By FERNANDO NOGUEIRA DA COSTA*
Chico de Oliveira rejected the idea that there were two economies or two distinct sectors (modern and backward) in underdeveloped countries
When I was a student of economics at FACE-UFMG, from 1971 to 1974, the student movement also discussed the Dependency Theory of Fernando Henrique Cardoso and Enzo Faletto. It was a more complex and nuanced approach compared to other versions of this theory, such as those of André Gunder Frank and Rui Mauro Marini.
In the approach of Fernando Henrique Cardoso and Enzo Faletto, structural analysis (economic relations of dependence) was integrated with a historical analysis. In order to understand the specific dynamics of each country, in different historical contexts, they suggested understanding relations of dependence not as a permanent and unchangeable condition. For them, this relationship could change over time and with different development strategies. Dependence, for them, was historical and changeable, being the result of a combination of internal and external factors.
Fernando Henrique Cardoso and Enzo Faletto recognized that, despite their economic dependence and subordination to central countries, peripheral economies could have relative political autonomy to formulate policies to improve their insertion into global capitalism. Later, during the FHC government (1995-2002), local elites and governing oligarchs played a decisive role in adopting neoliberal strategies and expanding relations of dependence on transnational corporations.
They emphasized the importance of domestic political forces, especially power coalitions and the ability of nation states to negotiate and deal with foreign capital. This differentiated their approach from more “economist” approaches—economics as a direct determinant of politics—such as that of André Gunder Frank and his structuralist Dependency Theory.
André Gunder Frank's analysis was more structuralist and deterministic. Underdevelopment was seen as an inherent and structural condition of peripheral economies in the global capitalist system. Insertion into world capitalism prevented autonomous development. He saw little or no possibility for peripheral economies to break out of this situation of dependence.
André Gunder Frank placed little emphasis on internal political forces and local elites in the formation of development strategies. For him, dependence was an inevitable consequence of the relationship between center and periphery, and peripheral economies were trapped in this logic of subordination without much room for maneuver.
Rui Mauro Marini presented a Dependency Theory from a Marxist perspective that denounced a specific aspect of dependency: the overexploitation of the labor force. Underdevelopment would be reproduced by the internal logic of peripheral economies, with the need to maintain low wages and precarious working conditions to compensate for the costs imposed by external dependence.
Rui Mauro Marini highlighted the internal contradictions and the class struggle, deducing that local elites were an integral part of the process of dependence, subservient to foreign capital. “Surrender” reduced the possibility of autonomous development strategies.
Despite the influence of Dependency Theory, the most popular reading in the Student Movement during my time as a university student was the work Criticism of dualistic reason (1972) by Francisco de Oliveira. It was a landmark in Brazilian social and economic theory, presenting a critique of the dualistic thinking dominant in interpretations of the development of Brazil and Latin America.
Chico de Oliveira rejected the idea that there were two distinct economies or sectors (modern and backward) in underdeveloped countries. In a constructive critique, he offered a new interpretation of underdevelopment and dependence as an alternative.
He directed his criticism at the dualism present in theories such as those of Celso Furtado and economists linked to ECLAC. He criticized them for postulating the coexistence of two economies in underdeveloped Latin American countries: a modern sector, associated with industry, advanced technology and integration into the world market; a backward sector, related to traditional agriculture, archaic forms of production and economic backwardness.
For the dualist view, these two sectors coexisted but were relatively isolated from each other. Its perspective was that the modern sector would gradually integrate globally and surpass the backward sector, leading to development.
Chico de Oliveira contested this dualistic view, since there were not two separate sectors, but rather a contradictory integration between the modern sector and the backward sector. The modern sector did not exist independently, because it depended on the social and productive relations originating in the so-called backward sector. The internal contradictions and dynamics constituted a single process, where backwardness was functional to the development of dependent capitalism.
The backward sector, instead of being surpassed, would be directly connected and subordinate to the modern sector. The development of modern industry in Brazil benefited from and depended on the overexploitation of the labor force in the agricultural sector and on archaic production structures.
Thus, the delay would not be overcome, because it was a necessary condition for the accumulation of capital. It did not foresee the technological advance of agribusiness and the extractive industry in Brazil.
Industrialization would not lead to full development, but rather to the reproduction of underdevelopment on new bases. The integration of the periphery into global capitalism would occur in a dependent manner, and peripheral industrialization would occur under the logic of subordination to foreign capital located in the central economies.
The process of modernization and industrialization would not eliminate social and regional inequalities. These inequalities would be structural and inherent to dependent development. There would, however, be an increase in differences between sectors and social classes.
It would be naive to expect an end to inequality under capitalism. Today, we expect an end to poverty with active social policies. We do need to defend them!
In its early days, Brazilian industry still did not find sufficient sources of financing in the national financial system for large industrial and infrastructure projects. This limitation led governments to open it up to foreign investment, through foreign capital, both in the form of international loans and Direct Investment in the Country (IDP). Foreign shareholdings reflect this dependence by bringing in the financial resources needed for the emergence of strategic sectors.
Since then, this capital inflow has been accompanied by shareholding control by foreign companies or investors, leading to the remittance of profits abroad and limiting the capacity for domestic reinvestment. It has created a vicious cycle of dependence, where industrialization has occurred with intercompany loans, interest payments, and the import of industrial machinery and equipment. The benefits have been partially drained out of the IDP-dependent country.
This technological dependence occurs through shareholding partnerships, mergers or acquisitions of Brazilian companies by foreign corporations. Multinational companies operate in Brazil because they have acquired equity interests in industries such as the automotive, electronics and pharmaceutical industries. This results in a limited transfer of technological knowledge to Brazil, consolidating the country's position as a non-producer of advanced technologies.
Brazilian industry, especially where it requires cutting-edge technology to maintain competitiveness and productive modernization, is linked to Global Value Chains (GVCs) controlled by multinationals. They subordinate local production to their global strategies.
Production and technological innovation decisions are made at headquarters abroad. Brazilian subsidiaries operate as regional hubs for assembly, manufacturing of intermediate goods or production of commodities industrialized.
Brazilian industry is structurally dependent on external inputs to maintain its production processes. It depends on the import of high-tech parts and raw materials, increasing the vulnerability of the Brazilian economy to exchange rate fluctuations and international crises.
Foreign shareholdings also control other sectors considered strategic for Brazil's economic development, such as energy, telecommunications and infrastructure. The transfer of decision-making power abroad compromises the country's domestic capacity to formulate autonomous industrial policies, because the interests of foreign shareholders do not always coincide with national development objectives.
*Fernando Nogueira da Costa He is a full professor at the Institute of Economics at Unicamp. Author, among other books, of Brazil of banks (EDUSP). [https://amzn.to/4dvKtBb].
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