotsomcmini-subimpcrialisms.Tbc

ccond modcl prcsupposcs arcgimcottotalsocialrcprcssion

D tbcmctropolc,wbicbwill bcparticularly barsb during tbc
rcstructuringpbasc.
Ii MANIFESTO: Nonctbclcss,sucbamodclwouldnotinvolvca
contractionottbcproductivcbascintbcccntcr.
AMIN: No. No contractionottbcproductivcbasc,andcvcn
rclativcgrowtbonccitwasputinplacc. Butitwillrcquircat
lcast twcnty ycars to put itin placc. to usc morc productivc
tccbnology, rcadjust tbclabortorcc, and rcconstruct awagc
bicrarcby.Ouringtbattimcall tbcmytbsandidcologicswbicb
bavcmarkcdtbclasttwcnty-bvcycarsotdcvclopmcntwillgo
undcr. Inbroadoutlinc,itwouldbcarcpctitionottbc I 9I 4-
I 94J pcriod. a rcvolution, tascism and Nazism, two world
wars. lrom tbcmomcnttbattraditionalindustryisnottrans-
tcrrcd to outsidc arcas witblowwqcs,asintbis modcl, tbc
'I''; \


..

1
Let's Not Wait for I 9S4 I J J
costot bnancingtbcrcstructuringwillbavc tobcsbouldcrcd
bytbcworkingclasscmploycdintbctraditionalindustricsin
tbcccntralcountrics.
FRANK: Supposingan cquilibriumsituationtortbismodclis
possiblc, it is politically vcry ditbcult to acbicvc, ditbcult
cnougbtomakcusbclicvctbattbismodclcouldnotcomcinto
bcing.Tbcsituationwcarcintodayistbcrcsultottwcnty-nvc
ycarsotcontinuouscpansion.Tbcwayoutotit,ncwmarkcts,
a ncw I 94J, must comc

trom tbc dcstruction ottbc currcnt

productivcapparatus.
AMIN: Alltbisbringsrcprcssionalongwitbit,andnotrcprcs-
sion ottbc !ascist typc, ifby tascism wc undcrstand a class
alliancc bctwccn tbc industrial-bnancial bourgcoisic and in-
tcrmcdiatc stratabclongingtocarlicrstagcsotdcvclopmcnt.
It would bc tbc rcal I 984. onc-dimcnsional ordcr, violcnt
rcprcssionotminoritics,togctbcrwitbadittusclibcralismin
sbort,rcprcssivctolcrancc.
Ii MANIFESTO: Going back to tbc brst bypotbcsis, tbatottbc
intcrnational division otlabor, itsccms to us tbat tbiswould
rcquircan Atlantic-typcsolutioninotbcrwords,tbcgrcatcst
possiblc coordination among countrics in tbc ccntcr. nly
givcn a bypotbcticalgcncral agrccmcntcould tbc traditional
industrialapparatusottbcdcvclopcdcountricsbcrcdistributcd
totbcpcripbcry. But,inyouropinion,istbclikcliboodoncot
maimumagrccmcntormaimumcondict!
AMIN: Inmyopinion,maimumcondict,astru_lcbrcaking
outamongtbcdittcrcntclansottbcbourgcoisic. Andwcbavc
to takc into account tbc tact tbat a policy involving subim-
pcrialistcountricsisalrcadybcginning.Morcovcr, tbissccms
tomctobctbcdominanttcndcncyinrcccntycars.contronta-
tion in monctary and taritt arcas, controntation witbin tbc
Luropcan Lconomic Community, controntations among tbc
dittcrcntpowcrstoinsurctbcircontrolovcrLgypt,Mauritania,
orTunisia.
I J Andre Gunder Frank and Samir Amin
IL MANIFESTO: Intact,aconsidcrationottbctbrccbypotbctical
rcsponscsyouattributc to tbc systcmlcadsustoconccntratc
ourattcntionontbcways inwbicbtbcy would bccarricdout.
Tbis sccms to bc a long road, markcd by acutc social and
intcrnational condicts and witb no brilliant solutions. Attcr
a crisis and a violcncc-riddcn proccss wc will still arrivc at
I 984-typcsolutions.racismand SoutbAtricanizationoronc-
dimcnsionalordcrandsystcmaticrcprcssion.Wccanconcludc
tromtbat,tbattbcmorcabstractcapitalismbccomcs,tbcmorc
monstcrsitproduccs.Butaswcundcrstoodit,youtormulatcd
tbcscabstractmodclsmainlytosbowtbcproblcmsinvolvcdin
puttingtbcm intocttcct,tbcconnictstbcy cngcndcr, andtbc
spaccstbatcanbcopcncdup.
Bctorcmovingontotbctbirdpoint,wcwouldbcintcrcstcd
inbavingyouropinionontbctopicottbcday.innationandtbc
oilcrisis.
AMIN: Tbcrcbasbccnagrcatdcalotpoliticaluscmadcottbc
oilcrisis.tcoursctbcpriccotoilandrawmatcrialsbasriscn,
butintbcindustrializcdworldtbcindationlcvclswcrcalrcady
bigbbctorctbiscrisis,arcsultotarcdistributionotdomcstic
incomc. Morcovcr, tbc tact tbat tbc pricc otcrudc oil bas
doublcd docs notbavc an cnormous cttcct, inasmucb as tbc
priccotcrudc makcsup I 0pcrccntottbcnnalpriccotoil.To
imputctbc I J pcrccntriscintbccostotlivingtooilisabsurd.
FRANK: Insotar as a probibition on Sunday driving or tbc
rcductionottclcvision scbcdulingwillbavc no cttcctontbc
balancc-ot-paymcnts problcm, it sccms to mc tbat tbc only
rcasontortbcaustcritymcasurcstbatbavcbccnadoptcdisto
makcatavorablcatmospbcrctorrcprcssion. I 984isnotonlya
ngmcntotourimagination.Morcovcr,rcgardinginnation,my
positionisvcrysimplc. indation bappcnswbcnprontstall,to
putabrakcontbctall,andtbisisrclativclycasyinancconomy
wbcrcmonopolygroupsbavcastrongprcscncc.
IL MANIFESTO: Wc bavc now rcacbcd our tourtb qucstion on
tbccrisis.Tbisistbcbypotbcsistbattbccurrcntintcrnational
Let's Not Wait for 1 984 I J 7
crisismarksaparticularstagc.capitalismscntryintoapbascin
wbicb its bistorical tunction bas bccn uscd up, tbc tunction
Mar attributcs to it in a tcw pagcs ot tbc Manifesto. Morc
spccin cally, bccausc capitalism is unablc to satisty socicty`s
nccds, cvcntboscnccds it contributcd to crcating, tbcnccd
torandtimclincssot goingbcyonditbccomcapparcnt.
FRANK: Lacbcapitalistcrisisbasnormallyrcsultcdinrcstruc-
turing, tbc scopc otwbicb bas bccnproportionalto tbc scri-
ousncss ottbc crisis. lor prcciscly tbis rcason,wc bavccm-
pbasizcd tbc tact tbat a long pcriod otcrisis is awaiting us,
wbicbwill sccprotound and dramatic connicts

Inasmucb as
capital is bistorical, it could bappcn that at tbc cnd ot tbc
tunncl capitalist dcvclopmcnt docs notrccovcr. I do not bc-
licvctbatcapitalis,mbasrcacbcdtbccndotitsbistory.
AMIN: I would answcr your last qucstion atnrmativcly and
witb conviction, and I would cvcn rctcr to a spccinc datc.
I 9I 7 . I 9I 7 sbows us tbat tor tbc brst timc in its bistory,
capitalismdidnotbavcwbatwasrcquircdtorcsolvcaccrtain
numbcrotproblcmsotbumansocicty.lromtbatmomcnton,
itbcgantobccvidcnttbatitsbistoricaltunctionotaccumula-
tion and tbc libcration ot pcoplc trom tbcir submission to
naturcbadbccncbaustcd.TbctacttbattbcLSSK`sproblcms
_
crc subscqucntly badly rcsolvcd, tbat tbc ctobcrKcvolu-
tionbadaparticularoutcomc,innowaycancclsouttbisproot
otcapitalism`s bistoric incapacity. Kcally, onc could say tbat
tbcSovctmodcotproductionbasintactrcsolvcdproblcmsin
tbcLSSKtbatcapitalismwasnotablctorcsolvc. Intbisscnsc,
tbc Sovictmodcotproductionalsomarkstbcbcginningota
transitionpbasc,nottbctriumpbalandbrilliantonccnvisagcd
byStalinism,butncvcrtbclcssatransition. Allovcrtbcworld,
morcandmorcproblcmsaccumulatccvcrydaytbatcapitalism
cannotrcsolvc, constantlyrcintorcing tbc nccdtogo bcyond
capitalism.
ILMANIFESTO: Tbisdocsnotimplytbcincvitabilityotitsdown-
tallmucblcssitstotalcollapsc:
I J8 Andre Gunder Frank and Samir Amin
AMIN Lbaustionotitsbistoricaltunctiondocsnotimplytbc
inabilitytoturtbcrdcvcloptbcproductivctorccs. Buttbatis
nottbcpointwcarcdiscussing.Togobacktoaparallclwbicb
sccmsusctultomcaslongasitrcmainsaparallcl,totbccndot
its cistcncc tbc Koman Lmpirc continucd to bc supcrior to
tbc barbarians at all lcvclstccbnical, military, and adminis-
trativc. Tbis did not ncgatc tbc tact tbat itwas alrcady in a
dccadcnt pbasc, mcaning tbat it bad cbaustcd its bistorical
tunction and bad sbown itscltto bc lcss and lcss capablc ot
rcspondingtotbc nccdsandproblcmswbicbgrcwoutottbc
socialcondictsottboscccnturics. Morcovcr, torcturntoour
owncasc,wbatotbcrmcaningdoourdittcrcnttormulationsot
I 984bavc!Wcbavc sctupabstractionsotpossiblcandcobc-
rcntcapitalistsolutionstotbccurrcntcrisis,bu
,
wcbavcdonc
so in ordcrto sbow tbcbarbarismottbc solution, and, cvcn
morc,tosbowtbcimpracticalityottbcroadtbatwouldtakcus
trom today`s rcality to tbat ot I984 In tbis scnsc capitalism
mustbcsaidtobavccbaustcditsbistoricaltunction.
IL MANIFESTO: Wc arc in ovcrall, tbougb incomplctc, qrcc-
mcnt witb cvcrytbing you attributc to I 9I 7and, as aconsc-
qucncc,totbccurrcntcrisis.Lndoubtcdly, I 9I 7rcprcscntcd
acbangc, not only bccauscitrcvcalcdcapitalismsinabilityto
rcsolvctbcproblcmsotapartotbumanity,butalsobccauscit
dcmonstratcd tbat tbc capitalist systcm, lctt to itsown logic,
wouldlcadto catastropbic rcsults.gcncralizcdwars, tascism,
rcprcssion. But itisalso aprovcntacttbatattcrtbcbrcakin
I 9I 7 tbccapitalistsystcmplaccdconstraintsonits logic and
succccdcd in giving ncw impctus to its dcvclopmcnt and its
bcgcmony as wcll-to tbc point tbat it was cvcn ablc to rc-
absorb, citbcrwbolly or inpart, movcmcnts wbicb bad rcp-
rcscntcdanticapitalistbrcaks. Atbottomitistbccpcricnccot
WorldWar IIand tbc twcnty-nvcycarsotdcvclopmcnt tbat
tollowcd, wc bavc cpcricnccd not only a ncwgrowtb pusb
butalso ncw momcntum tor tbc systcms crcdibility and tbc
crcdibility ot somc ot its valucs. In tbis rcspcct tbc I 9I 7
rupturc sccmsto us to bc aprcdcccssorottbccurrcntcrisis.
Tbis crisisisnotalincarconscqucnccottbatbrcak,ratbcr,it
Let's Not Wait/or I 9S4 I J9
rcprcscntsancwtrcnd,wbicbdocsnotmcanacboiccbctwccn
rcvolutionandcattropbcintbcncttcncvcntbirtyycars.
And tbis trcnd sbows up wbcn capitalisms incapacity is no
longcrlimitcdtosomcottbcproblcmsotoncpartotbumanity
butctcndstoallottbcproblcmspcrtainingtoallotbumanity.
It sccmstoustbattor tbcbrst timcinits bistory, capitalist
dcvclopmcnt is no longcr bcing proposcd as a satistactory
modcl,cvcnbyrclativclyprivilcgcdsocialstrataandcountrics.
Intbcsccondplacc,itisalsotbcnrsttimctbatnccdsandsocial
stru_lcsraisctbcdcmandtor ncwrclationsotproductionso
clcarly. In morc cplicit tcrms, tbis is tbc nrst timc tbat tbc
dcmandtor ancwbistoricaltormationwbicbis notbascdon
tbcdivisionotlaborandtbcdclcgationotpowcrbasariscnso
widcly and witbout utopian connotations. Tbis is tbc point
wbcrc tbc stru_lc ottbc prolctariat can no longcr b con-
taincd witbin tbc catcgorics ot capitalist dcvclopmcnt and
bcc

mcsadcmandtoradittcrcntwayotorganizingproduction.
AMIN: I agrcc complctcly. Itisnoaccidcnttbattbc systcms
rcsponscs,wbicbbavc bccomcincrcasinglyabstract, ntintoa
I 984pcrspcctivc,tbcsamconctbatrwclldcscribcd,bascd
on tragmcntsotLS socictyand Hitlcrism. I rcccntly rc-rcad
The Geran Ideolog andtoundascntcnccwbicbIundcrlincd
rcpcatcdly, tbc onc wbicb atn rms tbat communism is ncccs-
sary it bumankind is to avoid total dcstruction. Tbis, and
notbing clsc, sccms to mc to bc tbc mcaning ottbc tamous
`socialismorbarbarismdilcmma.tobammcrbomctbcnccd
torcommunismas tbc only bistoricalpossiblcwaytorrcsolv-
ing tbc problcms capitalist dcvclopmcnt bas poscd tor con-
tcmporarybumanity.Andintbisscnsc,Mar`sbypotbcsistbat
capitalismsuccccdsincrcatingtbcbistoricalsubjcctcapablcot
ovcrcoming itin otbcr words, its own tombbolds. Tbc
most ncgativc aspcct ottbc I 984 pcrspcctivc would bc prc-
cisclytbcdcstructionottbcprolctariatastbcbigbcstproduc-
tivctorccandantagonistclass. tbcprolctarianizationotcvcry-
onc and tbc cnd ot tbc prolctariat. But tbcrc arc no two
straigbt roads trom bcrc citbcr to I984 or to communism,
ratbcrasortotcontradiction,inwbicbwcmustpayagrcatdcal
I 0 Andre Gunder Frank and Samir Amin
ofattcntiontointcrnalcontradictionsintbcdominantforccs
wbicb tcnd to bc acccntuatcd by tbccrisis. Ltus notforgct
tbat tbc Kussian and Cbincsc prolctariats won bccausc tbc
institutions ofpowcrwcrc disintcgrating, bccausc tbc domi-
nantforccswcrcdividcd.
Inconclusion,witbcacbstcptbcpoliticaltcndcncytocon-
scrvcpowcrby moving toward I 984, tbus rcmainingwitbin
tbccapitalistsystcm,provokcsrcactionstbatcouldrcvcrsctbc
tcndcncyandbcginarcvolutionaryproccss.Tbcscrcactions,
tbcsc countcrtcndcncics,sbowupinbotb tbcccntcrandtbc
pcripbcry, but I bclicvc tbcy arc mostlikcly intbc so-callcd
ccntralfringc. tbc advanccdpartsoftbc pcripbcryandback-
wardpartsoftbcccntcr.Tbisistbcarcawbcrccontradictions
willbctbcmostconccntratcdandwbcrctbcgrcatcstpotcntial
foranaltcrnativcwilllic.
IL MANIFESTO: In tbis contct, do you attributc animportant
rolc to tbc countrics of tbc pcripb

ry and tbc proccss of

prolctarianizationwbicbistakingplacc!
AMIN: It bas ncvcr bccn a mystcry tomc tbat tbc Lnitcd
Statcssbouldbctbccountrycloscstto I 984.Itisnoaccidcnt,
but tbc rcsult of a scrics of bistorical circumstanccs. Tbc
cistcnccofacivilizationbuiltonimmigrationand,cspccially,
tbclackofapast,tbclackofaprccapitalistbasc,cplainstbc
rapid growtb of tbc Lnitcd Statcs. But it also makcs it a
backwardcountry,wbcrcprolctarianconsciousncssrcmainsat
avcrylowlcvcl.LnlikcotbcrcountricsintbcWcstandtbis
isimportant~tbc linkswcrcncvcrcrcatcdbctwccntbcCbi-
ncsc Cultural Kcvolution and tbc dccpcst dcmands of tbc
working class for cgalitarianism and against tbc division of
labor. Tbis isancmbryonicpbcnomcnon, butitindicatcstbc
tcndcncytowardconsolidationofanticapitalistimpulscs.Tbis
tcndcncyisstrongcstintbcindustrializcd arcas of)apanand
Luropc (witb intcrnal dicrcnccs, bccausc in my opinion
soutbcrn Luropc cbibits importantpcculiaritics) and in ad-
vanccdarcasoftbcpcripbcry.
I donotcntircly qrccwitbyouwbcnyousaytbatprotcst
Let's Not Wait/or I 9S4 I I
against tbc division oflabor bas ariscn only i nrcccnt ycars
witb tbc Cbincsc Cultural Kcvolution. Tbis protcst was nrst
cprcsscdby tbcutopiansocialistsattbctimcoftbcindustrial
rcvolutionandtbcbirtbofcapitalismandrcappcarcdwitbtbc
ParisCommunc.Iwanttostrcsstbisinordcrtoputforwarda
tbcsis, albcit a risky and ccrtainly notcbaustivc onc, wbicb
supportstbcpossibilityofaconsolidationbctwccnarcasofold
capitalism, advanccd arc intbc pcripbcry, and proccsscs of
pro!ctarianization onan intcrnationalscalc. Incffcct, I attri-
butc agrcat dcalofimportancc to tbc vcstigcs ofbartcr(c-
cbangc bascd on usc valuc) wbicb arc still prcscnt in somc
arcas oftbcmctropolis (notintbc Lnitcd Statcs) andintbc
advanccd pcripbcrics andong tbc millionsofpcoplcwbo
bavc rcccntly bccomcpartoftbcprolctariat. Attbispointin
tbccrisisofcapitalism`sbistoricalfunction(andtbcrcforcofits
culturc as wcll, a culturc bascd on ccbangc valuc), tbc sys-
tcm`s inability to solvc problcms ofgrowing importancc for
humanitycouldproduccapositivcrcsponsc,ortbcbasisfora
positivcrcsponsc,outoftbismcmoryofuscvaluc.Todaytbis
is no longcr a critiquc coming from romantics (and from
utopiansocialistsorrcactionarics),ratbcritisatrucaltcrnativc
politicaI stru_lc, a rcjcction oftbc I 984 pcrspcctivc, away
out oftbc systcm toward tbc crcationofancw social forma-
tion. To say tbat tbisprospcct can cistmcans tbatwc must
lookforit.towaitonlymcanstowaitforI 984.
NOTE
. Paul A. Samuelson, in The Business Cycle Today, ed. V. Zarnovitz
(Washington: National Bureau of Economic Research, 1 970), p. 1 67.
2. Alexander Eckstein in ibid.
3. Solomon Fabricant in ibid., p. 4.
4. Kermit Gordon, "Some Conjectures on Policy Problems of the 1970' s;'
American Economic Review, May 1 975.
5. Geoffrey Moore, "Some Secular Changes i n Business Cycles," American
Economic Revie, May 1 974, pp. 1 33-1 35.
6. Robert L. Heilbroner, "Proceedings of the Annual Meetings of the
American Economic Association," December 28-30, 197 3, American
Economic Review, May 1 974.
7. Joseph S. Davis, The Worl Between the Wars. !V!V!VV.An Economist's
View (Baltimore, 1 975), pp. 394, 398.
8. Ibid. , p. 1 94.
9. J. Jewkes, quoted in ibid. , p. 406.
1 0, Joseph A. Schumpeter, Business Cyces, vol. 2 (New York, 1 939), pp.
793-794.
1 1 . For a depressing but revealing catalogue of continuous misprediction,
misdiagnosis, and refusal to see the reality before their eyes in this
period, see John Kenneth Galbraith, The Great Crash, ! V2V (Boston,
1961 ).
1 2. Walter W. Heller, "What's Right With Economics?" Presidential ad
dress delivered to the AEA on December 29, 1 974, published in the
American Economic Review, March 1 975.
1 3. I bid.
14. Paul A. Samuelson, Economics: An Introductory Analysis, 4th ed. (New
York, 1 958).
1 5. Mark Blaug, "Kuhn Versus Lakatos, or Paradigms Versus Research
Programmes in the History of Economics," History o/Political Economy,
vol. 7, no. 4, 1 975.
1 6. Joseph Steindl, Maturity and Stagnation in American Capitalism (New
York: Monthly Review Press, 1976).
1 7 . Paul A. Baran and Paul M. Sweezy, Monopoly Capital (New York:
Monthly Review Press, 1 966).
I 5
I 4 Notes
1 8. Moore, "Some Secular Changes in Business Cycles," p. 1 35.
1 9. Richard C. Edwards, "The Impact of Industrial Concentration on Infla
tion and the Economic Crisis,"' in Radical Perspectives on the Economic
Crisis 0/Monopoly Capitalism (New York: Union of Radical Political
Economics, 1 975) ; Howard Sherman, "Infation, Unemployment and
Monopoly Capital," Monthly Review, vol. 27, no. 10, 1976.
20. Sherman in ibid. , pp. 32-33.
2 1 . Roger Bratenstein, "First Steps Towards a Cyclical Theory for LDCs,"
intereconomics, October 1 974.
22. Quoted in Edwards, "The Impact of Industrial Concentration," p. 44.
2 3. Quoted in David Gordon, "Capital vs. Labor: The Current Crisis in the
Sphere of Production," in Radical Perspectives on the Economic Crisis 0/
Monopoly Capitalism (New York: Union of Radical Political Economics,
1 97 5), p. 34.
24. Gottfried Haberler, Weltwirtschajiches Archiv, vol. 2 (Kiel, 1 974), p.
1 91 .
.
25 . Ibid. , pp. 1 82, 1 84.
26. Paul M. Sweezy and Harry Magdoff, The Dynamics 0/U.S. Capitalism,
(New York: Monthly Review Press, 1 972), pp. 1 72-1 7 3.
27 . Charles P. Kindleberger, The World Depression, ! V2V-! VV (Berkeley,
1 97 3).
28. Fred Block, "Contradictions of Capitalism U a World System," Insur-
gent Sociologist, vol. 1 , no. 2, 1 975, pp. 1 0-1 2.
I
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