The Underdevelopment of Development / Part 3

by Andre Gunder Frank

From Some More Anthropology and Dependence to World System

 Still keeping a finger also in the anthropological pie, I wrote to the founder-editor of Current Anthropology, Sol Tax and other anthropologist friends to initiate the "Responsibility in Anthropology" debate. Its opening gun was the abovecited article by Gough (1968).  Some of us wanted to use anthropology to support instead of to combat guerrillas in Indochina and other "developing" regions. I argued against liberal anthropology and for liberation anthropology (reprinted in Frank 1969). The debate took on some significance, with Maggie Mead now on the other side. The scope of the debate extended from anthropologist advisors in Indochina and Thailand to the annual meetings and mushrooming teach-ins in the United States. They were originally invented for that purpose by the anthropologist Eric Wolf and his colleagues and students at the University of Michigan.

 In another "debate" I  put a curse on both the formalist (micro-economic) and substantivist (institutionalist) houses in economic anthropology. I argued that neither took proper account of the effects of colonialism and imperialism on underdevelopment and the peoples they studied. Current Anthropology printed a "reply" by George Dalton saying that there is no use replying to someone "as full of anger and ideology." Later, I returned to the theme of "liberation anthropology" in an article entitled "Anthropology = Ideology, Applied Anthropology = Politics" written for the 1973 International Congress of Anthropological and Ethnological Sciences in Chicago, for which the U.S. government denied me an entry visa. (The last two are reprinted in Frank 1984).

 At the same time, I also participated -- first as a football bounced around by others and then also as an active contributor--in what came to be known as the "Mode of Production in Indian Agriculture Debate." It took place mainly in the pages of the Bombay Economic and Political Weekly (EPW) and also turned around issues of feudalism or capitalism and their respective political implications at the time there were three different Communist parties in India. One of my "contributions" in EPW in 1973 was entitled "On 'Feudal' Modes, Models and Methods of Escaping Capitalist Reality" (reprinted in Frank 1984). On many occasion in the 1970s and 1980s, I proposed to published the debate as a book. In the early 1980s, my then colleague John Harriss and I actually collected it all together, edited it, and he wrote an introduction. But no publisher would take our book, and one said modes of production were already out of fashion. Utsa Patnaik, who was the star in the whole debate, finally edited and published it (in part) in 1990.

 In the meantime still in Montreal, Said Shah and I put together, like a jigsaw puzzle, an anthology/reader constructing a dependence theory and analysis for all of the Third World and not just Latin America. The reader was to have two or three volumes, on the past, present, and future. The first volume was finished. It began with a critique of received development theory and used selections from Alexander Hamilton and Friedrich List among others. The next part on theory=history traced the development of a single capitalist world system. Then came parts which analyzed the development of underdevelopment in that same system of each of Latin America, Africa, the Middle East-North Africa, and Asia, with separate sections for India, China, Southeast Asia, and Japan.

 The last two of these sections drew heavily on Cliff Geertz's (1966) Agricultural Involution. The Process of Ecological Change in Indonesia. Geertz countered Boeke's version of dualism and instead demonstrated how stage by stage Indonesia was underdeveloped by its colonialized participation in the world capitalist system. I also used Geertz's chapter contrasting Java and Japan. This contrast supported our argument (also based on Lockwood and Norman) that Japan was never underdeveloped, precisely because it was never economically or politically colonialized. Higgins had written the foreword to this book, which we both liked, albeit perhaps for different reasons. However, I failed to be adequately impressed by its reference to ecological change or anti-development as it would now be called.

 In the preface to our reader, we had expressed our hope that our book would soon make itself unnecessary and out of date. We hoped that its dependence message would soon be accepted and improved upon by others. I have always regarded this reader as my magnum opus. Alas, our book never saw the light of day. One publisher after another refused to publish the reader. Through the good offices of my friend Geoffrey Kay, Cambridge University Press offered to do the first volume on the condition, among others, that we put "a Marxist view" in the title, which we refused.  Other mainstream publishers refused to publish it because as some admitted it was altogether too radical for them. Smaller progressive publishers could not publish the book, because it was too expensive for them - and/or because they could not yet see the coming wave of dependence consumption and new production. Some five years later in Asia, I noted that this kind of analysis was only just beginning to be made there. Therefore, I again tried to get at least the section introductions and table of contents published as an article. However, even that failed. So for the record, I finally placed the latter in an appendix of my essays collected as Critique and Anti-Critique (Frank 1984).
However, the wave of dependency production and consumption did indeed outdate our book even without its publication.

 Back in Chile in 1968-69, I sat down to write the theoretical introduction to the ill fated "Reader on Underdevelopment." It addressed various critiques of dependence from the inside and the outside, friendly and unfriendly. Then I recast the whole question in terms of the historical development of the world system as a whole. I had already written that underdevelopment through dependence was only a part of this  whole capitalist world economic system in my 1963 manuscript, in my 1964 mimeographed letter, and in my 1965 preface to my first book. So then in 1969-73, in ever longer draft after draft, this "introduction" became my history and analysis of this capitalist world system as a whole.

 Since the Reader was unpublishable, I decided to convert its theoretical "introduction" into a separate book. I rewrote it several times (while simultaneously also discussing and writing about current economic and political policy in Chile) until the military coup there put an end to my endeavors. However until 1978, no one was willing to publish this world system book manuscript either.  Penguin Books had signed and then renigged on a contract to do so much earlier. The manuscript was finally divided into two parts, published separately as World Accumulation 1492-1789 and Dependent Accumulation and Underdevelopment (Frank 1978 a and b). The first title traced the development of the capitalist world system from  the Discovery of America to the French Revolution. In doing so, it laid great stress on the role of long world economic cycles and crises of capital accumulation in shaping world development and underdevelopment. The second title concentrated on the role of the dependent Third World in world system capital accumulation over the past 500 years. I had already written in 1963,1964 and 1965 that what we need is an analysis of the capitalist world system. These books were my early contribution to this task. Alas, almost nobody except Eric Wolf (1982) and Albert Bergesen (19xx) took notice.

 As I completed my writing in Chile, I received a draft of the first volume of Wallerstein's (1974) Modern World System. The publisher asked me to write a blurb for its dust jacket. I did and said the book would become an instant classic. It did. Dos Santos also said that we (in the Third World) have to study the whole system ourselves and proceeded to write on contemporary American imperialism.  Samir Amin (1974) published his Accumulation on a World Scale, of which he had written a draft  for his PhD 15 years before. These studies on accumulation in the world system reflected the ongoing changes in world development. They were one of the responses by the new development thinking.

From Some Lessons of the Chilean Experiment vs. Dependence ...

 In Chile in the meantime, Allende's attempt to introduce socialist reform and reformist socialism came and went between 1970 and 1973. It had my active but altogether undistinguished small time participation. It was time to express political sentiments and to put dependence theory to practice. Our house in Chile became a place of refuge and of discussion for compañeros from near and far. Particularly long live in friends were Ricardo Letts on the run from the 1968 military coup in Peru and my sociology student at the University of Chile, Dagoberto Perez, after he emerged from jail for a political crime he did not commit. After his death in a shoot out with the military regime in 1974, I would dedicate two books to his memory. Miristas and Socialists, especially Miguel Enriquez, Bautista "El Bauche" van Schowen, Rafael Baraona, the Editor of Monthly Review in Chile Tito Benado, and the Brazilian Rui Mauro Marini, spent days and nights at our house and I sometimes in theirs or elsewhere in endless discussions about how to translate "dependence theory" into political practice in Chile. I also devoted many long sessions at home to Tito Pizarro and Orlando Caputo's dissertation on how to calculate the financial drain from Chile and Latin America. I wrote numerous politically inspired or even commissioned articles for the local press on timely issues of the day. Some, like one on the terms for the nationalization of copper, were written in collaboration with the journalist Gladys Diaz.

 It was an exiting time in which everybody, myself included, debated every kind of economic, social, and political issue of equity and efficiency in economic development. All of these issues arose daily in the concrete and took on political form. The Allende government drew substantially on dependence thinking and tried to introduce anti-dependence measures. Allende also sought, but failed to receive, socialist support from the Soviet Union for the same.

 To achieve equity and efficiency in economic development was more difficult in praxis than in theory. To begin with as President Allende never tired of pointing out, he was in government but not in power. That is why I thought the peaceful reformist way would not do. Even to capture and redirect the "potential surplus" was not so easy. Also, it turned out that improving equity by redistributing income was not so easy. The resulting change in the structure of consumer demand did not translate into a new structure of production. Thus, efficiency did not increase, except through lower unemployment. However, equity and social development took leaps and bounds as the people gained dignity  and popular education. Political participation and democracy mushroomed like never before in Chile and perhaps elsewhere.

 However, microeconomic neoclassical "efficiency" considerations did operate to keep the marcoeconomy going: Sergio Ramos, the Communist Party economist representative on the interministerial economic committee, and my colleague, friend and neighbor came over to explain why prices had to rise (to get them right?). He also explained why the now nationalized banks had to continue lending credit to the self-same enterprises: They had to prevent them from going out of business. If they went busted, they would create more shortages, renewed unemployment and greater political problems.  In 1972-73, I saw success as  increasingly difficult and doubtful. Domestic problems were growing and international ones were insufficiently appreciated. Kissinger and Nixon had just gone to Bejing and Moscow. They made a detente pact with Brezhnev, who abandoned Chile as part of the bargain.

 At CESO, my  institute at the University of Chile (where I was researcher and Marta librarian) Dos Santos, Marini, Pio Garcia, Marta Harnecker and many others debated the ins and outs of the transition to the transition to socialism. I made myself unpopular by warning that we should rather worry about the coming reaction and the possible transition to fascism.

 In 1972, at the UNCTAD III meetings in Santiago, I heard "development of underdevelopment" sloganized by establishment Third World delegates from afar. So I decided it was time to move on. In the same "UNCTAD" building a few months later, I gave a paper at the Latin American Congress of Sociology. It was entitled "Dependence is Dead, Long Live Dependence and the Class Struggle." The message was that  dependence itself was alive and kicking, but that the usefulness of dependence theory for political action had come and gone. That was true at least in Latin America. More and better class struggle was supposed to be on the agenda. Of course, more class struggle certainly would come. But it hardly became better, since it came in the form of military coups and repression in Chile and elsewhere. For instance, a year later Pinochet bombed out the old presidential palace and constitutional president, and then he moved his new government into the UNCTAD building instead.

 A few months later still in 1972, I went to Rome via Dakar. I stopped off in Dakar for a conference at which Samir Amin, who had also visited me in Santiago, wanted to introduce dependence theory to Africans. Then in Rome in September  1972, I announced that the world had entered a new Kondratieff B period of crisis. Giovanni Arrighi had put me on that track. I said that the socialist countries were starting to reintegrate in the capitalist world economy. I also repeated that not dependence theory but the analysis of the world crisis of capital accumulation was then on the analytical and theoretical agenda (reprinted in Frank 1981b). I would spend the next 16 years full time on this agenda, writing several crisis books (Frank 1980, 1981a, 1981b, 1982, 1983/4, 1988a, and countless articles). Alas all that was to no avail.

...To the Reaction and Chicago Boys in Chile

 The Chilean experimental laboratory (already in Christian Democratic President Frei's center-right and Allende's center-left times) has also been exemplary in more recent times. Chile was again important in development theory, praxis, my own experience and thinking, and the connection among all of these. Dependence theory and policy was dead indeed. General Pinochet decapitated it with his sword on September 11, 1973. Then he instituted an ultra-right counter-revolution and counter-reform. Still confined at home by the 24 hour post coup curfew before we left for Germany, I made several predictions: a) politically, it would be very bloody - inequitable in the terms of this volume. However, the reality of 30,000 dead, and countless disappeared and tortured to this day exceeded even my worst expectations. b)  economically, Chilean agriculture would become another California - if that is efficiency.  Now I have seen Chilean fruit in supermarkets not only here in Amsterdam, but also in Tokyo, Hawaii, and yes in California itself. In terms of development theory and praxis, Chile became a major example of export led growth (albeit not much in manufactures, except for cluster bombs and other arms sold to Iraq and elsewhere).

 The midwife for this transformation was Milton Friedman's monetarism carried to Chile by himself, Arnold Harberger and the Chicago Boys (This was Chile's version of the earlier Berkeley Mafia in Indonesia). The new policies were imposed by General Pinochet as equilibrium on the point of a bayonet. That was the subtitle of my Economic Genocide in Chile. It started as my two open letters to my  former professors at Chicago, Milton Friedman and Arnold Harberger (Frank 1976). My open letters also recalled the arrival of the first Chilean students under Harberger's direction at Chicago while I tried and failed to write a dissertation under his direction in the mid 1950s. I recalled that the Chicago line already argued in the mid 1950s, in the name of the efficiency of resource allocation, that Chile should abandon its relatively equitable social welfare system. Meeting Al Harberger again in Chile itself in 1964, I had already argued against his contention that subsidizing urban bus fares was misallocating resources inefficiently. I claimed that lower bus fares only helped a bit to redress  other inequities and other inefficiencies of resource allocation. Their marginal cost did not equal marginal revenue or price either. In his militarized Chile, General Pinochet gave the Chicago Boys free reign over economic policy. Therefore it was only natural for Friedman and Harberger to come down and to recommend their shock treatment therapy.   Free to Chose Friedman argued that the magic of the market (efficiency?) comes first and freedom (equity?) later. He was awarded the Nobel Prize for economics, not for peace, thank God.  However, Harvard refused to accept Harberger for his part in the whole sordid story. Yet, the World Bank still gives Chile the first pride of place for its model. For us, it has cost the assassination of literally countless personal friends, some still very recently.

 Monetarist and neo-classical supply side reactionary theory and the magic of the market policy swept around the world. They were enshrined in Reaganomics (which was actually started by Jimmy Carter in 1977) and Thatcherism, which was actually started by James Callaghan in 1976 (see Frank 1980). These same theories and policies also went on to get pride of place in Chile, Argentina, Uruguay, Israel, and to go on into China, the Soviet Union, etc. The 4 Tigers / Dragons in East Asia became the export led growth model. However, the economic and political importance of the state in South Korea and its political repression went largely unmentioned until theyt made world headlines because of the 1988 Olympics. If export led growth has been efficient there and in Taiwan, it is also thanks to the prior increase in  the equity of the distribution of income and the domestic market. These improvements were due to the land reforms forcibly imposed there and in Japan by the United States after the war.  Unlike the World Bank and others, I took account of these exceptional political and strategic factors. They make these NIC more of a unique experience than a copyable model. I was also unable to recommend their hardly equitable political repression as a model. However, I perhaps I underestimated their capacity for technological upgrading and new participation in the international division of labor (Frank 1981a).

 In 1974 already, I said and wrote (reprinted in Frank 1981b) that the Third World response to the new world economic crisis would be the exports to the world market. I also predicted how and why this (economically efficient?) model would be ushered in and supported by military coups, martial law, emergency rule, etc. These are the other (inequitable) political side of the coin of this economic model. It requires the physical and political repression not only of workers and their unions, but also of industrialists and others working for the internal market.  Alas, events in South Korea, the Philippines, Thailand, Bangladesh, Pakistan, Chile, Uruguay, Argentina and in too many other countries to name proved me sadly right. For documentation, see my Crisis in the Third World (1981a) chapter 6 on the state and chapter 7 on political economic repression. In many cases the political repression worked, but the export led growth led to the to a depression worse than in the 1930s and tothe Third World debt crisis (which was foretold in chapter 4).

From Basic Needs and NIEO to the Economic and Development Crisis

 The ever deepening world economic crisis also undid some new progressive theoretical thinking and policy by the more-of-the-same establishment. One of these was Growth with Distribution and Basic Needs (BN). It began at the Institute for Development Studies (IDS) at Sussex, England. then BN was adopted or adapted by the International Labour Organisation of the United Nations. It was also taken up by the World Bank under Robert McNamara. After his 1973 speech in Nairobi, the Bank began directing more funding to agriculture and ostensibly to the poor.  In fact, most of its farm support went to middle peasants, as my fiend Ernest Feder never tired to point out. Both institutions also discovered the "informal" sector. So now the Establishment started to applaud people who have to fend for themselves through the informal sector. That was cheaper than reducing their need for doing so by reforming the formal sector.

 The evidence had mounted (and was documented by Adelman and Morris 1973) that even fast growth had increasingly skewed the domestic distribution of income in one country after another. With this pattern of growth, the growing masses of very poor and hungry were by passed relatively or even impoverished absolutely. At the time, the ILO estimated them to number some 600 million in the world. Therefore, the new Basic Needs Strategy for the Third World was to guarantee everyone a basic minimum livelihood of food, shelter, clothing, and in some versions also of health and education, etc. In the socialist countries, this had long since been the policy if not everywhere the practice. The ever deepening world economic crisis, however, soon left the practice of this BN policy increasingly in the breach in both South and East. By the early 1980s, the ILO estimate of the very poor had risen to 800 million, and by now it probably is about 1,000 million.

 The other new "development" of the 1970s was the call for a New International Economic Order (NIEO). It was decided by the Non-Aligned at their meeting in Algiers in 1973. Then the Group of 77 (soon 125) "developing" countries "resolved" NIEO through  United Nations resolutions in 1974. The argument was (shades of dependence) that the old international economic order hinders development. So we need a new one. This NIEO should offer the developing world four things in particulat: 1. better prices for their commodity exports; 2. greater access to northern markets for their manufacturing exports (which according to the Lima target should reach 25 per cent of the world total by the year 2000); 3. more finance, like the link between world creation and distribution to the South of finacial reserve (which was already demanded and negated at UNCTAD III in 1972); and 4. greater Group of 77 participation in UN and world decision making.

 NIEO was the subject of countless international negotiating conferences. The North only came to them, as a French minister astutely observed, because OPEC had (temporarily) given the South enough bargaining power to get the North to sit down at the negotiating table. However, this new Third World bargaining power  was still not enough to make the North say "yes," let alone to give anything away. On the contrary, the West always, and the East much of the time, voted "no" at all UN and other conferences. In the real world in the meantime, the growing world economic crisis made the old international economic order go from bad to worse, instead of better on all four countrs (Frank 1980, Chapter 5).

 For a while, there were arguments about whether  NIEO demands were a clever diversionary tactic. Were the rich in the poor countries pointing NIEO finger at international relations to avoid the domestic reforms necessary to guarantee BN ? Or was it the reverse? Was BN was a clever diversionary tactic by northern interests like the World Bank to avoid confronting the real need for NIEO?  A few people, like Paul Streeten, pointed out that far from being alternatives, BN and NIEO were really necessary complements. I argued that they were neither, but only hot air pie in the sky (Frank 1980, chapter 5).

 The onset of the Third World debt crisis since 1982, especially in Latin America and Africa but also in Eastern Europe, resolved the issues in fact. If there was anything new in the economic order, it was that it became far worse in praxis than the old order of the 1950s-60s. For the South the new order of the 1980s became worse even than that of the 1970s. As for BN, the relative distribution of income and the number and depth of absolute poor became far worse than before.

 Unlike many of my friends, I had never regarded the multinational corporations and their foreign investment as the bugaboos. Many had  hoped that the replacement of the multinationals' direct foreign investment by foreign loans and bank debt would reduce if not eliminate dependence. The new debt crisis certainly proved them wrong. It vastly increased foreign dependence, even of "sovereign" national states. Their trade, monetary, fiscal and social or "development" policies are even more constrained now by foreign debt than they were before by foreign investment before.

 The debt is an instrument of neo-colonization and drain of "surplus" from part of the South. By my calculation, this loss of capital from South to North has been on the order of US $100 billion per year. The flow was over US $ 500 Billion from 1983 through 1986. $ 200 billion were through debt service, over $ 100 billion through capital flight, $ 100 billion through the 40 percent decline in the South's terms of trade, and $ 100 billion through normal remission of profits and royalty payments. Since then, this South to North capital flow has been another $400 billion or so. Thus, the Third World countries -- and the East European "socialist" ones too -- made de facto payments of more than the total of the debt owed. Yet in the meantime this total nearly doubled once again de jure. Hungary paid the amount of its debt three times over, and in the meantime the amount still owed doubled! Under "bourgeois" law in any "normal" capitalist country, of course, bankruptcy proceedings or "Chapter 11" debt relief would have been instituted long ago for "the common good." However, this benefit of the "First" world's civilization is not extended to the "Second" and "Third World." Perhaps, West Europeans will now extend this proceedure to their cousins in the East. The West German government has already quietly absorbed all of the DDR's US$ 21 billions of foreign debt, the DDR internal government debt, and most enterprise debt to the DDR state bank.

 Through much of the 1980s, the annual Third World debt service has been about 6.5 percent of its GNP. This percentage may be compared to perhaps 1 percent of GNP spent by the US on the Marshall Plan or by the West on higher oil prices in the 1970s. Even German war reparations in the 1920s only averaged 2 percent and rose to 3.5 percent in 1929-31, before they contributed to the rise of Hitler, who abrogated them (Frank 1987, 1988a).  In my reading of history, this drain is not new, but  has always increased somewhere in the South during each (Kondratieff B phase) economic crisis in the North (for some evidence see Frank 1978 a and b). As already observed in my opening paragraphs above, this time the drain has led to an economic depression more severe than that of the 1930s in Latin America and Africa. Now it is Eastern Europe's turn too. There can be no hope of getting any of Eastern Europe on its economic feet without remission of the debt. (We should recall that remission of the post World War I debt was conceeded to West Germany after World War II as the sine qua non of its financial reform).

 Failing that in the Third World as well, the result is not development, but the development of underdevelopment. This time it is with disinvestment in productive infrastructure and human capital and with the loss of competitiveness on the world market. As already observed above therefore, another result is that economic growth = development has practically disappeared from all but the most academic discussions. Liberal, Keynesian and structural development theories already entered into crisis earlier. Now neo-liberalism, post-Keynesianism, and neo-structuralism have also become totally irrelevant and bankrupt for development policy.  In the real world, the order of the day has become only economic or debt crisis management instead.

From the World Economic Crisis, West, East, and South...

 The aforementioned book on Crisis: In the Third World (Frank 1981a) is the extension of its companion volume Crisis:In the World Economy (Frank 1980). Other related occasional articles of mine were collected together in Reflections on the Economic Crisis (Frank 1981b). A reviewer would comment

 Andre Gunder Frank's trilogy does no less than attempt to historically trace and analyze this golbal crisis in the context of a long-term structural crisis of capital accumulation. Frank was a lone Marxist voice, anticipating the dangers and potentialities of the deep-rooted crisis which now, 10 years later, engulfs the capitalist, socialist and Third World regions of the world. In this trilogy, Frank expands his original insight into a comprehensive, complex, scientific, and passionate treatise (Shank 19xx: )

 I wrote these books in Germany. In September 1973, I arrived back in my birth place Berlin as an exile from Pinochet's Chile exactly 40 years after I had left it as an exile from Hitler's Germany, which burned my father's books. (He received the highest honors for his humanitarian literature in Imperial, Weimar and post- World War II Germany, East and West).  Urs and Clarita Muller-Plantenberg, whom I met in Chile, had arranged a visiting professorship for me at the Latin America Institute of the Free University of Berlin. There, I shared an office with another German exile from Chile, Franz Hinkelhammert. I had said good bye to him only a couple of weeks before in Santiago after the coup.  Then from 1974 to 1978, I worked elswhere in Germany with the financial support of the Max Planck Institute in Starnberg, the German Foundation for Peace and Conflict Research, and the Berghof Foundation. All this was only possible through the personal friendship and political and intellectual support for part of the time from Dieter Senghaas and for all of the time - and still since then - by Folker Frobel, Jurgen Heinrichs and Otto Kreye. They were simultaneously writing their related and pathbreaking The New International Division of Labour (1979). However, we disagreed about the existence or not of a crisis! I spent many years trying to persude my friends, and finally did --with a little help from the stubborn facts of crisis, which would not go away!

 I was never able to get a professorship in Germany, even though I  applied, got on short lists and even onto first place. Finally, one university president did want to hire me. However, the Minister of Culture, an ex police chief who now excercised his political judgement as arbitrer of all appointments, told the president who then informed me "this Frank will never get a professorhip here." So I left Germany in 1978. By contrast in England, Rhys Jenkins and Chris Edwards published several serious critiques of my writings on dependence and the world economy. Nonetheless, they urged me to compete for and then welcomed me as Professor of Social Change in the School of Development Studies at the University of East Anglia. There I met a professor of German literature. He later sent me photocopies from the German police files and war archives on my pacifist novelist father for the war years 1916 and 1917, when he was already in his first exile in Switzerland. Excerpts are: "He suffers from dementia...is supposed to be very strongly nervous...known as one of the most dangerous Spartacists....very dangerous Anarchist." Plus ca change...?

 My study of the world economy in crisis increasingly included the socialist countries. I had already seen the beginnings of the reincorporation of the socialist countries in the capitalist world economy in 1972 (reprinted in Frank 1981a). I analyzed the rapid progress of this process in detail in 1976 under the title "Long Live Transideological Enterprise! The Socialist Economies in the Capitalist International Division of Labor and West-East-South Political Economic Relations" (Frank 1977 and Frank 1980 chapter 4). I argued that the "Socialist Second World" occupied an intermediate position in this division of labor between the industrialized "First World" and the underdeveloped "Third World." However, I still did not see clearly enough that the "import led growth" in the East European socialist NICs was essentially the same as "export led growth" in the capitalist NICs. The former export to import, and the latter import to export. Almost all amassed foreign and domestic debts. The difference has been that NIC growth in Eastern Europe has been less successful than in East Asia. The latter now outcompetes the East Europeans in the world market and wants to invade their own domestic ones too. However, export led growth has been about equally  unsuccessful in the also indebted South America.

 Thus, economic crisis, stagnation, recession and even depression also visited some socialist countries of Eastern Europe. In part, they were home grown problems of transiting from extensive to intensive growth. In part, they reflected a conjuncture in the built in political investment cycle. In part, they were the result of the importation of economic crisis, inflation, and debt from the West  through the "import led growth" of the 1970s. All these strands became entangled in the early 1980s. Then, they  demonstrated that these socialist economies were not or no longer immune to the vagaries and costs of economic development in the world capitalist economy. We now know that the socialist economies also are subject to cycles, inflation, and soon to unemployment, not to mention inefficiency and inequity. After this was written, the Revolutions of 1989 were the effect. In the short run however, they can only aggravate these economic problems.

 Yet alongside the much heralded failure of "really existing socialism" in the East, nobody seems to see the same failure of "really existing capitalism" in the South. (These are compared in Frank 1990c and 1990d). All things considered, the East European model was still politically  less repressive and inequitable (except partially in Rumania) than in the successful EastAsian and the unsuccessful South American capitalist NIC areas. Moreover, in 1989 Jeanne Kirkpatrick turned out to be wrong: The "totalitarian" countries in the East changed more than the "authoritarian" ones in the South. Looking ahead, proposals to resolve the debt crisis in both abound. However, hardly anyone ever asks how to make the South American and East European NICs competitive against the East Asian ones and others. The debt service has made the former lose out in technological and other competition on the world market. These and other recent reflections on the world economic crisis and its political implications were collected together in Spanish in Frank (1988a). In English, no one was interested.

 I also suggested that, like the last one, this world economic crisis and world wide economic competition were generating the emergence of economic regionalization and the possible formation of political economic blocs. My first timid suggestion to this effect was also in 1972 (reprinted in Frank 1981). In the 1980s, I returned to this theme more and more insistently in Frank 1982, 1986, 1988a, 1988c. I also stressed the increasing conflicts of interest among the NATO allies across the Atlantic and argued for the political economic realism and desireability of an all European alternative arrangement instead. My title was The European Challenge: From Atlantic Alliance to Pan-European Entente for Peace and Jobs (Frank 1983/4). Even though Eastern Europe would be "dependent" on Western Europe, I argued that their common interests could and should override their supposed capitalist / socialist divisions, which were becoming increasingly irrelevant anyway. I continued to repeat and extend this argument until mid 1989.  Few people regarded my argument and proposal as realistic, but the Revolution of autumn 1989 made them and then some a reality!

... To the Crisis of Socialism and De-linking

 In the meantime, these and other momentous events had far-reaching implications and consequences for development and development thinking. Socialist revolution and development, de-linking and self reliance were in serous trouble in the Third World. Momentous changes ocurred in the largest country of the Third, socialist, and entire world, China. The Cultural Revolution proved a failure sometime between 1971 and 1976 (although its human costs did not become clear abroad until later). Mao and Chou En Lai died in 1976. After three years interregnum and the unmasking of the Gang of Four, a new period of anti-Maoist reforms began in late 1978. Then followed the de-collectivization of agriculture, effective privatization first of agricultural production and then of some trade and industry. First some special economic zones and then much of the coastline was opened up to the West. Now it appeared that agricultural incomes had stagnated and even declined over 20 years since collectivization and the Great Leap Forward. Now the 1980s have witnessed enormous increases in agricultural production and consumption. However, these changes have also brought on some seemingly typical capitalist inequities: more unemployment, serious inflation, growing regional and functional inequalities in income distribution, and threatening ecological degradation. All these benefit some at the expense of others. China came to participate in something of an economic-political-strategic de facto Beijing-Tokyo-Washington axis. China also went to war with Vietnam "to teach it a lesson."

 All these and other  developments  obliged all the world, and even development thinkers, to rethink. In 1980, I began an article: "The events of 1979 in and between Kampuchea, Vietnam, and China oblige socialists to undertake an agonizing reappraisal" (reprinted in Frank 1984, chpt. 20). They certainly obliged me to revise my own thinking about socialism, development and democracy (of which more below).

 The decade following 1974 witnessed the "liberation" or "enslavement" (depending on point of view) of 14 countries in Indochina, the Gulf-Horn region of Africa, its ex Portuguese colonies, and in the Central American-Caribbean region. Gradual de-linking and self-reliance along the "non-capitalist road" of the 1950s and 1960s had previously led Indonesia, Syria, Egypt, Ghana, Guinea, ujiama model Tanzania and so many others to a dead end before or by the 1970s (Algeria and until a few years later Burma were perhaps partial exceptions) . Now their new "socialism" or "socialist orientation" would lead these 14 countries into another blind alley. Half way down, several have already made a U turn. Mozambique and others, and even Socialist Vietnam, are attempting to get onto another development track or at least tack. But with little success so far.

 Therefore in 1988, I wrote:

 A number of conclusions are almost inescapable for Third World countries and liberation movements today....It is indisputable that both economically and politically the socialist countries are rapidly reintegrating in the world capitalist international division of labor and promoting peaceful coexistence between socialist and capitalist states. Moroever, with the particular exceptions (like Cuba and Vietnam that prove the rule?), the socialist countries have failed tio establish a division of labor and market as a viable alternative to the world capitalist one, either for themselves and even less for "non capitalist development" "socialist oriented" progressive Third World countries and liberation movements....

 In short, both objectively and subjectively speaking, really existing socialism offers scant realistic hopes for any real alternative solution to Third World problems today. The socialist economies offer the Third World no alternative escape, and their leaders condemn proposals to "stop the world, I want to get off" and de-link as illusiory and dangerous (Frank 1988b:324,327 and 1989:23,25).

 Ironically in Marxist terms, socialism had promoted superstructural political liberation in the Third World without ever being able to offer any infrastructural economic alternative.  All this was the case and written before the Revolution of 1989 in Eastern Europe, on which I have commented elsewhere (Frank 1990 c,d).

 All these backs and forths in economic development theory and praxis make it appear that the real economic development problem or insufficiency is not human and other capital, social structure, or values and ideology, but foreign exchange! The master key to the economic development door is the all mighty dollar. That is what all Third, Second, and not a few First World countries most need and least have to permit their acquisition of development capital and technology abroad and even at home.  The debt ridden economies of the South and East are all becoming "dollarized." The scarce U.S. dollar increasingly replaces their excessively plentiful and devalued domestic currency as the medium of exchange, store of value, and unit of account. Curiously of course, this dollarization spreads around the South and East just as the dollar and the U.S economy is altering in the West. Ironically, that is when the dollar is being most revered and enshrined as king in all the "socialist" countries! Every alternative is rejected and no sacrifice is too great to worship at the golden dollar altar. (This was written before the events of 1989!).

  This lack of real socialist or capitalist development alternatives in the real world calls into question the realism of the superpowers' ideological battles and military confrontation over their respective models and clients (as is argued more extensively in Frank 1987). What is all the political fuss about, if these -- and other -- countries really have no economic alternatives?  And are there any other alternatives?

 Continued in Part 4