P. KHVOINIK
__TITLE__ TRADE AMONG CAPITALIST COUNTRIES __TEXTFILE_BORN__ 2007-10-09T11:20:42-0700 __TRANSMARKUP__ "Y. Sverdlov" __SUBTITLE__ Trends and ProspectsPROGRESS PUBLISHERS ~ MOSCOW
[1]Translated from the Russian
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0604020000 ~ [2] CONTENTS Page Preface .................. 5 CHAPTER 1. RECENT TRENDS IN THE DEVELOPMENT OF THE WORLD CAPITALIST MARKET.......13 1. Main Results of Postwar Developments...... 14 2. Factors Underlying the Postwar Growth and Restructuring of International Trade........... 36 3. Specific Features of the Present Stage...... 41 CHAPTER 2. THE CHANGING FUNCTIONS OF THE EXTERNAL ECONOMIC SPHERE AND THE REVOLUTION IN SCIENCE AND TECHNOLOGY..........55 1. Shifts in the International Division of Labour and in the Structure of External Economic Exchange . . . 55 2. The Changing Role of International Trade .... 72 CHAPTER 3. THE NEW ROLE OF INTERNATIONAL MONOPOLIES ...................85 1. New Forms of External Economic Expansion of Monopolies ........,........87 2. The Superinonopolies' International Industrial Empires . Ill 3. The Role of Intracorporate Transactions in the Structure of World Capitalist Trade...........122 4. Contradictory Problems in the Private-Monopolistic Internationalization of Production and the Participation of Monopolies in International Trade......138 CHAPTER 4. EVOLUTION OF THE FOREIGN TRADE POLICY OF CON'FEMPORARY CAPITALISM.......169 1. Problems of the Liberalization of External Trade . . 169 2. Imperialism and Developing Countries: New Aspects of Trade Policies..............212 3 CHAPTER 5. THE PRESENT AND THE FUTURE Page 234 1. The Further Development of the World Capitalist Economy: Some Questions........... 234 2. Commodity Problems............. 239 3. Additional Observations Concerning Prices..... 264 Conclusions................... 278 [4] __ALPHA_LVL1__ PrefaceExternal trade and international economic exchange are playing an increasingly visible role in modern society. As a deepening process occurs in the international division of labour and as means of communications improve, exchanges in goods and services among peoples of different countries are becoming inherent to mankind's existence.
The interests of millions of ordinary persons in the West are influenced directly by current difficulties and sources of confusion in the sphere of international economic exchange and by the intensification of a number of global problems. Shortages of fuels, inflation, unemployment, the oppressive role of transnational corporations and increasingly recurrent economic downfalls have become sources of concern to large numbers of working people both in the Western world's industrial states and in developing countries.
These problems are both important and complex, so there are no standard recipes to fit all cases. In seeking answers, however, one should first clarify the causes that have produced the current situation, identify the basic tendencies in the development of the external economic sphere and evaluate their future prospects.
The present age is marked by an unprecedented acceleration of progress in all spheres of human activity. Major shifts in the development of productive forces since the Second World War were accompanied by fundamental transformations in the political and social spheres.
The simultaneous acceleration of scientific and technical progress and socio-economic progress is not a coincidence. In 5 recognizing the specific features that characterize the development of productive forces and production relations one should also consider their dialectical integral unity and mutual interdependence. Today what is perhaps their most important distinctive feature appears to be an unprecedented global scale, in which all aspects of social life unfold truly throughout the entire world.
From such a perspective our own age may be viewed as a new phase in that stage of human development that began with the appearance of large-scale industries. It was that stage, in the words of K. Marx, that "produced world history for the first time, insofar as it made all civilized nations and every individual member of them dependent for the satisfaction of their wants on the whole world, thus destroying the former natural exclusiveness of separate nations".^^1^^ Today there is an increasing prevalence of the tendency noted by V. I. Lenin towards the development of a diversity of relations among nations and the establishment of an international unified economic life.
It is important to stress Lenin's observation that such a trend towards internationalization is by no means an exclusive privilege of capitalism, but is in fact an element in the development of a more advanced social formation. "...All economic, political and spiritual life is becoming more and more international. Socialism will make it completely international.''^^2^^
The necessary prerequisite of such an internationalization and its material foundation are provided by a global international division of labour that is embodied in the world market and "links all countries of the world into a single economic whole".^^3^^ International trade always constitutes an important element in the internationalization of economies, for as the productive forces of capitalism develop "the universal commodity exchange and the world market and therefore the whole totality of _-_-_
~^^1^^ Karl Marx, Frederick Engels, "The German Ideology'', in: Karl Marx, Frederick Engels, Collected Works, Vol. 5, Progress Publishers, Moscow, 197<>, p. 73.
^^2^^ V. I. Lenin, "Theses on the National Question'', Collected Works, Vol. 19, Progress Publishers, Moscow, 1973, p. 216.
~^^3^^ V. I. Lenin, "The Development of Capitalism in Russia'', Collected Works, Vol. 3, Progress Publishers, Moscow, 1972, p. 67.
6 activities, contacts, needs, etc., which comprise this exchange, become the general basis of all industries.''^^1^^Today this function of international trade has become even more important and acquired a new content. Its development within the general trend towards an internationalization of economic life is stimulated by the need of productive forces for an intensification of the international division of labour. For in the context of the revolution in science and technology without such an intensification it is not possible to achieve an effective production of most goods, especially those produced by technologically advanced industries. These needs call for a further deepening of international specialization and cooperation in production because as the number of branches of production activities and areas of scientific research increases, as does the variety of goods, not even the largest and most developed country is able to advance simultaneously in all directions of scientific and technical progress. The growing specialization in production requires an intensification of international exchange since the absorption capacities of even the largest domestic markets are increasingly insufficient for many types of sophisticated goods whose manufacture may only be effective through large-batch production. Similarly, raw material supplies for national economies, and especially for those that are large and diversified are effective only when the country broadly participates in an international division of labour.
In such a context the fact that during the postwar period the international division of labour has grown more rapidly than general economic development itself, is readily understandable. This accounts for an increasing role of the external sphere in today's economies.
While the entire structure of economic relations is marked by evolution, external trade continues to play a leading role.
In view of the difficulties that are encountered in such studies, it is necessary to limit the range of problems that will be analyzed from the very first. It seems appropriate to focus on problems of international capitalist trade, which plays a _-_-_
~^^1^^ Karl Marx, Grundrisse der Kritik der politischen Okonomie, Verlag fur fremdsprachige Literatur, Moskau, 1939, S, 426,
7 leading role in worldwide trading activities, and more specifically on problems of developed countries, which account for the greater part of trade operations on the world capitalist market. But this also presupposes an analysis of external economic relations between developing countries and industrial powers inasmuch as this is necessary to comprehend the overall system of economic relations of modern capitalism.In view of the great variety of problems that are encountered, as well as of the existence of a substantial body of literature, it seems appropriate to emphasize those aspects that have been least studied and discussed. This refers, above all, to an appraisal of most recent tendencies and of prospects for their further development.
Today, the present very complicated and contradictory stage in the long-term development of world trade seems to be very topical. While until recently the changes that were taking place in the structure in international exchange appeared to be irreversible, the events of the early 1970s challenged such a view. That period was marked by a sharp aggravation of capitalism's crises in energy, raw materials, and international finances. These coincided with and amplified the general crises in business cycles, a rapid acceleration of inflation, a particularly rapid growth in prices for fuels, raw materials and food, and a growing importance of raw materials and in the relative weight of developing countries in world trade over the last decade.
One has to consider whether these changes represent a temporal deviation from the established pattern or, on the contrary, are a turning point in their future development.
One must also consider the extent to which the rapid growth in world trade is a reflection of deep structural changes in the international division of labour rather than simply a qualitative phenomenon. This raises a still more general question, namely, whether there are symptoms of a qualitatively new stage in the development of international economic relations.
An analysis of the structure of these relations also calls for a consideration of subjects of international trade, rather than of objects alone. The former determine the socio-economic aspects of the international division of labour. Particular interest 8 attaches to the role of international industrial monopolies in the internationalization of production. While much attention has been given in recent years to transnational corporations which play a major role in international economic relations as well as in capitalist economies, we believe that the true role of these supermonopolies in international trade has yet to be identified. This is especially true of the intracorporate transfers that take place within the international industrial empires that have been created by individual monopolies as the political and economic nature of this exchange differs greatly from traditional forms of international trade. Because no adequate studies yet exist of these ambivalent developments and because of the diversity of views that may be held concerning a number of proposed solutions it is appropriate to consider closely the entire range of questions that bear on the participation of monopolies in world trade.
It should be stressed that a scientific understanding of the role of monopolies in the internationalization of production is interesting not only by itself. An identification of the mechanisms that govern these processes and of their social essence helps to have a better understanding of the actual role played by transnational corporations in serving imperialist and neocolonial exploitation. It is through the system of huge transnational corporations that a tribute is collected from developing states as well as from working people in industrialised capitalist countries. Therefore, the exposing of the exploitative essence of international monopolies and their responsibility for most of the negative phenomena that exist in world economic relations today acquires particular importance in clarifying the general tasks of the anti-imperialist struggle.
The growing internationalization of economic life and resultant intensification of international trade are accompanied by corresponding changes in foreign trade policies, an increase in state-monopolistic interventions, and in the role of multilateral intergovernmental action in this sphere. The objective need for further extending the international division of labour enhances a certain liberalization in trade policies, although that tendency is constrained by a simultaneous striving for protectionism, particularly when economic difficulties become intense. At the 9 same time conditions governing external economic exchange are increasingly influenced by changes in the balance of forces on the world's arena that arc marked by a growing influence of both socialist and developing countries. This causes capitalist states to partly modernize their policies, including their foreign trade policies, particularly in relation to the national liberation movement. An analysis of these contradictory tendencies is of great importance in considering the general prospects for the further development of international trade and future climate of world economic relations.
Of course such studies require comprehensive factual data, particularly for recent years, as well as a retrospective approach in order to "...examine every question from the standpoint of how the given phenomenon arose in history and what were the principal stages in its development, and, from the standpoint of its development, to examine what it has become today".^^1^^
This, then, is a short survey of the major problems that will he considered. But I would like to preface their analysis with ,1 number of more general observations in order to convey more fully the author's intentions and to provide some guidance to the reader in the approach to this study.
First this study is not a textbook. It does not claim to present a systematic exposition of all aspects of international trade and to reiterate general principles that may be found in textbooks. Although this is, of course, more difficult, it is also more interesting to analyze the most recent and most contradictory developments in the given area, especially those that have not yet been widely studied. This calls for an approach to research that encompasses only a part of the wider range of problems being considered and hence resembles an essay. Since it addresses itself to relatively well-informed readers it does not lend itself to wide popularization. But while the interpretation of certain theoretical problems that are still under discussion may interest only specialists it is my hope that the present work itself will be useful to all persons who are interested in current developments in world economy.
_-_-_~^^1^^ V. I. Lenin, "The State'', Collected Works, Vol. 29, Progress Publishers, Moscow, 1965, p. 473.
10Secondly, this study is largely concerned with the foreign trade of developed capitalist countries. This is partly because they account for the greater part of trade in the non-socialist world. Above all, however, this is because in the trade activities of Western countries among themselves as well as with developing countries that one sees most clearly inany traits and tendencies that generally characterize the external economic exchange in the non-socialist world as a whole. Yet such an aim does not preclude a consideration of other aspects of the trade activities of Western states as well, to the extent required for obtaining an overall view of the situation.
It should be stressed here that a study of East-West trade, which is one of the major dynamic elements of world economic relations, lies outside the scope of this book and may present an independent object of research. For a detailed discussion of this problem the reader may be referred to the publications by Soviet researchers listed below.^^1^^
Thirdly, this study is addressed to readers in other countries. The author recognizes that some of them may not share his view of the world and the conceptions of Marxist-Leninist economic teachings, and that some may have acquired a misleading conception of these views from sources that are biased and ill-intentioned. This may create difficulties relating to methods and terminology deriving either from the reader's lack of knowledge of the categories of Marxist-Leninist political economy or his rejection of the ideology of scientific communism. I would therefore like to clarify a number of points from the very beginning.
In order to find a common language and avoid accusations of ``propaganda'' an explicit effort is made to rely on political _-_-_
^^1^^ See, for example. Yu. N. Kapelinski, Na vzaimovygodnoi osnove (On the Basis of Mutual Advantage), Me/hdunarodniye Otnosheniya, Moscow, 1975; Ekonomicheskiye sviazi vostok-zapad: problcmy i vozmozhnosti (East-West Economic Relations), Mysl, Moscow, 1976; M. M. Maksimova, SSSK i mczhdun/irodnoyr ckonomichfskoyr sotrudiiichrsli'n (The USSR and International Economic Cooperation), Mysl, Moscow, 1977; AW'}' i-lnp ekonomicheskogo sotnidiiichrstva SSSR .t rtizvitymi l;nl>italistichfskimi strniitimi (A New Stage in the Economic Cooperation of the USSR with Developed Capitalist Countries), Nauka, Moscow, 1978 (all in Russian).
11 definitions that are frequently employed in Western economic literature as well as in Soviet literature (such as for example exploitation, monopolies, imperialism, and neo-colonialism). Similarly, the classification and grouping of countries that are employed into socialist, developed capitalist, and developing countries correspond to the terms and criteria adopted in documents of the United Nations, even though that methodology is at times questionable.While seeking to find a common language, the author does not propose to renounce his right to defend his own ideological conceptions and to expose views that he rejects from a MarxistLeninist position. But this does not imply a refusal to engage in scientifically grounded polemics with representatives of opposing viewpoints. The author will greatly welcome opinions of opponents and colleagues from Western countries that are based on analytical arguments.
Finally it should be stressed that this study does not contain comprehensive solutions to all major problems of international trade, but rather represents the outcome of reflections produced through studies of specific issues. Because many of the phenomena are new and contradictory they call for further clarification. Similarly, the interpretations that are given and are sometimes deliberately emphasized for purposes of discussion remain to be verified by the actual course of events.
Such is the context that guides both the methodology that will be applied in this study and the range of problems that will be considered.
[12] __NUMERIC_LVL1__ CHAPTER I __ALPHA_LVL1__ RECENT TRENDS IN THE DEVELOPMENTIn analyzing the current state of the world market and evaluating its probable prospects it is necessary first to establish the tendencies that govern the long-term development of international trade. This will make it possible to consider the most general principles that govern the further extension of external economic relations in the age of the revolution in science and technology and of struggle between the two world social systems as well as to establish the specific features that characterize the present stage.
That last consideration is especially important. This is not only because the present stage differs substantially from preceding periods in the development of international trade and possesses its own specific traits. Nor is it because some distinctions are now more sharply apparent than ever before while the corresponding processes have become more dynamic. Above all it concerns the complex and contradictory character of the changes that are taking place. It testifies to the development of factors that are qualitatively new, and precludes an interpretation of the recent events entirely in terms of a fundamental shift in all the basic tendencies that have governed the development of the capitalist world market since the Second World War. This is why it is so important to analyze long-term tendencies with care and caution in arriving at particular conclusions concerning impending changes (that may have already begun) and the emergence of new elements.
But this requires that the major parameters of the studied processes be identified, and that a factual basis be developed to accommodate the complex ramified structure of international 13 trade. As an initial step lot us note the basic dimensions of the evolving structure of world capitalist trade. This will constitute a general background, as it were, for further analysis.
__ALPHA_LVL2__ 1. Main Results of Postwar DevelopmentsWhile presenting a quantitative survey of the development of international capitalist trade over a specified period of time may at first seem simple, it does meet with a number of difficulties, particularly methodological ones. These represent the reverse side, as it were, of a natural inclination to compare the present stage with a period as long as possible, which is necessary to identify objective long-term tendencies. But as the period under consideration is extended there is an inevitable loss of accuracy in primary data. This is partly attributable to smaller volume of statistics available in prewar years, and partly to differences in earlier methodology by comparison with the current system of international trade statistics.
Particular attention should be given to the fundamental changes in the world's political map that have taken place since the Second World War following the formation of a world socialist system and the successes of the national liberation movement. Some of the methodological problems in the analysis of international trade statistics result from the shrinking share of the capitalist market and from changes in the position of individual countries within the world economy.
The very first problem that one encounters is to select logically and statistically comparable objects for comparing postwar and prewar trade. While it is not difficult to recalculate prewar data in terms of the capitalist world's current boundaries the question is whether this will permit justifiable and representative comparisons. On the one hand it may seem that it is indeed appropriate to compare only those countries that currently constitute the world capitalist market. But this has the effect of eliminating the radical shifts within the world capitalist system and its declining scope following the withdrawal of socialist countries. Since the 14 postwar territorial shrinking of the capitalist market reflects fundamental changes in the balance of forces on the world stage, an explicit recognition of these realities carries a political as well as a statistical significance. This points to the possibility of two approaches to long-term comparisons of parameters describing world capitalist trade: one that relates to the specific boundaries within which the world capitalist system existed during particular historical periods, and one relating to the current boundaries.
A second problem concerns the classification of countries within the world capitalist system. In a number of cases this derives from a need for separate studies of the dynamic shifts in trade of developed capitalist countries on the one hand, and of the developing states, on the other. But a number of difficulties, not so much methodological, but rather of a purely technical character, arise here. It is widely known that before the Second World War the classification of states differed substantially from the division into developed and developing countries that is currently accepted in the statistics of the United Nations and of other international organizations. But since the statistical data prepared by the League of Nations was based on a fundamentally different classification it is not possible to mechanically recalculate the prewar trade data for groups of countries on the basis of the current classification. When one considers changes in the boundaries and political status of former colonies, trusteeship territories, and dependent countries, as well as the emergence of new states after the war, it becomes clear how senseless and artificial it would be to seek to estimate the position of today's developing states within the prewar international trade especially when taking into account the great variety of countries encompassing the so-called "Third World".^^1^^
_-_-_~^^1^^ We find that the term "Third World'', which is widely employed in the Western literature is far from being unambivalent and in some cases it is simply misleading. While a large group of developing countries do possess many common features that relate primarily to economic and social backwardness, it is hardly appropriate to always refer to all new states in terms of such a definition. For the fundamental character ot a country's social system differs primarily in terms of its membership in either the socialist world or the capitalist world (in terms of Western terminology this is in fact equivalent to "countries with a centrally planned economy" and "countries with a market economy''). In this __NOTE__ Footnote cont. on page 16. 15
Similarly it is extremely difficult to compare today's commodity composition of international trade with that of the prewar period. While this is partly clue to differences in the corresponding statistical recording systems, it is primarily because of changes in the qualitative composition of individual commodity groups and the appearance of new objects of trade that do not fit into earlier forms of classification.
Another obstacle to long-term comparisons can be seen in repeated changes in rates of currency exchange and in methods of calculating the world prices of individual commodities.
Coupled with serious difficulties in the classification of groups of countries these factors greatly reduce the reliability of available prewar trade data. It is especially difficult to compare price indices and indices of physical volume of trade, for substantial differences in the nature of these indices sometimes make their recalculation in terms of a common base even theoretically impossible.
These objective difficulties are fully reflected in existing estimates of prewar international trade in terms of its current geographic and commodity composition. Even in the most authoritative sources such data are frequently incomplete and inconsistent, and in many respects merely suggestive. This is, of course, a natural development if one considers that in spite of continuing shortcomings, today's international economic statistics are far superior to their prewar quality for most of the problems that arise. But in spite of the shortcomings of prewar data it is still appropriate to make use of them, particularly since no other practical alternative exists for long-term comparisons. In such cases the only possible method appears to be a critical utilization of available data, supplemented by one's own calculations and estimates whenever required.
_-_-_ __NOTE__ Footnote cont. from page 15. connection the Maoist interpretation of the "Third World" in terms of the relation of individual countries to the two ``superpowers'' is especially misleading. Nevertheless, while emphasizing that fundamental interpretation of the issue, the author does find it possible to use the term "Third World" in some cases only because it is more familiar to the Western reader and because it is convenient in some cases as a short designation for the entire group of developing countries, but for no other reason than that. 16Another aspect of the methodological problems that attach to long-term comparisons concerns the selection of sufficiently representative time segments for such comparisons and analysis. The longer the historical period that is employed for comparisons, the greater are possibilities for studying long-term tendencies. From such a point of view it is quite tempting to view the dynamics of current international trade against the background of the entire history of the world market in the age of imperialism, that is since the end of the nineteenth century, for the better understanding of the present period's specific features. While this is made extremely difficult by the paucity and poor commensurability of data relating to distant years, there may be cases in which such comparisons are possible.
The selection of a particular periodization of processes being studied may be governed by a variety of considerations. On the one hand, it is desirable to select a period that is as long as possible while still possessing an internal unity and corresponding to a specific type of conditions of reproduction and international trade. As a rule these coincide with general cycles in the world capitalist economy's development. On the other hand, one must also consider the availability (or absence) of sufficiently representative data relating to the "boundary points" of such stages.
This problem resolves itself relatively simply for the prewar years. For in most cases statistical data relate to three basic stages which do constitute boundaries in the development of both capitalist economy and external trade, namely, 1913, as a year for recording the level of economic activity attained before the First World War; 1928, as the year recording the point of maximal growth before the Great Depression of 1929--1933, and 1938, as a year that marks not so much a position within a cycle as the last peaceful year before the Second World War. If one also takes into account the considerable reduction in international trade during the two world wars and the absence of corresponding data, such a periodization is quite acceptable.
That problem is more difficult, in our view, for postwar years. First, the more than three decades that have elapsed are too long a segment to serve as a taxonomic unit for comparisons with shorter preceding periods. Secondly, in spite of the specific features of the postwar period that make it possible to view it as a __PRINTERS_P_17_COMMENT__ 2---872 17 qualitatively new stage in the development of the world capitalist economy, these decades were far from homogeneous, particularly in the area of international trade. It is therefore desirable to divide postwar years into some kind of subperiods while keeping in mind that an excessive periodization may lead to a neglect of elements that are common and typical for longer periods of time.
It thus seems appropriate to consider postwar years in terms of two periodizations, whenever possible---as a whole, and in terms of major stages. For international trade such boundaries appear to be: 1950, as the year when the major consequences of the wartime disorganization of world trade were overcome; 1960, as the year that marked a peak in the political decolonization of most of the newly-emerged nations; and finally 1970, as the year that opened the way to a decade of major shifts on the international market related to the energy, raw materials, food, and monetary crises as well as to a general economic crisis of the capitalist world. It is also useful to note 1975 as the year in which the basic quantitative and value proportions characterizing the most recent period of international trade became apparent.
In some ways, of course, such a periodization is as arbitrary as any other. But it does generally correspond to major stages in the development of capitalist economy and the fact that it generally coincides with the end of a decade also makes it convenient for practical comparisons. As for the beginning of the postwar period the choice of 1950 as a reference year is also the only one possible, for (with the partial exception of 1948) there are no world trade statistical data relating to earlier years. It should be added that these methodological considerations concerning statistical analysis merely define a general scheme that should help integrate subsequent studies rather than to constrain them within an artificial framework.
In noting the important successes scored in the statistical aspects of international economic data in the postwar period one must acknowledge significant advances in the statistical services of individual nations and of international organizations, especially of the United Nations system. One must agree with George F. Ray, an English specialist, that "life would certainly have gone on without standardized statistics, but many of the activities we 18 now take for granted would not have been possible without some sort of internationally comparable information".^^1^^
The highly diverse activities of the United Nations statistical service deserve particular mention. Its data is becoming more comprehensive, more regular, and more analytic as it continuously improves. It is against such a background of improvements that one observes a number of shortcomings that it is important to overcome in view of the growing complexity of analyzing current economic activities. Leaving aside the debatable nature of a number of methodological conceptions let us simply observe that sometimes extensions in statistical observation are not accompanied by a concern for maintaining the continuity of a number of major statistical indicators. What makes long-term comparisons difficult is the fact that some quite interesting calculations are not related to an historically retrospective context, while individual statistical series are replaced by new ones without linkages to the earlier ones.
One can only welcome, for example, the new and more detailed statistics on world price indices for a wider assortment of commodities that the United Nations has begun to publish in the 1970s. But this has also been accompanied by partial changes in the construction of indices for generalized commodity groups, while some groups have disappeared altogether (such as for example the summary price index for metallic ores). This naturally disrupts the continuity of statistical series. Similarly statistics relating to developing countries have become far more comprehensive in United Nations publications as well as more analytical and differentiated (petroleum exporting countries and groups of countries are specified in terms of their average per capita income). But this relates only to the most recent period and thus fails to disclose long-term tendencies. This is also true of the price index for all non-energy raw materials, which for some reason is calculated only since 1972 (not even since 1970, which is a reference year for other indices).
It is of course true that these problems are quite complex and _-_-_
^^1^^ G. F. Ray, "The Internationalization of Economic Analysis'', in International Economic Relations of the Western World 1959--1971, Ed. Andrew Shonfield assisted by Hermia Oliver, Vol. 1, Oxford University Press, London, 1976, pp. 418--19.
__PRINTERS_P_19_COMMENT__ 2* 19 that one could attribute the resulting shortcomings to normal difficulties of growth. But one occasionally has the impression that particular arbitrary changes in statistical series or base years are motivated by subjective and even tendentious considerations. Accordingly, while recognizing the achievements of the United Nations Statistical Service, one also wishes to express the hope that there will be further improvements, for again in the words of George F. Ray "the achievements to date are far from perfect, and they need leave of room for improvement".^^1^^A distinctive feature of the postwar period is a tangible acceleration in the rate of development of international trade, which attained its highest level over the entire history of the world market under capitalism. Exports in current prices provide the most general indicator. This is made particularly apparent through long-term comparisons, which, in spite of all the reservations that follow from their reliance on the diversity of sources, clearly reflect the dominant tendency towards rapid growth in trade in postwar years (see Table 1).
It is indicative to compare trade data within each of the three main periods in the world capitalist market's development, namely, before the First World War, during the interwar period, and after the Second World War. During the first four decades of the emergence of the international trade structure (up to 1913) its volume increased by approximately three times. Following the crisis in 1929--1933 it generally did not grow during the interwar period. But during the three decades that followed the Second World War it increased by almost twentytwo times after 1948 in spite of a reduction in the capitalist market's geographic scope.
It is important to keep in mind that since these figures reflect not only the real increase in the physical volume of trade but often substantial increases in prices they convey a somewhat exaggerated picture. Yet even after eliminating the influence of prices __PARAGRAPH_PAUSE__ _-_-_
~^^1^^ G. F. Ray, op. cit., p. 419.
20 Table 1 Exports in International Trade in Current Prices (billions of dollars) Years Entire World Capitalist World 1876---1880* 6.0 6.0 1886---1890* 7.0 7.0 1900 10.1 10.1 1913 19.5 19.5 1928 32.7 32.3 (30.3**) 1938 22.7 22.4 (21.1**) 1948 55.8 53.9 1950 60.7 55.7 1960 128.3 113.1 1970 314.5 281.1 1975 875.9 790.4 1978 1,287.5 1,162.4 1979 1,631.3 1,482.6 * Average yearly level. **For current geographic boundaries. Calculated on the basis of: The Network of World Trade, League of Nations, Geneva, 1942; Industrialization and Foreign Trade, League of Nations, Geneva, 1945;7Y««Js in International Trade,GATT, Geneva, 1958; UN,Statistical Yearbook 1974,New York, 1975; UNCTAD, Handbook of International Trade and Development Statistics, 1976, New York, 1976; UNCTAD, Handbook of International Trade and Development Statistics, 1979, New York, 1979; UN: Monthly Bulletin of Statistics, July 1980. __PARAGRAPH_CONT__ one ultimately discovers the same general tendencies---but with a smaller amplitude for increases in absolute levels of trade (see Table 2).The postwar period is characterized by a nearly continuous acceleration in the rate of growth of exports: even after adjustment for constant prices its average rate was 6 percent in the 1950s, 8.2 percent in the 1960s, and 8.2 percent between 1970 and 1974. That expansion in international trade was checked only by the very sharp economic crisis that developed in the mid-1970s, but even then, as will be shown later, the external economic sphere continued to develop more rapidly than did the capitalist economy as a whole.
21 Table 2 Exports of the Capitalist World (as percentage of 1876--1880)* Years In Current Prices In Constant Prices 1886---1890* 117 144 1900 168 202 1913 328 333 1928 538 434 1938 373 401 1948 898 369 1950 928 438 1960 1,885 792 1970 4,685 1,720 1975 13,173 2,267 1978 19,373 2,752 1979 24,705 2,953 * Average yearly level. Calculated from Table 1 and on the basis of data in: Industrialization and Foreign Trade; UNCTAD, Handbook of International Trade and Development Statistics, 1972, New York, 1972; UN, Monthly Bulletin of Statistics, October 1980.There were also substantial shifts in the geographic composition of international capitalist trade, even though the corresponding figures are less impressive. They are quite evident, in spite of the difficulties that attach to a ``retrospective'' grouping of many countries in terms of the currently practised division of states into three basic groups---the socialist countries, developed capitalist countries (developed market economies if one uses United Nations terminology), and developing countries. Because such calculations (which are, moreover, only approximate as well as inconsistent in many respects) are available for only a few prewar years, comparisons of the present stage with preceding periods must be limited to the end of the 1920s.
Nevertheless this unavoidable constraint on the historic scope of the analysis is unlikely to influence its outcome to any substantial degree, since for analytical purposes one may assume that during the interwar period the balance of forces between developed 22 and backward countries on the world capitalist market did not differ very much from what it was at the beginning of the century. In support of such an assumption one may point to indirect indicators for individual countries based on sample data. Still more important is the fact that imperialism's colonial system did not experience any fundamental changes as a result of the First World War, and that a partial redistribution among major powers of colonies and spheres of influence did not alter the earlier division of countries into groups in terms of their economic development and political independence.
This serves to show the importance of the post-World War II geographic shifts in international trade associated with changes in the world's political map as well as with objective processes leading to a decline in the role of agrarian and raw materials producing countries and to an intensification of mutual exchange among industrial powers. Evidence of processes of the first type is provided above all by the reduced geographic scope of the world capitalist market, which lost its exclusive role in international trade after the Great October Socialist Revolution in Russia. Following the emergence of the world socialist system, the role of the world capitalist market was disrupted further as the share of capitalist countries in world exports declined from 98.7 percent in 1938 to 88.3 percent by the early 1960s.
The changes that took place within the world capitalist market itself are equally far-reaching. It is especially significant that they are largely attributable to developments that followed the Second World War rather than to its direct consequences. While the balance of forces between capitalist states and underdeveloped countries was generally the same during the initial postwar years as towards the end of the 1930s, the trade position of the former colonial periphery deteriorated continuously during the next twentyfive years.
It is only recently that the share of developing states I>egan to grow as a result of increased prices for their exports in the context of the energy and raw materials crisis.
The figures for the 1970s should be interpreted with caution, for important though the re-establishment of control by the petroleum-producing countries over their natural wealth may be, increases in the relative weight of developing countries in __PARAGRAPH_PAUSE__ 23 Table 3 The Geographic Structure of World Capitalist Exports (in percent) Years Developed Countries* Developing Countries* 1928 67.3---71.3 28.7---32.7 1938 66.8-71.6 28.4---33.2 1950 66.5 33.5 1960 75.6 24.4 1970 80.0 19.0 1975 73.2 26.8 1978 74.3 25.7 1979 72.9 27.1 * For the period between 1928 and 1938 developed and developing countries are grouped in accordance with GATT d«ta and League of Nations data (the latter recalculated by the author in the light of current methodology). After 1950 it corresponds to the United Nations classification. Calculated on the basis of: The Network of World Trade; Trends in International Trade; UNGTAD, Handbook of International Trade and Development Statistics, 1979; UN, Monthly Bulletin of Statistics, January 1981. __PARAGRAPH_CONT__ capitalist international trade are explained almost exclusively by the higher price of petroleum. At the same time, even when one considers increased prices for other types of primary commodities, the foreign trade position of the overwhelming majority of those developing countries, that do not export oil, actually deteriorated. If one subtracts from the data shown in Table 3 the value of the exports of those eighteen new states, which according to United Nations' statistics are classified as major petroleum exporters (including countries in which petroleum accounts for more than 50 percent of all exports),^^1^^ then the share of all other developing countries in world capitalist exports reached 16.7 _-_-_
~^^1^^ They include Algeria, Angola, Bahrein, Brunei, Venezuela, Gabon. Indonesia, Iraq, Iran, Kuwait, Katar, Lybia, Nigeria, the United Arab Emirates, Oman, Saudi Arabia, Trinidad and Tobago, and Ecuador,
24 percent in 1960, 13.2 percent in 1970, 11.6 percent in 1975, and 13 percent in 1979.^^1^^The declining role of countries exporting agrarian and raw material products was accompanied by a parallel decline in their share of world capitalist imports (from 29.6 percent in 1938 and 28.7 percent in 1950 to 25.2 percent in 1960, 19.1 percent in 1970 and 24.1 percent in 1978). The view that had been formed over many decades that colonial and dependent countries constitute the major, if not the only sources of raw materials, as well as leading markets for the industrial products of imperialist powers began to be a matter of the past. While developing countries continued to serve as major suppliers of a number of mineral raw materials and, of course, of petroleum, the main mcrease in international capitalist trade during the postwar period was attributable to expanded trade among developed industrial countries, whose role within the world capitalist market became even more dominant.
The development of trade activities was particularly rapid for members of regional and subregional trade and economic blocs of developed capitalist countries. Above all this refers to such integration-oriented groupings as the Western European Common Market. For members of the EEC the role of trade with each other increased from 34.5 percent of their exports in 1960, to 50.1 percent in 1970, and 52.6 percent in 1973. It is only because of the increased costs of raw materials and of fuels in the mid-1970s that this trend was subsequently interrupted (see Table 4).
Yet the relative weakening of newly-emerged states within world capitalist trade was not accompanied by substantial shifts in the geographic distribution of their external trade relations. In spite of an appreciable expansion in economic cooperation with socialist countries, whose share in the exports of these states increased from 2.4 percent to 5.7 percent between 1955 and 1970, the external trade of developing countries continued to be __PARAGRAPH_PAUSE__ _-_-_
~^^1^^ Unless otherwise indicated all the economic and foreign trade data are based on the statistical publications of the United Nations and of UNCTAD and conform to the classification of countries that these publications have adopted.
25 Table 4 The Distribution of World Capitalist Exports by Country Groups (percentage of world total) Origin of Exports Destination of Exports Developed Countries Developing Countries Developed Countries 1938 38.6 20.4 1950 35.2 23.2 1960 53.2 19.3 1970 61.7 15.3 1975 51.0 17.4 1978 52.3 16.7 1979 53.0 15.9 Developing Countries 1938 24.9 7.2 1950 28.0 11.0 1960 17.5 5.0 1970 14.4 4.0 1975 19.4 6.0 1978 19.1 5.6 1979 19.4 6.7 __PARAGRAPH_CONT__ largely oriented on the markets of the imperialist powers. This is explained both by its commodity structure and its unequal position within the world capitalist economy. The developed countries' share in the exports of developing countries increased from 72.1 to 73.3 percent during that period, and it rose to a record level (74.2 percent in 1974) in the first half of the 1970s, because of rising prices of raw materials. Trade among developing countries continued to be insignificant and even tended to decline (from 24.3 percent in 1955 to 19.4 percent in 1970). While this figure was somewhat higher in Asia (25 percent of all exports in 1970) it was appreciably lower in Latin America and Africa (16.3 percent and 5.3 percent respectively). 26Ultimately the nature of the world market is a function of changes in the composition of commodities and of evolutionary shifts in their geographic distribution. Accordingly an analysis of these changes helps establish the character of geographic tendencies. Without prejudging which of these changes have been more important it must be noted that changes in commodity composition have been striking. It is there that structural shifts in the world economy deriving from the revolution in science and technology are reflected most directly.
Table 5 The Relative Shares of Raw Materials and of Manufactured Goods in World Exports (percentage, in value terms and in current prices) Years Kaw Materials Manufactured Goods 1876--1880* 62--04 36--38 1886--1890* 61--62 38--39 1900 60--62 38--40 1913 59--63 37--41 1928 57 43 1938 55 45 1950 59 41 1960 45 55 1970 35 65 1973 35 65 1974 42 58 1975 40 60 1976 40 60 1977 39 61 1978 36 64 Calculated on the basis of data from: Trends in International Trade; UNCTAD, Handbook of International Trade and Development Statistics, 1972; UN, Monthly Bulletin of Statistics, July 1980. * Average yearly level. Calculated on the basis of: Industrialization and Foreign Trade; W. A. Lewis, World Production, Prices and Trade, 1870--1950; Manchester School of Economic and Social Studies, May 1952; UNCTAD, Handbook of International Trade and Development Statistics, l'J/2; UNCTAD, Handbook of International Trade and Development Statistics, 1979; UN, Monthly Bulletin of Statistics, July 1980. 27A major distinctive feature of postwar trade has been a longterm tendency towards a relative decline in international trade in raw materials and an intensification of trade in manufactures. While that process was barely perceptible in the first half of the present century it began to develop rapidly in postwar years (see Table 5). Today one may speak of truly revolutionary transformations in the qualitative composition of external trade. While during its entire preceding history world trade was primarily concerned with raw materials, today it places an increasing emphasis on industrial products. During the first two decades that followed the Second World War the relative share of raw materials in value terms declined from three-fifths to one-third.
This trend has not been altered by the temporary increase in the value of exported raw materials in, the 1970s resulting from sharp increases in prices, especially of petroleum. At the same time the absolute volume of primary materials consumption has not declined. In spite of the declining relative weight of raw materials and fuels both in the world economy and world trade, especially in value terms, the physical volume of raw materials entering international trade has greatly increased. In short there are no grounds for believing that trade in raw materials is declining if one keeps in mind that this refers to its relative share.
Within that basic tendency there are major differences in the trade dynamics of individual commodity groups. Trade in agricultural raw materials is expanding very slowly. This is also true of certain types of food products, particularly those in which developed countries have become self-sufficient. Trade in mineral products and especially in petroleum, on the other hand, has developed rapidly (see Table 6).
As for world trade in industrial products, a growth in exports of highly processed goods was especially rapid. But the higher growth rates of exports of machinery and equipment generally do not fully reflect the increasing role of new products in international trade, whose development is largely attributed to growing exports of goods originating in the most modern industries ( aircraft, electronics, precision instruments, petrochemicals). For example, between 1965 and 1975 exports of computers, which constitute a major embodiment of scientific and technical progress, increased from 0,8 billion dollars to 6.9 billion dollars, thus __PARAGRAPH_PAUSE__ 28 Table Commodity Composition of World Capitalist Exports (percentage, in value terms and in current prices) Commodity Groups 1953 i960 1970 1975 1977 1978 Primary Commodities* 53 45 33 40 39 36 food products 24 18 13 12 11 11 non-food raw materials (other than fuels) 19 17 11 8 7 7 fuels 10 10 19 20 20 18 Manufactured Goods* 47 55 67 60 61 64 chemical products 5 6 8 7 7 8 machinery and equipment 16 21 29 28 29 30 other finished goods 26 28 30 25 25 27 * These commodities are grouped in accordance with the Standard International Trade Classification (SITC) that is applied in United Nations statistics. Because it was not possible to extract data for raw materials and final products from the last item in the SITC (`` Miscellaneous Transactions and Commodities not Especially Specificated'') the relative weight of some commodities was calculated in relation to totals of indicated commodity groups. The weight of the neglected item of SITC is approximately one percent. Calculated on the basis of: UN, Statistical Yearbook 1971, New York, 1972; UN, Statistical Yearbook 1977, New York, 1978; UN, Monthly Bulletin of Statistics, July 1980. __PARAGRAPH_CONT__ exceeding the value of trade in some of the leading types of raw materials (sugar, coal, lead, zinc).
Yet, the global tendency towards a growing role for highly processed technologically complex products does not develop evenly but is accompanied by growing disproportions in the role of individual suppliers and entire groups of countries on the world capitalist market. This, in turn, influences the geographic distribution of capitalist trade. The growing role of developed countries in international commerce and the deteriorating foreign trade position of developing countries do not only result from the latter's emphasis on exporting raw materials rather than industrial products. What is more important is the fact that the developing countries are losing ground in the supply of certain raw materials.
Between 1953 and 1970 the share of developing countries in the world capitalist system's primary commodities exports __PARAGRAPH_PAUSE__ 29 Table 7 Share of Selected Groups of Countries in World Capitalist Exports of Major Products (percentage in value terms and in current prices) 1953 1970 1978 Product Groups 11 tt .S« a.S8 1? S» o.S a OJ fi &D M S '» Q..2! o * O tH 0 ^ o t~ O L. O L ``3 c o> p; OJ (1 QJ C <D fl OJ G > 3 f* 3 > 3 > 3 > 3 > 3 <u o <D 0 <L> O 01 o OJ o S5 «u PU Pu Po PO 0 Primary Commodities 50 50 56 44 45 55 raw materials, except fuels 53 47 66 34 69 31 food products 53 47 65 35 69 31 non-food raw materials (other than fuels) 53 47 67 33 69 31 fuels 37 63 30 70 19 81 Manufactured Goods 93 7 93 7 90 10 chemical products 94 6 96 4 95 5 machinery and equipment 99 1 98 2 95 5 other Finished Goods 88 12 87 13 84 16 Calculated on the basis of: UN, Statistical Yearbook 1971; UN, Monthly Bulletin of Statistics, July 1980. __PARAGRAPH_CONT__ declined from 50 percent to 44 percent, and even more so if one omits petroleum (from 47 percent to 34 percent). While raw materials continue to account for 80 percent of these countries' exports the earlier view that they are the major sources of raw materials is largely obsolete, even in the context of an intensified raw materials crisis. Except for commodities in which the developing states retain a natural monopoly because of their geographic location (tropical agriculture, some non-ferrous and rare metals, and partly even in liquid fuels) imperialist powers are increasingly replacing developing countries on many markets for raw materials.
It is true that the aggravation of global ecological problems and of the fuel and raw materials crisis that developed in the 1970s resulted in a partial improvement of the situation in favour of developing countries. But these events were not able to neutralize the basic postwar tendency that has made it possible for imperialist countries to acquire leading positions in 30 exporting most types of raw materials (except liquid fuels and a number of non-ferrous metals), in addition to their absolute dominance on the world capitalist market for industrial goods, where shifts in favour of new states are taking place even more slowly (see Table 7).
An analysis of major changes in the geographical comjjosition and commodity composition of the world capitalist market shows that by comparison with prewar years, when international trade was largely governed by the high relative share of underdeveloped countries exporting primary products of the ``traditional'' type, today that trade is increasingly losing its colonial features. In terms of its major jjarticipants and commodity comjjosition it is becoming primarily industrial. While strong remnants of colonial relations continue to play a role in establishing the terms of trade between capitalist powers and developing countries, elements of political and economic decolonization, are also leaving their mark on the transformation of the capitalist world market that results from the shifts in its structure.
But aside from the pronounced tendencies in these changes that have already been noted, the resulting characteristics of current international trade would be seriously incomplete unless major changes in the level and behaviour of world prices are also considered. In particular it is the different direction of price changes for raw materials and for industrial products that have largely determined the shifting of proportion in the values of exports of these two basic groups of jjroducts and hence in the relative weight of developed and developing countries in capitalist trade (see Table 8).
While the ratio of raw material prices to prices of finished goods was relatively stable throughout the world capitalist market's prewar development (with the exception of a sharp decline in prices of raw materials following the economic crisis of 1929-- 1933) the purshasing power of suppliers of primary commodities in relation to industrial goods has declined almost continuously since the Second World War. The loss in value of raw material exports of develojjing countries was one of the major factors in the deterioration of their position in international trade before the early 1970s. It is too soon, moreover, to make any definitive assertions concerning substantial improvements in this area in 31 recent years^^1^^, particularly since the "terms of trade of raw materials" are largely defined by rapidly growing petroleum prices (they increased by almost nine times between 1970 and 1979 while the price of non-energy raw materials increased nearly three times less).
Table 8 Indices of Export Prices in World Capitalist Trade (1963=100) Years All Commodities Raw Materials Finished Goods Exchange Coefficient of Raw Materials* 1876--1880** 42 44 38 116 1886--1890** 33 34 32 106 1900 35 34 37 92 1913 41 42 39 108 1928 52 53 53 100 1932 27 22 34 65 1938 39 34 47 72 1948 102 112 95 118 1950 89 98 81 121 1951 108 121 96 126 1960 100 101 99 102 1970 113 108 117 92 1973 162 197 156 126 1974 226 333 190 175 1975 243 323 212 152 1976 248 342 212 161 1977 269 378 291 164 1978 296 384 265 145 1979 352 497 303 164 * The ratio of the price index for raw materials tQ that for finished goods. ** Average yearly level. Calculated on the basis of: Industrialization and Foreign Trade; Relative Prices of Exports and Imports of Under-Developed Countries, UN, New York, 1949; Paul Lamartine Yates, Forty Years of Foreign Trade, Allen & Unwin, London, 1959; UNCTAD, Handbook of International Trade and Development Statistics, 1972; UN, Monthly Bulletin of Statistics, April 1976, October and December 1980. _-_-_^^1^^ Further details in Section 3 of the present Chapter.
32While the long-term price rations of raw materials and finished goods reflect the increasing role of processing industries in the world economy, the ``microdynamics'' of prices for individual raw material groups points to their role within the general composition of raw material exports. Between 1955 and 1970 the prices for energy resources were among the most stable. Their average fluctuations did not exceed one percent. This reflected the policies of the international petroleum cartel as well as the growing demand for liquid fuels. Similarly prices for non-ferrous metals retained a relatively favourable position. Among agricultural products, whose prices generally declined more rapidly than those of other primary goods, those for produce of the temperate zone declined especially rapidly. This resulted from the increasing selfsufficiency of developed capitalist countries, especially with regard to natural textile fibers, whose prices could not compete with those of synthetic materials (the prices for that group declined by 24 percent).
Table 9 Indices of Export Prices of Raw Materials in World Capitalist Trade (1963=100) Years Developed Countries Developing Countries Years Developed Countries Developing Countries 1953* 107 110 1965 105 102 1954 103 120 1966 107 102 1955 102 112 1967 103 100 1956 104 111 1968 100 100 1957 105 113 1969 104 103 1958 97 108 1970 109 106 1959 96 103 1971 119 119 1960 96 102 1972 136 135 1961 97 98 1973 210 193 1962 96 96 1974 264 468 1964 104 103 1975 257 450 1976 262 486 1977 272 554 1978 295 544 1979 337 666 * For earlier years these indices were not calculated for groups of countries. Sources: UN, Statistical Yearbook 1963, New York, 1964; UN, Monthly Bulletin of Statistics, June 1973, December 1980. __PRINTERS_P_33_COMMENT__ 3---872 33Among the objective factors accounting for the general deterioration of raw material suppliers one cannot neglect the policies of multinational corporations aimed at supporting their own producers of primary goods and at maintaining low prices for products of developing countries. While prices for law materials generally declined those of products exported by capitalist countries largely continued to be in a more favourable situation (see Table 9).
In particular declining raw material juices reduced the value of raw material exports from developing countries by 20 percent, between 1954 and 1962, and only by 7 percent in the case of developed countries. Similarly the modest growth in prices between 1963 and 1970 was greater for the exports of developed countries (9 percent) than of developing countries (6 percent). It is only following the aggravation of the fuels and raw material crisis of the 1970s that the prices of raw materials from __PARAGRAPH_PAUSE__ Tablc 10 "Terms of Trade" of Developed Capitalist Countries and Developing Countries (1963 = 100) Years Developed Countries Developing Countries Years Developed Counlf it-s DeveLipins Countries 1938 98 79 1962 100 98 1948 95 95 1964 100 101 1950 92 110 1965 100 99 1951 88 119 1966 100 101 1952 91 115 1967 101 100 1953 94 105 1908 101 101 1954 92 113 1969 101 101 1955 92 110 1970 103 101 1956 93 107 1971 102 102 1957 92 104 1972 103 103 1958 96 104 1973 102 113 1959 97 105 1974 90 158 1960 98 104 1975 93 141 1961 99 100 1976 92 147 1977 91 151 1978 93 141 1979 90 157 Calculations based on: UN, Yearbook of International Trade Statistics, 1961, New York; UN, Monthly Bulletin of Statistics, July 1973, October 1980. 34 __PARAGRAPH_CONT__ developing countries moved to favourable levels (largely because of petroleum).
Such movements of prices in opposite directions influenced the external trade positions of various groups of countries, depending on the particular commodities that they bought and sold. This may be partly seen in the behaviour of a synthetic indicator, namely the ratio of indices of export prices to those of import prices (the "terms of trade''). In most of the postwar years this was relatively favourable to developed countries (see Table 10).
No matter how one interprets the highly debatable causes for such a deterioration in the new states' "terms of trade" during the first postwar decades,^^1^^ it is quite clear that this coincided with a period of rapidly declining prices for raw materials that contrasted sharply with a short-term raw materials boom during the Korean War. It is true that in the 1960s the position of developing countries, at least with regard to their "terms of trade" became somewhat more stable, and since the early 1970s it has even improved. Yet such ``statistical'' improvements cannot hide other more substantial indications of a weakening in the foreign trade position of the overwhelming majority of these countries and the nearly continuous decline in their contribution to international capitalist trade (without petroleum).
It should also be kept in mind that in many respects aggregated indicators of the behaviour of "terms of trade" distort the actual picture of a growing polarization in the external trade positions of individual developing countries. It is symptomatic, for example, that between 1954 and 1972, that is before the sharp increase in prices for liquid fuels, the "terms of trade" of petroleum exporters had improved by 18 percent, while that of all other developing countries deteriorated by 17 percent.^^2^^ In the 1970s that differentiation became more pronounced. Between 1973 and 1978 the "terms of trade" of major petroleum exporting countries _-_-_
~^^1^^ For further details see P. I. Khvoinik, Mirovaya torgovlya i ekonomicheski progress razviuayushchikhsia stran (World Trade and the Economic Progress of Developing Countries), Mysl, Moscow, 1974, Chapter Six (in Russian).
^^2^^ UNCTAD, Handbook of International Trade and Development Statistics, 1979, New York, 1979.
35 improved by 263 percent, while those of other new states declined by 11 percent.These, then, are the major structural shifts that have taken place on the world capitalist market since the War. Whatever the approach, they appear to be quite signiiicant, in many ways radical, and in some cases irreversible. It is true that this last assertion may meet with serious objections, for while the events of the 1970s do not challenge the importance of these changes they may raise doubts concerning their stability over the long term. But before seeking to reply to such questions it is appropriate to consider the general conditions to which one may attribute these tendencies.
__ALPHA_LVL2__ 2. Factors Underlying the Postwar GrowthAn analysis of the behaviour of major indicators of international trade after the Second World War points to the uniqueness of that period within the long-term chronology of international economic relations. Never before, at least not since the beginning of capitalism's imperialist stage, were there such major, truly radical shifts in international trade over a relatively short period of time. In spite of their very great diversity these shifts' distinguishing features may be reduced to two major traits, namely, extremely rapid rates of growth, and a deep restructuring of the commodity and geographic composition of world trade.
It is not an exaggeration to say that changes in the external economic sphere are consequences of major shifts in all areas of human activity.
Naturally, the greater intensity of external economic exchanges reflects the needs of developing productive forces. Yet, while stressing the basic role of that factor, one should also fully recognize the very important changes in the political sphere that established the concrete conditions that have governed the unfolding of the revolution in science and technology and corresponding structural adjustments within the economy. The factors that have influenced the domestic as well as the external economic policies of capitalist states include the emergence and consolidation of the world socialist system, the transition of a large group of 36 former colonial and dependent countries to independent political life, the growing role of the international workers' movement, and changes in the balance of forces on the world stage in favour of socialism, democracy and social progress. In adapting to new conditions, imperialism faced not only the general strategic task of maintaining its existence as a social system, but also a number of new problems, some of which were directly linked to its economy, on whose further development its viability as a social formation largely depended. Among these problems a special role was played by the intensification of external economic relations. In the context of its historic struggle with socialism capitalism finds it necessary to apply all possible efforts to withstand the rapidly growing political influence and economic power of the world socialist system. This factor compels capitalism to make full use of its latent reserves'for economic development, including those that originate in an international division of labour.
But it is no't only its economic competition with socialism that causes capitalism to expand its world economic relations. Their loss of political dominance and the weakening of their economic positions in former colonies causes capitalist countries to search for additional raw material resources on their own territories, since those in developing countries are becoming increasingly `` unreliable'' as a result of changes in the political orientation of a number of new states and as they strive to assert their sovereignty over their natural wealth. In such a context a major role is played by their policies to limit or even fully exclude foreign capital. This may be seen from the fact that between 1956 and 1972 the assets of foreign companies that were nationalized by developing countries amounted to 10.1 billion dollars.^^1^^ All these factors encourage a tendency towards self-sufficiency in raw materials and thus contribute to an intensification of exchange among developed capitalist states.
At the same time the loss of many familiar instruments for putting pressure on developing countries encourages capitalist states to intensify their economic relations with them. The latter's _-_-_
~^^1^^ M. L. Williams, "The Extent and Significance of the Nationalization of Foreign-Owned Assets in Developing Countries, 1956--1972'', Oxford Economic Papers, Vol. 27, July 1975, No. 2, p. 266.
37 concern with overcoming the legacy of their unequal, monocultural position within the international capitalist system of division of labour leads the West's industrial powers to seek new forms for penetrating their economies.Another major factor encouraging the further extension of economic cooperation with developing countries derives from the growing intensity of ecological problems. These cause leading capitalist countries to partly transfer to developing countries those production processes that are most labour- and energy-intensive, and environmentally harmful. Aside from purely economic considerations, attention is also given to possibilities for encouraging these countries to follow a capitalist mode of development.
Another major factor leading to a widening of international economic relations is the objective tendency of countries with different social systems to develop practical forms of cooperation. While the relative weight of their trade with each other is still modest, and many obstacles to equitable forms of economic exchange continue to be placed by capitalist countries, that tendency does increasingly assert itself. This is facilitated in many ways by the consistent policy of socialist countries to reduce international tensions. Such are the factors that account for the growing importance of the external economic aspects of the problems that capitalism is encountering on the international stage.
While noting various aspects of the policies of capitalist countries that contribute, whether intentionally or not, to a rapid growth of international trade, it is important to stress that the resulting growth does not point to capitalism's stabilization and a consolidation of its forces. On the contrary, the intensification of world economic relations is accompanied by a further intensification of interimperialist contradictions and contradictions among major ``centres'' of imperialism and countries seeking to liberate themselves from capitalist exploitation. The deep general economic crisis of the mid-1970s, which became interwoven with the crisis in fuels and raw materials and the international monetary crisis provides a vivid illustration of the further deepening of the world capitalist economic system's crisis. It is also illustrated by the growing symptoms of a new economic decline in the early 1980s.
But it is also important to fully recognize that despite its many contradictions the external economic policy of capitalist states 38 reflects the objective historic process of internationalization of economic life, which represents a response to the real needs of productive forces as they develop on the basis of large-scale production that increasingly exceeds the framework of national boundaries and thus requires a further widening of international economic exchanges as a necessary condition for further growth. That aspect of the problem is evident in the structural shifts in today's capitalist economies which have caused an intensification of international trade in postwar years as well as changes in its composition.
The basic changes in the postwar reorganization of the capitalist economy that have directly influenced the character of international exchange activities are, first, a decline in the share of agriculture in the productive sphere, and an increase in that of industry (from 31 to 19 percent and 69 to 81 percent respectively between 1950 and 1975). The declining role of the agrarian sector in industrially developed countries was also accompanied by an increasing output of agricultural raw materials and an increasing self-sufficiency in this respect. Secondly, the growth of sophisticated industries has been especially rapid. This is attributable to their intensive use of equipment, the complexity of their products, and the use of modern technology in ways that reduce their material-intensity. Rapid increases in the assortment of finished products serve to accelerate the growth of trade in new industrial products^^1^^.
Third, technological progress itself has produced a relative decline in the consumption of raw materials and has caused a significant displacement of natural raw materials by artificial and synthetic products. The recycling of raw materials has also increased.
Thus, together with the higher rate of development of nonmaterial-intensive sectors of industry, the declining utilization of raw materials per unit of finished product largely explains the declining influence of raw materials in international trade, and _-_-_
^^1^^ According to some estimates for each ten products being sold in 1970, an average of only five were also produced in 1960. Similarly eight out of every ten industrial products that will be sold in 1985 have not yet been invented. Lcs industries rnechaniques, January 21, 1971.
39 especially of natural raw materials (with the exception of liquid fuels arid certain types of non-ferrous and rare metals). This was accompanied by a further increase in international trade in industrial products, especially highly processed goods.These shifts were further stimulated by the growing internationalization of industrial production in meeting the needs of developing productive forces at a time of revolution in science and technology. They were also encouraged by the tendency towards an increasing concentration of production and growth in the minimal and optimal size of industrial enterprises which become economically effective only when they are engaged in mass production on a scale that requires external markets.
Under capitalism, however, the internationalization of production is closely associated with an internationalization of capital, as it finds the framework of national boundaries increasingly constraining for modern, highly specialized production activities. The level of capital movements among leading industrial capitalist countries reached an especially high level in postwar years. This is where the most promising and technologically progressive industrial sectors are concentrated that foreign investors find so attractive. At the present time the composition of world capitalist trade is largely determined by internal corporate deliveries within the international industrial empires of major monopolies.
All these factors have contributed substantially to the expansion of international trade and to its emphasis on trade in industrial products among developed capitalist countries. An additional factor intensifying international trade, and one that is directly associated with the revolution in science and technology, has been the considerable progress that has taken place in transportation and communications. This has made the process of international trade itself more rapid as well as less expensive.
But one should also fully recognize the role of specific economic policies pursued by modern capitalism. While meeting the objective requirements for expanding the international division of labour these take the form of goal-oriented activities of bourgeois states in intensifying external economic relations. The leading circles of the state-monopolistic establishment are aware that "the flow of goods, services, and capital among nations has reached a magnitude such that few nations, if any, can 40 effectively isolate themselves from economic events elsewhere".^^1^^ This is the context in which one should view the tendency towards a liberalization of external trade practices that has been typical of postwar years, and towards reductions in trade policy barriers that continue to assert themselves despite unavoidable eruptions of interimperialist contradictions.
The economic integration of developed capitalist countries gives rise to even greater contradictions in international trade. On the one hand, closed economic and trade blocs impede imports from third countries, constitute a source of discrimination in international trade, and disorganize certain of its sectors. On the other, it would be difficult to deny that rapidly growing trade among participants of integrated groupings also operates as a factor that contributes to the general increase in international trade.
Finally, in considering the various sources of intensification of world economic relations it is important to note the tendency towards widening economic as well as scientific and technical cooperation that derives from the global character of the revolution in science and technology itself. While the principal channels of exchange in technologies continue to be provided by inter-firm relations, an increasing role is played by a concentration of intergovernmental efforts on joint solutions to global economic and scientific and technical problems. These include the protection of the environment, the utilization of outer space, the exploitation of the riches of the World Ocean, the struggle against famine and disease, and improvements in international transportation and communication.
__ALPHA_LVL2__ 3. Specific Features of the Present StageIt is against the background of these postwar developments in the capitalist world market that we recognize the extraordinary character of the events of the first half of the 1970s that _-_-_
~^^1^^ International Economic Report of the President, Washington, 1974, p. 1.
41 have produced sharp changes in nearly all basic parameters of international trade---its commodity composition, its geographic distribution, its level, and its prices. No matter how one interprets the causes and consequences of these changes it is difficult to exaggerate their far-reaching character. In particular United Nations specialists have stated that "...the global economic situation has undergone changes of such magnitude as to amount to a virtual transformation of the international economic scene".^^1^^The specific features of this period will probably continue to engage the attention of specialists for many years. Already today, however, it is possible to note at least three groups of factors whose interaction accounts for such fundamental and wholly unexpected structural shifts.^^2^^ Above all they concern the unchecked growth of inflation, the raw materials problem, and the general economic crisis. It is difficult to assign a priority to any one of them (except perhaps to the economic crisis itself), since in recent years each has played a dominant role at particular times. But in terms of the chronology of events the raw materials problem should be considered first.
Within the general relatively unfavourable situation that confronted suppliers of raw materials during the second half of the 1960s symptoms of a growing demand and increasing prices for certain primary commodities began to appear. Initially this related primarily to mineral raw materials and especially fuel and non-ferrous metals. It was attributable to both the increasingly evident prospect of a depletion of natural resources and an intensifying struggle on the part of developing countries for full sovereignty over their resources and against imperialist dominance in commodity trade. In 1972--1973 an additional impulse was given by a substantial, even though short-lived increase in the general level of business activity within the capitalist world.
That factor coincided not only with a growing inflation, _-_-_
~^^1^^ U. N. Document TD/B/496/Add. 1, 19 August 1974, p. 1.
~^^2^^ In the words of the Chairman of the Council of Economic Advisors, Walter W. Heller, "...shocks of 1973--1974 caught not just the economy, but the economists by surprise" (The American Economic Review, March 1975, p. 1).
42 particularly after two successive devaluations of the American dollar, but also with short-term changes on many commodity markets, where for a variety of reasons there were similar situations of increasing demand and even temporary shortages. In particular bad harvests in a number of countries aggravated the food situation in the capitalist world's periphery, while increasingly pressing raw materials and ecological problems produced the fuel and raw materials crisis. Together with the growing inflation and the disorganization of the world monetary system and also the growing speculation on commodity market which contributed to increasing not so much the real as a fictitious deficit of certain types of raw materials, all combined this produced a rapid growth of world prices, especially for raw materials. In its turn the growing cost of raw materials contributed substantially to the general increase in prices, for even after a reduction of the relative weight of primary materials in the cost structure of modern processing industries the principle, noted by K. Marx, continues to operate according to which "...the price of the product is influenced far more by the price of raw materials than by that of fixed capital...''^^1^^.It is thus the joint operation of these factors that produced a substantial increase in the average price level of fuels and raw materials. In the words of the General Secretary of the United Nations "The widespread increase in primary product prices reflects, in part, the high and rising world levels of economic activity and income in the 1970s, which were not matched by correspondingly high and rising levels of output of primary commodities. The magnitude of the price increase has been so great, however, that it is clear that other factors apart from any imbalance between real demand and supply at current price levels were at work.''^^2^^ Similarly in a special study of the Secretariat of UNCTAD it is noted that "rapidly accelerating inflation, monetary uncertainties, low levels of stocks for many key commodities, coupled with growing speculation in commodity markets and production and supply difficulties for many __PARAGRAPH_PAUSE__ _-_-_
~^^1^^ K. Marx, Capital, Vol. Ill, Progress Publishers, Moscow, 1971, p. 108.
^^2^^ U.N. Document A/9544, 2 April 1974, p. 3.
43 Table 11 Indices of Export Prices in World Capitalist Trade (1963 = 100) Commodity Groups 1970 1972 1973 1974 1975 1978 1979 All products 113 129 161 226 243 296 352 Manufactured Goods 117 132 156 190 212 265 303 Primary Commodities 108 137 197 333 323 384 497 food-products 111 140 200 262 236 288 321 non-food produce 101 123 200 238 198 262 315 mineral raw materials 111 145 199 580 604 695 972 fuels 108 150 202 633 652 763 1,076 (1975=100) Commodity Gioups 1970 1972 1973 1974 1975 1978 1979 Primary Commodities * 38 57 103 100 119 154 Petroleum * 22 29 100 100 117 170 Primary Commodities Other than Petroleum * 55 84 107 100 121 138 * Price indices for raw materials other than petroleum began to be calculated by the United Nations Statistical Service in 1977 for the period following 1972. It is therefore not possible to present a continuous series of such indices for preceding years based on 1963 prices. Calculated on the basis of: UN, Monthly Bulletin of Statistics, April 1976, October, December 1980. __PARAGRAPH_CONT__ products, coincided with the heightened demand pressures, resulting in a spectacular boom in commodity prices".^^1^^As shown in Table 11 not only was there a rapid increase in raw material prices by comparison with prices of manufactured goods in this period, but there were differences in the rates at which prices were growing for individual groups of products. Between 1970 and 1974, while average prices for raw materials increased by 208 percent, those of cereals increased by 162 percent, and those of industrial raw materials originating in _-_-_
^^1^^ U.N. Document TD/B/496, 20 August 1974, p. 3.
44 agriculture increased by 124 percent (145 percent in the case of textile fibres). It is the prices of those commodities (except for fuels and non-ferrous metals), which in preceding decades had ``suffered'' most---such as sugar, cocoa, cotton, wool, and natural rubber---that experienced the greatest increases. One should especially note the substantial contribution of petroleum prices to the general increase in price levels on capitalist markets.It should be stressed that no matter how large the role of the energy crisis may have been in intensifying capitalism's overall raw materials problem, a substantial growth in prices began before oil producing countries announced a fourfold increase in export prices at the end of 1973. Between 1968 and 1973 the index of all raw material prices (still unaffected by higher oil prices) increased by 88 percent while subsequently it increased by only 69 percent between 1973 and 1974. There are, therefore, no grounds for the attempts of Western propaganda to hold the members of OPEC, and especially Arab countries, responsible for the energy and raw materials crises. The biased nature of such assertions is generally clear.^^1^^
It is important to fully recognize objective factors that contribute to the real increase of the international value of certain types of raw materials, especially petroleum. The efforts of imperialist powers to develop their own raw materials and energy resources, a shift to the development of less abundant deposits, and a substantial increase in offshore oil production, which is still expensive, together with large expenditures on the development of alternative sources of energy, all influence the average level of market values made up of "the actual sum of the values of all individual commodities taken together, whether produced under average conditions, or under conditions above or below the average".^^2^^ As a result, whenever a number of specific causes leading to a decline in supply operate together, a situation may develop in which "...if the supply is too small, _-_-_
~^^1^^ For further details sec R. Andreasyan, "Neft i antiimperialistich. eskaya borba" (Petroleum and the Anti-Imperialist Struggle), Kommunist No. 5, 1974.
^^2^^ K. Marx, Capital, Vol. Ill, pp. 182--83.
45 the market value is always regulated by the commodities produced under the least favourable circumstances...''^^1^^.A clear illustration of that proposition of Marxist political economy is provided by the corresponding change in Great Britain's position. Following the development of its own offshore petroleum production facilities, this has changed from that of a country interested in low world prices to one that supports high minimal prices for petroleum.^^2^^ Thus it supports the principle that world petroleum prices be governed by the least favourable production costs.
In considering the numerous objective influences that have altered the balance of demand and supply in raw materials one should not neglect the role of inflation and the loss in value of individual currencies, especially of the American dollar, in the general price rise. While a precise calculation of the role of these factors is hardly possible, some notion of their scope may be inferred from available estimates. According to United Nations data, for example, while prices for primary commodities increased by 103.7 percent from 1970 to the fourthquarter of 1973, when expressed in dollars, they only increased by 41.6 percent in terms of West German marks.^^3^^ It follows that 60 percent of this increase in prices may be attributed to the declining value of the dollar. It is true that this estimate, which is based on a short-term comparison of the purchasing powers of only two currencies, appears to be too high. Data presented in another United Nations study appear to be more representative. According to our own calculations they indicate that between 1970 and 1974 the general index of export prices for raw materials originating in developing countries (other than fuels) increased by 101.3 percent, and following an adjustment for the declining value of the dollar, by 75.7 percent. This yields a "coefficient of inflation" of 25.3 percent.^^4^^ That figure also approximates the value of the indicator of general _-_-_
~^^1^^ K. Marx, Capital, Vol. Ill, p. 185.
^^2^^ Aurore, 17 December, 1975.
~^^3^^ U.N. Document A/9544, pp. A-9, A-15.
~^^4^^ U.N. Document TD/B/530/Add. 1 (Part I), 3 Februrary 1975, pp. 3, A-3.
46 inflation in advanced capitalist countries, which was 33 percent for the corresponding years.^^1^^In noting the influence of both structural shifts and inflationary factors on the general tendency of world prices to increase in the 1970s attention should also be drawn to a highly characteristic feature, namely an appreciable, though short-term, decline in prices for primary commodities in late 1974 and early 1975. By comparison with the maximal level that they reached in 1974, in the fourth quarter of 1975 food prices declined by 23 percent (cereals by 18 percent), those of industrial raw materials of agricultural origin declined by 18 percent (textile fibres by 31 percent), and those of non-ferrous metals by 37 percent, while on the average all prices for primary commodities (other than petroleum) declined by 23 percent from their peak value in April 1974. That decline was especially rapid for some of the commodities whose price had increased more rapidly during the earlier boom. This confirms both the role of speculative elements in creating exaggerated shortages, and the ``flexibility'' that characterizes raw material prices generally (in shifting situations prices of the goods traded on commodity exchanges rise and fall both earlier and more sharply than those of other objects of international trade).
It is especially striking that in 1974--1975 prices for nonenergy raw materials declined in spite of the absence of any changes relating to their depletion, and especially in spite of a growing inflation. In that case the development can be simply attributed to an extremely deep cyclical crisis.
The specific features that characterize the crisis of the mid1970s, which has been the most destructive one since the economic depression of 1929--1933, concern not only its scope, but also the fact that it followed a prolonged period of relatively stable development that was interrupted only by modest short-term declines. As noted at the CPSU's 25th Congress its scope was especially far-reaching and marked by the "sharp cutback in production and the growing unemployment in most of the capitalist countries [that] intertwine with such serious convulsions of the capitalist world economy as the monetary, _-_-_
~^^1^^ U.N. Document TD/B/AC. 18/2, 12 June 1975, p. 5.
47 energy and raw material crises. Inflation has made the crisis processes especially acute.''^^1^^The analytical problems that this raises call for the, most careful studies. In connection with the immediate concerns of the present study, however, the crisis of the mid-1970s is viewed primarily in terms of cyclical factors in the development of foreign trade.
The cyclical fluctuations of capitalist economy exert a determining influence on all its spheres, including external economic exchanges. Marxist political economy views crises of the world market as a forced adjustment of all the contradictions of bourgeois economy. We will consider only two aspects, namely the influence of cyclical factors on the volume of international trade, and their influence on the level of world prices.
In comparing the behaviour of world market parameters with the general course of capitalist production it would be appropriate to use data on the gross national product. But given the incommensurability of global data over prolonged periods of time it is possible to rely instead on indices of industrial production since it plays a dominant role in the capitalist world's material production (81 percent in 1975). Alternatively, in the absence of corresponding data, one may use indices of the dynamics of processing industries, which account for 90 percent of industrial output (86 percent in 1975).^^2^^
A first approximation to the relation that exists between the rate of development of industrial production and changes in the physical volume of world capitalist trade over the longest feasible time segment already points to the extreme dependence of exports on fluctuations in production levels. But while corresponding data are available for every year in the present century, to avoid unnecessary complexity it was deemed possible _-_-_
~^^1^^ L. I. Brezhnev, Report of the CPSU Central Committee and the Immediate Tasks oj the Party in Home and Foreign Policy, XXVth ; Congress oj the CPSU, Novosti Press Agency Publishing House, Mos- j cow, 1976, p. 33.
^^2^^ Calculated on the basis of UN, Statistical Yearbook 1977.
48 to consider distinct sample time segments and examine the most essential changes within each. Beyond this, in view of major shifts in the economic structure and general conditions of capitalist reproduction it is also appropriate to consider prewar and postwar data separately. Table 1 2 The World Capitalist System's Industrial Production and Exports Before World War II (1913=100) Years Industrial Production* Physical Volume of Exports Export Elasticity in Relation to Production Index Rates of Growth (percent) Index Rates of Growth (percent) 1900 58.7 -0.3 59.4 ---0.2 0.67 1901 60.8 3.6 59.4 --- ____ 1902 65.6 7.9 62.5 5.2 0.66 1906 77.7 4.7 75.0 9.1 1.94 1907 80.1 3.1 75.0 --- ____ 1908 73.5 -8.2 71.9 ---4.1 0.50 1909 80.6 9.7 78.1 8.6 0.89 1910 86.3 7.1 84.4 8.1 1.14 1911 87.8 1.7 84.4 --- ____ 1912 45.3 8.5 93.8 11.1 1.31 1913 100.0 4.9 100.0 6.6 1.35 1921 81.1 ---13.0 78.1 ---8.3 0.64 1922 99.5 22.7 87.5 12.0 0.55 1923 104.5 5.0 90.6 3.5 0.70 1927 139.2 6.3 121.9 11.4 1.81 1928 146.1 5.0 128.1 5.1 1.02 1929 153.3 4.9 134.4 4.9 1.00 1930 131.8 ---14.0 125.0 ---7.0 0.50 1931 114.1 ---13.4 112.5 ---10.0 0.75 1932 97.3 ---14.7 93.8 ---16.6 1.13 1933 110.1 13.2 96.9 3.3 0.25 1934 119.3 8.4 103.1 6.4 0.76 1935 133.1 11.6 106.3 3.1 0.27 1936 149.2 12.1 109.4 2.9 0.23 1937 159.3 6.8 125.0 14.3 2.10 1938 142.4 ---10.6 118.8 ---5.0 0.47 * Processing industries. Calculated on the basis of: Statistical Yearbook of the League of Nations, 1938/39, Geneva, 1939; Industrialization and Foreign Trade; UNGTAD, Handbook of International Trade and Development Statistics, 1972. __PRINTERS_P_49_COMMENT__ 4-872 49 Table 13 The World Capitalist System's Industrial Production and Exports Ajter World War II (\ !m:5--- loo «' 51 Years Industrial Production Physical Volume of Exports Export Elasticity in Relation to Production Index Rates of Growth (percent) Index Rates of Growth (percent) 1951 58 9.0 50 11.1 1.23 1952 59 1.7 50 --- 1953 63 6.8 54 8.0 1.18 1954 1955 1956 63 70 73 11.1 4.3 57 61 67 5.6 7.0 9.8 0.63 2.28 1957 75 2.7 70 4.5 1 .67 1958 1959 1960 1961 73 80 86 89 ---2.7 9.6 7.5 3.4 70 76 84 87 8.6 10.5 3.6 0.90 1.40 1.06 1962 94 5.6 93 6.9 1.23 1963 1964 100 108 6.4 8.0 100 110 7.5 10.0 1.15 1.15 1965 115 6.5 118 7.3 1.13 1966 123 7.0 127 7.6 1.09 1967 127 3.3 134 5.5 1.67 1968 136 7.1 151 12.7 1.79 1969 147 8.1 167 10.6 1.31 1970 152 3.4 183 9.6 2.82 1971 156 2.6 194 6.0 2.31 1972 167 7.5 213 9.8 1.31 1973 182 9.0 238 11.2 1.24 1974 183 0.5 249 4.6 9.20 1975 174 ---4.9 240 ---3.6 0.73 1976 189 5.8 267 11.3 1.95 1977 197 8.6 276 3.4 0.40 1978 204 3.6 293 6.2 1.72 1979 213 4.4 312 6.5 1.48 Calculated on the basis of: UN, Statistical Yearbook 1969, New York, 1970; UN, The Growth of World Industry, Vol. I, New York, 1973; UN, Monthly Bulletin of Statistics, October, November 1980.In the age of imperialism, throughout the entire prewar history of the world capitalist market there was not a single instance in which production and trade moved in different directions. In all cases fluctuations in the general level of 50 business activities were accompanied by corresponding tendencies in exports. Beyond this all production slumps led to approximately comparable reductions in international trade. At the same time, and this was characteristic precisely for the given period, the amplitude of fluctuations in both spheres was generally the same. This is indicated by the coefficient of elasticity of exports in relation to production, which as a rule was close to one and exceeded this value only in years that followed large expansions in economic activity. (This is quite natural if one keeps in mind that because of delays between concluding foreign trade deals and corresponding deliveries changes in demand in a given year are largely reflected in the trade figures of the subsequent year.)
The postwar period (see Table 13) appears to reflect the same type of behaviour as in the past. But one is struck by substantial differences. First, in the period before 1975, declining industrial production (this occurred only once, in 1958) was not accompanied by a reduction in international trade. Only the crisis of the mid-1970s, and then only its lowest point, was able to produce a curtailment of trade but even then the decline in exports was less than that in production. Secondly a clear tendency emerged under which the rate of growth of international trade was more rapid than that of the general economic activity. The coefficient of export elasticity was less than one only in those years in which economic growth was most rapid (and even then as for example in 1977, this was explained by the ``inertia'' noted earlier of foreign trade statistics), and after the mid-1960s its value was usually substantially greater.
At the same time a comparison of current and long-term tendencies governing the world market's development as a function of the cyclical course of capitalist production does not itself indicate that the current stage is in any way anomalous, particularly during the postwar period. Both the rapid and stable prolonged growth in external economic exchange activities and its reduced intensity in years of cyclical decline fully accord with the general principles that govern world capitalist economy.
A different picture emerges when we consider the influence of cyclical factors on world prices. In order to fully bring out 51 the specific characteristics of recent years it is probably appropriate to renter our attention on periods that are relatively similar with regard to cyclical factors, such as the fifteen years that preceded the Second World War, and also the 1970s. For clarity of exposition base years should correspond to shifts in cycle behaviour. There is no doubt that for the prewar period this was 1929,^^1^^ while today, judging by the course of production activities and of the gross product, it is 1974,^^2^^ even though an intensification of crisis phenomena could already be noted in 1973.
It is true, of course, that a comparison of individual years exclusively in terms of cyclical attributes is in many ways arbitrary, for the concrete conditions under which reproduction took place, as well as the entire structure of the capitalist economy were very different in each of those two periods. Nevertheless even a comparison of that kind is suggestive in many ways.
If we limit ourselves to those aspects of the cyclical development of capitalist economy that we are currently considering, then the principal differences that distinguish the present stage from the crisis of 1929--1933 relate primarily to the behaviour of prices in years preceding the crisis. While world prices declined continuously in the 1920s, even when economic activity was increasing, and thus reflected difficulties in the sphere of distribution, in the 1970s the general economic situation was marked by rapidly growing prices. The differences in the amplitudes of these diverging processes are also suggestive: in 1925--1929 prices declined by 17 percent, while in 1970--1974 they increased by 96 percent. Beyond this, while the very first year of the prewar crisis produced a substantial price decline, in the first half of 1975 the average level of world prices continued to increase. Finally, while prices did not regain their precrisis level following an acceleration of business activity in the mid1930s, today, in a similar situation they greatly exceed it. __PARAGRAPH_PAUSE__ _-_-_
~^^1^^ In the present context the declining production after 1937 is not representative because it took place against the background of accelerated militarization of the economy and because that cycle was interrupted by the Second World War.
^^2^^ In 1974 a cessation of growth in the GNP of developed capitalist countries was recorded for the first time since the Second World War.
52 Table 14 Indices of Industrial Production and Export Prices in Capitalist Countries Prewar Period Current Period Years Production Prices Years Production Prices 1929=100 1974=100 1925 84.1 120 1970 82.6 50 1926 85.0 110 1971 85.1 53 1927 90.8 104 1972 90.9 57 1928 94.8 104 1973 99.3 70 1929 100.0 100 1974 100.0 100 1930 86.5 86 1975 93.4 108 1931 74.8 68 1976 101.4 110 1932 63.8 54 1977 105.6 119 1933 71.9 62 1978 109.4 131 1934 77.7 76 1979 114.6 156 1935 86.0 74 1936 96.4 78 1937 103.7 84 1938 93.0 78 Calculated on the basis of: Statistical Yearbook of the League of Nations, 1938/39; UNGTAD, Handbook of International Trade and Development Statistics, 1972; UN, Monthly Bulletin of Statistics, October, November 1980. __PARAGRAPH_CONT__ Perhaps these differences are partly explained by the unusual level of inflation that is characteristic of the current period and which distorts the real dimensions of price fluctuations. Nevertheless, as was shown earlier, even when maximal adjustments are made for the devaluation of currencies, there is no doubt that prices have in fact increased.The causes for such a divergence should probably be sought in the concrete conditions within which these two crises have developed as well as in their specific characteristics. The crisis of 1929--1933 emerged and developed as a typical crisis of overproduction that was accompanied by difficulties in the sphere of distribution and by declining prices. The crisis of the mid-70s, on the other hand, began to develop at a time of high demand and even of shortages of many commodities, particularly petroleum and raw materials. While in the 1920s it was declining prices that pointed to an emerging overproduction, 53 today the crisis was preceded by a sharp increase in the prices.
Such a comparison shows that, on the one hand, the basic principles that: govern the development of capitalist economy continue to hold. In particular, the general level of economic activity continues to exert a decisive influence on the intensity of international trade which reflects the course of the economic cycle. From that point of view the 1970s are by no means so unique, including postcrisis developments, and one should therefore not overemphasize the significance of obvious differences. On the other hand, there are clearly specific features that distinguish it from the Great Depression of the 1930s. While both crises express the processes of overproduction that are inherent in capitalism, in recent years these factors have combined with temporary difficulties on individual commodity markets, and especially with general changes in the conditions governing economic, development, the deepening crisis of the entire structure of the world capitalist economy, and ultimately a deepening of the general crisis of capitalism. It was noted at the 26th CPSU Congress that recent years were marked by a further aggravation of the general crisis of capitalism. While capitalism has not, of course, reached a stalemate, it is experiencing its third economic recession in a decade.^^1^^ This expresses itself both in an intensification of the energy, raw materials, monetary, food and ecological problems of capitalism, in changes in the balance of power between advanced capitalist and developing countries, and among the capitalist powers themselves, and in a general weakening of the positions of world capitalism. It seems probable that all these new factors will continue to operate with growing intensity and influence the further state of the world capitalist market.
_-_-_~^^1^^ L. I. Brezhnev, Report of the Central Committee oj the CPSU to the XXVI Congress of the Communist Party of the Soviet Union and the Immediate Tasks of the Party in Home and Foreign Policy, Novosti Press Agency Publishing House, Moscow, 1981, p. 27.
[54] __NUMERIC_LVL1__ CHAPTER 2 __ALPHA_LVL1__ THE CHANGING FUNCTIONSThe unprecedented growth of international trade in postwar years and far-reaching shifts in its geographic, and commodity composition are not only important in themselves but a source of numerous new problems. Together with the development of other forms of international economic relations, the greater intensity of external trade raises the more general question of underlying factors and manifestations of an increasing tendency towards the internationalization of economic life. This causes us to consider the manner in which the international division of labour evolves.
In the context of the present study it is appropriate to consider selected aspects of these problems, namely those that make it possible to follow the growing importance of external trade within the general process of reproduction, identify the deeper causes to which the intensification of external trade may be attributed in the presence of revolution in science and technology, and establish the extent to which the specific features that characterize the present stage in the development of international trade are evidence of change in the role of the external sphere within the economy of modern capitalism. By considering such a general problem primarily through the prism of world trade, which reflects nearly all concrete outcomes of the international division of labour, it is possible to center our attention on a leading and especially typical dimension of international economic relations in approaching a problem that is multidimensional.
Before giving answers to these problems, a number of parameters characterizing the greater intensification of the 55 international economic sphere and international trade in comparison with those of the reproduction of the world capitalist economy, must be established and some methodological problems must also be considered.
The existence of a tendency towards internationalization is a generally recognized fact whose basic causes and manifestations have been examined in some detail in the economic literature. In bringing out the specific features that characterize its current stage the quantitative aspects of corresponding processes should first be considered. This will provide a basis for a subsequent analysis of their qualitative aspects. But the technical and methodological difficulties that arise in connection with available international statistical data are even greater than in the analysis of world trade.
This relates above all to statistics of gross national products since the system which is currently most elaborated and most convenient for international comparisons, namely the system of national accounts of the United Nations Organization, differs in many respects from the methods that were applied in prewar years for calculating the magnitudes and behaviour of the gross national products of individual countries. Moreover, world totals for the prewar period are not available, and an analysis of comparable time series must be limited to postwar years alone. Yet while these difficulties greatly complicate the task that is envisaged, they do not make it impossible, but merely call for appropriate caution in appraising existing data.
The simplest and most accurate method for establishing the scope of the international division of labour appears to be the calculation of external trade transactions within overall economic activity as measured by gross national (or domestic) product. It should be noted that while for individual countries data for gross domestic product (GDP) are more representative than are gross national product data (GNP) both these indicators are practically equivalent, when applied to the world capitalist economy as a whole. For the differences between the GDP and 56 GNP of each country ultimately compensate each other. Accordingly, while recognizing the factual equivalence of both indicators, it is useful to select the one for which the data are more regular and systematic. In recent years United Nations statistical data has accorded preference to gross domestic product. It is in relation to these data that it is therefore useful to define export quotas, that is the shares of all output that are channeled to international exchange activities.
Table 15 Behaviour of Export Quotas in Relation to the GDP* of Capitalist Countries (in current prices) 1958 I960 1970 1975 1976 Total GDP (billion dollars) 980.0 1,125.7 2,485.3 4,941.6 6,418.8 Exports (billion dollars) 96.0 113.0 281.1 790.4 900.0 Export Quota ( percent) 9.8 10.0 11.3 15.4 16.6** Developed Countries GDP (billion dollars) 820.0 943.8 2,098.4 4,079.4 4,404.3** Exports (billion dollars) 71.2 85.7 225.0 578.6 643.1 Export Quota ( percent) 8.7 9.1 10.7 14.2 14.6** Developing Countries GDP (billion dollars) 159.8 181.9 386.9 862.2 1,014.5** Export (billion dollars) 24.8 27.3 56.1 211.8 256.9 Export Quota ( percent) 15.5 14.8 14.5 24.6 25.3** * Gross domestic product at market prices. ** Author's estimate. Calculated on the basis of: UN, Statistical Yearbook 1970; UN, Statistical Yearbook 1974; UNCTAD, Handbook of International Trade and Development Statistics, 1977, United Nations, New York, 1978; UNCTAD, Handbook of International Trade and Development Statistics, 1979. 57These data, which are available only for the period following 1958, clearly point to a tendency towards a deepening international division of labour within the world capitalist economy as a whole. This is due to an especially rapid increase in trade turnover within the group of industrial countries. In particular there has been an accelerated rate of development in the international division of labour in recent years. Even in 1974 when a crisis began to influence the entire capitalist economy, worldwide economic relations continued to increase. But it is also true that the sharp increase in export quotas after 1973 largely reflects nominal increases in the value of exports. This was due to a rate of increase in the level of world prices that exceeded the rate of inflation.
But in spite of their simplicity these indicators do not fully reflect the actual state of affairs. For export quotas, which are calculated in the usual way in relation to the gross product, underestimate substantially the share of external markets in material production. Methodologically it would be more correct to compare commodity exports not to the entire gross product, but only to its material component, since this is in fact the only one that directly enters into foreign trade. In effect this extends only to agricultural production, extraction and processing industries, for the output of other branches of material production (construction, transportation, etc.) does not enter international trade in a "pure form''.
Such an exclusion of other components of the gross product while calculating export quotas is still more justified if one considers, first, that the services in the domestic sphere that constitute a significant part of GDP, bear no relation to exports; and secondly that the specific types of services that do enter directly into foreign trade (in connection with transportation, insurance, etc.) as well as payments for non-commodity operations and other types of international capital movements are included under "invisible trade" within the balance of payments, and arc not reflected in the statistics of commodity exports.
It is appropriate to eliminate the influence of price fluctuations so as to arrive at the real dynamics of proportions between the gross product and export quotas. Such an approach makes also 58 possible comparisons over long-time segments during the postwar years.^^1^^ The method that is proposed for calculating the ``real'' export quotas, namely by comparing exports with the output of material production, expressed in constant prices, offers a more accurate instrument of economic analysis than do traditional export quotas, and permits a more comprehensive evaluation of the role of international exchange activities.
Table 16 The Behaviour of ``Real'' Export Quotas of Capitalist Countries (in 1963 prices) 1950 i960 (970 1975 197C Total Production * (billion dollars) 359.6 521.0 843.2 947.6 1,013.7 Export (billion dollars) 63.0 114.1 246.5 313.6 360.7 Export Quotas (percent) 17.5 21.9 28.9 33.7 34.6 Developed Countries Production * (billion dollars) 200.6 411.9 661.6 720.0 776.9 Exports (billion dollars) 43.7 87.6 195.8 262.2 291.4 Export Quotas (percent) 15.0 21.3 28.7 30.4 34.0 Developing Countries Production * (billion dollars) 69.0 109.1 181.9 227.8 236.8 Exports (billion dollars) 19.3 26.5 47.7 51.4 59.3 Export Quotas (percent) 28.0 24.3 26.2 22.6 25.0 * Output of agriculture, mining and processing industries expressed in terms of market prices. Calculated on the basis of: UN, Statistical Yearbook, 1970, 1977; UNCTAD, Handbook of International Trade and Development Statistics, 1972, 1979.While ultimately the behaviour of ``real'' export quotas points to the same processes associated with the internationalization of production as do indicators of ordinary export quotas, it shows _-_-_
^^1^^ Unlike the data on the absolute volume of gross products within the capitalist world as a whole, which refer only to individual sample years, United Nations statistics provide a continuous series of indices representing changes in the GDP and its components in constant prices since 1950.
59 that their scope is substantially larger.^^1^^ It also reveals certain differences in the tendencies towards international specialization on the part of industrial and developing countries.It becomes clear, in particular, that during the last two decades the role of exports in the material production of advanced industrial powers has increased more rapidly than indicated by traditional methods of calculation, and that even the crisis of the mid-1970s did not cause it to cease. In contrast to this, in the case of developing countries one sees a clear stabilization of that indicator. This appears to reflect the growing importance of their internal markets during the transition to independent economic development, following the achievement of political independence. This factor is quite noticeable against the background of the very high earlier level of export quotas that existed during the colonial period when the economies of backward countries expressed a one-sided emphasis on meeting the needs of capitalism's major economic centres.
While there is certain arbitrariness in such calculations, and while there are grounds for questioning individual absolute values, the order of magnitude of proportions between the export quotas of developed capitalist countries and developing countries is eloquent in many respects. The extent to which the first group of countries is engaged in an international division of labour appears to be generally greater than for the second group. This may be inferred from the ``real'' export quotas following an adjustment for unequal rates of growth in prices which create a misleading impression of the extent to which exports from developing states have increased (between 1963 _-_-_
~^^1^^ It is interesting to note that for individual countries the share of exports in material production calculated by the U.S. President's Council of International Economic Policy (on the basis of current prices and through another method) shows differences of approximately the same order of magnitude between conventional and ``real'' export quotas. For example, while our own calculations showed the ``real'' quota of all developed countries in 1970 to be 2.8 times larger than (he conventional one, data produced by the Council shows that this difference would be 2.7 for the United States, 2.4 for Great Britain, and 1.7 for the Federal Republic of Germany (calculated on the basis of data in Tables 15 and 16 and in International Economic Report oj the President, Washington, 1974, p. 5).
60 and 1976 the price index of a unit exported from these countries increased by 333 percent, while that of developed countries' exports increased by 121 percent).While the postwar intensification of external economic exchange activities for the capitalist world as a whole is relatively evident, the place of the present stage within long-term tendencies in the development of international economic relations is more difficult to establish. In part this is because of the unavailability of world data concerning the gross national product before the Second World War, both for individual countries (usually only their national income was calculated) and especially for the capitalist world as a whole. Secondly, and __PARAGRAPH_PAUSE__ Table 17 The Behaviour of Exports Quotas to Gross Product for Developed Capitalist Countries* (percent) Period u. s. Great Britain West Germany France Before the First World War 5.3 23.9 15.6** 14.9 Before the 1929--1933 Great Depression 5.0 22.2 16.2** 22.1 Between the Great Depression and the Beginning of the Second World War 3.4 15.4 5.6** 10.8 Initial Postwat Years 3.9 20.9 17.2 11.3 1960 4.0 14.3 15.9 11.2 1970 4.3 16.1 18.2 12.2 1972 4.2 15.9 17.8 13.2 1973 5.4 17.5 19.5 14.4 1974 6.9 20.4 23.4 17.2 1975 6.9 21.1 22.9 16.1 1976 6.7 22.1 21.5 16.7 1977 6.4 21.6 20.9 16.0 1978 6.8 22.0 20.3 15.1 * For prewar and initial postwar years this was recalculated on the basis of data on ratios of average exports and imports to national income. ** For all Germany. Calculated on the basis of: Charles P. Kindleberger, Foreign Trade and National Economy, New Haven, 1963; UNCTAD, Handbook of International Trade and Development Statistics, 1979; UN, Statistical Yearbook 1974; UN, Monthly Bulletin of Statistics, December 1980. 61 __PARAGRAPH_CONT__ this is especially important, the composition of the gross national product of developed capitalist countries has greatly changed, particularly with regard to the increasing role of services. While changes in llie methodology employed to calculate GDP makes it almost impossible to adjust for this last element, one may arrive at approximately comparable indicators by recalculating available data on the ratio of exports to national income in terms of the traditional ratio of exports to gross products.^^1^^
These indicators show that the extent to which most developed capitalist countries are engaged in the international division ol labour at least approaches the level that existed just before the Great Depression of 1929--1933, which greatly disrupted international economic relations. The fact that this level was exceeded by such countries as the U.S. and the Federal Republic of Germany is __PARAGRAPH_PAUSE__ Table 18 Industrial Production and Physical Volume of Exports of Capitalist Countries (1963=100) Years Production Exports Years Production Exports 1913 21* 32 1958 73 71 1921 17* 25 1968 137 152 1929 32 43 1970 151 184 1932 21 30 1972 167 213 1938 30 38 1974 183 249 1948 45 36 1976 189 267 1978 204 293 1979 213 312 * Processing industries. Calculated on the basis of: Statistical Yearbook oj the League of Nations, 1938/39; Industrialization and Foreign Trade; UNCTAD, Handbook of International Trade and Development Statistics, 1972; UN, Statistical Yearbook 1974; UN, Monthly Bulletin of Statistics, October, November 1980. _-_-_
~^^1^^ If one considers the usual difference of approximately one-tenth between gross product and national income, export quotas defined in terms of a comparable basis (as a share of gross product) must also be approximately one-tenth lower than a similar index for national incomes.
62 especially suggestive, as is the partial decline in export quotas immediately after the crisis of 1974--1975. It may generally be assumed that if it were possible to take the increasing share of services in the gross product into consideration today's world capitalist economy's ``real'' export quota would probably exceed its maximum interwar value.This may also be inferred from a comparison of rates of development of the entire capitalist economy and its external economic sphere. Since comparable data on the global gross product is unavailable for such a long period indices of industrial output may be employed, for they reflect the growth of a major part of material production.
These data point to a radical break within the development of the external economic sphere. While during the quarter century that preceded the Second World War (1913--1938) industrial production increased by 43 percent and exports by only 19 percent, exports increased by 8.3 times during the three decades that followed the Second World War, while industrial production increased by 4.5 times. In terms of long-term tendencies, accordingly, postwar years should be viewed not as merely another period of accelerated external trade, but rather as a fundamentally new stage marked by an intensification in international economic relations greater than that of economic development itself.
It should especially be noted that in the interwar years, during the economic boom external trade developed more slowly than did industrial production, and unlike production trade turnover did not recover during the postcrisis period of the 1930s. In contrast to this postwar years saw a stable expansion of world trade, that continually outpaced the rate of growth of industrial output. This continued, until 1974, independently of cyclical fluctuations in the economy.
Comparisons of prewar and current tendencies suggest a thought that at first appears to cast doubt on the very fact of an intensified international division of labour. Indeed, if one infers the latter entirely from an increasing share of the external sphere within the economy and from higher rates of its development compared with general economic growth, then one must consider precisely how this can produce an increasing gap 63 in the behaviour of these two series of indicators, which would appear to be closely linked. For if one assumes that even 100 percent of output is channeled into exports corresponding changes in exports should only match those in production.
Yet there is a fine point in the calculation methodology, which shows both that such a formulation of the question is incorrect, and that the major finding concerning the intensification of the external sphere is valid. This concerns the fact that gross product and output are calculated in terms of "value added"; that is only in terms of the value that is added in the course of processing, without considering earlier labour expenditures that have become embodied in intermediate products. Foreign trade statistics, on the other hand, are based on full market values of both final and intermediate products.
It may appear that we are witnessing all the formal attributes of double counting. Yet that is not the case. As the international specialization of production deepens, various commodities enter the channels of external trade not once but repeatedly. This is why the external sphere, which mediates the internationalization of production, develops more rapidly than do the economies of individual countries, and hence more rapidly than the sum of the GDPs of all countries. This is precisely where one should seek the causes not only of the growing volume of international economic relations, but of their changing composition, and ultimately of their varied role.
All this provided a convincing characterization of the currently prevailing tendency towards a growing internationalization of productive forces and a deepening and widening of the international division of labour. But while these data define the quantitative aspect of these processes with reasonable accuracy, they do not explain the qualitative shifts in the external economic sphere and also their direction, which point to a fundamentally new stage in the development of world economic relations.
This is partly confirmed by the emergence of a number of new aspects in the internationalization of capitalist production today. For beyond an expansion of traditional spheres of external economic relations (foreign trade, exports of capital) such relatively 64 new forms of international economic relations as exchanges of scientific and technical information, the migration of labour, and international tourism have appeared in postwar years. Earlier these had existed only in rudimentary forms. In addition entirely new types of international production and distribution activities are developing extremely rapidly. They include `` marketing'' systems (for adapting the corporate operational production activities to the needs of markets through the use of computer assisted economicomathematical methods for analyzing current situations), ``engineering'' arrangements (complex consulting and construction engineering services in designing and equipping industrial facilities), and ``leasing'' arrangements (for the long-term rental of equipment).
Another qualitatively new development relates to international cooperation in solving global economic and scientific and technical problems. Its scope now greatly exceeds that of earlier periods.
While the present study describes the further development of traditional spheres of external economic relations in some detail we will limit ourselves to a short description of the scale on which some of these new processes are taking place. An important role is played by exchanges in scientific and technical knowledge, which follow directly from the revolution in science and technology. Between 19Q5 and 1975 the corresponding trade activities increased from 2.7 billion dollars to 11 billion dollars.^^1^^ International exchange relating to technology takes the form of both commercial and non-commercial transfers of patents, licenses, and production secrets (``know-how''). Trade in licenses plays a leading role. In 1975, for example, revenues of leading capitalist countries exporting technology from the sale of licenses amounted, according to our estimates, to approximately 7.3 billion dollars.^^2^^ Even if one assumes a minimal return of licenses at 5 percent of the value of corresponding finished products, this indicates that in 1975 for the world as a whole the volume of industrial production valued at 150 billion dollars was based on foreign technology. This is more than the yearly volume of _-_-_
~^^1^^ U.N. Document E/C. 10/38, 20 March 1978, p. 70.
~^^2^^ Ibid., p. 275.
65 industrial production of such big industrial countries as Great Britain or France, and is comparable to that of Japan or the Federal Republic of Germany.While these figures are impressive they appear to reflect only a small part of international exchange in technology, since no statistical data can reflect the real scope of transfers of production secrets within international industrial empires of major monopolies that are not based on commercial transactions, nor that of exchanges in scientific and technical knowledge based on barter transactions, i.e., without specified prices and licensing payments (``cross-licensing transactions''). A special United Nations study has concluded that this justifies an "iceberg theory'', according to which the flows that do lend themselves to quantitative measurements represent only the tip of the iceberg.
It is even more difficult to define the quantitative parameters describing the operation of ``marketing'' systems. Such operations are currently employed by nearly all large capitalist firms in organizing and planning production and distribution activities. This is also true of operations of the ``leasing'' and `` engineering'' type. While not even provisional estimates of the role played by ``leasing'' in international activities are available one may judge their magnitude through a number of indirect indicators.
For example, although the value of capitalist exports of computers in 1973 was 4.8 billion dollars, the expenditures of West European countries on acquiring computers and associated services (including rental payments) were approximately 10 billion dollars.
While noting the substantial intensification that has taken place in new forms of international economic relations that are apparently proceeding more rapidly than are traditional forms of trade, it should be stressed that international trade itself remains the leading element within the capitalist system of world economic relations that ultimately mediates all other aspects of the international division of labour. The development of most of the new forms contributes to increasing international trade turnover.
66The intensification of the international division of labour reflects objective principles governing the development of productive forces in the age of the revolution in science and technology. This not only results in the growth of foreign trade but also transforms its nature, role, and function within the international division of labour. These developments are caused by changes in the structure of production according to the possibilities and requirements of technical progress, that lead to an increasing productivity of labour through its further specialization. These developments fully confirm V. I. Lenin's proposition that "technical progress must entail the specialization of different parts of production. . .''^^1^^ which ''. . .by its very nature is as infinite as technical developments".^^2^^
The deepening division of labour and its increasing specialization and cooperation at the national level are accompanied by a more intense division of labour at the international level which, judging by the more rapid development rates of the external economic sphere, proceeds even more rapidly at that level. In its turn the changing character of the international division of labour directly influences the contents of external trade.
Modern technology presupposes a ramified division of labour in which the great diversity of products and extreme emphasis on specializing in particular types of production makes it unprofitable, and occasionally impossible, to fully meet the needs of a particular country---no matter how big and economically developed---for industrial products through national efforts alone, without a wide-ranging international cooperation. In the early 1970s there were approximately 20 million products serving the needs of production and consumption, while in the 1960s there were approximately some 600,000 finished engineering products, including 250,000 in the U.S. Specialization in the production of intermediate parts occasionally reaches remarkable _-_-_
~^^1^^ V. I. Lenin, "On the So-Called Market Question'', Collected Works, Vol. 1, Progress Publishers, Moscow, 1960, p. 101.
^^2^^ Ibid., p. 100.
67 dimcnsions. (In producing an aircraft of the Bocing-747 type approximately 4.5 million different types of components are assembled on the basis of subcontracts involving 16.000 firms in both the U.S. and other countries).^^1^^Growing specialization and cooperation within individual countries as well as at the international level is facilitated by a number of specific features of current development, and especially of the revolution in science and technology. Among them are the growing minimal and optimal size of enterprises, economic efficiency of large-scale production, the increasing rate of obsolescence, the rapid renewal of the assortment of industrial products, the growing specialization and scope of research activities (which presuppose an intensification of international exchange in technologies), the development of new types of products and of new applications of existing products, structural shifts in the raw material and energy base of production, and the need to adapt production processes and their location to the solution of ecological problems.
Without pausing to consider the numerous ways in which scientific and technical progress influences the deepening of international specialization in production let us turn to those changes in the international division of labour that bear directly on the contents and character of external trade. Above all this calls for identifying those forms of international division of labour that are currently typical and the extent to which they are mediated through external trade. We also believe that the analysis of the structure of international trade makes it possible to establish more accurately the specific features that characterize the current stage in the development of world economic relations.
On the one hand, the most general basic categories relating to the social division of labour in capitalist economics do not appear to have changed in recent times, and one finds at the international level those lines of developments that were already noted by K. Marx for economies of individual countries, namely a general division of labour among major economic branches or spheres (agriculture, industry, etc.) and also specific divisions _-_-_
~^^1^^ Interav'w, No. 12, 1968, p. 1499.
68 of labour among their types and subtypes (sectors), as well as within individual enterprises^^1^^. With the exception of individual enterprises these traits also provide a comprehensive characterization of the international capitalist division of labour that existed in the prewar period, when the transactions on the world market involved mainly exchanges of primary commodities for finished goods and of manufactures of industrially developed countries for the products of labour of colonial and dependent nations.It is true that such a scheme is somewhat simplified, since even then exchanges between individual capitalist countries had reached a substantial volume. Nevertheless international trade rested almost exclusively on intersectoral divisions of labour--- both general and specific---for it involved mainly primary commodities while industrial goods generally appeared on the external markets as finished goods. Thus, before the Second World War underdeveloped countries accounted for approximately onethird of total capitalist exports while the share of primary commodities was more than one-half.
Today, on the other hand, while the ``autonomy'' of each of the major types of international division of labour is retained, the proportions among them have changed substantially. This is shown by the obvious shifts in the geographic and commodity composition of world capitalist trade as one considers the changed character of the international division of labour. Indeed, while this does not yet identify all the structural shifts that have taken place in the contents and forms of the international division of labour the decline of the relative weight of developing countries to one-fifth by the early 1970s, the concentration of trade turnover primarily within the group of developed states (three-fourths of the total), and the decline in the share of primary commodities within exports to one-third of the total volume dominated by industrial goods, reflect a substantial reorganization of the structure of international trade as well as a crisis of the colonial system of economic relations.
This situation is emphasized not only by the sharp increase in the volume of reciprocal trade among industrially developed _-_-_
~^^1^^ K. Marx, Capital, Vol. I, Progress Publishers, Moscow,1974, pp. 331--32.
69 countries, but especially their exchange in finished products, notably in sophisticated goods. In 1972, exchanges of industrial products among developed capitalist countries (prior to the changes in the value proportions that followed the sharp rise in primary commodity prices in 1973) amounted to 47 percent of the total value of world capitalist trade, the share of machines and equipment being 22 percent.But the main development relates to a radical reorganization of the ``microstructure'' of product exchanges, especially in the case of industrial products. This refers to the growing role of various intermediate rather than final products, corresponding to different stages of the production process. While corresponding totals are not available, still fragmentary indications provide some general information. For example, the share of imports in the consumption of ``intermediate'' products by the processing industries of the Common Market countries increased from 35 percent in 1959 to 45 percent in 1965.^^1^^
This indicates that the decisive factor in the changing pattern of foreign trade has been a transition in the international division of labour to a more advanced stage of development, namely from intersectoral forms to intrasectoral forms, and from individual instances to a division of labour involving specific production processes. This follows directly from the objective needs of the internationalization of production that call for a growing international specialization not only of countries but also individual firms and even enterprises. It must be stressed that this refers to the development of international specialization not merely in terms of exchanges of finished goods which is traditional for world economic transactions, but in the production of individual components (exports of various parts to be assembled) and in a wide-ranging international technological division of labour involving individual operations.
But it is also essential to keep in mind that within the specific conditions that are created by the capitalist mode of production these objective requirements of the internationalization of __PARAGRAPH_PAUSE__ _-_-_
~^^1^^ Richard Rlackhurst. Nicholas Marian, Jan Tunilir. "Trade Liberalization, Protectionism, and Interdependence'', GATT, Studies in International Trade, Geneva, November 1977, p. 16.
70 Table 19 Shares of Individual Commodity Croups in Foreign Trade of Developed Capitalist Countries (percent) Countries Years All Finished Goods* Machines and Equipment** Exports Imports Exports Imports u. s. 1937 1977 44.0 65.9 23.8 46.5 22.8 43.3 1.1 24.7 Groat Britain 1937 1977 65.2 75.8 17.2 52.6 17.7 37.5 3.4 22.8 France 1937 1977 49.9 68.9 21.0 50.6 8.8 37.4 5.7 22.6 * 1937---finished products, excluding commodities subjected only to primary processing; 1977---groups 5-8 SITG, without ferrous and nonferrous metals. ** 1937---agricultural and industrial equipment; 1977---group 7 SITG (machinery and transport equipment). Calculated on the basis of: Statistical Yearbook of the League of Nations, 1938/39; UNCTAD, Handbook of International Trade and Development Statistics, 1979. __PARAGRAPH_CONT__ productive forces take forms that are specific to modern capitalism and rest on a private monopolistic basis. It is not surprising that the leading positions in the production and trade of sophisticated goods are held by international monopolies that employ foreign trade channels to pursue technological cooperation within their own international industrial complexes.Unfortunately, available calculations based on foreign trade statistics do not make it possible to follow the changes in the structure of world trade that are produced by such shifts in the international capitalist division of labour over sufficiently prolonged periods of time and in terms of a common reference base. Nevertheless, with some reservations due to an incomplete correspondence of commodity classifications, they do provide some information on the sharply increased intensity with which the economics of leading imperialist powers have entered into intrasectoral forms of division of labour in postwar years.
What is important is not so much the growing share of 71 finishcd goods in the foreign trade of corresponding countries, in conformity with global tendencies, but the striking changes in exports of machinery and equipment. It is especially symptomatic that while in the case of exports one ultimately merely notes a further growth in the specialization of the United States and Great Britain as traditional suppliers of equipment, in the case of imports of machinery we see a marked qualitative leap. Leading industrial capitalist powers that did not purchase these commodities on external markets in the past have shifted to massive imports of machinery and equipment in postwar years. In 1977 their share in the imports of France increased by four times in comparison with the prewar period. It increased by 6.7 times in the case of Great Britain and by 22.5 times in the case of the United States. This provides an eloquent indication of the nature of the shifts that have taken place in the character of international capitalist division of labour and external trade.
__ALPHA_LVL2__ 2. The Changing Role of International TradeThese shifts in the contents and character of international trade raise the following question, namely, to what extent is the growing role of the external sphere in capitalist economy accompanied by changes in that sphere's functions resulting from new aspects of the internationalization of production attributable to the revolution in science and technology? This is directly linked with an evaluation of the current stage in the development of external trade.
That question can hardly be answered in an unequivocal manner. On the one hand, as before, external economic exchange continues to serve all those functions that derive from a specialization and cooperation of production activities among individual countries and the needs of international division of labour. In particular it continues to play its historical role as a major factor in the international concentration of production at the monopoly stage of capitalism's development.
72But at the same time as the international division of labour gnnvs in scope and in depth, the system of world economic relations increasingly acquires the properties of exchange that, as Marx noted, brings spheres of production "into relation and thus converts them into more or less interdependent branches of (he collective production of an enlarged society".^^1^^
At the present stage of development of the international division of labour which has acquired a vast scope and produced an extremely ramified specialization of the economies of individual countries in the context of the revolution in science and technology, there is every reason to speak of a tendency towards a transition to a new and higher level of both the internationalization of production and economic life as a whole. The corresponding symptoms include, first, the rapid rate of development of the external economic sphere. Secondly, certain changes must be noted in a number of traditional forms of world economic relations, as well as the appearance of new types of external economic activities that mediate objective processes of mutual complementarity and mutual substitutability among nationally distinct economies and link "all countries of the world into a single economic whole".^^2^^ It is precisely as such a "linkage element" that trade in commodities operates today, as together with other types of international exchange it acquires new features, that formerly did not enter into international division of labour in the past.
Third, relaxation of international tensions stimulates economic cooperation between countries with different social systems, world economic relations become increasingly important areas of economic competition between socialism and capitalism. This facilitates the development of the external sphere still further and influences world market relations in corresponding ways.
Finally, and this is probably the most important point, although it is dictated by profit-maximizing considerations under capitalism, the very fact of participation in international division of labour is beginning to represent the starting point, as it _-_-_
~^^1^^ K. Marx, Cnpitnl, Vol. I, p. 332.
^^2^^ V. 1. Lenin, "The Development of Capitalism in Russia''. Collected Works, Vol. 3. p. 1)7,
73 were, and sometimes even an absolutely essential condition of production that otherwise could not take place at all. This is especially important in the case of organizing highly specialized types of production in sophisticated industries, and also in the case of large-scale projects, which quite aside from their profitability, frequently lie beyond the capacity of any one country, even a highly developed one.^^1^^It is important to note that the influence of progress in science and technology has become something more important than merely a factor encouraging production of export-oriented goods in conditions of international division of labour. The very increase in the minimal and optimal size of enterprises in sophisticated industries implies a certain orientation on external markets, for in such sectors as, for example, petrochemicals, aircraft construction and computer technology, even the lowest possible levels of batch production exceed the internal needs of most countries. Even when existing technico-economic opportunities make it possible for a major monopoly to rely entirely on its own means in carrying out large and complex projects, the tendency to optimize causes internal markets to be too narrow for most types of industrial activities relying on methods of mass production. This automatically produces at least a partial orientation on external markets. Thus in the early 1970s, when optimal levels of output in the production of automobiles ranged from 300,000 to 600,000 passenger automobiles per year, 12 of the 15 models produced in such quantities in leading capitalist countries required exports to provide for optimality. The share of exports of such models was then 2/3 in the case of West Germany, 2/5 in Italy, 1/3 in France, 1/4 in Japan, and 10--15 percent in the United States.^^2^^ But this production, too, is based on an increasingly wide international division of labour. This leads to a situation in which the specialization in both national and _-_-_
~^^1^^ Examples of such joint efforts of several industrial countries in solving large and difficult technico-cconomic problems are provided by British-French cooperation in building the Concorde supersonic passenger plane, and by the cooperation of West European countries in establishing the Intersat satellite communications system.
^^2^^ The Oriental Economist, October 1971, p. 22; The Motor Industry of Great Britain, London, 1973.
74 international production is becoming a dominant factor in the internationalization of production.These developments point to a specific modification of the functions of external economic exchange and to an evolution in its role that may be viewed both as a further development of processes that are inherent to the capitalist mode of production and as a consequence of a growth in productive forces. In stressing the universal character of commodity production under capitalism, K. Marx observed that "here trade appears no longer as an activity that takes place between autonomous producers to allow them to exchange their surpluses, but rather as a vital and comprehensive prerequisite and element of production itself".^^1^^ In the context of the present revolution in science and technology the objective need for international specialization and cooperation in production creates a situation in which these characteristics of trade, which are "prerequisites and elements of production itself'', express themselves increasingly only in external trade. Because it is through trade that international division of labour is realized trade is becoming a component element of international production itself which cannot exist at all without the external exchange.
Thus, due to the sharp intensification of international specialization in production, induced by scientific and technical progress, external economic linkages operate increasingly as a necessary condition of production rather than simply a means for increasing its effectiveness.
The international division of labour and external trade are also acquiring qualitatively new features as a result of the changes in the very character of exchange and in the relations between sellers and buyers. Increasingly, international trade is losing its original features of a simple realization of a specific surplus of output over internal needs on external markets. Instead it is assuming the form of prearranged deliveries of goods between cooperating enterprises in different countries, especially in the framework of international complexes established by major monopolies. While remnants of pasl practices continue to operate to some extent in the marketing of certain raw materials and _-_-_
~^^1^^ Karl Marx, Grundrisse der Kritik der politischen Okonomie, S. 311.
75 products of small-scale industries, for most commodities entering international trade, and especially in the case of sophisticated goods it is the new form of realization which represents a type of contracting, that has now become typical, not to mention intracorporate exchange.It is an emphasis on the development of technologically advanced industries that provides the technico-economic basis for a transition to the manufacture of goods geared to the needs of specific known buyers. This is especially true of investment goods, such as machinery and equipment. Generally most of them cannot be produced for some kind of "abstract client''.
Leaving aside the case of large-scale equipment designed for specific applications (such as turbines for a hydroelectric station or nuclear reactors) made to order, today nearly all international trade in engineering products is based on long-term contracts involving product specifications geared to the needs of clients and the specific technological processes that they employ. As trade in technologically progressive types of equipment expands (computer systems, automated mass production lines, integrated enterprises), which are also associated with lengthy construction periods, the importance of forward contracting increases. In its turn trade in modern equipment contributes to an intensification of exchanges in science and technology, since the acquisition of new equipment presupposes a corresponding reorganisation of production technologies.
To a certain extent such an orientation of production geared to specific clients characterizes most other types of industrial products as well, including mass consumer goods. Neither colour television sets nor electrical lighting equipment can be produced for an unknown market without considering the specific characteristics of radio broadcasting systems and electrical supply systems in corresponding countries. Similarly in the case of automobiles one cannot neglect the specific features of road traffic in particular countries and corresponding safety requirements. Accordingly the share of machinery and equipment in world capitalist trade, impressive though it may be (more than onefourth), does not fully convey the scope of prespecificd deliveries. These appear to extend to nearly all industrial products in international trade, i.e.. approximately 60 percent of 76 international trade. If one also considers long-term contracts for raw materials deliveries and other stable commodity flows linking established selling and buying organizations, that figure may exceed 80 percent.
Still another major factor in removing the category of " unknown buyers" from international capitalist trade is the activities of multinational corporations, since an important part of their external trade involves flows of raw materials, intermediate products, and final goods among subsidiaries of a single company located in different countries. In a strict sense it is difficult to view such deliveries made according to specific terms among major monopolies' cooperating subsidiaries as international trade in the common meaning of that term. For, as will be shown later, they are governed much more by elements of intracorporate exchange than by more familiar commercial principles. But independently of how one interprets the economic and social nature of such operations, which involve as much as one-third of the value of world capitalist trade, their role in changing the functions of external trade is considerable. It causes trade to reflect prespecified linkages between producers and consumers that produce an increasing influence on production.
All these shifts in the character of external economic exchange reflect corresponding changes in the international capitalist division of labour, and ultimately in productive forces at the current stage of the revolution in science and technology. This confirms K. Marx's observation that it is "industry which constantly revolutionizes commerce".^^1^^ In our opinion it is precisely the revolutionizing influence of productive forces that explains the current transformation in the functions in external economic exchange, as it becomes both a prerequisite for production and direct component of production based on an international division of labour. The appearance of a number of fundamentally new aspects of international economic exchange, in turn, explains its very high rates of growth.
These specific features that now characterize the external economic sphere make it appropriate to refer to a new stage in its development. A comprehensive Marxist-Leninist analysis of _-_-_
^^1^^ K. Marx, Capital, Vol. Ill, p. 333.
77 these characteristics was presented to the CPSU's 25th Congress, allowing a fuller understanding of the essence of corresponding changes. In particular, it is noted that "a specific feature of our times is the growing utilisation of the international division of labour for the development of each country, regardless of its wealth and economic level".^^1^^ This draws attention to the great significance of the expansion that has taken place in external economic relations, and to their objective character, dictated by each country's needs to develop its productive forces, which increasingly require an international division of labour.Viewed in the perspective of their development the major qualitative shifts that have taken place in the contents of the international division of labour and particularly in external trade do not appear as some kind of anomaly. Ultimately the genesis of the external economic sphere and the sharp intensification of world economic relations appear as a further step of the historic tendency towards internationalization. This is a process that is marked by "the development and growing frequency oi international intercourse in every form, the break-down of national barriers, the creation of the international unity of capital, of economic life in general, of politics, science, etc.. .''^^2^^ Today's reality, in which that tendency has everywhere asserted itself, confirms emphatically K. Marx's thought that both the internal organization of peoples and their international relations express specific types of division of labour.^^3^^
The new stage in the development of the international division of labour is evident not only in the intensification that has been noted in the internationalization of production and the __PARAGRAPH_PAUSE__ _-_-_
~^^1^^ L. I. Brezhnev, Report of the Cl'SII Central Committee and the Immediate Tasks of the Party in Home and Foreign Policy, XXVth Congress of the CPSU, p. 97--98.
^^2^^ V. I. Lenin, "Critical Remarks on the National Question'', Collected Works, Vol. 20, Progress Publishers, Moscow, 1977, p. 27.
^^3^^ Karl Marx and Frederick Engels, Selected Correspondence, Progress Publishers, Moscow, 1975, p. 30.
78 Table 20 Average Yearly Growth in the, GDP and Exports of Developed Capitalist Countries (percent) Country 195(1---1900 1960--1970 1970--1977 GUP Exports GDI' Fxporis GDP Exports Total 4.1 [6.4 4.9 9.0 3.4 17.4 Including: kJapan 8.2 15.'.) 10.8 16.1 5.4 20.3 France 4.8 6.4 5.8 9.3 3 . 9 18.5 Canada 3.9 5.3 5.2 11.1 4.7 13.8 Italy 5.5 10.5 5.5 13.0 2.7 17.8 West Germany 7.7 10.0 4.9 10.8 2.5 18.1 U. S. 3.2 5.1 4.0 7.4 3.2 16.5 Groat Britain 2.8 4.8 2.7 6.1 1.8 16.2 Sources: UNCTAD, Handbook of International Trade and Development Statistics, 1976; UNCTAD, Handbook of International Trade and Development Statistics, 1979. __PARAGRAPH_CONT__ modified functions ol international trade, but also in the increasingly effective role of the external sphere as a factor ol economic growth. This is especially true of the role of external economic exchange in stimulating the general rate of economic development. It was noted in the preceding chapter that while changes in the scale of external trade generally followed fluctuations in gross product and industrial production, reflecting their leading role during the prewar period, in postwar years, at least until the depression of 1975, the greatest rates of economic growth were recorded largely by those capitalist countries (Japan, West Germany, France, Italy) that were able to develop their external trade at still higher rates (see Table 20).There is a clear correlation between these two series. At the same time the persistent development of exports at higher rates than the gross product is also symptomatic. Growth in exports exceeded that of gross product by an average of 56 percent in 1950--1960, 80 percent in 1960--1970, and even 400 percent in 1970--1977 (this last period also reflects the rates of increase in world prices that were greater than those of domestic prices). Although there are no grounds for interpreting either this "lag" 79 of the rates of growth of external trade from those of the general economic, basis or the increasing dynamism of the external sphere as a decline in (lie priority of economic Inundations, this docs point (o a new and more active role of international exchange within the overall system of factors governing economic growth.
The tendency towards an increasing ``autonomy'' of the external sphere reflects the very same developments. There are many indications that both the specific features ol the mechanism of internationalization of production and its scope arc lending traits to the overall structure of international economic relations that do not always coincide with the development of national economies, thus affecting their evolution.
In particular, declines in the economic activity of contemporary capitalism's "power centres" were generally not accompanied by declines in the corresponding countries' external economic transactions and even less by reductions in overall international trade. In the preceding chapter (Table 13) it was shown that even during periods of general deterioration in the world capitalist economy as a whole reductions in foreign trade were less pronounced or else it even continued to grow. The fact that this relative autonomy of the external market has tended to grow, emphasizes the relative independence and advantages of those production activities that are based on an international division of labour by comparison with economic sectors that are entirely contained within national economies.
The extent to which such an ``autonomy'' has been achieved, should not, of course, be exaggerated, for within the system that encompasses both production and exchange, production and the further development of productive forces naturally continue to operate as the leading element. One can only say that within such a context the external market acquires traits of relative independence as well as increased mobility that follow from its role in the international division of labour and are ultimately determined by its growing role in modern economy.
But a recognition of these characteristics does not imply the acceptance of simple causal interpretations. Important though it may be, the more rapid rate of development of the external sphere merely constitutes a tendency. In today's concrete 80 conditions the influence of opposing tendencies originating in the growing intensity of capitalism's basic contradiction are especially pronounced. Past experience has shown that in spite of its substantial achievements, the capitalist form of international division of labour cannot overcome the contradictory, uneven, and unstable character of economic development that is inherent in capitalism, even though intensified international economic relations can partly compensate for this at certain stages. Those traits that express the historical limitations and contradictory nature of the world capitalist economy are increasingly evident. These are the features noted by K. Marx when he observed that "the capitalist mode of production is ... a historical means of developing the material forces of production and creating an appropriate world market and is, at the same time, a continual conflict between this, its historical task, and its own corresponding relations of social production".^^1^^
Such an approach makes it possible to establish more fully the ways in which the further development of the international division of labour through the achievements of the revolution in science and technology combines both with an intensification of all of capitalism's contradictions and with a growing crisis in the world capitalist economic system. Today we see conclusively that while it does produce a tendency towards agreements among monopolies as well as capitalist states, the internationali/ation of production and capital does not overcome interimperialist contradictions, intensified conflicts, and crisis situations never seen before.
The major economic upheavals that world capitalism experienced in the 1970s were marked by a crisis in production, growing unemployment, inflation, an intensification of crises in raw materials and energy supplies, and problems of foreign exchange, as well as by a crisis in the very structure of economic relations between developed and developing countries. This provides a vivid illustration of the manner in which in the context of a growing interdependence among national economies the deep flaws that are inherent in the capitalist mode of production intensify all its contradictions. In the words of an international _-_-_
^^1^^ K. Marx, Capital, Vol. Ill, p. 250.
__PRINTERS_P_81_COMMENT__ 8---872 81 group of experts led by Jan Tinbergen of the Netherlands, a Nobel Prize Winner, this is "a crisis in the very international structure and inechaiiisins which the Western world itself has largely created".^^1^^The contradictory character of the development of capitalism's external economic sphere expressed itself most strongly in the 1970s. On the one hand, the deepening of the international division of labour in the context of the revolution in science and technology operates as a major factor in increasing the effectiveness of production and its further modernization. But at the same time, since these processes unfold primarily through the activities of private monopolies, the growing interdependence of national economies and internationalization of economic relations are marked by an absence of regulation. This limits the possibilities of state-monopolistic forms of regulation in the external economic sphere, which disseminates the crisis phenomena internationally through a process of chain reaction.
The contradictory nature of the capitalist internationalization of economies does not diminish the importance of gaining a further understanding of the specific features that characterize the present stage of development of the external economic sphere and the changing role of international trade.
The need lor a re-examination of established views concerning external trade is also felt increasingly by Western researchers. Already in the 1960s, when attention was turned to the increasing interdependence of national economies, many specialists expressed their concern at the inability of bourgeois economic science to make constructive contributions to the emerging problems. Aside from recognizing the clear inadequacies of bourgeois conceptions of international economic relations appeals were made to search for new doctrines that would better meet the interests of an external economic expansion of monopolies at a time when "countries today are gradually entering new environment, not merely returning to a condition that once existed".^^2^^
_-_-_~^^1^^ Jan Tinbergen, coordinator, Anthony J. Dolman, editor, Jan van Ettingen, director, Reshaping the International Order. A Report to the Club of Rome, E. P. Dutton and Co., Inc., New York, 1976, p. 15.
^^2^^ Richard N. Cooper, The Economics of Interdependence: Economic __NOTE__ Footnote cont. on page 83. 82
In particular Ronald Findlay. who is a British researcher, has observed that "the formal theory of the gams Irom trade ... is unfortunately restricted to a static context. Hence the vital contribution that the opportunity to specialize makes towards the dynamic transformation and development of an economy does not appear [as one of the benefits of trade]. It is to be hoped that the pure theory of the subject will advance sufficiently to take some account of these fundamental matters.''^^1^^
Harry G. Johnson, a prominent Western specialist on international economic relations, has also called for a re-- examination of traditional views, for "we have evolved beyond international trade into international business''.^^2^^ Under the influence of new conditions many bourgeois scientists agree with James W. Howe that the "present era of interdependence will require nations to add a fresh dimension to their conduct of foreign affairs".^^3^^
But it is also symptomatic that in spite of such frequent appeals as well as of a tangible emphasis in research activities on the most recent developments in world economic relations and on the use of econometric methods, these efforts have generally remained ineffective. While recognizing the usefulness of some recent concrete factual studies of individual problems of international economic relations it must be noted that not a single Western researcher has been able to propose an integrated analytical conception of the new role of the external sphere in economic processes, a conception sufficiently justified even from the point of view of bourgeois political economy.
In making this observation the author is not ignoring all the research findings of his colleagues in other countries, many of whose interesting studies are employed in the present work. And while emphasizing his differences in matters of principle and _-_-_ __NOTE__ Footnote cont. from page 82. Policy in the Atlantic Community, McGraw-Hill Book Company, New York, 1968, p. l)3.
~^^1^^ Ronald Findlay, Trade and Specialization, London, 1970, p. 134.
^^2^^ Harry (1. Johnson, International Economic Questions Facing Kritain, the U.S. and Canada in the 1970s, London, 1970, p. 11.
^^3^^ James W. Howe, Interdependence and the World Economy, Headline Series, Published by the Foreign Policy Association, No. 222. October 1974, New York, p. 9.
83 basic methodological positions he recognizes that researchers confront serious objective difficulties. These derive both from the fact that the new international economic processes to be subjected to scientific analysis have appeared only recently, and the growth in their scope and complexity. But there is no doubt that no comprehensive solution is possible outside the framework of Marxist-Leninist economic theory.The thoughts that have been expressed must, of course, be viewed as only variants of a possible approach to an understanding of the new phenomena and principles governing the development of the external economic sphere. To follow concrete developments that reflect interactions between the development of productive forces under the influence of the scientific and technical revolution and changes in the character and functions of external economic exchange is probably one of the most important approaches to their scientific understanding. Only the initial steps have been taken towards such an approach, and there is great need for further work.
[84] __NUMERIC_LVL1__ CHAPTER 3 __ALPHA_LVL1__ THE NEW ROLE OF INTERNATIONAL MONOPOLIES __ALPHA_LVL2__ [introduction.]The analysis of tendencies in international trade presupposes not only a knowledge of the objects of exchange and the geographic distribution of commodity flows but also an identification of the subjects of trade transactions, their economic characteristics and relations among them. This general proposition which applies to any stage in the development of the world market is acquiring a new content at the present time, and a new significance in connection with the sharp intensification of the external economic activities of the largest industrial monopolies, and especially in connection with their changing role within the system of external economic relations.
A group of United Nations experts have observed that "in the past quarter of a century the world has witnessed the dramatic development of a multinational corporation into a major phenomenon in international economic relations".^^1^^ It would be difficult to accuse them of overdramatizing this development. In the words of the Secretary-General of the United Nations, Kurt Waldheim, these corporations "have become increasingly important in virtually every aspect of international life".^^2^^ Similarly the authors of a special study prepared by UNCTAD have concluded that "the multinational corporations . . . have clearly become a dominant factor in determining the pattern of world _-_-_
~^^1^^ Atitltiiialiontil Corporations in Word Development, United Nations, New York, 1973, p. 1.
^^2^^ The Impact oj Alii/liiuilio/in! Corporations on Development and on International Relations, United Nations, Ne\v York, 1974, p. 6.
85 exports,"^^1^^ since the influence of international monopolies on the external trade of capitalist countries is unquestionable.But it is not sufficient to merely state such a self-evident fact, because many activities ot international monopolies are closely guarded. Both from a theoretical point of view, and practically it is especially important to arrive at an understanding of the specific role played by international monopolies in international trade, and at a fundamental evaluation of their place in the international capitalist division of labour and in global economic relations.
With regard to the analysis of world capitalist trade, the growing intensity of the international activities of industrial giants draws particular attention to the direct participation of multinational corporations in international trade. This raises a number of questions concerning the nature, forms and the scope of influence on international trade of intracorporate deliveries among subsidiaries of a particular monopoly, located in different countries.
In particular it raises questions concerning the extent to which this specific type of exchange reflects certain new elements of modern capitalism's economic structure.
There is no intention, of course, to present a comprehensive analysis of problems relating to multinational corporations. The problem is limited to a consideration of mutual interactions between international monopolistic production and international trade. At the same time it is not possible to clarify that problem without a fundamental evaluation of the new role played by international production activities of industrial monopolies and internal corporate transfers in the world capitalist economy and without identifying the economic dimensions of the resulting relationships. This makes it appropriate to consider not only a number of specific questions relating to international trade, but also several more general problems relating to the activities of multinational industrial monopolies---to the extent that this falls within the framework of the present study.
_-_-_~^^1^^ Proceeding of I lie I`ui/i'il .\'iilii>ns Conjerencc on Trade and Development, Third Session. Santiago <!< Chile, /.'? April to 21 May 1972, Vol. II. United Nations, New York, 1973, p. 207.
86 __ALPHA_LVL2__ 1. New Forms of External Economic ExpansionWhile it is general practice to begin a scientific study with a description of the object being considered, in the present case the need lor a more precise definition of concepts and terms is especially great, for there docs not exist a clear consensus in the definitions and names that are applied to the phenomenon being considered. Different authors propose their own terminological prescriptions. The Western literature contains numerous combinations of the nouns ``corporation'', ``company'', ``enterprise'', ``firm'' with such adjectives as ``multinational'', ``transnational'', ``international'', and ``global''. Soviet economists, on the other hand, generally prefer such names as ``transnational'' or `` multinational'' monopoly (corporation) and also refer to `` international'' and ``supranational'' monopolies.
This terminological diversity is not altogether surprising, for it reflects efforts to arrive at an adequate expression of those new functions in the sphere of international economic relations that are currently being performed by industrial monopolies. Yet the inertia of earlier conceptions concerning types of international activities of monopolistic capital often results in a confusion of concepts and aggravates the problem further.
It therefore seems important to emphasize from the first the significant difference that exists between the term "international monopoly" that was employed in the recent past, and the phenomenon that is currently described by any of the indicated combinations of words such as "multinational corporation''. The traditional interpretation of an international monopoly, an international cartel or an international alliance of capitalists referred, first, to such attributes of their international character as an association of capitals from different countries, of different national origins within the framework of the given private capitalist grouping, and secondly, it referred primarily to international operations in the sphere of marketing. These are precisely the aspects of monopolies that V. I. Lenin emphasized when he noted the "economic partitioning of the world among international trusts, 87 the partitioning of countries, by agreement, into market areas'',^^1^^ that are characteristic of imperialism. These are the forms of international capital that were typical for the prewar period, when international marketing cartels were active as well as such multinational production monopolies as the Unilever concern.
The genesis of that process was clearly traced hy V. I. Lenin who showed that "monopolist capitalist associations, cartels, syndicates and trusts first divided the home market among themselves'', and that as capital exports grew and external spheres of influence ''. . . of the hig monopolist associations expanded in all ways, things `naturally' gravitated towards an international agreement among these associations, and towards the formation of international cartels".^^2^^
In this connection it is important to emphasi/e the meaning that Lenin's analysis attributes to the difference between a cartel, which is an association of several capitalists, and a trust, which is an autonomous capitalist firm. In his "Notebooks on Imperalism" one finds the following excerpt from F. Koestner's study of cartels: "The difference between the two concepts" (cartel and trust) "is really one of ownership: various owners in the cartel, only one in the trust.''^^3^^ Subsequently, after considering the views of other authors on this question, V. I. Lenin adds a marginal note that is of great importance for understanding the essence of the problem: "Trust---ownership of all enterprises, [[box sole and absolute power"^^4^^.. ]]
The further concentration of production and capital dictated by objective needs of the economies of scale as scientific and technical progress attained new levels, has quite `naturally' increased the economic power not so much of international associations of the cartel type as of autonomously operating very large monopolies---trusts, concerns, and corporations. Through _-_-_
~^^1^^ V. I. Lenin, "Revision of the Parly Programme'', Collected Works, Vol. 26. Progress Publishers, Moscow, 1964, p. 167.
^^2^^ V. I. Lenin, "Imperialism, the Highest Stage of Capitalism'', Collected Works, Vol. 22, Progress Publishers, Moscow, 1964, p. 246.
~^^3^^ V. I. Lenin, "Notebooks on Imperialism'', Collected Works, Vol. 39, Progress Publishers, Moscow, 1968. p. 45.
~^^4^^ Ibid., p. 73.
88 their giant size and much greater scale of international operations leading firms increasingly seek to acquire an undivided monopolistic control over markets, and "sole and absolute power" without relying on direct alliance with capitalists of other countries.It is true, of course, that cartels and multinational firms of the older type, including some very large ones, continue to exist today (for example, Royal Dutch Shell, or the International Petroleum Cartel). But they have clearly receded into the background following the unprecedented increase in scope of autonomous international operations of most of the capitalist world's industrial giants.^^1^^ While their international character is a distinguishing feature of these monopolies this relates no longer to the origin of their capital but rather to the region in which it is applied. The primary question is no longer from where, in what countries the capital originates, but rather to what region it is directed, and where it operates. In the overwhelming majority of cases the capital of today's ``multinational'' monopolies is that of a single country, and even though production activities are carried out in many countries it is not at all multinational.
It should be noted that the ownership of a part of capital shares by foreign investors does not alter the dominant principle, since as a rule financial, production, technological, and patentlicensing forms of control over the operation of the overseas subsidiaries are retained either fully or mainly by the national capital of the parent firm's country of origin. It is indicative that of the total direct foreign investments of the U.S. and Great Britain (which together accounted for 66.5 percent of all international capital investments in 1971), 90 percent represented assets of affiliates and subsidiary companies for which the controlling interest was held by the parent firm. Moreover, in 67 percent of the affiliates, U.S.-based parent companies owned more than 95 percent of the shares. Only in 7 percent of the cases did they own less than 50 percent of the shares. It is not surprising, _-_-_
~^^1^^ A list of 422 major industrial companies in the capitalist world whose volume, of sales exceeded 1 billion dollars each in 1976 includes only three (!) monopolies belonging to capitalists of several countries (Fortune, May, August 1977).
89 therefore, that an authoritative group of United Nations experts has defined multinational corporations as "enterprises which own or control production or service facilities outside the country in which they are based'',^^1^^ and not as joint investment enterprises ol several countries.Thus the primary specific criterion defining the type of international monopoly that we are considering is that they are International not in their capital, but in the locations where capital is applied, and they are international, moreover, not only in the sphere of circulation hut above all directly in production sphere. Given such an understanding of the object of analysis, the familiar term "international monopoly" is entirely suitable, since it does point sufficiently to the nature of corresponding activities. It is then important not to associate today's international monopolies with the earlier conception, and to keep in mind the new contents of the earlier definition. Of the other terms that are applied today the term ``transnational'' seems to be closest to the essence of the matter, since it refers to an extension beyond national boundaries of an "internationally operating" firm relying primarily on national capital. This is also the term that is employed increasingly in recent years both in the studies of Soviet authors and in the United Nations publications. Nevertheless, the problem remains of arriving at a still more accurate definition that would avoid mistaken interpretations.
But the problem of terminology and the obvious need to improve it is by no means the most important matter, even though it does lead to clashes of opinion at the international level. It is far more important to define the contents of that concept and to identify those attributes that are typical for large international industrial companies. In very general terms it is correct, although not yet sufficient, to define such companies as " corporations with foreign assets'', or else as "firms engaged in production activities in different countries''. But the essential point concerns the form of international activity in which they arc engaged and the scope of these activities that are characteristic of the new type of international monopolies.
_-_-_^^1^^ The Impact of Multinational Corporations on Development and on International Relations, p. 2T).
90We would like to stress again that this emphasis on what may be called ``mononational'' international monopolies does not imply that the traditional monopolies that are truly international in terms of their capital, such as trusts, concerns and cartels, have ceased to exist. Moreover, while they appear to be far less numerous than are today's transnational corporations, this is partly explained by the secrecy that attaches to international cartel agreements, which rely on extremely complicated methods to avoid anti-trust legislation. In addition, the revolution in science and technology has produced a new important sphere for dividing markets, namely international cartel agreements relating to exchanges of technologies. These lend themselves even less to antitrust control and generally escape the attention of researchers.
Yet, no matter how one interprets these two different types of international activities of monopolistic capital, the most important point to note for purposes of research is that they are dilferent. It is the object of our own study to establish these differences and to arrive at an understanding of the specific traits that characterize international ``mononational'' monopolies of the new type as well as of their role in international trade.
It is in the economic literature of other countries that the problems of transnational corporations have received most attention. There one finds the most diverse points of view concerning the criteria that define international monopolies. They reflect, however, two distinct types of concern, namely to identify a group of indicators that could be viewed as necessary and sufficient in characterizing the foreign activities of such companies, and to define calculation methodologies for measuring such indicators.
While there is a variety of views with regard to the first problem, there are no fundamental differences in the basic approach. In the final analysis the various criteria that individual authors propose---whether this is the share of foreign operations in assets, sales, production volume, revenue, or employment--- ultimately express in varying degrees the same underlying processes resulting from the overseas activities of international monopolies. Accordingly while views may differ concerning the extent to which a particular element is in fact representative, for the purposes of the present study it is possible to consider any 91 indicator lliat conveys a clear image of the role of monopoly capital's operations abroad. In particular the widely used data concerning the volume of investments or sales is quite acceptable from such a point of view.
In the second case, in seeking to identify specific parameters for a "coefficient of foreign content" of international corporations, although the differences that exist appear to be less significant from a quantitative point of view, are more important in terms of substance. In particular most Western researchers adopt the figure of 25 percent as the initial threshold for "international content''. This may refer to the share of foreign operations in the firm's revenue or sales, assets, or employed persons.^^1^^ Such an approach, which is purely formal, has no other justification than the common-sense conception that more than 50 percent is too much and less than 25 percent is too little. In spite of the attractive simplicity of such a criterion of "international content" it does not reflect the role of international operations within individual sectors and types of production activities of a particular international corporation, but only provides a general summing-up.
One may easily imagine, for example, that in fact the major product of a given corporation---some unique or technically complex device---is produced precisely through a cooperation of enterprises belonging to the company that are located in different countries, and that it is with regard to that particular product that the firm holds a monopoly position on the world market. But at the same time the corporation's main volume of output involving the production of primary materials, semi-processed goods, a variety of secondary products, and technological infrastructures may be concentrated in the country in which the firm's headquarters arc located, and this results in a below average "coefficient of international content''. Could one then say that a coefficient of less than 25 percent would ``neutralize'' the monopoly's international character?
_-_-_~^^1^^ Jack N. Belinnan, Some Patterns in the Rise oj the Multinational Enterprise, Chapel Tlill (North Carolina), 1969, p. 13; Implications of Multinational Firms for \\'orld Trade and Investment and for U.S. Trade and Labour, U.S. Senate, Washington, 1973, p. 82: Multinational Corporations in World Development, p. f>.
92Another criterion of "international content" is even more formal. This refers to the number of countries in which a particular corporation operates. A three-level index has been proposed by J. \V. \atipel ol Harvard l/niversity: he proposes that (inns that do not possess subsidiaries or affiliates be called national, that those possesing enterprises in 1-5 countries be called transnational and that those possessing such facilities in six or more countries be called multinational.^^1^^ Most authors are inclined to view six foreign countries as the minimal threshold for operations of international companies, although sometimes that number is reduced to two.^^2^^ Yet the major point clearly concerns not the number of countries in which international corporations operate but the scope and role of their international operations.
Table 21 Indicators oj Foreign Activities oj Major Industrial Monopolies in 1976 Firm* Relative: Share of Foreign Operations (percent) in sales in assets in earnings in employment General Motors 24 12 18 Ford Motor 31 40 45 si' i. n. M. 50 30 55 . . . General Electric 38 27 37 30 Chrysler 28 33 22 47 ITT 49 30 31) Philips 37 ' * 20 78' Renault 45 Hoechst 08 43' BASF 80 GO' 70 * Ten leading firms in the processing industries ranked according to volumes of sales. ** Without Europe. Source: U. N. Document E/C. 10 38, 20 March 1978. _-_-_~^^1^^ Raymond Vcrnon, Restrictive Business Practices. The Operations oj Multinational United States Enterprises in Developing Countries. Their Role in Trade and Development, United Nations, New York, 1972, p. 2.
^^2^^ Multinational Corporations in World Development, p. 5.
93It is evident that both these and a number of other criteria are highly eclectic. They not so much reflect perceived economic regularities and analytically substantiated parameters as list selected, even though perhaps essential traits relating to external similarities among international monopolies. Indeed even a simple comparison of various indicators of the "coefficient of international content" of the capitalist world's industrial giants identifies a certain set of attributes that arc typical of international monopolies (see Table~21).
While these figures are suggestive they also [joint to the arbitrariness of corresponding criteria, or at any rate of attempts to define them quantitatively. In our opinion the authors of a special report of the U.S. Tariff Commission have come closer than other studies in this regard. They have concluded that "it is difficult to define a 'multinational company' precisely, because no quality limitations have ever been associated with the term".^^1^^ But there is an attribute of international monopolies, which is also perhaps the most important one, that may be easily expressed in terms of quantitative indicators. This is the size of a firm and the scope and spheres of its activities.
The sharp intensification that is observed in the foreign operations carried out by the leading capitalist countries' industrial corporations results from the transition of the largest monopolies to a direct participation in the international division of labour on a technological basis. It is not surprising that in the current meaning of that term international corporations are not merely firms possessing direct investments in other countries, but rather large firms that are international in both their range of interests and the volume of capital and level of competitiveness, i.e. corporations carrying out worldwide operations.
This is precisely the feature that is emphasi/ed by all researchers who share Raymond Yernon's view that "si/e, it is _-_-_
~^^1^^ The Impact of Multinational Corporations on Development and on International Relation's, p. 81.
94 presumed, means power. And power lies somewhere near the heart of the problem".^^1^^ According to the methodology employed by the United Nations Secretariat "a central characteristic of multinational corporations is the predominance of large-si/e firms".^^2^^Most authors define the lower boundary of such large firms in a purely empirical way. But the corresponding specifications are exacting: at least 100 million dollars in yearly sales, or else membership in the list of 500 major companies compiled by the Fortune magaxine. Occasionally" even membership in the privileged "Five Hundred Club" proves to be insufficient, for most international operations are carried out by leading members of the monopolistic elite.
The major distinguishing feature of today's international monopolies is an enormous concentration of economic power and of financial and productive resources. It is sufficient to note that in 1976 three supergiants accounted for 15 percent of the entire volume of sales of 650 major industrial corporations in the capitalist world, while another 16 percent of turnover was concentrated in the hands of six supcrmonopolies, whose volume of sales exceeded 16 billion dollars each.^^3^^
A variety of indicators point to the economic power of international monopolies. According to some estimates the value of the output of all international monopolies towards the end of the 1960s exceeded the gross national product of any country, except the United States and the USSR.^^4^^ The total volume of sales of General Motors alone in 1969 equalled the national income of all developing countries minus Algeria, Egypt, Libya, and Morocco.^^5^^ If one views international industrial monopolies as autonomous economic organisms similar to the economies of _-_-_
~^^1^^ Raymond Vcrnon, Sovereignly at Bay. The Multinational Spread o[ U.S. Enterprises, Longman, London, 1971, p. 7.
~^^2^^ Multinational Corporations in World Development, p. 6.
~^^3^^ Calculated on the basis of data in U.N. Document E/C. 10/38, 20 March 1978, pp. 288--311.
^^4^^ William Diebold, Jr., The United States and the Industrial World. American Foreign Economic Policy in the l!>70s, Praeger Publishers, New York, 1972, p. 209.
^^5^^ Proceedings of the United Nations Conference on Trade and Development, Third Session, Vol. II, p. 207.
95 individual countries, then 50 of the world's 100 largest " economic units" are international corporations.^^1^^ The extent to which it is in lad possible to rely on such frequently used comparisons ol the outcome of activities of capitalist monopolies with the national product of individual countries is another matter, particularly since even from a formal point of view certain adjustments are then needed, for a certain part of the output of overseas subsidiaries of international companies are included in the gross national products of corresponding countries. Yet even though methodological questions do arise, such comparisons are highly suggestive in a purely illustrative sense.In view of the absence of generally accepted criteria for defining international industrial monopolies, particularly with regard to the volume of their turnover, it is difficult to establish the number of firms that meet the basic attributes of " international company''. The most cautious estimates suggest that they do not total more than 238.^^2^^ According to other data there were 650 such companies in the early 1970s, including 358 with headquarters in the U.S., 74 in Japan, 61 in Great Britain, 45 in West Germany, and 32 in France.^^3^^ Finally if one accepts the wider interpretation of transnational corporations as firms possessing at least one overseas subsidiary, there were 9,481 such companies in 1973.^^4^^
In spite of the approximative nature of these estimates, two important aspects should be noted. First, U.S.-based corporations occupy a leading role among international industrial monopolies. This may be seen both from their share of the total number of international firms, and what is more important, from the greater magnitude of their economic potential. Within the list of 422 leading firms that has been mentioned, each of whose sales exceeded 1 billion dollars, there were 223 U.S.-based corporations _-_-_
^^1^^ Norman Macrae, "The Future of International Business'', The Economist, January '22, 1972, p. XXF.
^^2^^ Sydney E. Rolfe and W. Darnm, Eds., The Multinational Corporation in the World Economy. Direct Investment in Perspective, Praeger Publishers, New York, 1972, p. 17.
^^3^^ Multinational Corporations in World Development, p. 127.
^^4^^ Survey of Multinational Enterprises, Commission of the European Communities, Vol. 1, Brussels, 1976, p. 25.
96 in 1976; while among the 17 supergiants whose turnover exceeded 10 billion dollars, there were 14 U.S.-based monopolies.^^1^^ It is therefore not surprising that even American authors admit that "one does not have to be a European---or Asian or Latin American---to feel that in quite a few cases the words ' multinational corporation' have become a slightly mealy-mouthed euphemism for 'big American company with large overseas interests'~''.^^2^^ Today nearly all very large industrial monopolies possess the attributes of international companies. In this connection R. Yernon observes that "the multinational enterprises covered in this study are, as it turns out, nearly identical with the largest U.S. corporations''.^^3^^In order to understand the role of international corporations in today's capitalist economy and especially in its international trade, it is extremely important to stress the element of " international content" as a necessary attribute of any large industrial monopoly, their increasing participation in the international capitalist division ol labour directly within the productive sphere, and their growing striving to extend their activities beyond national boundaries.
The problems that are being considered require that the basic contours of the development of that process be identified. Direct private foreign investments may be viewed as the most comprehensive synthetic indicator of the intensity and scope of activities ol international industrial corporations. In spite of the shortcomings of that indicator,^^4^^ and of the incompleteness and lack of consistency of corresponding data, that make long-term _-_-_
~^^1^^ Calculated on the basis of data in U.N. Document E/C. 10/38, 20 March 1978, pp. 213, 288.
~^^2^^ William Diebold, Jr., The United States and the Industrial World, p. 197.
^^3^^ Raymond Vernon, Sovereignty at Bay, p. 113.
^^4^^ For example, the Western economic literature and statistical publications do not contain any standard interpretation of the distinction between direct and portfolio investments, for the U.S. Department of Commerce defines the minimum control boundary over the operational activities of firms to be 10 percent of the shares, rather that 25 percent as is customary; in case the ownership of shares is even more widely distributed, it relies on an even lower figure (Implications of Multinational Firms..., p. 81).
__PRINTERS_P_97_COMMENT__ 7---872 97 comparisons difficult, figures relating to foreign capital investments appear to be sufficiently representative. They also offer the most systematized source of information concerning the international operations of transnational corporations. Nevertheless it is important to keep in mind when employing such data that they do not identify the foreign activities of international industrial giants fully. Especially at the present stage these data can only be approximately measured in terms of indicators of capital exports.It is especially important to consider the dynamics of foreign capital investments of leading capitalist countries; and in order to bring out the specific chaiacteristics of the postwar period it is desirable to compare (he longest possible periods of time. It is true that such an approach meets with substantial difficulties, since statistical data concerning direct foreign investments within the capitalist world as a whole arc relatively adequate only for recent years. The data for earlier years and especially for the prewar period are fragmentary.
One notes the relatively slow rate of development of that process in prewar years, and a sharp acceleration in postwar __PARAGRAPH_PAUSE__ Table 22 Direct Private Foreign Investments of Capitalist Countries (in billions of dollars) Years Total U. S. Years Total U. S. 1913* 20.0 1.5 I960 55.0* 32.8 1929 22.0* 7.5 1966 89.6 54.6 1938* 25.0 7.0 1967 105.3 56.6 1946 22.0* 7.2 1970 147.0* 78.1 1950 28.0* 11.8 1971 158.0 82.6 1973 198.8 101.3 1975 58.9 124.2 1976 287.2 137.2 * Estimated by the author. Calculated on the basis of: 1'oliticheskaya ekonomiya sovremennogo monopolisticheskogo kapitalizrna (Political Economy of Modern Monopolistic Capitalism), Vol. 2, Moscow, 1975 (in Russian); Harry Magdoff, The Age of Imperialism. The Economies of U.S. Foreign Policy, Monthly Review Press, New York, 1969; Sidney Rolfe, International Corporation, Paris, 1969; Multinational Corporations in World Development; U.N. Document E/C. 10/38, 20 March 1978. 98 __PARAGRAPH_CONT__ decades. It is symptomatic that while the substantial leap in foreign investments in the 1950s is so striking partly because their initial values were very low, their rate of increase became even more rapid in the 1960s (9.6-10.3 percent on the average per year, and 11.8 percent for the period 1970--1976) in spite of substantial increases in absolute volume.
While these figures are already eloquent they underestimate the actual rapid growth of foreign activities of industrial capital, for they are based on reports concerning the nominal value of assets.
Available international statistical data make possible to construct sufficiently reliable time series characterizing the development of world trade over a prolonged period of time. The major methodological obstacle to the use of such figures is their reliance on price indices for the prewar years referring to overall world trade rather than that of capitalist countries alone. Yet if one considers the relatively limited role of the Soviet Union in prewar world trade, and also the rough correspondence of the USSR's foreign trade prices with those of the world market, one may expect that even if ``pure'' indices of capitalist trade could somehow be obtained they would practically coincide with those that are currently available.^^1^^
It is probably in seeking to standardize foreign investment data over long periods of time that the greatest difficulties are encountered. This is associated with extensive and often arbitrary calculations designed to account for numerous revisions in exchange rates. Since the resulting data are more likely to distort the real state of affairs than to verify it let us assume instead that available data are sufficiently representative in reflecting both the direction and approximate magnitude of basic processes.
On the one hand, these data clearly confirm the general tendency in postwar years towards a more rapid development of the external economic sphere by comparison with production. 1 hey also bring out the fact that exports of entrepreneurial __PARAGRAPH_PAUSE__ _-_-_
~^^1^^ In 1938 the share in the value of world exports of the USSR and of other countries that are now socialist was approximately 7 percent (calculated on the basis of: UN, Statistical Yearbook 1969, New York, 1970.)
99 Emacs-File-stamp: "/home/ysverdlov/leninist.biz/en/1982/TACC284/20071009/199.tx" __EMAIL__ webmaster@leninist.biz __OCR__ ABBYY 6 Professional (2007.10.10) __WHERE_PAGE_NUMBERS__ bottom __FOOTNOTE_MARKER_STYLE__ [0-9]+ __ENDNOTE_MARKER_STYLE__ [0-9]+ Table 23 Indices of Industrial Production, Exports, and Direct Private Foreign Investments of Capitalist Countries (1913=100) Yuars Industrial Production Physical Volume of Exports Investments 1929 155 134 110 1938 158 125 125 1950 255 150 140 1960 436 263 275 1966 622 397 433 1967 643 419 527 1970 764 575 735 1971 787 610 790 1973 918 748 994 1975 879 754 1,295 1976 955 839 1,436 Calculated on the basis of Table 22; Review of World Trade, 1938; and UN, Statistical Yearbook 1960, 1966, 1970, 1977. __PARAGRAPH_CONT__ capital constitutes a particularly dynamic clement within modern capitalism's system of world economic relations. The origins of this may be traced back to the last prewar decade, when international trade did not succeed in fully recovering from the Great Depression of 1929--1933, but foreign investments continued to expand rapidly. But it is after the Second World War that these processes acquired a new quality and became fully apparent: between 1950 and 1976 foreign capital investments increased by 18.3 times, thus overtaking not only the substantial growth in industrial production (by 3.7 times) but also the even more rapid development of world trade, whose physical volume increased by 5.6 times.The same processes are reflected in the more rapid growth of the share of direct foreign investments in the gross domestic product of developed capitalist countries by comparison with the growth of export quotas. While the first of these indicators increased from 5.8 to 7.0 percent between 1960 and 1970, the second increased only from 9.1 to 10.7 percent. It is true that in the last decade one observes what may be seen as a reverse 100 tendency, in which a rapid growth in the exports share was accompanied by a decline in the share of such investments in GDP from a maximal level of 7.1 percent in 1971 to 6.9 percent in 1976.^^1^^ Yet this is merely a "statistical illusion" attributable to the fact that the volume of GDP and also exports in current prices are more influenced by the growing inflation than is the value of capital investment balances.^^2^^ If one considers that factor it may be assumed that at the very least the real significance of foreign investments did not decline, and has most probably continued to increase.
Thus while the rates of development of external trade and foreign investments were practically identical during the interwar period, and pointed to a close relation between these processes as well as to the important function of capital exports in encouraging the export of commodities, today foreign investments have moved so far ahead that the qualitative aspect of that phenomenon must be re-examined. This suggests that there is now something more than a simple stimulation of commodity exports behind the growing role of industrial monopolies in international economic relations. But the questions that this raises cannot be answered without considering basic tendencies in the structure of capital exports.
An analysis of the specific features that characterize the distribution of foreign investment flows at the present stage makes it possible to establish a number of regularities in the _-_-_
~^^1^^ U.N. Document E/C. 10/38.. 20 March 1978, p. 36.
^^2^^ While inflation influences the overall volume of GDP produced in a given year, it does not result in a corresponding inflationary depreciation of the balance value of earlier accumulated investments. It influences only additional investments in a given year. For example, if GDP, measured in arbitrary units, increased Ironi 100 to 150, while investments increased from 30 lo -If), then, in current prices, the share of investments in GDP has remained constant, namely 30 percent. For a rate of inflation of 50 percent GDP expressed in constant prices will be 75 units and investments will be 37.5 units, i.e., their share in GDP will increase to 50 percent.
101 development of international industrial monopolies. In considering shifts in their geographic composition particular attention should be given to two major aspects of the problem, namely the redistribution of power among investing countries, and changes in the destination of capital exports. As for the sources of capital exports, the present period differs fundamentally from prewar years: a relatively modest U.S. share has been replaced by a clear prevalence of American capital within total direct foreign investments (see Table 24). Aside from the other causes to which the increased role of the United States in the world capitalist economy may be attributed following the Second World War, a substantial role was played by the weakened position of other imperialist powers in their former colonies, and also by an intensification of American investment activities. While these changes have recently become somewhat less evident they continue to reflect an increasingly intense struggle among a growing number of participants in today's "capital investments race''.One sees not only a gradual decline in the U.S. share from a maximal level of approximately 60 percent in the early 1960s to less than 50 percent in the mid-1970s, but also a sharp acceleration in the expansion of West German and Japanese capital. __PARAGRAPH_PAUSE__ Table 24 Distribution of Foreign Direct Private Investments Among Major Capital Exporting Countries (percent) Countries 1967 197G u. s. 53.8 47.6 Great Britain 10.6 11.2 West Germany 2.8 6.2 Japan 1.4 6.7 Swit?erland 4.8 6.5 France 5.7 4.1 Canada 3.4 3.6 Netherlands 2.1 3.4 Sweden 1.6 2.7 Belgium and Luxembourg 1.9 1.2 Italy 2.0 1.0 Source: U.N. Document E/C. 10/38, 20 March 1978. 102 It is particularly noteworthy that between 1971 and 1976 the flow of direct investments from major capitalist countries (other than the U.S.) exceeded exports of U.S. capital by one-third. The growing strength of West German and Japanese international monopolies can hardly be attributed entirely to their expansion in the areas formerly dominated by British imperialism. Their higher rates of economic development, by comparison with those of Great Britain, indicate that foreign investments should be viewed not so much as an element of external economic expansion into the capitalist world's backward regions (even though that function undoubtedly does remain and in some cases even increases), as an expression of general problems of modern imperialism's economic growth.
Such a formulation of the question is also justified by the radical shifts that have taken place during the postwar period in the destination of foreign investments. In contrast to prewar years capital exports are generally channeled to industrially developed countries rather than to developing ones. Since there are no overall data relating to the capitalist world as a whole __PARAGRAPH_PAUSE__ Table 25 Distribution o[ the U.S. Direct Foreign 1'rivate Investments Developed Countries Developing Countries Years Trillions Percent Billions Percent of Dollars of Total* of Dollars of Total* 1929** 3.7 51 3.5 49 1950 5.7 50 5.7 50 1960 19.4 02 11.9 38 1970 51.8 73 19.2 27 1971 54.0 73 20.7 27 1973 72.2 76 22.9 24 1975 90.9 78 26.2 22 197G 101.2 78 29.1 22 * Total for developed and developing countries without taking into account a negligible part of investments that were not distributed in countries of destination. ** Conditionally adapted to current classification of developed and developing countries. Calculated on the basis of: Implications oj Multinational Firms. . .; Survey o[ Current Business, August 1963, September 1967, August 1971. 103 __PARAGRAPH_CONT__ over a prolonged period of time, this tendency may he illustrated in terms of basic indicators of the geographic composition of American investments.
While following the growth of "technological colonialism" in recent years, and also the intensification of the energy and raw materials problem, the role of investments in developing conntries has again begun to increase, the tendency towards their concentration in industrial countries continues to prevail.
This does not, of course, imply that there is a declining interest on the part of imperialist powers in obtaining access to sources of raw materials within the capitalist world's periphery, particularly in the context of the energy crisis.
The point is that the declining share of developing countries in total foreign investments is partly attributable to the nationalization of the properly of foreign monopolies in these countries, especially in the petroleum industry. It is not a coincidence that it was in 1974. when petroleum-producing countries made their striving to free themselves from the domination of foreign monopolies particularly evident, that total U.S. investments in developing states declined for the first time not merely in relative terms but also in absolute terms.
On the other hand, the role of this factor should not be overemphasized, for the role of petroleum investments is not as decisive to the West's relations with OPEC countries as one might be led to think by the manner in which it has been stressed in press accounts. In particular while the relative share of developing states in capitalist nations' total foreign investments declined from 31 to 26 percent between 1967 and 1975. the share of OPEC countries declined from nine to six percent, i.e., in the same proportions as in the case of developing countries that do not export petroleum.^^1^^
North America and Western Europe, i.e., modern capitalism's most developed regions, have become the principal centres of attraction of foreign capital. The two largest investment flows, moreover, are the one from the United States to West European countries, and the flow in the reverse direction. Together _-_-_
~^^1^^ U.N. Document E/C. 10/38, 20 March 1978, p. 237.
104 they accounted for approximately one-half of all foreign direct private investments in the mid-1970, thus exceeding the total capital exported to all developing countries.Following the Second World War the United States acquired a leading position in this struggle for mutual penetration. While in 1937 West European capital exceeded that of its American competitors (1.337 million dollars of investments in the United States as opposed to 1,259 million dollars of U.S. investments in Europe), arid while their levels continued to be comparable in 1959 (4.5 billion dollars versus 5.3 billion dollars, respectively), by 1969 American monopolies effected a sharp leap and exceeded the volume of West European investments by nearly three times (8.5 billion dollars versus 21.6 billion dollars).^^1^^ Without considering the causes for such a sharp turn of events at this point it is appropriate to note that a major increase in U.S. capital exports coincided with the formation of the West European Common Market.^^2^^
Finally, the most recent years are characterized by a tendency towards a balancing in the flows of direct foreign investments of leading Western powers; increasingly countries that are net exporters of capital are becoming centres of attraction for foreign investors, while, conversely, net importers are increasing their capital exports. In particular, between 1967 and the mid-1970s the ratio ol received foreign investments to exported foreign investments increased from 18 to 22 percent in the United States and from 47 to 65 percent in Great Britain; it declined from 120 percent to 96 percent in the case of West Germany and Irom 519 to 388 percent in Canada^^3^^.
Of course that increasing concentration of capital investments within a specific group of developed countries is attributable to _-_-_
~^^1^^ Nicholas Faith. The Infiltrators. The European Business Invasion of America, E. P. Duttnn and Co., Inc., New York, 1972, p. 14.
^^2^^ Mns rrlers only to direct capital investments. II one considers portfolio investments as well, the properly owned by West European firms in the U.S. will exceed, according to some estimates, the sum of American Ions-term assets in Europe (United States International Economic Policy in an Interdependent World, Vol. 2, July 1971, Washington, p. 91).
~^^3^^ U. N. Document E/C. 10/38, 20 March 1978, p. 240.
105 a number of factors, some of which are economic while others are political and social. Such developments as the struggle of peoples in newly liberated countries for a self-sustained national development, a certain deterioration in the investment climate for monopolies in many developing states, and a growing risk of nationalization of foreign property tend to oppose the expansion of intei national monopolies in developing countries and therefore contribute to the redirection in investment flows to ``calmer'' regions.But this does not reduce the significance of other factors, especially technico-economic, ones in producing major changes in the sectoral composition of foreign investments and in partly influencing their geographic composition. Together with a concentration of capital investments in developed countries there has been a particular emphasis by international monopolies on developing manufacturing industries in other countries. This is reflected in the dynamics of U.S. investments.
That concentration of capital investments in the processing industries occurred at a time of a general ``industrialization'' of American foreign investments: the share of the non-productive sphere, which before the war reached nearly one-half of the total value of direct capital investments, declined to one-fourth by the end of the 1950s. In spite of the growing role of liquid fuels in the world energy balance and the increased intensity of interimperialist struggles for access to sources of petroleum and natural gas, the rate of absorption of foreign capital in manufacturing industry during the postwar period exceeded that of the petroleum industry. And this occurred precisely in the early 1960s when the new role of leading industrial monopolies in the international capitalist division of labour had become increasingly apparent.
The activities of international monopolies were especially intense in those sectors of processing industries that are closely associated with scientific and technical progress. In the early 1970s the influence of foreign capital was the greatest (more than 75 percent of assets, production, or sales) in the production of computers and electronic and electrical equipment in the case of Great Britain; of computers, electronic equipment and petrochemicals in the case of the Federal Republic of Germany; and __PARAGRAPH_PAUSE__ 106 Table 26 Sectorial Distribution of U.S. Direct Private Investments Abroad i > 2 3i M cn e o £ a o rn Units of Measurement ``3 _£.£, 3 >, a) t a be M.58 0> « 3 B O f a£~ t-, OJ CO C5 C, 3 OJ OJ ``o 05 to '5|-S £3 t" EH B.S 11 « 5 3 r^KT3 o 1929 billions of dollars 7.5 1.8 1.1 1.2 3.4 percent of total 100 24 15 16 45 1950 billions of dollars 11.8 3.8 3.4 1.1 3.5 percent of total 100 32 29 9 30 1960 percent of 1929 billions of dollars 157 32.7 211 11.2 309 10.9 92 3.0 103 7.6 percent of total 100 34 33 9 24 1970 percent of 1950 billions of dollars 277 78.2 295 32.3 321 21.7 273 6.2 217 18.0 percent of total 100 41 28 8 23 percent of 1960 239 288 199 207 237 1976 billions of dollars 137.2 61.1 29.7 7.1 39.0 percent of total 100 45 22 5 28 percent of 1970 175 189 137 175 217 Calculated on the basis of: Sidney E. Rolfe, op. cit., p. 146; Survey of Current Business, August 1972, 1977. __PARAGRAPH_CONT__ of office equipment, electrotechnical equipment and chemicals in the case of France.^^1^^
If one considers these general data concerning the emphasis of international monopolies on advanced industrial sectors more closely the following picture emerges in relation to individual commodities. Already by the end of the 1960s international monopolies and especially American firms controlled the entire production of computers, semi-conductor instruments and transistors in Western Europe, 100 percent of the output of ball bearings in Italy and 80 percent in France, and 90 percent of the output of synthetic rubber in France.^^2^^
Thus the principal tendencies in the development of today's world economy reflecting the influence of scientific and _-_-_
~^^1^^ Multinational Corporations in World Development, pp. 164--67.
^^2^^ Issach A. Litvak, and Christopher J. Maule, Eds., Foreign Investment: the Experience of Host Countries, Praeger, New York, 1970.
107 technical progress have largely determined the ultimately converging outcomes of two mutually interdependent processes, namely the evolution of the geographic distribution of foreign investments and of their sectoral structure. International monopolies are especially attracted to advanced industrial sectors and therefore to industrially developed countries, where conditions for the development of these sectors are especially favourable.It should be noted that the figures shown earlier do not fully convey the actual character of these shifts in the geographic and sectoral distribution of international monopolistic capital. To compensate for a deterioration in the conditions for foreign external economic expansion major exporters of capital have altered their methods for penetrating the economies of other countries.
In particular the declining share of the United States in the overall sum of direct foreign investments does not necessarily imply a corresponding reduction in the influence of U.S.-based transnational corporations. They frequently export capital through their foreign subsidiaries, rather than directly from the country in which their headquarters are located. This is illustrated by the investments in Western Europe of Canadian subsidiaries of U.S.-based international monopolies. Beyond this, "measured by the size of firms, the importance of the United States as a base of transnational corporations is far greater than the United States' share in the total number of transnational corporations would indicate".^^1^^
Together with increasing restrictions in a number of countries on the activities of foreign subsidiaries that are fully owned by transnational corporations one sees a growing participation of these companies in mixed firms that include either government capital or private capital of countries to which investments are exported. Particular emphasis has already been placed on forms of external economic expansion that formally are not associated with the acquisition of property on the territory of other countries (so-called non-equity arrangements). New forms of monopolistic dominance are extended to industrial cooperation, _-_-_
~^^1^^ U.N. Document E/C. 10/38, 20 March 1978, p. 36.
108 technology transfers, and joint activities in research and development, as well as to managerial, financial, marketing, transportation, and information services and contracting and subcontracting operations.This naturally raises the question whether the agreements that are not associated with property rights in fact alter the conditions of operation of multinational corporations fundamentally by comparison with those that are typical for direct investments. The wide experience that already exists shows that the answer can only be negative. In particular it is clearly evident that when firms retain a dominant role in the sphere of management and technological matters this serves to preserve control over all production and commercial activities. In the words of United Nations specialists "the progression from traditional concession regime to a joint venture has in many cases not substantially affected the location of control of the decision-making process, so long as a transnational corporation has continued to manage the undertaking'',^^1^^ and "some service or work contracts . . . are not very different from a concession".^^2^^ As a result "there is some evidence that foreign penetration rates have increased significantly in some developing countries".^^3^^
The evolving composition of investments contributes much to understanding the origins of international monopolies, and of the transition from simple capital investments abroad (in 1914 some 90 percent of exported capital consisted of portfolio investments, while in the early 1970s direct capital investments represented 75 percent^^4^^) to the establishment of integrated international production complexes. It leads one to consider the nature of the moving forces behind that phenomena.
Examples of entrepreneurial activities at the international level have long been known: already in the eighteenth century European companies invested capital in other countries, while in the first half of the nineteenth century American firms possessed _-_-_
~^^1^^ U.N. Document E C. 10/38, 20 March 1978. p. 105.
~^^2^^ Ibid., p. 109.
^^3^^ Ibid., p. 60.
~^^4^^ Christopher Tugendhat, The Multinationals, Eyre and Spottis\voode, London, 1971, p. 17.
109 15 foreign enterprises.^^1^^ As capitalism developed numerous enterprises based on foreign capital appeared in raw material producing sectors of the economies of colonial and dependent countries. It is by no means a coincidence that for a long time direct foreign investments were limited to extraction industries and plantations. This is by no means, as is sometimes asserted, because " certain industries are by nature international".^^2^^ In spite of such an ``inherently'' international character of raw materials, it is industrial production that has become the main source of attraction for the capital investments of international monopolies.Similarly the practice, typical of the prewar period, of combining capitals at the international level in order to exploit other countries and divide the world market could not by itself bring multinational industrial corporations into existence had not appropriate economic factors emerged. Even if there did exist a direct continuity in certain purely technical aspects of business management at the international level, this secondary aspect of the matter is by no means the one that defines the essential differences between modern international monopolies and the international cartels of the older type. It is a transition from distribution-oriented activities to production activities in other countries that is the main development in the evolution of international monopolies, and its cause should be sought primarily in changing conditions of production and in the need for an internationalization of productive forces deriving from the revolution in science and technology. This is, in effect, the aspect of the given process that has also been considered though from a different ideological position by John Kenneth Galbraith, who believes that "the multinational corporation is the necessary manifestation of international trade in manufactured products".^^3^^
_-_-_~^^1^^ Mira Wilkins, The Maturing of Multinational Enterprise: American Business Abroad from 1914 to 1970, Harvard University Press, Cambridge (Mass.), 1970.
~^^2^^ Multinational Enterprise and Social Policy, International Labour Office, Geneva, 1973, p. 22.
~^^3^^ John Kenneth Galbraith, "The Defence of the Multinational Company'', Harvard Business Review, March-April 1978, p. 87.
110 __ALPHA_LVL2__ 2. The Supermonopolies'Time series describing foreign investments only partly reflect the aclivilics of international monopolies. The principal outcome of entrepreneurial capital is embodied in corresponding outputs, a part of which is channeled into international trade. This raises the problem of identifying quantitative measures of these activities of multinational corporations in order to compare them with the more general outcomes of production and of external trade of the capitalist world.
But let us first examine these phenomena in qualitative terms. This is precisely the issue that leads to most debates in the growing volume of literature abroad that is devoted to the " international production" of transnational corporations. That problem is least of all concerned with identifying the indicators that express the scope of international production, for one may readily accept the widely employed method of defining it in terms of volume of sales. A much more important question concerns the meaning of international production itself, and the type of figures that should be employed in measuring it.
The confusion that exists in this regard is illustrated even in the most objective and also most comprehensive study in this area, namely the first study on this subject prepared by the United Nations Secretariat. In it two essentially different concepts are employed to refer to the same phenomenon. In our own opinion the definition of international production as "sales by foreign affiliates of multinational corporations to nonaffiliates" is particularly objectionable.^^1^^ For this interpretation greatly reduces the significance of the foreign production activities of international monopolies, some of which are channeled to internal intracorporate transactions and constitutes one of the most important characteristics of such companies. A second definition of international production is closer to the truth. Closer to the _-_-_
~^^1^^ Multinational Corporations in World Development, p. 25.
111 substance is the definition of international production as " production subject to foreign control or decision and measured by the sales ol loreign affiliates of multinational corporations. . .''^^1^^ The merit of that interpretation derives from its emphasis on the role of monopolistic control, and it would raise no objections whatever if one viewed international production only as the output of foreign affiliates, not taking into account the overall activity of a corporation.Different conceptions of the essence of the international production of transnational corporations are a major reason for the extremely diverse and highly unreliable estimates that exist of the volume of output of international industrial monopolies, even though one must, of course, also recognize the considerable practical difficulties that attach to such calculations even when a correct methodology is employed. So, the estimates of the volume of international production activities at the beginning of the 1970s ranged from 230 billion dollars to 450 billion dollars and more.^^2^^ It is therefore useful to consider some of the typical interpretations of the problem of defining parameters of international production.
The most detailed and logically supported approach to such calculations, even though it is also the most conservative one, was proposed by specialists of the United Nations Secretariat. The actual ratio of the volume of sales of foreign affiliates of U.S.-based companies to the book value of direct foreign investments of the United States in 1970 (2:1) is employed to derive a transfer coefficient of 2.0. Applying that coefficient to all foreign investments (165 billion dollars) a figure of 330 billion dollars is obtained to represent the outcome of the capitalist world's international production in 1971.
Judd Polk, an American researcher, who estimated the value of international production in 1969 at 450 billion dollars, _-_-_
~^^1^^ Ibid., p. 13.
~^^2^^ Pierre Uri, Ed., Trade and Investment Policies for the Seventies. New Challenges for Atlantic and Japan, New York, 1971; Stefan II. Robock, Kenneth Simmonds, Jack Zwick, International Business and Multinational Enterprises, Richard D. Irwin, Inc., Ilomewood (111.). 1973; see also Multinational Corporations in World Development, pp. 159--160.
112 applied a different set of criteria. He admits that the possible range of error attaching to this figure is 50 percent in either direction, and that it therefore merely yields an order of magnitude.^^1^^ Leaving aside the reliability of that figure itself, let us note the wider interpretation that is employed in defining the sphere of international production, since in addition to the sum of direct foreign capital investments Judd Polk also includes the value of portfolio investments. Beyond this Professor Jack Behrman, from the University of North Carolina, also includes a quantitative estimate of the relations that result from international firms' foreign sales of technology. He estimates a total value of international production in 1971 at 450 billion dollars, of which 264 billion dollars are attributable to direct investments (on the basis- of a ratio of their book value to total sales as 1:2), 170 billion dollars is attributable to portfolio investments (at a ratio of 1:1), and 16 billion dollars are attributable to licensing agreements.^^2^^That calculation is interesting not so much because of the final estimate to which it leads as of the estimate of proportions among different types of external economic activities of international monopolies that it suggests, and especially of its wider interpretation of the category of international production itself. While the share of portfolio investments and especially of licensing agreements is not a determining factor, and the idea of including these factors directly into international production may appear debatable, one may see in this a definite element of rationality. In our own opinion this is because even if the international output of industrial monopolies is defined in such a way as to include only the output of the foreign subsidiaries (and this is already a debatable proposition), it is hardly correct to limit this only to relations attributable to direct investments. For in fact portfolio investments, too, wherever capital shares are widely disseminated, and especially technological forms of control by owners of licenses, not to mention combinations of these two levers, offer means for influencing the financial and _-_-_
~^^1^^ Judd Polk, The New International Production, Tokyo, 1971 ( miinco.), p. 10.
^^2^^ Jack N. Behrman, "New Orientation in International Trade and Investment'', Pierre Uri, Ed., op. cit., pp. 11--12.
113 production activities of dependent firms that may he at least as extensive as are direct capital investments.It is another matter whether it is possible to view international output, even in its widest delinilion, as a function of the foreign affiliates of international monopolies alone, by viewing it separately from the wider complex of operations that a given firm performs at any one time in various countries. But that problem may be examined after considering the specific features of intracorporate relations, whose analysis makes it possible to understand the mutual relations that exist between internal and foreign production activities within the international industrial empires of international monopolies. For the time being we shall estimate the magnitude of international output at the level of the world capitalist economy as it is traditionally understood.
In that connection we would again like to stress the importance of selecting commensurable indicators, since a neglect of the methodological aspects of international economic comparisons in this area often leads to inaccurate results. The most common error concerns direct comparisons of international output with the gross national (or domestic) product of individual countries and the capitalist world as a whole. This neglects the fact that the foreign outputs of international firms, which are usually defined as a sum of all sales, including the sales of intermediate products, contain elements of double counting, while gross product is calculated on the basis of "value added'', i.e., of only that value which is added by processing. For example, in the U.S., which is especially relevant in view of its role in the capitalist economy and also foreign investments, the ratio between total sales and value added within the sphere of material production in the 1960s was 1.99 to 1, thus literally constituting double counting.^^1^^ Nor were these pitfalls of simplified comparisons avoided by Judd Polk and Jack Behrman, according to whose data international production at the beginning of the 1970s constituted 22--23 percent of the total gross product of capitalist countries. This figure appears to be too inflated, for as noted in the first report of the United Nations experts, both _-_-_
~^^1^^ Calculated on the basis of: Survey of Current Business, Vol. 49, No. 11, November 1969, pp. 30--35.
114 authors neglect adjustments for value added.^^1^^ Such an adjustment may be made, for example, by using the coefficient pertaining to the United States mentioned earlier, in one of two ways: either by reducing the value of total sales of foreign output of international companies, or else by correspondingly increasing the figures for the gross product. Ultimately this will yield identical proportions, but in view of the greater reliability of estimates of gross products, it is better to perform such a manipulation on figures of international production. If that coefficient is applied to the estimate of the first study of the United Nations experts (without considering portfolio investments and licensing relations), which established international production in 1971 at 330 billion dollars, then its value added constituted approximately 165 billion dollars, that is about 6 percent of the gross domestic product of all capitalist countries.^^2^^ The average of available estimates yields a magnitude of the order of 7 percent, and as large as 10 percent.Even though these figures are much smaller than are the widely known indicators, which erroneously establish the share of international production at nearly 20 percent of the capitalist world's gross product,^^3^^ they are nevertheless quite impressive. For even these six percent exceed the gross national product of Great Britain or France, while seven percent nearly equals the total output of West Germany, and 10 percent is more than the output of Japan, which is the capitalist world's second power in terms of its economic potential.
Yet even such a "methodologically pure" comparison neglects _-_-_
~^^1^^ Multinational Corporations in World Development, p. 14.
^^2^^ Estimated on the basis of: UN, Statistical Yearbook 1972, p. 62.
~^^3^^ It is a different matter to consider the international production of international monopolies jointly with their other output, including that of parent companies. The only such estimate that is available was made in a special study of the United Nations Secretariat. It establishes the total production of international corporations (on the basis of value added) at 500 billion dollars in 1971, which indeed corresponds to approximately 20 percent of the capitalist world's gross product (Multinational Corporations in World Development, p. 13). In that case international production is essentially viewed as a component part of the activities of international monopolies. In our opinion such an approach is more correct.
__PRINTERS_P_115_COMMENT__ 8* 115 substantial differences in the composition of international production and gross product that are attributable to the much greater share of non-productive sectors in the gross product. It therefore seems correct to compare only the industrial output of foreign enterprises of international monopolies with the corresponding part of gross product.^^1^^ Such an approach also permits direct comparisons of international production with indicators of world trade, whose channels absorb only the output of material sectors.When such a calculation method is employed the significance of international production increases. The latest available estimates of the sectoral composition of all foreign investments establish the share of processing and extracting industries in 1966 at 60 percent.^^2^^ ff that proportion is applied for 1971, then total sales of industrial products, inferred from a level of international production of 330 billion dollars, must have been approximately 20(1 billion dollars. When recalculated in terms of value added this will be 100 billion dollars. At the same time the share of industry in the capitaist world's gross product in 1970 was 35 percent,^^3^^ and accordingly, in relation to the magnitude of some 2,700 billion dollars in 1971, constituted approximately 950 billion dollars.
Thus at the beginning of the 1970s the foreign production of international monopolies without double counting represented 10.5 percent of the entire industrial output of the capitalist world, i.e., even on the basis of a cautious estimate, exceeded the relative share of Japan in the capitalist world's industrial production. This indicates that the foreign possessions of international monopolies alone represent modern capitalism's third largest industrial centre---after the U.S. and the countries of the Common Market.
A comparison with foreign trade data that do not require recalculation in terms of value added and may therefore be _-_-_
~^^1^^ This refers to industrial production alone, because investments in the agriculture of other countries and the corresponding foreign agricultural output of international monopolies is in fact negligible.
~^^2^^ Sidney E. Rolfe, op. cit.
~^^3^^ Calculated on the basis of: Yearbook of National Accounts Statistics 1971, Vol. Ill, United Nations, New York, 1973, p. 108.
116 effected in fully commensurable units, points to a still more significant role for the foreign industrial production of multinational corporations. When calculated on the basis of a cautiously estimated value of the foreign industrial production of these monopolies in 1971, namely 200 billion dollars, this represented 58 percent of the world capitalism's total exports, and when calculated on the basis of a maximal estimate it was practically equal to it (312 billion dollars).It should be noted that our emphasis on data for the early 1970s is deliberate, because the studies relating to that period were marked by attempts to find new approaches to establishing the scope of the transnational corporation's international production. In a later study of the United Nations Centre on Transnational Corporations the original methodology was changed, and that category came to be interpreted as the production ol foreign affiliates without counting intracorporate transactions. This greatly reduces the actual scope of the activities of transnational corporations, even if one defines it only in terms of the operations of foreign subsidiaries. In addition, the recalculation coefficient relating book values of foreign investments to volumes of sales was increased from 2.0 to 3.8.
Calculated on the basis of the new methodology the total sales of foreign subsidiaries of transnational corporations was 830 billion dollars in 1976, of which 670 billion dollars refer to industrial companies. According to the earlier method this should correspond to the value of international production amounting to approximately 1,000 billion dollars according to the new coefficient and 570 billion dollars according to the old.^^1^^ If one relies on the initial formula which includes internal corporate transactions, and employs the latest recalculation coefficient as well as the proportions between overall investments and industrial investments proposed by specialists from the United Nations Centre on Transnational Corporations, then the value of international production in 1976 must have been approximately 800 billion dollars. The scope of the foreign production of transnational corporations then appears to be more impressive: in 1976 it was 89 percent of the value of world capitalist exports, _-_-_
~^^1^^ U.N. Document E/C. 10/38, 20 March 1978, p. 35.
117 and (in terms of value added) 11.7 percent of industrial production.^^1^^Naturally our own calculations, too, are by no means free of a certain measure of arbitrariness. Above all this derives from the constraining interpretation of international production for which statistical data are available, and also from comparisons of international production with world totals of which international production itself is a part. (Greater accuracy would require comparisons in which the activities of international monopolies are subtracted from the gross product, something which in practice is impossible.) There is perhaps only one respect in which the methodology that is proposed by the present author cannot be criticized: it cannot be accused of exaggerating the role of international monopolies. Its findings, from which secondary factors have I>een removed, point to the great seriousness of the problem of establishing the true place of international corporations in the contemporary world economic relations.
Scientific and technical progress influences in many ways the intensification of the international division of labour that is taking place in concrete conditions of capitalist mode of production primarily within private monopolies. A distinguishing characteristic of today's industrial monopolies concerns not merely the transfer of a part of their production and distribution operations to other countries, but a form of ``internationalism'' in which all elements of the firm's international structure are viewed as component parts of a single mechanism.
This produces a cosmopolitan approach in the strategics of international monopolies, since in defining their programmes of international activities investing firms are primarily inlercsted in the contribution that its capital investments will make to the well-being of the overall organization. The very possibility of _-_-_
~^^1^^ Calculated on the basis of: UN, Statistical Yearbook 1977; UNGTAD, Handbook of International Trade and Development Statistics, VJTJ.
118 such a global approach is largely created by new conditions in the development of modern economy.The direct influence of scientific and technical progress on intensifying the international production activities of the largest industrial corporations may be traced in many ways. Their most important one is a growth in the minimal and optimal size of enterprises and shrinking domestic markets for their large-scale production. This is especially true of advanced industrial sectors that are most closely associated with developments in science and technology.
It is therefore not unexpected that both within their own countries and beyond their borders the principal form of activity of international monopolies is emphasizing the output of products that are especially complex in a technical sense, and also ``science-intensive'' (excluding of course military equipment, which although it is exported, is generally, as is self-evident, produced only ``domestically''). This is confirmed by the data considered earlier concerning the sectoral composition of foreign investments, the dominant role of the largest corporations in advanced industrial sectors, and their acquisition of dominant positions in the sphere of scientific research activities and technological designs.
Their advantages in science and technology then provide to transnational corporations such powerful instruments for penetrating the production structure of other countries as patentlicensing relations, for under capitalist conditions the financial dependence of subsidiaries is closely associated with technological dependence. Consequently the actual extent of control is significantly greater than would be suggested by formal indicators of the volume of trade in technology. In analyzing the monopolistic practices of U.S. corporations abroad Douglas F. Greer, who is an American researcher, notes that "stress can also be laid on the finding that firms in industries heavily reliant upon complex or semi-complex technologies, such as chemicals, drugs and electrical equipment often extend their monopoly powers beyond those granted by simple patent rights".^^1^^ This is especially _-_-_
~^^1^^ UNCTAD, Restrictive Business Practices. Studies on the United Kingdom of Great Britain and Northern Ireland, the United States of America and Japan, United Nations, New York, 1973, p. 87.
119 true of international monopolies whose leading role in exporting technology is indicated for example by the fact that in 1971 they received about 90 percent of all earnings for licensing agreements between American and foreign firms.^^1^^To some extent the global character of contemporary monopolies is attributable to scientific and technical progress indirectly, as it were, through the fact that aside from creating structural shifts in economies it has also contributed to further improvements in the technical infrastructure of international linkages. A substantial modernization of old means of transport and communication and the appearance of new ones that rely on computers and mathematical methods for achieving an optimization of commercial operations---such are the material prerequisites of a dramatic increase in the ``international'' flexibility of territorially scattered corporate organisms that permit them to function as an integrated whole. In particular the use of marketing systems based on advanced technical methods enhances the operational character of corporations' management and permits the introduction of elements of planning to the extent possible under capitalist conditions.
In many respects the revolution in science and technology and the need that it creates for the internationalization of production have predetermined the extension of industrial monopolies beyond national boundaries. "Modern technology has compelled the efficient productive enterprise to become both large and international.''^^2^^ In its turn, the international character of monopolies endows them with further advantages not only by expanding their zone of exploitation, but also through the possibility of deriving gains from differences in the economic situations that exist in individual countries. By manoeuvring with resources, adapting their production and distribution programmes to the concrete conditions of various national markets, and speculating on difficulties that may arise, international corporations strive to achieve an optimization of their activities (this refers of course, to a capitalist optimization on a global scale).
_-_-_~^^1^^ Implications of Afullhialiontil Finns. . ., p. 10.
^^2^^ The United Nations and the Business World, Business International, New York, 1967, p. 2.
120Nearly all serious researchers in this area have noted this aspect of international monopolies. In particular, one of the studies carried out by UNCTAD's Secretariat observes that "the multinational firm spreads its operations around the world in the way most likely to further its own objectives of profitability and growth and there is no reason to suppose that this will result in an optimum situation as seen by any particular country in which the firm operates".^^1^^
The means that are employed in carrying out such a global strategy are highly diverse. A major role is played by the development of integrated production and marketing policies and coordination of all activities within an international conglomerate of enterprises controlled by very large industrial monopolies. Similarly, an important role is played by financial operations, since "in a global context, the free movement of funds is the bloodstream of the corporations".^^2^^ While such an evaluation of this particular factor is an exaggeration, since the major sources of a firm's international character must be sought in the sphere of production, financial manipulations do make possible the extraction of additional profits. In particular, a study of 115 multinationals' affiliates in Great Britain shows that in 1964--1965, when a devaluation of the pound sterling seemed to be inevitable, 30 percent of them transferred more than 100 percent of their revenues abroad, while in the preceding 3-4 years dividends had not been paid at all.^^3^^
At the same time even official American data shows that another procedure for repatriating hidden profits to the U.S.-- based parent corporations on a large scale is the assigning to overseas affiliates of inflated expenditures for technological licenses, research and development activities and various other expenses associated with the management of the corporation as a whole. But it is trade transactions between the parent firm and _-_-_
~^^1^^ Proceedings of the United Nations Conference on Trade and Development. Third Session, Santiago dc Chile, 13 April to 21 May, 1972, Vol. Ill, p. 79.
^^2^^ Multinational Corporations in World Development, p. 41.
~^^3^^ M. Z. Brooke and II. Lee Remmers, The Strategy of Multinational Enterprises, London, 1970, p. 168.
121 its subsidiaries in other countries that probably provide the greatest scope for "global manipulations"---if one canr refer to such intracorporate deliveries as trade. __ALPHA_LVL2__ 3. The Role of Intracorporate TransactionsTo arrive at a better understanding of these processes it would be appropriate to shift (with due consideration of scientific and technical progress) to an analysis of the activities of international monopolies at the molecular level as it were. Yet unlike the natural sciences, where methods and instruments of research have experienced a rapid development, economic methods in this area (even when mathematics is involved), have not developed very much. To a large extent this is because the giant ``molecule'' itself---the monopolistic corporation---is increasingly active in resisting outside interference. As public and scientific interest in the contradictory aspects of the operation of multinational industrial giants increases, the latter's efforts in camouflaging them grow even more rapidly.
In spite of a very large number of monographs and articles, reports and proceedings of symposia, as well as statistical and other data, it is almost as difficult today to penetrate into the mechanisms that govern the mutual relations that exist between parent firms and their overseas subsidiaries as in the past. One must therefore accept the inevitably fragmentary nature of corresponding information and evaluation data. At any rate there is a general agreement on one issue (and it will be difficult to exaggerate this point) namely concerning the dearth of available information, the extreme secrecy that surrounds the "intimate life" of international monopolies, and especially their intracorporate deliveries. According to a special group of Eminent Persons appointed by the Secrctary-denernl of the United Nations for studying the activities ol international monopolies, it was "struck by the lack of useful, reliable and comparable 122 infonnation on many aspects of this subject".^^1^^ Similarly in the view of the UNGTAD Secretariat: "Many of the activities of the multinational corporations . . . involve aspects of policies of these corporations which are either strictly confidential or secret. They concern exports, and in particular, exports by its subsidiaries and affiliates; the purchasing of essential inputs from within the corporation, that is from the parent company or its other affiliates; the prices paid for such purchases; and the movement of funds into and out of currencies by and within the corporation.
For this reason only limited information is available. . .."^^2^^
Above all this refers to the prices that are assigned to intracorporate deliveries, for which a special term is employed in order to distinguish them from world market prices, namely "transfer prices'', even though formally they are foreign trade prices. Nearly all sources emphasize that the insufficiency of information concerning the activities of transnational corporations is particularly apparent with regard to the question of transfer pricing.^^3^^ It is especially there that "the policies adopted by multinational corporations . . . are secret, and information is, therefore, difficult to obtain".^^4^^ Beyond this even the fragmentary information that may be found in the press is unreliable for "in the case of arrangements for export within the multinational corporation, and, in particular, where the subsidiaries are controlled by the parent company, such arrangements are generally not concluded on a formal written and juridical basis".^^5^^
The artificial character of the prices that are employed in intracorporate trade is not a new phenomenon. This practice was also relatively widespread at an earlier stage in the development of international monopolies. Already in one of the first _-_-_
~^^1^^ The Impact of Multinational Corporations on Development and on International Relations, p. 53.
^^2^^ Proceedings oj the. United Nations Conference on Trade and Development, Third Session, Santiago de Chile, 13 April to 21 May, 1972, Vol. II. New York, 197:?, p. 220.
^^3^^ Dominant Positions of Market Power of Transnational Corporalions, /'.vc o\ Transfer Pricing Mechanism, United Nations, Now York, P. 1-
^^4^^ Proceedings oj the I'nilcd Nations Conference, , ., Vol. II, p. 233.
~^^5^^ Ibid., p. 230.
123 fundamental studies undertaken by the United Nations Secretariat concerned with the evolution of world prices during the prewar period and the initial postwar years it was noted that "prices in intra-company dealings are not genuine market prices; the economic interests of consigner and receiver are not opposed. The charges made to subsidiaries operating abroad, for equipment and other items shipped to them, are of an accounting nature".^^1^^ Essentially the situation has not changed since that time, and more recently specialists working for UNCTAD have observed that "export prices often have little economic meaning (and represent intra-company accounting prices)".^^2^^The large-scale use of fictitious transfer prices originated in the practice of international monopolies in the extracting industries that took possession of sources of raw materials in developing countries. They were interested in deliveries of primary materials to their processing enterprises in capital-exporting countries at the lowest possible cost. This resulted in a situation in which on a number of commodity markets aside from the usual world prices a separate price level appeared for the internal operations of the international empires of the largest monopolies. In particular such a situation is typical for the copper market, where "the manipulation of transfer prices meant that a twoprice system was bound to develop---one set of prices being maintained by the copper companies for their transactions with affiliates and favored buyers, another set being maintained for `free' transactions".^^3^^
But it is in the petroleum industry that the use of transfer prices appears to have acquired the greatest scope. There, until recently, the lion's share of exports on the world capitalist market was carried out by enterprises of seven leading supermonopolies (``the seven sisters'') which formed an unofficial but extremely powerful international petroleum cartel. In order to reduce the payment of taxes to petroleum-producing nations, whose level _-_-_
^^1^^ Relative Prices <>/ Exports and Imports o[ Under-developed Countries, United Nations, New York, December 1919, p. 110.
^^2^^ Proceedings of the United Nations Conference on Trade and Development, Third Session, Vol. IV, United Nations, New York, 1973, p. 78.
^^3^^ Raymond Vernon, Sovereignly at Bay, p. 13.
124 was calculated as a share of the price of sale, petroleum monopolies deliberately undervalued nominal export prices. At the same time, by charging high prices for finished petroleum products in consuming countries, such low payments for raw materials made it possible to attain the maximal profit in the monopolies' home countries. A close analysis of that mechanism representing a monopolistic "profit pipeline" has led Edith T. Penrose, a professor at London University, to conclude that "crude-oil prices are for most companies primarily internal (inter-affiliate) transfer prices'', since ultimately, "for an integrated company, the price at which crude oil is transferred from producing to refining affiliates determines the distribution of its total profit between crude production and refining".^^1^^ It should be noted in passing that petroleum monopolies manipulate transfer prices to reduce not only their payment of taxes in exporting countries but in their home countries as well. Some estimates indicate that in 1970 the artificial character of transfer prices for petroleum has made it possible for these companies to reduce their taxes in developed capitalist importing countries by 240 million dollars.^^2^^This practice, which originates in the "raw materials past" of international monopolies, has led to a widely held view that intracorporate prices are always lower than those of the world market. On the basis of that assumption customs agencies in most capitalist countries evaluate commodities entering the foreign trade of firms by making an upward adjustment of 10--30 percent, and occasionally even 100 percent.
But in fact, precisely because of their fictitious character, intracorporate prices may deviate from world prices in any direction with equal ease, depending on the concrete situation in different countries in which the international monopoly operates and also on th firm's "global marketing strategy''.^^3^^ In _-_-_
~^^1^^ Edith T. Penrose, The Large International Firm in Developing Countries. The International Petroleum Industry, George Allen and Unwin Ltd., London, 1968, pp. 177, 186.
^^2^^ Glenn P. Jenkins, Brian D. Wright, "Taxation of Income of Multinational Corporation: the Case of the United States Petroleum Industry'', The Review of Economics and Statistics, Vol. 57, No. 1, February 1975, p. 9.
^^3^^ Jeffrey S. Arpan, International Intercorporate Pricing. Non-- American Systems and Views, Praeger Publishers, New York, 1972, p. 126.
125 such cases prices least of all reflect product values, and strictly speaking arc not even prices, but merely conventional accounting units whose magnitude* is determined by considerations that bear on the calculation of the given monopoly's profits. This general rule concerning the determination of intra-hrm prices was already noted in the first postwar study of the United Nations, in which it was observed that "under-valuation shifts profits to the subsidiary; over-valuation, the other way".^^1^^ The choice of the alternative, namely higher prices or lower prices is determined primarily by the concrete taxing practices in individual countries.While the methods of calculating transfer prices are carefully hidden the general mechanics of this procedure are well known. In particular this is true of the U.S. customs agencies who admit that "in intra-firm trade, a company which moves goods among subsidiaries in different countries can attempt--- subject to the watchful eye of tax authorities who are well aware of the technique---to price shipments in such a manner that the bulk of profits is realized in subsidiaries located in low-tax countries".^^2^^ A simple knowledge of the secret of the transnational corporations however is not very helpful for "customs authorities face difficulties in controlling such activities; there are frequently no comparable world market prices available for the products in respect of transactions on an intra-corporation basis".^^3^^ This is not surprising: for the products that are transferred through the channels of intracorporate trade include intermediate objects relating to the division of labour within individual plants that are usually not viewed as objects of commercial exchange among independent firms, not to mention firms of different countries.
United Nations specialists also stress that "prices charged for tied imports have been shown in some instances to be far above prevailing 'world prices', and conversely those for exports have been below world prices. As already noted, overpricing, _-_-_
~^^1^^ Relative Prices of Exports and Imports of Under-developed Countries, United Nations, New York, December 1949, p. 140.
~^^2^^ Implications of Multinational Firms. . ., p. 122.
~^^3^^ Proceedings of the United Nations Conference on Trade and Development. Fourth Session, Nairobi, 5-31 May, 1976, Vol. Ill, Basic documents, United Nations, New York, 1978, p. 55.
126 particularly for wholly-owned affiliates, has been used as an alternative to royalty payments.''^^1^^ This last point is especially emphasi/cd by Lars Nieckcls, a Swedish researcher, who believes that "of the different means for the allocations of profits, the one dealing with a change of transfer prices, is the most efficient".^^2^^An example of the deviation of intracorporate prices from world prices depending on changes on the tax situation is provided by the practice of the largest U.S. aluminum company, ALCOA. Between 1940 and 1960 deliveries of bauxite from subsidiary enterprises located in Surinam and adjoining Caribbean Islands were effected at constant prices that were 50 percent below U.S. market prices, even though during that time the price of aluminum itself increased by 78 percent. When the subsidiaries of U.S.-based companies in the Western Hemisphere began to receive foreign tax credits the price of Surinam bauxite rose sharply in the 1960s. This led to a substantial increase in the ``book-keeping'' profits of branches outside the United States, and to a corresponding decline in ALCOA's tax payments in the U.S. from 52 percent to 25 percent. For the same reason the relatively low-quality bauxite brought from the Dominican Republic was unloaded in the U.S. through internal ALCOA channels at high prices---12.5 dollars per ton. at a time when the best-quality bauxite originating in enterprises of an associated Canadian firm in Guyana was exported at 6.85 dollars per ton, for comparable tax privileges did not exist in Canada.^^3^^
Information concerning concrete prices for-final products and semi-processed goods within intra-firm transfers that is occasionally mentioned in the press shows that the deviations of transfer prices from world prices may be very substantial. For example a survey of the Andean Pact Organization has found that in Colombia's electrical engineering industry, 90 percent of which is controlled by foreign monopolies, the artificial inflation of _-_-_
~^^1^^ Multinational Corporations in World Development pp. 34--35.
~^^2^^ Lars Nieckels, Transfer Pricing in Multinational Firms, A Heuristic Programming Approach and a Case, Study, Almqvist and Wiksell International, Stockholm, Sweden, 1976, p. 155.
~^^3^^ Robert T. Rhodes. Ed., Imperialism and Underdevelopment: a Reader, Monthly Review Press, New York, 1970, pp. 84--85.
127 import prices attained 69 percent, while in Ecuador import prices for corresponding products were sometimes 200 percent higher than even the Colombian level.^^1^^ According to the findings of another study the import prices of the pharmaceutical industry in India for deliveries of international firms in the early 1970s were 124--347 percent higher than those of other firms.^^2^^ Even more striking examples of price manipulations are found in a study prepared by UNITAR concerning the pharmaceutical industries of developing countries which arc nearly fully controlled by international monopolies. Table 27 Prices for Pharmaceutical Products in Colombia (dollar per kilogramme) Name of Product Suppliers Multinational Firms Other Firms Nitrazopan Diazopan Prometacin Erytromycin 2 088.00 2 500.00 140.00 275.56 108.70 30.00---45.55 17.75---21.00 100.00---145.50 Source: Lawrence H. Wortzel, Technology Transfer in the Pharmaceutical Industry, UNITAR, 1971, p. 52.The author explains this enormous difference in prices as follows: "When operating in a market in which there is inflation, the possibility of devaluation, and the problem of dividend remission, the profit-oriented firm will want to take as much of its profit at home and as little in the LDC as is possible.''^^3^^
This refined mechanism for creating special conditions governing intracorporate deliveries makes it practically impossible for those countries in which international monopolies operate to _-_-_
^^1^^ Proceeding, of the United Nations Conference on Trade and Development, Third Session, Santiago de Chile, 13 April to 21 May, 1972, Vol. Ill, p. 129.
^^2^^ Economic and Political Weekly, Bombay, October 30, 1976, p. 1733.
^^3^^ Lawrence H. Wortzel, op cit., p. 37.
128 control them. Such a situation is a logical consequence of the very essence of a capitalist society and its dictum that private property is sacred. It is therefore not surprising that, in the words of one of the groups of United Nations specialists, "transfer pricing has been essentially regarded by governments as an internal accounting affair of the multinational corporation".^^1^^ In those cases in which bourgeois governments seek to somehow regulate the activities of international corporations in order to defend the interests ol local capital, the corporations find a variety of ways to make these regulations ineffective. In the cynical words of one managing director of such a monopoly, "it is the job of governments to make the rules, and ours to find the loopholes".^^2^^There are grounds for believing, moreover, that available data concerning intracorporate trade, even though recorded at fictitious prices, does not reflect all commodity flows among various subdivisions of international monopolies. Above all this relates to deliveries of products in payment for licensing agreements and barter deals in which there are no specified prices. It is not possible to monitor such operations, but it is believed that the volume of flows based on compensatory licensing agreements and the mutual exchange of production secrets is more significant than are agreements leading to financial operations.
There is thus no question concerning the special character of the intracorporate operations of international monopolies. And the general unreliability of available data, which derives from the specific characteristics of these relations, does not remove the problem of defining the role that is actually played by reciprocal deliveries of products among various subdivisions of transnational corporations, both in overall world capitalist trade and in the economic exchange of individual countries. In fact its difference from generally accepted norms of international trade draws particular attention to this phenomenon.
_-_-_^^1^^ UNGTAD. Restrictive Business Practices in Relation to the Trade and Development of Developing, Countries, Report by the Ad Hoc Group of Experts, United Nations, New York, 1974, p. 9.
~^^2^^ Christopher Tugendhat, The Multinationals, p. 131.
__PRINTERS_P_129_COMMENT__ 9---872 129In a first approximation the problem ol defining the role of international corporations in world trade boils clown to selecting and calculating indicators that charactcri/e the quantitative aspect of these processes. That problem in turn, consists of two closely related although formally independent parts which derive from the possibility of approaching the problem in different ways. Under a narrow interpretation of the role of international monopolies in contemporary world trade it would be sufficient to analyze intracorporate exchange activities, leaving aside all other aspects of the participation of these firms in international economic relations. The wider interpretation, on the other hand, extends to the entire complex of external trade relations of international industrial giants.
In many ways that alternative rejoins the problem that was posed earlier, concerning the extent to which one may associate the international production of multinational corporations with only that part of their product that is produced by enterprises in other countries controlled by the given firm, without considering their output in the home country. "The extent to which the exports by the multinational corporations are intra-company transactions, that is, exports to the parent company or other affiliates, is difficult to estimate.''^^1^^ Available data, which relate largely to the United States, are largely based on rough estimates and on fragmentary surveys. For other countries such information is even more fragmentary. Naturally this complicates the task, which nevertheless remains feasible, since at least the order of magnitude of corresponding figures may readily be established.
In describing the composition of commodity flows associated with international monopolies one may accept the data relating to the external operations of U.S.-based transnational corporations as being sufficiently representative. The most detailed _-_-_
~^^1^^ Proceedings of the United Nations Conference on Trade and Development, Third Session, Santiago de Chile, 13 April to 21 May, 1972, Vol. II, pp. 226--27.
130 information of this type is found in a special study carried out for the U.S. Senate in 1973, and relates to 1970 (such comprehensive data are not published on a regular basis and therefore are not available for subsequent periods, see Table 28). Table 28 7Vic I'oreiun Trade of I'.S.-Based Multinational Corporations in 1970 Total Exports from U. S. Exports of Parent Companies to subsidiaries* to other clients Exports of Other Firms to Subsidiaries of Multinational Corporations* Exports of Subsidiaries* from Countries To Affiliates to U. S.-based parent companies to firms* in third countries To Other Firms in the U. S. in third countries In Billions nf Dollnrs Percent of Total 72.8 100.0 29.5 40.5 27.9 38.3 11.4 15.0 10.5 22.7 idiaries * 1.0 2.2 Third 43.3 59.5 24 2 33.2 8.1 11.1 16.1 22.1 19.1 26.2 2.1 2.9 17.0 23.3 * Includes only mostly owned foreign affiliates. Source: Implications of Multinational Firms. . ., p. 272.Aside from showing the important share of intracornpany deliveries in the external transactions of international monopolies (48.8 percent) these data also identify the functions of intracorporate trade. That is far more important. It is symptomatic that the volume of direct exchanges between parent companies and their overseas subsidiaries account for slightly more (19.5 billion dollars) than the volume of reciprocal trade of foreign enterprises under their control (16.1 billion dollars). While operations of the first type result from including the foreign possessions of a corporation into a single technological cycle together with the parent company, the second flow expresses relations of the next order that tie the internal linkages of an international monopoly's industrial empire not from home but from overseas bases.
__PRINTERS_P_131_COMMENT__ 9* 131It is here that the dual role of overseas subsidiaries of transnational corporations is particularly evident. This includes assistance to the firm in its export activities in general through a partial substitution of exports directly from the parent company, and also material support on an international scale for the activities of the international production mechanism. It should be noted that in terms of their quantitative values these functions are equal (both intracorporate exchange and exports of all enterprises of huge firms to external clients account for 35.6 billion dollars each), thus symbolizing their mutual complementarity.
Processing industries play a leading role in the foreign trade operations of international monopolies, and also hold a leading position in the allocation of investments. It should be emphasized that in terms of that indicator, which accounts for 56 percent of all exports of U.S.-based transnational corporations in 1970, the role of processing industries is greater than in all U.S. direct foreign investments (41 percent). In this respect the results of activities of U.S. corporations are quite representative of all transnational corporations. This follows from their common sectoral structure (in 1966 the share of processing industries in the U.S. direct foreign capital investments was 40 percent, while that of other countries was 41 percent).^^1^^
It is in the case of non-corporate sales that one observes the most significant differences in the functions of parent companies and overseas subsidiaries. While the share of intracorporate deliveries in the processing industries (46 percent) approximates its average level, in the case of exports to outside clients it is parent companies that dominate. Their exports are 2.1 times larger than those of their junior partners abroad (12.9 billion dollars as opposed to 6.2 billion dollars in 1970), while if one considers the total foreign trade of international monopolies the reverse is true (the share of overseas subsidiaries exceeds that of ``independent'' exports by 15 percent).^^2^^ To some extent this reflects the specific geographic features of investments in processing industries, since transnational corporations seek to _-_-_
~^^1^^ Sidney E. Rolfe, op. cit., p. 47.
^^2^^ Implications of Multinational Firms. . ., pp. 272, 279.
132 initially concentrate the production of advanced goods in their own countries and only gradually assign innovations to their overseas affiliates. Accordingly these affiliates emphasize deliveries of component parts to parent companies, whose technical superiority permits them to be more effective in penetrating external markets through their own direct exports. Such an "inversion of functions" is probably particularly typical for U.S.-based corporations in view of the "technological gap" that exists between the U.S. and other capitalist countries.Turning to the problem that has been posed concerning a quantitative definition of the importance of intracorporate trade, it should be noted that suggestive though they may be, the data in Table 28 appear to be too low since they are based on a general estimate of the activities of all U.S.-based multinational firms. The findings of a sample survey of leading American multinational corporations show that in 1970 intra-finn operations accounted for 55 percent of all exports of these firms.^^1^^ If one considers that the firms that were surveyed account for nearly 70 percent of the U.S. foreign trade associated with multinational corporations,^^2^^ that figure may be accepted as typical for all U.S.-- based transnational corporations. In the absence of comparable data for other countries one may apply a similar proportion to the activities of international firms representing non-American capital.
While taken by itself this high share of intracorporate trade is quite impressive, however, in order to compare it with the volume of world capitalist trade the volume of all external trade operations of international monopolies must be estimated. In our opinion, while the special character of intra-firm deliveries should of course be cinphnsi/ecl, they should not be viewed _-_-_
~^^1^^ Calculated on the basis of: Leonard A. Lupo, "Worldwide. Sales by U.S. Multinational Companies'', Survey oj Current Business, Vol. 53, No. 1, January 1973, pp. 33--39.
^^2^^ These data also point to a high level of concentration, for the 298 firms that were surveyed together with 5,237 of their overseas affiliates constitute a small part of ihc 3,300 American firms that, taken altogether, possess 23,000 overseas affiliates (Betty L. Barker, "U.S. Foreign Trade Associated with U.S. Multinational Companies'', Survey of Current Business, Vol. 52, No. 12, December 1972, p. 22).
133 separately from the remaining so to say ``non-corporate'' external trade of international monopolies. For how could these seemingly strictly ``family'' operations fail to influence the production and distribution policies of corporations on a global scale and fail to influence their trade with other firms. It is difficult to imagine even hypothetic-ally that in taking a decision concerning an external trade transaction with an independent firm an international monopoly will not consider its own foreign activities, its own positions on corresponding markets, intracorporate commodity flows, and possibilities for manoeuvring that depend on the situation that exists in different countries, i.e., that it would voluntarily relinquish those advantages that stem from its international character.Even official U.S. sources, which are by no means interested in exaggerating the already highly visible role of international giants in economic life, make wide use of estimates of trade operations associated with multinational corporations. Essentially that term derives from an expanded interpretation of corporate trade, since, as may be seen in Table 28, it extends not only to deliveries among the enterprises of a given firm that are located in different countries, but to all their export and import operations. A tendency to diminish the role of transnational corporations is then expressed in intentionally limiting the number of enterprises controlled by a parent company to those in which the latter possesses a majority of shares. An analysis of available data shows that in order to account for the foreign trade operations of those foreign firms that are controlled by owning less than 50 percent of their shares (aside from portfolio investments) corresponding statistical indicators should be increased by approximately 15 percent.
In order to arrive at even an approximate estimate of the parameters of foreign trade and intracorporate transactions of all international monopolies it is appropriate to apply to the firms of other countries the same criteria that were applied in the analysis of the activities of U.S. corporations. That such an assumption is justified is confirmed by a number of indirect data. In particular while the share of intracorporate trade in the U.S. esxports is of the order of 27 percent (in 1970) a similar indicator for Great Britain in 1966, estimated by the Board of 134 Trade, was approximately 22 percent.^^1^^ The data concerning the relative share of intra-firm deliveries in the exports of international monopolies of different countries are even closer to each other: in the U.S. sample survey data for 1965 indicated that this was 52 percent,^^2^^ while in Great Britain in 1966 it was 56 percent.^^3^^ As for establishing the absolute volume of (he foreign trade of all international corporations it is possible to extrapolate data relating to U.S. corporations to other countries in proportion to the share of U.S.-based monopolies in the total volume of direct foreign investments (52 percent in 1970). This implies an assumption that similar volumes of capital investment generate similar volumes of external trade.
At first these figures may seem to be too inflated, for the resulting image of the power of transnational corporations in international economic exchange is exceedingly sinister. They may __PARAGRAPH_PAUSE__ Table 29 The Contribution oj International Firms to World Capitalist Exports in 1!>70 In Billions of Dollars Percent of Total Total 281.1 100.0 Exports of Multinational Corporations U. S. it; i.o 83.7 57.2 29.7 Other Countries 77.3 27 . 5 Including Intracorporiite Trade U. S. firms 88.5 /.(i.O 31 . 5 16.4 firms of other countries 42.1 5 15.1 Estimated on the basis of data in: Implications of Multinational Firms. . ., p. 272; Multinational Corporations in World Development, p. 159; Survey of Current Business, January 1973; UNCTAD, Handbook of International Trade and Development Statistics, 1979. _-_-_
~^^1^^ In this case comparisons with U.S. data do not include the upward adjustment by 15 percent.
^^2^^ Calculated on the basis of: Marie '['. Bradshaw, "U.S. Exports to Foreign Affiliates of U.S. Firms'', Survey of Current Business, Vol. 49, No. 5, Part 1, May 1969, p. 37.
~^^3^^ Board of Trade Journal, August 1968, p. 471.
135 __PARAGRAPH_CONT__ even produce accusations of "biased estimation''. Without denying the author's commitment to identify the true role of international monopolies in world trade, the extremely conservative nature of the estimates that have been employed should be noted. They arc based on published official data and on generally accepted methods for entering corrections (which are, moreover, not significant). What is especially important is that our calculations do not consider the "invisible part of the iceberg" relating to intra-firm relations based on licensing agreements and portfolio investments. The role of multinational corporations in international technology exchanges is even higher than in international trade. For example, in 1971 international industrial monopolies accounted for 73 percent of all payments to the U.S. based on licensing agreements.^^1^^It is hardly possible to assume, moreover, that the role of transnational corporations in international trade is declining. At least such an eloquent indicator as (he share of intracorporate deliveries in all exports of affiliates of American transnational corporations to (he U.S. did not change between 1971 and 1975^^2^^ (aggregate data for all countries are unavailable).
Tt is noteworthy that the only estimate of the role of transnational corporations in world trade produced by an authoritative international organi/ation (even though this is for a later date) in fact fully coincides with our own calculations. Thus, in the opinion of the Secretary-General of UNGTAD, the share of these corporations exceeds one-half and is possibly as high as two-thirds.^^3^^ In such a context it becomes clear why the type of detailed data concerning the external trade of U.S.-based transnational corporations that were presented in the study prepared _-_-_
~^^1^^ Calculated on (he basis of: Afultinalional Corporations in World Development, p. 188.
^^2^^ U.N. Document, E.'C. 10/38, 20 March 1978, p. 221.
~^^3^^ Possibly, this estimate takes account of, or at least could take account of, the author's cited assessment published a year before the appearance of the first variant of the above-mentioned UNCTAT) paper (see P. I. Khvoinik, "Me/hdunarodniye monopolii i ine/.hdunnrodnaya tonjovlya" (International Monopoly and World Trade), Atirot'ttya ckonomika i mezhdiinurodniye olnoshcniya (World Economy and International Relations). No. !">, 1975.
136 for the U.S. Senate mentioned earlier in which the figures relate to 1970 alone, have not been continued. The simple fact is that the ``anatomy'' of big business makes it possible to arrive at an image of the actual extent to which transnational corporations prevail in international capitalist trade that supporters of monopolies prefer not to advertise.It should be emphasized that the role of modern multinational corporations in world trade, which is approximately 60 percent, is substantially higher than the corresponding indicators for international cartels of the prewar period. Available estimates indicate that in 1927--1937 approximately 40 percent of world capitalist trade involved commodities and markets in which international cartels were active.^^1^^ If one considers that the very fact that a cartel was present dcx's not yet indicate that it occupied a fully dominant position, and that in a number of cases relatively large countries and firms remained outside the range of agreements to regulate markets, one may assume that the actual scale of monopoly control did not exceed 30 percent of capitalist trade.
Beyond this there is a fundamental difference in the very object of regulation by international monopolies: before the war cartel agreements extended almost exclusively to trade in raw materials, while today transnational corporations dominate primarily trade in industrial goods. Finally the fundamental difference reduces to the fact that the prewar cartels regulated the trade of several member firms, while at the present time single international monopolies control an appreciable part of world trade.
All this refers, of course, to average indicators, which hide important differences in the role of transnational corporations in the foreign trade of individual countries. This role is most pronounced in the U.S., where it reflects that country's leading role as an exporter of capital. In 1970, even according to official estimates (without the 15 percent upward adjustment), exports associated with international monopolies (29.5 billion dollars) _-_-_
^^1^^ A. Manukyan, "Vyvox, kapitala i inezhdunarodniyc monopolii" (Capital Exports and International Monopolies), Mirovaya ckonomika i mezhdunarodniye otnosheniya, No. 2, 1970, p. 34.
137 constituted 70 percent of the total export of commodities from the U.S. (42 billion dollars). This included intracorporate deliveries---27 percent. The sales of foreign enterprises controlled by U.S. firms accounted for 43.3 billion dollars and exceeded total U.S. exports by 3 percent. If one assumes that foreign direct investments in the U.S. produced roughly comparable proportions of commodity flows, then exports from the U.S. of the output of foreign affiliates must have been approximately 6.9 billion dollars, and thus some 36.4 billion dollars or 87 percent of total U.S. exports were ``generated'' by international monopolies.In spite of the approximations that they contain, these data still describe the order of magnitude itself, and lead us to consider the role of international monopolies in world trade even more closely.
__ALPHA_LVL2__ 4. Contradictory ProblemsThe penetration of international monopolies into modern capitalism's economic and social structure generates numerous conflicts in various spheres of social life. The principal nodes of these contradictions develop at interfaces between the policies of monopolies and those of opposing interests in individual countries, in the mutual relations of multinational corporations with national governments, and finally in collisions of private monopolistic strivings with capitalism's overall system of international economic relations. The advocates of monopolies seek to play down the social intensity of these contradictions by asserting that aside from certain exceptions multinational corporations merely produce new aspects of the general problems of international investments rather than exceptional problems. But the very nature and scope of these problems show that they greatly extend 138 far beyond the framework of traditional capital exports and are inherent in the specific character of international monopolies. These conflicts develop at various levels, reaching a grave stage in social tensions.
The struggle of almost all sections of labour and trade union movement against the oppression of international giants which is acquiring an increasingly anti-monopolistic character, is governed by the concrete conditions that bear on the activities of transnational corporations in various countries. They are marked by a number of specific features, depending on whether the country in question is a capital-exporting, or capital-importing one. Thus in the United States the growing dissatisfaction with transnational corporations is partly attributable to fears of increasing unemployment following the transfer of some production activities to other countries.
In capital-importing countries the struggle against international monopolies displays a marked political character, and even bourgeois economists are compelled to recognize that "the strength of economic nationalism in the modern world, and the irrationality of which it is capable, is nowhere more evident than in the extreme hostility and suspicion with which private direct foreign investment is generally regarded in the `host' country. This is true not merely in less developed countries with a colonial past and present political weakness, but in the developed countries of Europe and British Commonwealth.''^^1^^ The reasons for such an attitude are not a secret to anyone, and even the Pearson Report, which calls on developing countries to enter into a "new partnership" with foreign capital, finds that "it is hardly surprising that citizens in some countries look upon the subsidiaries of foreign corporations as the harbingers of new foreign domination".^^2^^
The activities of international monopolies are especially unchecked in developing countries, whose economies are especially vulnerable to the destructive consequences of the transnational _-_-_
^^1^^ Harry O. Johnson, Economic Policies Toward Less Developed Countries, The Bronkings Institute, Washington, 1968, p. 76.
^^2^^ Lester B. Pearson, Ed., Partners in Development. Report of the Commission on International Development, Praegcr Publishers, New York, 1970, p. 99.
139 corporations' "global strategies''. It is true that the successes of the national liberation movements and the intensifying struggle of new states for their political and economic independence is causing international monopolies to adapt to new conditions. As they replace old forms of colonial plunder transnational corporations are shifting to more refined methods for penetrating the economic structure of developing countries by transferring to the capitalist world's backward regions the most labour-intensive types of production and those that are most harmful to health and to the environment. Those types of production also relate to only a part of the technological cycle, which continues to be controlled by head offices from the country in which the monopolies are based.Transnational corporations are also adapting to the deteriorating investment climate in new states by turning to economic investment policies that emphasize various forms of ventures and control over local firms without direct participation in their assets. In fact a. special branch of bourgeois economic science has developed that is concerned with methods for struggling against the nationalization of the property that transnational corporations own abroad. For example, in an article entitled " Managing Against Expropriation'', David G. Bradley stresses that "joint ventures with local private parties substantially reduce the likelihood of nationalization".^^1^^ He advises explicitly to "ensure that each new investment is economically dependent on the parent corporation in the United States".^^2^^
Another sphere that is marked by active contradictions concerns the relations of international monopolies to national governments. Occasionally they lead to situations in which " suddenly, it seems, the sovereign states are feeling naked'',^^3^^ and there develops a "dangerous inferiority complex of nation states towards multinationals".^^4^^ Such a feeling of ``nakedness'' results _-_-_
~^^1^^ David G. Bradley, "Managing Against Expropriation'', Harvard Business Review, July-August 1977, p. 80.
^^2^^ Ibid., p. 82.
~^^3^^ Raymond Vcrnon, op. cit., p. 3.
~^^4^^ Rainer Ilcllmann, "Nation State and Regional Groupings'', Gerard Curzon and Victoria Cur/on, Eds., The Multinational Enterprise in a Hostile World, Basingstokc Macmillan, London, 1977, p. 121.
140 from the fact that precisely because of their international character the specific instruments that are employed by transnational corporations in their economic expansion increase the " penetration power" ol monopolies so considerably that governments find it ever more dilficult to protect national interests with the help of traditional methods in opposing these corporations, who openly ascribe to themselves the role of sovereign world powers.^^1^^ In the words of Wilfred Jenks, the ILO's Director-General, "for some, the multinational corporations are an invaluable dynamic force . . . for others, they are monsters which our present institutions, national and international, cannot adequately control, a law unto themselves which no reasonable concept of the public interest or social policy can accept".^^2^^ This leads some of the advocates of the cosmopolitization of capital to question the principle of national sovereignty because of the lack of correspondence between the obsolete political structure of individual states and the actual global economic structure.The aggravation of economic, social, and political conflicts that result from the power of international monopolies has produced an increasing concern among many bourgeois scientists as well as in progressive public opinion in capitalist countries. The former are appealing to the interests of big business itself and calling on transnational corporations to abandon the most distasteful forms of their activities. They are frightened not so much by the anti-monopolistic struggle as by its opposition to exploitation more generally, which threatens the very foundations of capitalism. In the words of Pierre Uri, a well-known French economist, "the MNEs represent extreme examples, the ultimate expression of the capitalist idea. . . . The MNE is blamed not only for what it does but also for a whole system of which it is the most glowing example''.^^3^^
Such a "critique from the right" is directed at a variety of _-_-_
^^1^^ Abdul A. Said and Lui/. R. Simmons, Eds., The New Sovereigns. Multinational Corporations as World Powers, Prentice-Hall Inc., New Jersey, 1975.
^^2^^ Multinational Enterprises and Social Policy, International Labour Office, Geneva, 1973, p. IX.
^^3^^ Pierre Uri, Development Without Dependence, Praeger Publishers, New York, 1976, p. 61.
141 dimensions, some of which are contradictory. Most such wellmeaning critics seek to minimize the actual power of international monopolies, and argue that multinational companies do not possess political power, and that it is only "through an extreme simplification of the problem, [th.it] public opinion has constructed a myth of the all-powerful MNC''.^^1^^ Conversely others stress the power of MNCs, noting that "they would continue to sustain their global strategies and operations . . . even in the face of hostile public policies''.^^2^^It is John Galbraith, however, who has been the most open advocate of transnational corporations. He criticizes monopolies not for the power they possess but for denying its existence. He recognizes explicitly that multinational companies must "have influence and power in its own markets ... It must, accordingly, be able to persuade the consumer to want the product that eventually emerges;. . . so living, it seeks to influence the decisions of the government. This exercise of power is not a matter of choice but of necessity."^^3^^ In his opinion the natural need of monopolies for power justifies the policies of the MNCs for ''. . . the time has come when a realistic defence is not only wiser but even, I would judge, inevitable".^^4^^ Such a factual appeal to shift from defence to active initiatives is not less promonopolistic by the author's caution: "I would like to urge a defence which affirms the existence of power, accepts that it must be responsibly employed, and notes that there have been substantial advantages from such employment of power in the past.''^^5^^
It would of course be a simplification to believe that the interests of bourgeois governments and of international monopolies diverge at all points. On the contrary, for world capitalism as a whole, the transnational corporations ultimately stand for the development of capitalist relations generated by foreign _-_-_
~^^1^^ Eric Gabus, "Multinational Companies. The External Relations'', Gerard Curzon and Victoria Cur/on, Eds., op. cit., p. 130.
^^2^^ Karl P. Sauvant and 1'arid G. Lavipour, Eds., Controlling Multinational Enterprises. Problems, Strategies, Counterstrategies, West Review Press, Boulder (Colorado), 1976, p. 109.
^^3^^ John K. Galbraith, op. cit., p. 8(>.
^^4^^ Ibid., p. 84.
~^^5^^ Ibid., p. 92.
142 investments. This political aspect of the external expansion of monopolistic capital is even stated openly in official American sources, which justify tax reductions to the transnational corporations by noting that by displaying the advantages of a "free enterprise system" this will serve to export that philosophy to other countries.^^1^^ Accordingly the conflicts that arise in this area reflect not only contradictions between international monopolies and national interests, but also the struggle of local capital with more powerful foreign capital for the right to exploit the peoples of host countries. It is therefore not surprising that we observe a collision of two contradictory tendencies, that are attributable to the striving of international monopolies towards unlimited dominance on the one hand, and on the other, to protective responses of capital-importing countries.At the same time the disharmony and direct collision of contradictory interests of sovereign states and transnational corporations produce not only conflicts but also tendencies towards compromises and a search for ways to regulate these conflicts at both the national and international levels. Naturally in each specific case the initiative for cooperation originates with that side which is more interested in compromise solutions to the problem.
In particular the International Bank for Reconstruction and Development (IBRD), which expresses the interests of monopolistic capital, has proposed a convention for settling investment disputes that is in fact designed to help consolidate the positions of transnational corporations on the basis of international law. According to the terms of that convention, which has entered into force in 1966, an International Centre for Settlement of Investment Disputes between national states and representatives of other countries has been established, to which the corresponding states have temporarily ceded their jurisdiction on corresponding matters. As for whose interest this formally unbiased international arbitration is intended to serve may be inferred from the fact that its 62 members do not include such large-scale capital importers as Canada, Australia, India and all LatinAmerican states. Even more eloquent in this respect is the fact _-_-_
~^^1^^ The Multinational Corporation and World Economy, p. 15.
143 that the International Centre has been completely inactive during the first five years of its existence.^^1^^But the efforts of transnational corporations to rely on intergovernmental institutions in serving their interest extend to still other arrangements. As they view with concern the growing resistance that the activities of international monopolies are meeting in capital-importing countries, proponents of international business are proposing far-reaching projects that seek to provide legal protection to foreign investments. In 1966 Eugene Rostow, who is a prominent American economist, has proposed the acceptance of international legislation regulating in the interests of monopolies the status of foreign investments and the activities of international corporations.^^2^^ This idea has been embodied in a concrete proposal to establish an international body concerned with such issues that would be similar to the General Agreement on Tariffs and Trade (GATT).
At the same time a similar need for comprehensive international regulation of the complex problems that arise from the activities of transnational monopolies is increasingly felt by the governments of individual countries as they begin to understand that joint efforts are needed to tarne the "uncontrollable monsters''. The seriousness of that problem is partly shown by the monopolies' practice of holding very large short-term assets in other countries. In this regard official American sources recognise that the lion's share of these assets is controlled by international firms and banks based in the United States. These 268 billion dollars (in 1971) which were entirely controlled by private individuals and circulated on private markets actually lay beyond the control of official bodies of any country, and exceeded by more than twice the total of all international reserves belonging to all central banks and international financial institutions throughout the world.^^3^^
A variety of international measures have been proposed relating to individual spheres of activity of transnational monopolies. _-_-_
^^1^^ Proceedings of the United Nations Conference on Trade and Development. Third Session, Santiago de Chile, 13 April to 21 May, 1972, Vol. II, p. 25!).
^^2^^ Fortune, October 1966, Vol. 74, No. 5, p. 116.
~^^3^^ Implications of Multinational l;irms. . ., pp. 8-9.
144 They range from taxation, specific modes of control over foreign investments, the arbitration of disputes, to the development of a comprehensive international convention and the creation of supranational bodies under the United Nations and even the creation of global "space corporations''. The very formulation of these issues is attributable to a visible growth of ``anti-corporate'' activities in many capitalist states, and also to a simultaneous visible shift on the part of international monopolies from confrontation with national governments to a search for joint solutions. Although that shift largely represents a forced response to unavoidable pressures it is not unexpected that such a more flexible tactic on the part of monopolies is opposed by the most adamant advocates of big business.Developed capitalist countries also rely on purely imperialistic methods within the framework of the Organization for Economic Cooperation and Development (OEGD) in seeking to reconcile what in fact cannot be reconciled. In 1976, in order to smooth over the sharpest consequences of the activities of transnational corporations and to somehow allay world public opinion the OECD adopted a "Declaration and Guiding Principles of International Investment and Multinational Enterprise''. Together with an appeal to transnational corporations to "abstain from bribery, improper contributions to political organizations or undue interference with local political activities" it emphasized the "positive contribution of MNSs".^^1^^
Yet the actual course of events continues to call for the establishment of truly effective international measures designed to normalize the entire climate of world economic relations and to exclude dictate and inequalities that derive primarily from the monopolies' "global policies''. Discussions of these issues in the United Nations reflect their social importance. A progressive majority has been calling with growing insistence for a taming of the uncontrolled activities of foreign monopolistic capital that cause particular harm to the still vulnerable economies of newlyemerged countries. The struggle of developing states against the power of international monopolies has become especially intense in recent years in connection with the policies that seek to _-_-_
~^^1^^ The OECD Observer, November-December 1975, p. 17. 10---872
145 reestablish the full sovereignty of developing countries in political and economic areas, and to secure an effective right to dispose of their own natural wealth. Developing states rely on the support of socialist countries in the struggle, who have followed a consistent policy aimed at establishing truly equal and mutually advantageous forms of international cooperation that are based on respect for national sovereignty and non-interference in the internal affairs of other countries.The Sixth Special Session of the United Nations General Assembly (in May 1974) adopted a Declaration on the Establishment of a New Economic Order which was an important landmark along such a course. It envisages a "regulation and supervision of the activities of transnational corporations by taking measures in the interest of the national economics of the countries where such transnational corporations operate on the basis of the full sovereignty of these countries. . .".^^1^^
A Charter of Economic Rights and Duties of States adopted by the XXIX Session of the United Nations General Assembly defines explicitly the right of each state to regulate and control the activities of international corporations in areas under their jurisdiction and to take measures designed to ensure that their activities do not violate their laws, norms, and directives and correspond to their economic and social policies. Multinational corporations must not interfere in the internal affairs of the host countries.^^2^^
The growing importance of this range of problems in the work of the United Nations is also reflected in the transition that is envisaged within that organization from occasional studies of individual aspects of transnational corporations to complex evaluations of their role and attempts to find realistic ways for international approaches to resolving the problems that arise. The first concrete step in such a direction was the establishment in 1972 of an expert group of Eminent Persons that was entrusted with studying all aspects of the influence of corporations on international relations and to forward corresponding recommendations.
_-_-_~^^1^^ U.N. Document A/9556 (Part II), 1 May 1974, p. 27.
^^2^^ It is indicative that 120 countries
voted in favour of this resolution and only six, including the U.S.,
Great Britain and West Germany, against it.
146The findings of that group deserve the closest attention, as does the comprehensive factual data that was prepared on that occasion by the United Nations Secretariat, and which at that time represented the fullest available survey of data concerning the composition of capital exports and other activities of international corporations. The experts' basic findings were quite significant. They noted that the "spread and growth [of multinational corporations] has been one of the outstanding phenomena of the last two decades" and that "fundamental new problems have arisen as a direct result of the growing internationalization of production as carried out by multinational corporations".^^1^^ The group thoroughly analyzed a wide range of economic and social problems resulting from the penetration of international monopolies into the structure of the modern capitalist economy. It emphasized the contradictory character of transnational corporations and the seriousness of the conflicts that they produce, both in various spheres of the social life of individual countries and in overall international relations.
One should also note the group's recognition of the socialist alternative to a private monopolistic internationalization of production. In particular the report notes that "in the socialist countries of Eastern Europe, for example, where planned economic integration is the counterpart of regional integration among market economies, this process is carried out at the public and interstate level, through, inter alia, joint state-owned undertakings established by the member states of the Council for Mutual Economic Assistance".^^2^^
While taken as a whole this study of a group of senior experts represents a positive contribution, but one should not ignore a certain inconsistency in individual conclusions and recommendations that reflects the group's heterogeneous composition. Moreover some of the recommendations which may be correct in principle appear to be insufficiently realistic and merely represent well-intentioned wishes. For example in the absence of a substantial limitation of the power of monopolies it is hardly _-_-_
~^^1^^ The Impact of Multinational Corporations on Development and on International Relations, pp. 25, 26.
~^^2^^ Ibid., p. 27.
__PRINTERS_P_147_COMMENT__ 10* 147 possible to expect that transnational corporations will agree to provide full information concerning transfer prices, or shift to the use of world prices in intracorporate trade.^^1^^Yet the report of the group of Eminent Persons does represent a clear step forward. All its main findings have subsequently met with the support of the Secretary-General of the United Nations. At the Seventh Special Session of the United Nations General Assembly on Problems of Development and International Economic Cooperation he raised the issue of establishing specific forms of international accountability on the part of multinational corporations, so that their activities may combine with the requirements of development, of organized world trade, and of stability on markets for foreign exchange.^^2^^
The next stage in the corresponding course of events was an implementation of the experts' recommendations concerning the establishment of a special United Nations body concerned with problems of transnational corporations. In 1975 a permanent intergovernmental body was established---the United Nations Commission on Transnational Corporations, together with the United Nations Research and Information Centre on Transnational Corporations which operates as its secretariat. The Commission's initial steps show that on the whole it has chosen a sound direction. In March 1976 it issued a recommendation to the United Nations Economic and Social Council to create a working group for developing a "code of conduct" for international monopolies.
In that connection it should be noted that on the one hand, the United Nations has been much more active in recent years in studying the problem of transnational corporations and in seeking solutions to it. Following the adoption by the Fourth Session of UNCTAD in 1976 of a number of resolutions aimed against negative influences of transnational corporations on international trade and the economic development of new states the activities of various United Nations units in that area intensified. For example, by the time of the Fifth Session of UNCTAD in May 1979 the preparation of an International Code of Conduct on the Transfer of Technology had progressed substantially, _-_-_
^^1^^ Ibid., pp. 89--90.
^^2^^ U.N. Document E/5536, June 24, 1974, p. 16.
148 as did the development of guiding principles in struggling against so-called restrictive business practices of transnational corporations.^^1^^On the other hand, the inevitable resistance of monopolies to interference in their "personal life" and also the earlier experience of United Nations activities seeking to resolve such complex problems offer no grounds for excessive optimism. It is especially with regard to this issue that it is important to fully recognize the opposition of certain imperialist circles in the United Nations to the adoption of effective measures against the oppressive powers of international monopolies, which constitute an integral element in capitalism's overall system of world economic relations. There are indeed grounds for the long familiar assertions of bourgeois researchers to the effect that "it is unlikely that in the near future an international agreement can be reached on a 'code of behaviour' for multinational enterprises, and government policies towards them. . .''^^2^^
Fur the time being, unfortunately, these prophecies are continuing lo be realized. In particular in 1978, when the Second Report of the United Nations experts on transnational corporations appeared, the sphere of application of the proposed code was still undefined, as was its legal nature, and no mechanism had been developed for its implementation.^^3^^ It would of course be difficult to expect that such a serious problem can be somehow resolved all at once. But independently of its obviously complex character substantial blame for the slowness of progress falls to particular circles among Western powers that are concerned only with international measures that are advantageous to themselves. This is also shown by discussions in the United Nations Commission on Transnational Corporations that are formally concerned with the terminological problem of lending greater precision to the concept of a transnational corporation.
_-_-_~^^1^^ Report of the United Nations Conference on Trade and Development on Its Fifth Session, Part One, U.N. Document TD/268, July 13 1979.
^^2^^ Hugh Corbel and Robert Jackson, Eds., fn Search of a Ni'w World Economic Order, Croom Helm in association with the Trade Policy Research Centre and The Round Table, London, 1974, p. 147.
^^3^^ U.N. Document E/C. 10/38, 20 March 1978, pp. 32--33.
149For example, it is apparent in the Report of the United Nations Centre on Transnational Corporations mentioned earlier that efforts are made to extend the scope of the term " transnational corporation" itself in such a way that it may apply to any firm operating abroad. This meets with serious substantive objections. For under such an approach giant international monopolies that are carriers of negative tendencies in international relations generally and especially in international economic relations dissolve, as it were, and disappear from view among thousands of small and medium-sized firms engaged in operations beyond the borders of their home countries. It is evident that in practice such an interpretation of the term "transnational corporation" would deprive both the "code of conduct" and other regulatory measures, initiated by the United Nations, of their specific addresses, and by making international control over genuine transnational corporations very difficult would impede the United Nations Commission's and Centre's official mission.
Beyond this certain Western authors use such a definition of transnational corporations, that is deprived of objective criteria, to include foreign commercial offices of the foreign trade organizations of socialist countries, even though these differ from transnational corporations fundamentally, both in terms of their socio-economic nature and objectives and with regard to the practical methods in performing their economic activities. Such a ``depolitization'' of the term "transnational corporation" serves to confuse the process of developing effective international measures for controlling transnational corporations. Under such an interpretation, which represents a particular form of the theory of convergence, a common classification is applied to private monopolistic exploitative forms of external economic relations and to corresponding socialist alternatives that are based on social ownership and provide mutual advantages.
The same efforts of specific circles to block attempts to expose the true role of international monopolies were evident in the opposition of Western powers at UNCTAD's Fifth Session to a draft resolution proposed by socialist countries relating to Transnational Corporations and International Commodity Trade. A consideration of that proposal was postponed. Yet whatever the fate of individual proposals considered in the United Nations, 150 the very fact that they are discussed must be regarded as an important step in intensifying international efforts that seek to control the activities of transnational monopolies.
The analysis of individual aspects of the participation of international monopolies in world economic relations leads to a more general question, upon whose answer much depends with regard to how one approaches their role in international trade. The main element appears to be that the entire multilevel complex of problems that arises in connection with the given phenomenon's rapid growth should be viewed primarily in the context of the objective tendency towards an internationalization of productive forces at a time of the revolution in science and technology. The requirements of a deepening and widening of the international division of labour have led to the extension of the largest monopolies beyond national boundaries not only in the sphere of circulation but in that of production itself. Essentially this refers to the continuing development in today's specific conditions of the governing principle already noted by V. I. Lenin, according to which ''. . . world capitalism's productive forces have outgrown the limited boundaries of national and state divisions...''.^^1^^
These objective tasks of internationalization of economic life under capitalism are solved through means and methods that are characteristic of the corresponding mode of production. While at the state-monopolistic level these objectives are met through integrationist measures, at the private monopoly level they are carried out by international industrial monopolies, and on the whole this is done more effectively and on a greater scale. It is in fact the largest industrial corporations that play a leading role in the most advanced economic sectors and control the core of modern capitalism's scientific and technical potential. And it is they who have come to play a leading role in the _-_-_
~^^1^^ V. I. Lenin, "The Conference of the R.S.D.L.P. Groups Abroad'', Collected Works, Vol. 21, Progress Publishers, Moscow, 1977, p. 159.
151 internationalization of the capitalist world's production and external trade, thus embodying not merely the internationalization of capital but also a cosmopolitan stage in its application.While recognizing and emphasizing the many contradictions that exist in the activities of international monopolies, it cannot be denied that they basically serve as an instrument of an internationalization of capitalist production and that in the field of industry, at any rate, they possess the capitalist world's most powerful and effective mechanism of division of labour and engaging in external economic exchanges in both commodities and technologies. The fact that the actual behaviour of international monopolies is governed exclusively by their corporate interests rather than by problems ol "world prosperity" as advocates of international business circles assert is, of course, another matter. UN experts are closer to the truth when they observe that while the role of multinational corporations in a rational allocation of resources on a global scale is debatable, there is no doubt concerning their role in linking the economies of most developed countries.^^1^^
In noting these general features of international monopolies one should consider the factors underlying their appearance, the causes for a transition from traditional international cartels, representing coalitions of capitalists of diflerent countries primarily concerned with the division of markets, to contemporary multinational corporations in which the capital of individual countries is chiefly turned to production on an international scale rather than merely marketing.
This calls once again for a brief examination of the motivations that underlie the external economic expansion of monopoly capital, but this time from a more general point of view. When taken together the published findings of Soviet and other studies concerning the highly diverse and sometimes contradictory motives of the entrepreneurial activities in Other countries provide a relatively complete picture of the stimuli governing international production. Yet while these motivations existed earlier as well, the scope and forms of the TNGs' foreign activities have greatly changed. Does this not suggest that new and more fundamental _-_-_
~^^1^^ Multinational Corporations in World Development, p. 2f>.
152 causes have appeared for the growth of internationalized monopoly production? Such a formulation of the problem does not deny the leading role of profit orientation as a major stimulus of capitalist activities. References to the narrowing gap between the average level of returns on investments within a country and abroad do not prove that from the point of view of transnational corporations the attractiveness of operations in other countries has become less. For as American researchers have noted "because the subsidiary may be an instrument for only a fragment of multinational strategy . . . the yield generated by the operations of such a subsidiary cannot be calculated by reference to the accounts of the subsidiary alone...''.^^1^^ In spite of the obvious relevance of that factor it can hardly displace other motives for the external economic activities of transnational corporations.Of course, in general the efforts of monopolies to maximize their profits may explain nearly all economic processes taking place within modern capitalism. But in the present case it is necessary to recognize that when translated from the language of private capitalism into that of tcchnico-economic categories, the pursuit of maximum profits is a synonym not only of a greater exploitation but ultimately of a search for methods to increase the effectiveness of social production (of course only in the interests of monopolies). From such a point of view international industrial monopolies may be viewed as an unregulated manifestation of an objective process, in which ways are sought to adapt modern productive forces to the tasks of internationalization, but within specific private-monopolistic conditions and forms that account for the ambivalent and contradictory character of that process and for the intensification of its negative manifestations.
In our own opinion the main development concerns the structural shifts that are taking place in the world's capitalist economy under the influence of further developments in the scientific and technical revolution, which create a growing need for a deepening and widening of the international division of labour. It is international monopolies that perform this function of direct internationalization of new productive forces on _-_-_
^^1^^ Raymond Vernon, op. cit., pp. 154, 155.
153 an advanced technical basis. Scientific and technical progress has made it possible for industrial monopolies to shift from a joint coordination of marketing to a unilateral utilization of all the advantages of international specialization of production and corresponding forms of cooperation. In the present conditions the internationalization of production ensures not only maximum profits but often constitutes a necessary precondition for any effective entrepreneurial activity, particularly in advanced sectors of production.Lenin observed the emergence of these specific features of the internationalization of production and capital at the beginning of the century. At that time he referred to the striving to export capital in the most developed, ``old'' regions for reasons other than the maximization of profits alone. "Under imperialism, capital has begun to be exported to the old countries as well, and not for superprofits alone. What is true with regard to the new countries is not true with regard to the export of capital in general.''^^1^^ Today's developments essentially illustrate the further development of these particular tendencies, whose scope and concrete forms are now governed by specific, requirements of scientific and technical progress and by the current level and structure of productive forces.
At the same time it is precisely the capitalist nature of the transnational corporations that unavoidably produces the undesirable forms and negative consequences of the global activities of ``supranational'' corporations. And while international monopolies represent the highest form of internationalization of production at the present stage of the development of capitalism, the socio-economic contradictions that they stimulate are also the sharpest, for the lack of correspondence between property relations and the character of productive forces is especially pronounced.^^2^^ The contradictory character of that phenomenon _-_-_
~^^1^^ V. I. Lenin, "Revision of the Party Programme'', Collected Works, Vol. 26, pp. 165--66.
,
^^2^^ The conflicts of the emerging situations are described by the wellknown words from the Merry Wives of Windsor, which have become a common expression in describing the monopolies' ``global'' policies: "the world's mine oyster''. However, in Shakespeare's work the words that follow are: "which I with sword will open.''
154 ineludes the fact that while expressing an objective need for the internationalization of productive forces and contributing to its realization international corporations do this in accordance with their nature, in monopolistic forms, and thus limit existing possibilities for an unimpeded development of economies at the international level. In addition their private-monopolistic basis and narrow corporate interests lead to a situation in which the international specialization of production activities within the international industrial empires of major monopolies frequently collides with existing patterns of international division of labour, generates disproportions and aggravates the uneven development of individual countries and sectors. This is clearly shown by the sudden aggravation of all the contradictions of the world capitalist economy in the 1970s.Thus while on the whole the private-monopolistic internationalization of production objectively contributes to the progress of productive forces and marks important advances in many respects, international monopolies are progressive only in the sense that capitalism is progressive in relation to feudalism, and are reactionary to the extent that imperialism is reactionary by comparison with socialism, for it is precisely these monopolies that represent the quintessence of imperialism. Independently of their own volition the TNCs contribute to the attainment of a new and higher phase in the international division of labour, and stimulate the growing productivity of social labour and its internationalization as well as its socialization on a scale that brings them to the threshold of a necessity for socialist forms of socialization. But simultaneously their reactionary character expresses itself in an intensification of monopolistic oppression that leads in turn to an aggravation of social conflicts and a strengthening of the struggle against monopolies.
One thus finds within the monopolies themselves the dialectical prerequisites for a transition to a genuine socialization and internationalization of production activities on a different, nonexploitative basis.
A clarification of the economic nature ol international monopolies bears directly on the solution of a number of problems concerning the role of TNCs in world capitalist trade and in global economic relations.
155The first of these concerns the methodology to be used in defining the boundaries and scope of production carried out by international monopolies, that is, their economic foundations and the sphere of their effective control. It was shown in terms of concrete examples that there is little justification for accepting the widely current narrow interpretation of the TNCs international production, in which only the output of the monopolies' overseas affiliates is taken into consideration. For the international production of the parent firm includes that which is produced at the other end of the chain, a chain by which internal corporate exchange is projected to division of labour in a company on the basis of unified production, technological and marketing patterns. Thereby the entire international corporate empire is integrated into one organism.
The second problem, which is even more complex, lies in the extent to which exchange activities among subsidiaries of a single corporation, located in different countries, may be viewed as international trade in the generally accepted meaning of that term. An analysis of the specific conditions that govern intracorporate deliveries does not yield a positive answer. Such transfers merely resemble international trade transactions only in terms of appearances (and only to the extent that this is needed to meet the requirements of customs, and foreign exchange formalities).
In particular we do not find such a major attribute of an external trade commercial transaction (or that of any other for that matter) as the participation of two independent parties---a seller and a buyer. Accordingly, intracorporate exchange does not result in the necessary outcome of any exchange transaction, namely a shift in the rights of ownership, for in fact the owner remains the same. This is especially evident in the case of transactions between the parent firms and their subsidiaries in other countries, not to mention the fact that a part of these operations is altogether fictional.^^1^^ No matter how we may view such a _-_-_
~^^1^^ An example is provided by the operations of an American firm, Pittsburgh Plate Glass, which through its affiliate in Swit/rrland sells glass to enterprises that it controls in Canada to be used in the production of automobile parts. In fact the goods are shipped directly from the United States to Canada, by-passing Switzerland. By recording __NOTE__ Footnote cont. on page 157. 156 transaction which only resembles international trade, it possesses all the attributes of a closed non-commercial transfer within an integrated economic mechanism whose nature has not been altered by the fact that its individual components are located in various countries and are nominally listed as independent juridical persons. Is it not paradoxical that such transactions are recorded by customs statistics as a part of international trade, i.e., of trade between countries, even though in fact there is not even trade between firms?
These specific features of intracorporate exchanges are not even denied by bourgeois researchers, who admit the inability of Western economic science to explain such a phenomenon. In particular Christopher Tugendhat observes that "the position of multinational companies makes nonsense of conventional theories of international trade as taught in classical economics [ classical bourgeois economics---P. Kh.] where it is assumed that international trade is the result of bargaining between independent traders in different countries.. .".^^1^^ Similarly W. Corden, a wellknown specialist in this area who teaches at Oxford University, addresses himself directly to the following question: "One might ask whether international trade theory should be radically reconstructed or perhaps abandoned completely because a significant part of world trade is carried on by and within multinational corporations.''^^2^^ His view is shared by Paul Streeten, who recognizes that "neither existing theory nor practice are equipped to deal with this new phenomenon and it presents an important agenda for future research".^^3^^
The problem is not limited to the formal aspects of recording _-_-_ __NOTE__ Footnote cont. from page 156. corresponding sales in Switzerland and manipulating transfer prices, the firm is able to register the greatest possible profits in that country, where the level of taxation is lower than it is in either the United States or Canada (R. Hal Mason, Robert R. Miller, Dale R. Weigel, The Economies of International Business, John Wiley and Sons, Inc. New York, 1975, pp. 383--84).
~^^1^^ Christopher Tugendhat, op. cit., p. 108.
~^^2^^ W. M. Corden, "The Theory of International Trade'', John H. Dunning, Ed., Economic Analysis and the Multinational Enterprise, George Allen and Unwin Ltd., London, 1974, p. 208.
^^3^^ Paul Streeten, "The Theory of Development Policy'', John II. Dunning, Ed., op, cit., p. 265.
157 intracorporate transfers in balances of international trade'. It is far more important to identify the contents of intracorporate exchange, which mediates all forms of specialisation, including all instances of the division of labour within the framework ol international production complexes of a given transnational monopoly. An example is provided by the specialization and cooperation of Ford tractor factories located in different countries. In particular an enterprise located in Antwerp delivers transmissions to plants in Detroit and Basildon (Great Britain) and receives engines and hydraulic components from Great Britain; the enterprise in Detroit sends automatic gearshifts to Great Britain and Belgium and itself receives corresponding components from Basildon and: Antwerp.^^1^^ Thus what appears to be a form of international trade relates essentially to intra-firm transfers, and in some cases to intraplant cooperation; in short it is not trade at all but intracorporate deliveries, and may be viewed as a system of strictly intra-firm activities in the area of material and technical supply.Beyond this there arises the question whether the objects of such international intracorporate deliveries (especially raw materials and semi-processed goods as well as components) are in fact commodities. Strictly speaking the objects of this postulated ``trade'' are not yet commodities, since products become commodities only when exchanged, as a result of which they express their value in terms of their prices. In this case, however, in the absence of market exchange between independent parties, and of real transfers of property, and in the presence of fictitious prices (even though they may be partly guided by proportions existing on the world market) everything that occurs has no direct relation to the social value and exchange, just as the product itself is not a commodity in the same sense as individual items produced within a single enterprise for subsequent assembly are not yet commodities. In such cases the form of external trade clearly does not correspond to these intracorporate contents.
All this casts doubt, in our view, on the validity of comparisons between intracorporate deliveries and usual forms of international trade. These differ with regard to nearly every major _-_-_
^^1^^ Christopher Tugendhat, op. cit.
158 economic parameter. For indeed, is it really possible to record as genuine international transactions the one-sixth of Belgium's overall trade with West Germany that consists entirely of reciprocal transfers between Belgian and West German plants of the Ford Motor Company?^^1^^ Is this not more akin to the movements of goods among the enterprises of a firm located within a single country, or even among the shops of one of its plants? It would seem that the difference is not so much economic in character as social,---for in the given case the monopoly exploits workers not of one but of several countries. It is then in that respect that the ``quasi-international'' and ``pseudo-international'' operations of transnational corporations on the world capitalist market are truly international.The problems that have been raised concerning the participation of international monopolies in external economic exchange and the approaches that have been suggested to their solution, debatable though they may be, in no way encompass the entire range of issues that arise. In particular there is a question concerning the very category of international monopolistic production as a special form of international capitalist division of labour based on international private-monopolistic forms of ownership.
The most general methodological views of Marxist-Leninist political economy concerning the essence of the social division of labour generally and of the international division of labour are considered in some detail in the work of V. L. Tyagunenko, who was a prominent Soviet economist. We will consider only those aspects of the problem that bear directly on the question being considered. In particular, V. L. Tyagunenko rightly emphasizes the difference between a social division of labour and a technological division of labour, which "relates to the fact that within a single economic unit a partial worker does not yet produce _-_-_
^^1^^ Christopher Tugendhat, op. cit., p. 106.
159 a commodity''.^^1^^ It is precisely the social division of labour that underlies commodity production and operates in the sphere of exchange as a necessary prerequisite of markets. For any market, including the world market, is based on "a social division of labour and a differentiation of producers as property owners (or else allocators) of means of production".^^2^^But in the case of the industrial monopolies' international production these categories can hardly be applied without substantial reservations. It has already been mentioned that not only partial workers but occasionally entire enterprises (which are, moreover, located in different countries) essentially do not produce commodities, since their output does not enter the sphere of exchange and does not manifest its exchange value. One also does not find such a major attribute of the world market as the differentiation of the producers in various countries as genuine rather than formal owners of means of production.
In short, within the context of international industrial complexes of individual monopolies the intracorporate technological process and reciprocal intra-firm non-commercial, i.e., non-- commodity transfers of primary commodities, semi-processed goods, and components no longer appear to be the outcome of the type of division of labour that is characteristic of classical capitalism, and which Marx described as "a spontaneous and jree division within society as a whole, manifesting itself as production of exchange values".^^3^^
The question, then, is this: to some extent this part of world capitalist trade and modern capitalism's international economic relations may be viewed, in the words of K. Marx, "as relations among producing nations".^^4^^ It is of course clear that by emphasizing that aspect of the problem one does not yet fully encompass the complex and contradictory nature of the international _-_-_
~^^1^^ V. L. Tyagunenko, Mezhdunarodnoye razdeleniye truda i razvivayushchiesya strany (International Division of Labour and Developing Countries), Nauka, Moscow, 1976, p. 18 (in Russian).
^^2^^ Ibid., p. 48.
~^^3^^ Karl Marx, Gnindrisse der Kritik der politischen Qkonomie. Anhang. 1850--1859, Verlag fur fremdsprachige Literatur, Moscau, 1941, S. 910.
~^^4^^ Ibid., S. 84G.
160 production of international corporations, not to mention the identification of its socio-political aspects. For no matter how that category is interpreted one cannot ignore the undeniable fact that international monopolies exploit workers of different nations lying in the sphere of the given corporation's international production complexes. One cannot forget that the material values are created not by the capital of international monopolies but by the labour of peoples of individual nations.In the present case there is a particular interest in identifying those lines of influence of scientific and technical progress on the international division of labour within which purely technological factors influence not only the forms but also the substance of modern capitalism's entire system of world economic relations. It would, of course, be too simple to view this merely in terms of the technico-economic aspect of the corresponding process, and to accept a strictly technocratic interpretation of the current evolution in international economic relations. The problem is somewhat different, namely, how does one proceed from a general recognition of the need for an internationalization of production (deriving from the objective requirements of developing productive forces in the context of the revolution in science and technology) to concrete, direct manifestations of that process in order to identify its specific features.
It would appear that this aspect of the problem is still insufficiently elaborated. Accordingly further studies of mutual relations between scientific and technical progress and the international division of labour call for an emphasis on concrete issues bearing on the internationalization of production and exchange. In particular this concerns the problem, which we believe has now become timely, of fully identifying the new role of international monopolies in capitalist economy. Such an approach may be of considerable importance for understanding the principles that govern the development of external trade, which is the most important sector of international economic relations.
While there is no doubt concerning the special character of intracorporate transfers within the international industrial empires of international monopolies, a number of aspects bear on the influence of TNGs on world capitalist trade. Apparently, external exchanges between the parent firms and their __PRINTERS_P_161_COMMENT__ 11---872 161 subsidiaries and affiliates on the one hand, and other independent firms on the other, may also be viewed in some measure as a somewhat specific sector of the world capitalist market. We see its specific characteristics in the fact that in many respects the content and characer of this trade---the assortment of commodities, its geographic composition, the level of prices---are in each case largely determined by the needs and policies of only one international monopoly, and stem from its global strategy rather than from traditional economic interests of participating countries and national firms alone.
In these conditions the view presented earlier concerning the role of TNCs in the international trade acquires a new meaning. Still other interpretations of the essential nature of the phenomena being considered are, of course, possible, as are other approaches to resolving the problems that emerge. The aim of the present author's interpretation is largely to formulate the problem. But no matter how one interprets the very high share of transnational corporations in external economic transactions these corresponding facts cannot be avoided. This calls for a number of specific adjustments in the traditional conceptions of the seeming commensurability and equally ``international'' character of all flows entering world capitalist trade. The theoretical as well as the practical significance of the important and occasionally fundamental differences stemming from the external trade activities of transnational monopolies is at least proportional to the role that this phenomenon plays in world economic relations.
Accordingly questions relating to the future long-term role of TNCs in economic life and to tendencies governing their participation in world capitalist production acquires particular importance. Most researchers believe that if current tendencies continue the role of TNCs will increase. A typical view is the one that was expressed by an international group of experts under J. Tinbergen whose members expect that by the end of the 1980s TNCs may account for 40 percent of world capitalist production.^^1^^ Assuming such an expected increase in the significance _-_-_
~^^1^^ Jan Tinbergen, et al., Reshaping the International Order, A Report to the Club of Rome, E. P. Button and Co. Inc., New York, 1976, p. 39.
162 of international monopolies in capitalist economy in the foreseeable future let us pause to consider the role that they will then play in international trade.The lack of sufficiently representative data concerning the volume of trade that is associated with the activities of international monopolies greatly impedes such attempted forecasts. Unlike the relation between the volume of foreign investments and the value of international output, which does lend itseli to quantitative expressions, the relation of these factors to the growing external trade operations of TNCs is currently established only in a most general way. As a result forecasts of the behaviour of investments do not yet provide an acceptable basis for calculating the external trade transactions of international monopolies. It must therefore be assumed that external trade will increase at least proportionally to the growth in investments and most probably even more rapidly.
In order then to arrive at some kind of dimensions of the future being forecast one must unavoidably turn to the only available relatively comprehensive studies concerning the participation of international corporations in the U.S.'s external trade for 1966--1970. It is true, of course, that data relating to a single country, even if that country does play a dominant role in capital exports, provide an insufficient basis for comprehensive findings on the probable foreign trade operations of the monopolies of all countries. But just the same that opportunity should not be left untried, since we have no reasonable alternative.
Above all it seems evident that the external trade transactions of international monopolies will continue to grow more rapidly than the overall volume of U.S. foreign trade. Between 1966 and 1970 the volume of exports associated with 298 major multinational corporations increased by 11.5 percent each year, while the U.S. total exports increased by 9.4 percent. If one applies that proportion to world capitalist trade, then a rate of growth that is 22 percent more rapid on the average, implies---assuming that the tendencies for expanding trade transactions that were observed in the 1960s continue to prevail (9.5 percent in current prices)---that the share of international monopolies in exports will increase from 58 percent in 1970 to 85 percent in 1990, and that it will extend to all capitalist external __PRINTERS_P_163_COMMENT__ 11* 163 exchange before the end of the century. Moreover, if one considers only intracorporatc exchanges, and applies this calculation method to the more rapid rate of growth in the trade of monopolies with their affiliates (53 percent) by comparison with that of all U.S. exports,^^1^^ it will be found that the share of intracorporate transactions within world capitalist trade will increase from 32 percent in 1970 to 78 percent in 1990 and 100 percent in 1995.
These calculations, which clearly lead to exaggerated results, are significant in two respects. On the one hand, they point to the danger of simplified, purely mechanical extrapolations of current tendencies to the future without considering the factors operating in opposite directions. The absurd nature of such extrapolations is evident, for even with the wildest imagination one cannot conceive that absolutely all of world capitalist trade will be carried out only by international corporations. At the very least one non-international firm will remain, not to mention national state firms, which are playing an increasingly prominent role in the foreign trade of a number of non-socialist countries, and especially of developing countries.
Yet on the other hand, these values are not so inconceivable as to relate to science fiction. There arc more reasons to be surprised at the current state of affairs, namely that nearly threefifths of world capitalist trade is already controlled by international monopolies and that nearly one-third of international commodity exchange has been transformed into intracorporate deliveries that are essentially of a non-market character. As a result even the most conservative assumption based on the existing tendencies in the growing economic power and external trade of transnational corporations, point to the possibility of a further growth of their share in world trade even though the corresponding trends may become less rapid. Since for the time being these tendencies appear to be dominant, even if the corresponding processes are made less rapid by the inevitable intensification of the conflicts that monopolies generate, an extension in the sphere of influence of international corporations beyond the present 60 percent will already represent a movement towards _-_-_
~^^1^^ Calculated on the basis of Betty L. Barker, op. cit., p. 23--24.
164 the extreme limits that current rates of development imply. But even under the most extreme assumptions one may hardly expect that by the end of the century the overall volume of commodity flows associated with the TNCs' activities will exceed, let us say, 80 percent of world capitalist trade, and that intracorporatc transfers will constitute more than 50 percent.At the present time it is extremely difficult to even guess what values these parameters will in fact assume. For the time being it is only clear that international corporations, i.e., practically all leading monopolies, have already acquired a "controlling share" of today's capitalist economy, and their dominance is especially pronounced in advanced industrial sectors. One may assume that as these sectors are subject to a further monopolization, and as the international character of major monopolies continues to increase, the role of TNCs in world capitalist trade will also grow. This will be enhanced by the long-term tendency towards a growing share of industrial products in international trade, i.e. of products in which the control of monopolies is greatest.
All this, and especially the purely illustrative calculations (as opposed to concrete estimates) do not, of course, imply that the development of transnational monopolies will proceed without impediments, that their growth will be unlimited, or that it may result in the appearance of some kind of international `` supermonopolies''. First, it is clear that the processes accounting for the increased role of TNCs in world capitalist production and trade that have been mentioned operate merely "as a tendency, like all other economic laws. . .''^^1^^ that is opposed by numerous other tendencies deriving from the contradictory nature of forms of socialization and internationalization of productive forces that are based on private monopolies.
Secondly, and this must be especially emphasized, the growing strength of individual international corporations and the extension of their sphere of influence to a fully global level do not overcome competition and rivalry among them. On the contrary this leads to a more intense ``intra-species'' struggle among international giants as well as to an intensification of all _-_-_
~^^1^^ K. Marx, Capital, Vol. Ill, p. 175.
165 intermonopolistic and interimperialist contradictions. In this connection the CPSU's 25th Congress emphasized that "the greater power of the international monopolies has made the competitive struggle still more ruthless".^^1^^In recent years these processes have continued to develop. Today, as has been noted by the GPSU's 26th Congress, "the interimperialist contradictions are growing more acute, the scramble for markets and for sources of raw materials and energy is more frantic. Japanese and Western European monopolies compete ever more successfully with US capital, and in the US domestic market too".^^2^^ Today's realities fully confirm the continuing validity of V. I. Lenin's criticism of the "theory of ultra imperialism'', in which it is erroneously asserted that ''. . . the rule of finance capital lessens the unevenness and contradictions inherent in the world economy, whereas in reality it increases them".^^3^^
In noting the intensification of the ``intra-species'' struggle among transnational corporations it should again be stressed that in spite of the greatly increased scale of concentration in production and also of capital, to this day there is no single corporation that possesses a true unlimited and long-term monopoly in its field of operations. This proposition applies !x>th to the economies of individual countries and especially to the world capitalist economy as a whole, where competition on the international market is especially intense as monopolies clash with monopolistic giants of various countries as well as with outsiders.
This is confirmed by an analysis of the relative weight of leading international monopolies and of their closest competitors on the world markets for major industrial products. In 1973, for example, a single company producing computers (the U.S.'s IBM) had achieved a relatively monopolistic position through _-_-_
~^^1^^ L. I. Brezhnev, Report of the CPSU Central Committee and the Immediate Tasks of the Party in Home and Foreign Policy. XXVth Congress of the CPSU, p. 33.
~^^2^^ L. I. Brezhnev, Report of the Central Committee of the CPSU to the XXVI Congress of the Communist Party of the Soviet Union and the Immediate Tasks of the Party in Home and Foreign Policy, p. 28.
^^3^^ V. I. Lenin, "Imperialism, the Highest Stage of Capitalism'', Collected Works, Vol. 22, p. 272.
166 a sales volume that exceeded by nearly ten times that of its closest competitor. In automobile production the leading firm was only able to exceed the output of its nearest rival by five times, in aircraft production this figure was only 2.5 times, and in other industrial sectors the volumes of sales of competing firms range from 52 to 95 percent of those of the leading monopoly. One finds a similar situation in cases in which a monopolistic role is sought not by individual transnational corporations, but by truly multinational firms or international cartels of the "classical type'', which are international in terms of their capital. For example, on the world capitalist market for food products and non-industrial chemicals, Unilever, a British-Dutch concern, had overtaken its closest competitors (Nestle of Switzerland, and Proctor and Gamble of the U.S.) by only a factor of two in 1973.^^1^^ Three US firms reached a level of total turnover greater than 30 percent of the leading firm's. Even the very powerful petroleum cartel that combines the capitalist world's seven largest private petroleum-producing firms has left 30 percent of all capitalist liquid fuel production to outsiders in 1970, as opposed to 12 percent in 1950.^^2^^ Subsequently as the control of petroleum-producing countries over their natural resources increased and as coordinated measures were adopted by the countries of OPEC, the power of the international petroleum cartel declined still further.These processes, which are typical for recent years, and under which, in spite of increases in their absolute size, no individual international firm is able to acquire a complete dominance on the world market confirm the lasting validity of Lenin's proposition that "monopoly under capitalism can never completely, and for a very long period of time, eliminate competition in the world market (and this, by the by, is one of the reasons why the theory of ultra-imperialism is so absurd)".^^3^^
The intense deepening in all of modern capitalism's _-_-_
~^^1^^ I. D. Ivanov, Mezhdunarodniye korporatsii v mirovoi ekonomike (The Role of International Corporations in the World Economy), Mysl, Moscow, 1976, p. 80 (in Russian).
~^^2^^ B. Rachkov, Neft i mirovaya politika (Petroleum and World Politics), Mysl, Moscow, 1972, p. 103 (in Russian).
^^3^^ V. I. Lenin, "Imperialism, the Highest Stage of Capitalism'', Collected Works, Vol. 22, p. 276.
167 contradictions and the aggravation of its energy, raw materials and international monetary problems as well as the economic crisis of the 1970s confirm the inability of that social system to provide for a stable economic development, even through the internationalization of production and application of the achievements of the revolution in science and technology. But this does not remove the need for understanding the new role that international monopolies play in the world economic relations, and in particular, for studies of a number of important and unfamiliar processes that are associated with the participation of TNCs in world capitalist trade.This is particularly true since the existing tendencies point to the probability of a further development of some of the processes that have been noted in meeting the needs of internationalization of production and intensification of external economic exchange which in the case of the capitalist world are carried out primarily in private-monopolistic forms.
Hence also the practical importance of an in-depth analysis of the operations of major corporations, since their experience in international production and external economic undertakings can, if critically assessed and with basic socio-economic distinctions taken into account, be partially put to use in the interests of higher efficiency of socialist economy and economic cooperation of CMEA countries.
The current relevance of such studies also derives from the fact that many leading corporations are displaying a growing interest in developing appropriate forms of cooperation with the countries of the socialist community, while some of these firms have already become business partners of the Soviet Union in carrying out large-scale and long-term economic projects. This draws the attention of Soviet economists specializing in international economic relations to a wide variety of problems concerning the participation of transnational corporations in international economic life.
[168] __NUMERIC_LVL1__ CHAPTER 4 __ALPHA_LVL1__ EVOLUTION OF THE FOREIGN TRADE POLICYThe growing internationalization of economic life in the context of the revolution in science and technology, the growing role of the external economic sphere, and also of international exchange activities as a major factor in the development of productive forces have all contributed to the major characteristics of the evolution of postwar capitalism's foreign trade policy.
The scope, objectives, and instruments of that policy are marked by great diversity. This reflects the general intensification of state-monopolistic intervention into the economic sphere, the rapid growth of external trade and also the growing complexity of its structure and its interaction witli new forms of world economic relations. This has required a corresponding modernization of the mechanism governing external economic activities. From (he wide range of problems that exist in this area it is useful to emphasize such crucial questions as the general tendency towards a liberalization of external trade, the evolution of imperialism's foreign trade policies towards developing countries, and the tasks of reconstructing the entire system of international economic relations.
As they reflect the internally contradictory character of the capitalist mode of production the policies bearing on the statemonopolistic regulation of external trade appear as a resultant of two contradictory tendencies. They reflect both interests of forms of capital that are nationally distinct and also an objective need for facilitating international communication under the increasing internationalization of production and of capital. A dominant role appears to be played by the second of these tendencies, which was already noted by V. I. Lenin, for it " 169 characterizes a mature capitalism that is moving towards its transformation into a socialist society".^^1^^
In the age of a global transition from capitalism to socialism that tendency within international economic relations expresses itself through a reduction of constraints on external trade and through efforts to remove corresponding obstacles. This is the course that is followed by trade liberalization---a term that refers to a complex of government measures designed to regulate both domestic economies and external relations in such a way as to facilitate external trade activities and reduce tariff and other barriers.
Strictly speaking the liberalization of external trade is not a postwar discovery. But while elements of that policy existed before the war as well current liberalization policies possess a number of distinctive features. First, the scope of corresponding measures has been greatly extended and has long included much more than tariff policies alone. Liberalization reaches nearly all sectors of economic life and its mechanism has become more complex and more ramified. Secondly, there has been a vast increase in the role of coordinated international actions and coordinated efforts of different countries in achieving a multilateral liberalization of external trade. Finally, and this is perhaps the most important feature, while in prewar years international liberalization did not extend beyond short-term armistices relating to customs activities, today, in spite of the frequent trade wars that are inherent in capitalism, it has been possible to achieve a very substantial long-term reduction in the overall level of impediments to the development of external trade.^^2^^
In noting the substantial differences that exist between the foreign trade policies of capitalist countries in recent decades _-_-_
~^^1^^ V. I. Lenin, "Critical Remarks on the National Question'', Collected Works, Vol. 20, p. 27.
^^2^^ Both here and in the sections to follow the problems of liberalization that are examined relate primarily to the task of facilitating mutual exchange transactions among developed capitalist countries and improving the conditions governing access to their markets for commodities produced in developing countries. This is the specific meaning of libcrali/.ation that has emerged today as a result of the trade policies of various countries and the activities of international organizations.
170 and those of the prewar period it should be emphasized that the current tendency towards liberalization has passed through a number of stages, in the course of which there were changes in the conditions governing its implementation. In its initial stage that tendency developed largely under the influence of two groups of factors.On the one hand, having learned the bitter lessons of the disorganization of world economic relations at the time of the Great Depression and of trade wars that it produced in the 1930s, the leading capitalist countries paid greater attention to coordinating their efforts in seeking to avoid similar events. It is symptomatic that at the very height of the Second World War, at a conference of the anti-Hitlerite coalition in May 1943, concerned with problems of food and agriculture, in Hot Springs, a slogan was formulated to guide postwar foreign trade policy, namely, "to reduce barriers of every kind to international trade and to eliminate all forms of discriminatory restriction thereon as effectively and as rapidly as possible".^^1^^ Objectively such a goal was progressive in character.
At the same time the postwar structure of international economic relations developed in the context of a major shift in the balance of power within the imperialist camp in favour of the United States. Taking advantage of the weakening of its competitors the U.S. sought to formalize its external economic expansion in international law and greatly extend the influence of American monopolies on the markets of colonial and dependent countries. The idea of an unimpeded access to these countries' resources, that would be especially advantageous to the United States, is already present in a report of the League of Nations that was prepared while the war was still raging. It related to future foreign trade policy, whose need for liberalization was motivated by "a close interdependence between greater freedom of trade and the achievement of high and stable employment of resources".^^2^^ But at a time when the U.S. was able to impose its views on economic relations to its West European allies, _-_-_
~^^1^^ Commercial Policy in the Post-War World. Report of the Economic and Financial Committees, League of Nations, Geneva, 1945, p. 7.
^^2^^ Ibid., p. 30.
171 the American ruling circles did not always seek to hide the true reasons for their interest in liheralization of international trade. In particular, D. Acheson, the U.S. Assistant Secretary of State, cutting short any attempt to disagree, stated explicitly that "many countries will feel that they cannot venture to commit themselves to the kind of economic policy. . . unless they can be reasonably certain that the United States can be counted on to give these principles full support".^^1^^As the West European and Japanese "power centres" grew stronger, while the external economic positions of the U.S. correspondingly declined, interest in liberalization of international economic exchanges came to be governed not so much and not so exclusively by the advantages that it presented to the U.S. as by the general requirements for expanding the international division of labour. In these new conditions, especially in connection with the successes of the struggle of developing countries for achieving full sovereignty over their natural resources, in many respects the tasks of liberalizing international trade came to be interpreted in a new way, in which greater emphasis was placed on the interests of all participants in external economic exchanges. It should be noted that having lost its leading role on the world capitalist market as well as its initiative in formulating foreign trade policy (this is recognized by American authors as well^^2^^), the United States itself began to experience the negative consequences of the "rules of the game" that had been established under its auspices. It found it necessary to advocate a "fundamental overhaul of international trading rules'',---to be sure in ways advantageous to itself---in view of its asserted "responsibility as an economic leader among nations".^^3^^
In considering the evolution in foreign trade policy that is taking place it should be emphasized once more that while it is the internationalization of production that has enhanced the importance of the external sphere as a factor of economic growth, _-_-_
~^^1^^ Ibid., p. 34.
^^2^^ Richard N. Cooper, Issues for Trade Policy in the Seventies, J. C. B. Mohr, (Paul Siebeck), Tubingen, 1971, pp. 17--18.
~^^3^^ International Economic Report of the President. U.S. Government Printing Office, Washington, 1974, p. 3; 1975, p. III.
172 the intensification of international trade produced an objective need for its liberalization. Although liberalization measures are essentially only a means for extending international trade they play a substantial role in overall economic activities.Within the context of the revolution in science and technology the direct linkage that exists between the internationalixation of production and the problems of facilitating foreign trade is becoming increasingly apparent. This is also noted by Western researchers, who view these problems primarily in terms of the influence of technological shifts on competitive struggles. For example, Gerard and Victoria Gurzon, who are Swiss economists, stress that "there are numerous and growing industries which are becoming more interested in gaining access to foreign markets than in preventing others from entering their own---as witness the 'economies of scale' arguments in favour of regional economic integrations".^^1^^
It is quite natural that transnational monopolies are especially interested in the unimpeded movement of goods among countries. Ultimately they view the liberalization of external trade as a means for facilitating intracorporate transfers within their international industrial complexes. Accordingly it is not surprising that "many industries, especially large multinational firms which both export large amounts and carry on extensive manufacturing operations abroad, favour a continuation of a liberal trade policy".^^2^^ It is also true, of course, that as the TNGs' interests are superimposed on the national interests of individual countries they by no means always operate as a catalyst of what appears to be a general tendency towards liberalization. In many respects they explain its contradictory character. But in spite of the contradictory nature of that tendency, it is governed by the tasks of widening world economic relations in the context of an internationalization of production. This view is generally accepted today because "trade liberalization is not a goal in itself . . . _-_-_
~^^1^^ Gerard and Victoria Curzon, "Options After the Kennedy Round'', Harry G. Johnson, Ed., New Trade Strategy for the World Economy, George Allen and Unwin, London, 1970, p. 65.
^^2^^ The Wall Street Journal, Vol. 126, No. 10, August 29, 1970, p. 21.
173 [it is concerned with] . . . economic cooperation for mutual benefit through the more eificient use of the world economy. . .''^^1^^.The policy of liberalization has achieved major successes in the area of customs duties,^^2^^ whose level has declined substantially in the postwar years. It is not surprising that international efforts at liberalization should have accorded priority to that particular sector of international trade policies. First, historical developments were such that tariff duties had come to symbolize a government's foreign trade regulating functions, and by tradition the level of tariff duties was viewed as the main criterion in judging trade policies. Secondly, tariff duties are especially visible by comparison with numerous other barriers to external trade, which are often carefully hidden. Finally, tariff duties easily lend themselves to comparisons, and in effect serve as the principal unifying element in the trade policies of all countries. This facilitates the conclusion of agreements concerning reciprocal tariff reductions.
In many respects the specific features of tariff duties have determined the forms of coordinated international measures relating to the liberalization of trade. Beyond this, in a context in which the most-favoured-nation principle is universally applied as one of the twentieth century's most fundamental norms of world trade policies, mutual tariff concessions by two countries automatically imply their extension to all other trading partners. In short the very nature of tariff barriers has led to their liberalization on a wide international scale.
Such are the objective prerequisites that have led to the emergence of the corresponding international institution, the General _-_-_
~^^1^^ William Diebold, Jr., The United States and the Industrial World, p. 173.
~^^2^^ This refers only to import duties, which directly influence the terms on which foreign commodities are admitted to a local market, and hence their ability to compete. Export duties, on the other hand, which generally perform a different function (largely a fiscal one) influence international trade much less, and are not a subject of liberalization in the sense being considered.
174 Agreement on Tariffs and Trade (GATT), which has held multilateral negotiations on reducing foreign trade barriers, and especially tariff duties. It is another matter that GATT has been greatly influenced by such subjective factors as the efforts of the United States and of other developed capitalist countries to make use of that instrument as a means for achieving a dominant position within capitalism's system of world economic relations.^^1^^Even in the Western press this emphasis in GATT activities had earned it the name of "rich men's club'', whose primary purpose is to serve the interests of developed capitalist states, and whose legal formulas are not always applicable to the conditions that exist in developing countries.^^2^^ It is important to stress that together with the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD) GATT forms an integral part of the system of organized measures that has been devised by imperialist circles to consolidate their positions in the sphere of international economic relations. This is precisely why GATT does not provide for a genuine equality among its members. On many issues full membership in GATT presupposes participation in the IMF, where votes are proportional to financial contributions. It is true that in the 1970s one could see a certain tendency towards a democratization of that institution through the greater representation of developing countries as well as of some socialist countries. At that time the growing role of progressive influences throughout the entire climate of international economic relations unavoidably influenced the work of GATT as well.
Leaving aside for the moment those features of GATT that are contradictory, let us consider the results of its activities in reducing tariff duties. This does not imply of course that GATT's role in the postwar liberalization of trade was decisive, for that _-_-_
~^^1^^ Concerning the history and nature of GATT see, for example, Gerard Curzon, Multilateral Commercial Diplomacy. The General Agreement on Tariffs and Trade and Its Impact on National Commercial Policies and Techniques, Frederick A. Praeger, New York, 1966; also "Basic Instruments and Selected Documents'', Vol. 4, Text of the General Agreement, GATT, Geneva, March, 1969.
^^2^^ The Economist, December 5, 1964, p. 1170.
175 process was determined by objective factors relating to the internationalization of the world economy. Ultimately the functions of GATT (and of any other international institution) constitute an organizational i'ormali/ation of that process, although this, too, is rather important.One should keep in mind that some of the difficulties that attach to long-term comparisons of average tariff levels throughout world capitalist trade cannot be overcome. Indicators of the level of tariff duties that are based on arithmetic averages do not reflect differences in levels of trade in particular types of commodities. At the same time the great diversity of types of commodities (of the order of several tens of thousands) makes it practically impossible to arrive at a precise calculation of a weighted average of tariff levels for the capitalist world as a whole.
But in spite of all the reservations that attach to such comparisons, there is a clear tendency towards a reduction in tariff barriers, and also towards an intensification of that process in the 1960s. At that time, following the negotiations of the Kennedy Round (1964--1967), agreement was reached on the largest tariff reductions in postwar years. It is true that formally the outcome of __PARAGRAPH_PAUSE__ Table 30 Outcomes of GATT Conferences on Tariff Reductions ------------------------------------------ - V'olume of Trade AKected ))y Tariff Concessions Number of Conference Site and Year of Completion Billions Percent of Concessi ons (in thousands) of Dollars All Exports Geneva, 1947 10.0 20 . 0* 45 . 0 Annecy, 1949 5 . 0 Torquay, 1951 8.7 Geneva, 195G 2.5 2.7 . . . Geneva, 19G1 4.',) 4 2 4 . 4 Geneva, 19G7 40.0 21.1 * Estimated. <"._i....i_..,j „„ ,;,„ v,.,c;c ,,r- If.,,-™ P. Tnlimnn. Ed.. New Trade Stral- Vitm,uicln_ U Mil VIIL uwjiu -. .-----*.j --- ^-------__ ? , eKV lor th<; World Economy, George Allen and Unwin Ltd., London, 1970, p. 57; UN, Statistical Yearbook 1969; UNCTAD, Handbook of International Trade and Development Statistics, 1972. 176 __PARAGRAPH_CONT__ the initial round of negotiations under GATT in 1947 is equally impressive. But this should lie viewed primarily as transitional measures that followed the wartime constraints on trade.
The tendencies towards increasing liberalisation reflect the capitalist economy's growing intei nationali/ation and a corresponding internationalization of capital, as well as the increasing number of large international industrial complexes of leading monopolies. It is symptomatic that it is precisely in the 1960s (see Table 22) that a substantial increase occurred in direct foreign investments. This is also indicated by the concentration of efforts to achieve multilateral tariff reductions primarily in the trade in finished goods, reflecting a deepening of international specialization and cooperation in industrial production.
The outcome of the Kennedy Round, which resulted in a reduction in tariffs averaging 36 percent between 1968 and 1972 conveys most fully both the scope of liberalizing measures and the composition and level of modern capitalism's tariff duty system. While there do not exist aggregate indicators of this type for the capitalist world as a whole, the corresponding data for the Common Market (six countries), the United States, Great Britain, and Japan, which accounted for 62 percent of total capitalist exports in 1972 may be accepted as entirely representative.
It should be noted that the most significant reductions in tarilf duties were attained for finished goods as a whole and especially for those types of industrial goods whose output is closely linked to progress in science and technology (chemical and pharmaceutical goods, machines and equipment).
As a result of this round of tariff reductions it may be said that the average level of tariff duties in the capitalist world's leading trading powers came to be modest in the 1970s---less than 7 percent of the value of imported commodities (excluding agrarian protectionism) and 9 percent for industrial goods. With a somewhat different mix of sample indicators the average weighted value of tariffs for industrial goods is 6.5 percent and even 6 percent.^^1^^ Detailed estimates of the influence of the outcome __PARAGRAPH_PAUSE__ _-_-_
~^^1^^ The Kennedy Round Estimated Effects on Tariff Barriers, p. 208; U.N. Document TD/B/459, 6 July 1973, p. 8.
__PRINTERS_P_177_COMMENT__ 12---872 177 Table 31 Weighted Average Level of Import Duties into the EhC,* U.S., Great Britain, and Japan he/ore and after the. Kennedy Round Commodity Groups Tariff duties as a Percent of Value (C. I. F.) Percent of Reduction in Tariff Duties Under the Terms of the Kennedy Round Before tile Kennedy Round After the Kennedy Round Food Products Beverages and Tobacco 50^3 43 '4 14 Raw Materials (except fuels) 3.2 2 2 31 Fuels 3.7 2.9 20 Fats and Oils 13.8 12.0 13 Chemicals 16.3 8.3 49 Manufactured Goods, Clas-- sified in Terms of Ini-- tial Materials 11.9 8.3 31 Machinery and Equip-- ment 13.1 7.4 44 Other Manufactured Goods 20.3 13.8 32 Total (excluding food, beverages and tobacco with subsidized inter-- nal prices) 10.5 6.7 36 Manufactures and Semi-- Manufactures 14.0 8.7 38 * Common external tariff of Common Market. Source: The Kennedy Round Estimated Effects on Tariff Barriers, Parts One and Two, United Nations, New York, 1968, p. 60. __PARAGRAPH_CONT__ of the Tokyo Round of GATT negotiations, which were concluded towards the end of 1979, are not yet available. But if one also considers the planned gradual reduction of tariffs between 1980 and 1987 by 33 percent (as opposed to 36 percent for the Kennedy Round) it may be expected that by the end of the 1980s the level of tariff duties will be still lower than at the beginning of the present decade. Accordingly, when compared with the average level of tariff duties in the early postwar years (approximately 20 percent) the achievements of the policy of liberalization appear to have been quite substantial.It is true that the actual significance of these conclusions must 178 be perceptibly adjusted if one considers at least three contradictory circumstances. First, all available calculations of the average level or else weighted average level of tariff duties hide important differences in tariffs for individual classes of commodities where tariffs may be quite high, and sometimes prohibitive. For example, duties of more than 20 percent of value, which are viewed as a significant factor influencing price formation, applied to 3 percent of the overall number of types of commodity classifications employed by customs agencies in the 1970s in the case of Great Britain, 3.7 percent for Japan, 4 percent for Canada, and 13.6 percent for the United States. In the United States, moreover, these 13.6 percent include extremely harsh duties exceeding 50 percent of the value of products on 0.5 percent of all commodity classes, while the maximum level of tariff duties was as high as 180 percent of their price. There is therefore much truth in the observation of G. Patterson, GATT's Deputy Director, concerning the "tendency ... to suggest that . . . tariffs would be at such a low level that they no longer constituted a serious hindrance to trade'', that in fact "an overall summary of the situation camouflages the high tariffs which remain.''^^1^^
Secondly, the nominal level of tariff duties does not reflect their true significance, since suppliers of industrial goods rightly calculate the influence of tariffs not in relation to the full value of the product but only in relation to the value that is added at a given stage of processing.^^2^^ It has been estimated by UNGTAD that while this resulted in an average nominal level of tariffs on industrial products in developed capitalist countries of 6.5 percent in 1972, in fact the ``effective'' import duty was _-_-_
~^^1^^ Gardner Patterson, "Current GATT Work on Trade Barriers'', United States International Economic Policy in an Interdependent World. Compendium of Papers, Vol. I, Washington, 1971, pp. 627.
^^2^^ Bela Balassa, Tariff Protection in Industrial Countries. An Evaluation, Yale University, Economic Growth Center, New Haven, Connecticut, 1966; W. M. Corden, "The Structure of a Tariff System and the Effective Protective Rate'', The Journal of Political Economy, June 1966; V. G. Pavlov, Promyshlenny eksport v strategic ekonomicheskogo razvitiya (The Role of Industrial Exports in Strategies of Economic Development), Mezhdunarodniye Otnosheniya, Moscow, 1967 (in Russian).
__PRINTERS_P_179_COMMENT__ 12* 179 11.1 percent, as opposed to 10.9 percent and 19.2 percent, respectively before the Kennedy Round.^^1^^Finally, the ``favourable'' average outcomes of the liberalization achieved within the framework of GATT hide the actual deterioration that has taken place in the position of young states within the system of tariff duties. In particular, under the Kennedy Round duties on commodities that are of particular interest to exporters from developing countries were reduced by an average of 30 percent, while duties on all other commodities exported primarily by developed capitalist powers were reduced by 44 percent. As a result, as the United Nations Secretary-General has observed, the outcome of the Kennedy Round has produced only disappointment among developing countries since the advantages that they gained were far more modest than those of developed countries.^^2^^ Similarly in the case of the Tokyo Round, the application of tariff concessions primarily to the export commodities of Western powers is producing a situation in which tariff reductions on commodities exported by developing countries will not exceed 25 percent, i.e., will be almost a fourth less than the average level.
It would accordingly be premature to ``bury'' the problem of tariff duties, which in fact continue to play an important role, particularly in individual sectors of world capitalist trade.^^3^^ Beyond this tariffs continue to serve as one of the most convenient _-_-_
~^^1^^ The Kennedy Round Estimated Effects on Trade Barriers, p. 208.
^^2^^ U.N. Document ECOSOC/198, SG/SM/51, 11 July 1967, p. 4.
^^3^^ One may judge of the effectiveness of even relatively low tariff duties by considering their influence on prices on household electrical record-players in Western Europe in 1974. In spite of the fact that suppliers from South East Asian countries (other than Japan) experienced costs of production that were considerably lower (2,900 dollars per 1,000 appliances as opposed to 6,170 dollars in the case of West European producers) that difference was compensated by transportation expenditures (1,540 dollars) and import duties amounting to 1,650 dollars (9.5 percent of the products' value). As a result the price of imported products (20,510 dollars per 1,000 appliances) proved to be less competitive than that of local suppliers (20,440 dollars per 1,000 appliances), International Subcontracting Arrangements in Electronics Between Developed Market-Economy Countries and Developing Countries, United Nations, New York, 1975, p. 39.
180 instruments of trade policy in relations among countries and as the traditional object of concessions or sanctions in interimperialist struggles. Nevertheless, it would be a still greater error not to recognize the decline in the role and scope of tariff barriers that continue to serve as the most significant constraint on international trade.^^1^^Together with the appreciable reduction in tariff barriers the tendency in recent years also to extend the scope of tariffless trade appears especially significant. Following the completion of measures designed to establish a free trade zone in Western Europe towards the end of the 1970s for trade in industrial products that complex will account for approximately 30 percent of all capitalist exports and 40 percent of exports of industrial goods.^^2^^ But if one also considers negotiations relating to the admission of new members to that zone, the other areas of tariffless trade within and among regional groupings, and the tendency towards a comprehensive gradual decline in tariffs at the international level it is possible that by the end of the present decade the greater part of trade in manufactured goods (and hence the greater part of world capitalist trade) will no longer be subjected to duties.
Progress in reducing tariff duties concerns only one sector of the front encompassed by the struggle for liberalizing international economic exchange, and moreover one that is hardly the most important one. Most researchers agree that "non-tariff barriers constitute a most important clement in any programme to promote free international trade. Frequently they present more significant impediments than tariffs".^^3^^
The importance of liberalizating non-tariff barriers has grown substantially in recent years. This is partly attributable to a " _-_-_
~^^1^^ Trilateral Commission Task Force Reports: 1-7, New York University Press, New York, 1977, p. 81.
~^^2^^ Estimated on the basis of the composition of trade in 1977.
~^^3^^ Mark S. Massel, Expansion of World Trade: Non-Tari/f Barriers as an Obstacle to World Trade, Washington, 1965, p. 72.
181 secondary effect" of tariff reductions which is unavoidable in competitive struggles for markets. In accordance with the principle of connecting reservoirs tariff reductions have been accompanied by increases in non-tariff barriers. At the same time the clear tendency towards a reduction in duties has made more apparent the unresolved nature of many other problems of liberalization.These encompass such a wide and extremely ramified system of state-monopolistic measures for influencing external trade that a full evaluation of its significance is perhaps impossible. This is confirmed by the great diversity of forms of non-tariff constraints. One of the most detailed lists of such obstacles compiled by GATT experts includes more than 800 items, each of which relates to constraints on an entire group of related commodities that sometimes includes several hundred commodity types within the customs classification.
The difficulties of establishing the influence of non-tariff barriers on international trade begin with this great number of types of direct and indirect constraints on international trade. This defines the by no means simple problem of classifying them. Differences in interpreting the main criteria in systematizing nontariff barriers account for the substantial diversity that one finds in the efforts that have been made to arrive at an integrated approach to codifying these barriers. Without favouring any one of the available classifications, let us consider the example of the manner in which non-tariff barriers are grouped by GATT itself. For this conveys a conception of the nature of these barriers:^^1^^
__FIX__ Ordered lists:I. Government participation in trade including:
(a) production subsidies;~
(b) export subsidies;~
(c) countervailing duties;~
(d) government procurement and restrictive business and union practices;~
(e) State-trading in market-economy countries.
II. Customs and administrative entry procedures, including:
(a) customs valuation;~
(b) anti-dumping practices;~
_-_-_^^1^^ Gardner Patterson, op. cit., p. 621.
182(c) customs classification;~
(d) formalities connected with iinportation.~
III. Industrial, health and safety standards, and packing, labelling and marking regulations.
IV. Special limitations on imports and exports, including:
(a) licensing arrangements;~
(b) quantitative regulations, including embargoes;~
(c) bilateral agreements;~
(d) motion picture restraints;~
(e) minimum prices in textile imports.
V. Restraints on imports and exports by the price mechanism, including:
(a) prior deposits;~
(b) administrative and statistical duties;~
(c) restrictions on foreign wines and spirits;~
(d) discriminatory taxes on motor cars;~
(e) special duties on imports;~
(f) credit restrictions for importers;~
(g) variable levies; (h) border taxes.
It is still more difficult to establish the influence of each of the numerous impediments on the volume and composition of external trade. This is especially difficult with regard to overall international trade, both because of the incommensurability of basically diverse constraints, and because they are hidden and intangible in many ways. For example, it is the view of British specialists that "whereas tariffs are published in a recognizable form (though problems of classification do arise and arc treated in this statement as 'para-tariff obstacles to trade), most nontariff distortions present difficulties even in specification and may be virtually impossible to quantify".^^1^^
The most comprehensive study in this area is a special report of the UNCTAD Secretariat on the classification and evaluation of the main types of non-tariff barriers in developed capitalist countries. That study is based on an analysis of sample data _-_-_
~^^1^^ Non-Tariff Distortions of Trade, PEP, Vol. XXXV, Broad Sheet 51 K September 1969, 7/6 George Hcrridgc and Co. Ltd., London, 1969, p. 687.
183 for 41 commodity groups, encompassing 136 classes within tinStandard International Trade Classification. According to these indicators the share of commodities subjected to non-tariff limitations when imported into 18 developed countries in 1968 was 44.9 percent for raw materials, 17.8 percent for finished goods and 22.1 percent on the average, including 41.2 percent on commodities from developing countries.^^1^^ While these data show the degree of discrimination that is applied by customs agencies of developed capitalist countries to suppliers from new states they do not reflect the actual scope of non-tariff barriers both because they relate primarily to exports of developing countries and because the study encompasses only non-tariff barriers of the quota type. If one considers all other types of impediments to undesired imports as well, one can easily imagine the actual scope of non-tariff barriers.It is probably with regard to import quotas that the effects of trade liberalization have been most evident, for those are both visible and commensurable. In the case of Japan, for example, the proportion of imports that are subject to trade liberalization increased from 42 to 97 percent between 1960 and 1973, while the list of product types that are subject to import quotas declined from 492 items to 31.^^2^^ It should be noted that just as a reduction in tariffs enhances the role of non-tariff forms of import regulation, within the latter traditional quotas and licenses are increasingly replaced by types of quantitative constraints that are less visible (see Table 32).
The problem of estimating the effects of non-tariff barriers and especially their relative effectiveness by comparison with traditional tariff barriers is especially complex.^^3^^ In our own view it is in fact hardly possible to arrive at precise values of quantitative indicators. Here technical difficulties (the need for collecting and integrating an enormous volume of statistical information and carrying out large-scale calculations) are by no means the __PARAGRAPH_PAUSE__ _-_-_
~^^1^^ U. N. Document TD/K/C1.2'115, 13 March, 1973, p. 5.
^^2^^ The OKCD Observer, April 1974, p. 29.
~^^3^^ II. Jager, G. L. Lanjouw, "An Alternative Method for Qualifying International Trade Barriers'', Weltwirtschajtliches Archiv, Bd. 113, Tubingen, 1977, S. 4.
184 Table 32 Non-Tariff Barriers to Imports in Developed Capitalist Countries in the Early 1970s Types df Harrier Total Number* Percent of Total Total 531 100.0 Including: Discretionary Licensing 185 34.7 Quotas 133 25.3 global import quotas 00 12.4 bilateral import quotas 50 10.8 bilateral quotas with global import quotas 11 2.1 Other Non-Tariff Barriers 213 40.0 variable levies 134 24.9 unspecified licensing 11 2.1 ``voluntary" export restraints 11 2 1 import prohibitions 12 2.4 unspecified types ot restriction 10 3.0 Other Measures 29 5 . 5 * Sum total of various types of barriers to individual commodities or commodity groups applied in each country. Source: Proceedings of the United Nations Conference on Trade and Development. Third Session. Vol. II, p. 147. __PARAGRAPH_CONT__ decisivc ones. For in the overwhelming majority of cases the chain ol causal relations that joins the numerous components that exist in the sphere of production and in that of distribution is so very large and possesses such unexpected configurations that it is simply impossible to identify particular links that do not influence external trade. While formally only a part of the measures initiated by governments concern the regulation of external trade transactions, in fact nearly all activities of the bourgeois state, and especially those that relate to the country's economic life, eventually influence both exports and imports. Accordingly one can only refer to the category to which particular government measures refer, and to their order of importance in terms of their proximity to a direct source of influence on external trade. When the problem is posed in this way it becomes evident that the non-tariff barriers can have a far greater overall impact than the old tariff duties. Such an evolution of forms of regulation of 185 external trade appears to be a further development of the principle established by V. I. Lenin that "no tariff system can be effective in the epoch of imperialism"^^1^^. At a time when statemonopolistic intervention in economic life is increasing, one sees this tendency both in the declining importance of import duties and in the gradual shift of the center of gravity of non-tariff duties from customs procedures to countless other forms of influencing external trade. Non-tariff barriers are especially effective when this carefully hidden layer of impediments is difficult to overcome, and when the corresponding bourgeois state pursues a policy of active reliance on these new instruments in its struggle for markets. At the same time non-tariff barriers are becoming an increasingly important sphere of liberalization, even though for the time being achievements in this regard have been limited. This is partly attributable to the novel character of the problem itself, and partly to the purely technical difficulties that attach to international comparisons of non-tariff barriers. But above all it is explained by the great diversity and refinement of means that are available to limit undesired imports. Although numerous declarations were made in GATT concerning the liberalization of non-tariff barriers, the first significant steps in that direction were taken only during the most recent Tokyo Round. At that time realistic possibilities for reducing tariffs had become largely exhausted. Six codes and agreements were developed to regulate the application of several widely-used types of such barriers. They relate to national technical standards, the access of foreign suppliers to state purchases, questions relating to government subsidies and compensatory duties, methods employed by customs agencies in evaluating commodities, import licensing, and systems designed to protect firms from the competition of foreign suppliers. Although it is still too early to judge the effectiveness of the measures that are envisaged there is no doubt that they represent only partial compromises, while the most sensitive problem---namely the use of import barriers to protect local producers---continues to be a source of disagreement and has been scheduled for further discussions. This provides one of many _-_-_~^^1^^ V. I. Lenin, "Re the Monopoly of Foreign Trade'', Collected Works, Vol. 33, Progress Publishers, Moscow, 1966, p. 457.
186 indications of the contradictory nature of the liberalizing processes that are taking place in modern capitalism's international trade.The tendency towards an intensification of external economic exchange that accompanies the internationalization of economic life under capitalism coexists, although far from peacefully, with an opposite tendency towards a modernization in the means that are employed in both open and undeclared trade wars as well as an extension in their spheres of action. Increasingly trade wars are becoming an inherent attribute of capitalist international trade, whether they encompass the entire world capitalist market or whether they are small, local trade wars between individual countries or else relate to trade in individual commodities (such as the famous "Chicken War" between the U.S. and the Common Market or the "Wines War" within the EEC). These contradictory traits of the liberalization of external trade are especially apparent in recent years, when protectionism has come to prevail over policies of free trade in many areas and even appears to have placed the further fate of liberalization in doubt.
Ironically, corresponding indications coincided with the initial implementation of large-scale liberalization measures under the terms of the Kennedy Round. Shortly after the signing of the corresponding agreement, a bill was introduced in the U.S. Congress to establish quotas on the importation of a number of commodities. Emergency measures designed to save the American dollar, including a unilateral decision in the second half of 1971 to levy an additional 10 percent surcharge on imports served as a signal to intensify "military operations" in world capitalist trade. According to the then Managing Director of the International Monetary Fund Pierre-Paul Schweitzer, unilateral action on the part of the United States produced a real threat of an all-out trade and currency war that could cause the capitalist world face "the prospect ... of disorder and discrimination in currency and trade relationships which will seriously disrupt trade and undermine the system . . .''^^1^^ Subsequently this concern proved to have been justified.
_-_-_~^^1^^ The New York Times, August 21, 1971.
187This is also the type of situation that one would expect when viewing the evolution of external trade policies against the background of the more general tendencies that govern the economic development of world capitalism. It is not a coincidence that a peak in introducing international measures serving the liberalization of reciprocal trade among developed countries occurred in the second half of the 1960s, i.e., at the end of the world capitalist economy's most prolonged period of stable development since the Second World War. Nor is it a coincidence that an accumulation of economic difficulties at the turn of the seventies within several leading imperialist powers has increased the number of local trade wars.
Moreover, the economic crisis that developed in the mid-1970s and interacted with an intensification of world capitalism's problems in the area of fuels, food products, ecology and international finance, not only dampened the liberalization of international trade but also frequently intensified protectionist tendencies in Western countries. Initially, in fact, the economic crisis paralyzed the scheduled round of bargaining within the framework of GATT (the Tokyo Round), which in 1975 had not only not been concluded as originally planned but had not even begun. It was only in 1976 that these negotiations were initiated.
The trade conflicts that flare periodically express an intensification of the intcrimperialist struggles for markets that originate in the contradictory character of capitalist integration. The logic that governs these processes under capitalist conditions is such that an expansion in mutual exchange among participants of closed integrated groupings such as the Common Market operates not only as a factor that enhances growth in world trade but also as a source of negative influences, through its discriminating practices, on other participants in world economic relations, impeding their normal development.^^1^^ This is precisely why the completion of trade liberalization measures within the EEC _-_-_
~^^1^^ The discriminatory character <>f the Common Market's tariff policies is noted by Jan Tinbergen, a prominent Western economist (Jan Tinbergen On the International Division of Labour, Stockholm, 1970, p. 6.).
188 and EFTA towards the end of the 1960s also stimulated protectionist attitudes both within these groupings and in other capitalist countries. The expectation that a turning [joint would occur- in the history of the liberali/ation of international trade by the 1st of July, 1968, when the Common Market countries fully eliminated tarilfs among themselves and also began to reduce external tariffs in accordance with the terms of the Kennedy Round, did not prove to be justified. In fact the entry of Great Britain into the Common Market and of certain other former members of the EFTA provided a new stimulus to conflicts on the world capitalist market.Aside from reflecting general economic difficulties the increased frequency of trade wars in recent years also reflects certain shifts in the balance of forces between modern capitalism's "power centres'', whose rivalries define the major centres of contradictions in world capitalist trade. These lie within a triangle joining the United States, the Common Market, and Japan. The increased membership of the EEC has produced a grouping of states that accounts for over 40 percent of capitalist trade and in spite of serious differences among its participants objectively this strengthens the position of the Common Market. Similarly the position of Japan within the world capitalist market has become much stronger. Exceptional rates of economic growth and of growth in foreign trade have led her to exert a pressure on her major competitors and to become the capitalist world's second economic power and third exporter (after the United States and West Germany), moving ahead of France in 1968 and of Great Britain in 1971. Today the United States not only lags behind the Common Market by about three times in terms of its aggregate external trade turnover (twenty years ago their exports were equal), but has also lost its position of the leading exporter. West Germany began to overtake the U.S. in this respect already in the early 1970s, and today, as West European authors note with a certain stint of gloating, "that primary responsibility is being shared increasingly with the European Community and Japan".^^1^^
_-_-_~^^1^^ Hugh Corbet, "Commercial Diplomacy in an Era of Confrontation'', H. Corbet and Robert Jackson, Eds., In Search of a New World Economic Order, Croon Helm, London, 1974, p. 16.
189It is true that because of the relatively lower share of exports in its gross product the United States is generally less dependent on external markets than are its competitors, and this provides it with certain advantages in trade conflicts. In the words of a West European publication to the United States, whose export quota is significantly lower than that of countries on the other side of the Atlantic or of Japan, "threats of retaliation are like flea bites on an elephant's toe nail".^^1^^ But such a comparison greatly underestimates the possible consequences of trade barriers on individual economic sectors of the United States that are more closely linked to the external market.
Moreover, as the share of the United States in world capitalist trade declines, so does its economic dependence on the external sphere increase. This is reflected in the growth of U.S. export quota.^^2^^ The fact that these two mutually interdependent tendencies operate in different directions largely accounts for the intensity and specific features of external trade contradictions between the United States, on the one hand, and the Common Market and Japan, on the other.
It should be noted that within the U.S.---Japan---Western Europe ``triangle'' the fundamental contradictions in external trade are focussed on the relations between the United States and the Common Market.^^3^^ These arc capitalism's primary economic centres and its ``superpowers'' in the field of trade. The economic complexes of North America and Western Europe are linked most closely to each other through the internationalization of production as well as of capital. At the same time, in keeping with the contradictory logic of capitalist internationalization, the United States and the Common Market are also the principal sources of discrimination in world trade although it would seem that they should be especially interested in avoiding _-_-_
~^^1^^ The Economist, London, October 10, 1970, p. 79.
^^2^^ Between 1953 and 1978 the share of the United States in world capitalist exports declined from 21 percent to 12 percent while the share of the EEC and Japan taken together increased from 32 percent to 47 percent. During the same period the United States' export quota in material production approximately doubled.
~^^3^^ A. N. Goncharov, Voina, kotoraya ne prekrashchayetsa (The War That Does Not Cease), Moscow, 1975 (in Russian).
190 obstacles to mutual economic relations. Moreover, foreign trade contradictions between the United States and Japan are also becoming deeper. The competitiveness of Japanese products is now higher. This is largely explained by the lower level of wages in Japan by comparison with the United States.While noting such a growth of protectionist attitudes it does not seem necessary to identify the initiators of specific trade confrontations, particularly since all participants seek to ascribe blame to others and to pass themselves for victims initiating countenneasures. It is appropriate, however, to draw attention to the extent to which such accusations are true. In our opinion accusations of this type that have been made since the formation of the EEC are close to the truth. A case in point is such assertions as "every day the EEC is looking more like a tight little protectionist club, instead of the free-trade champion it once claimed to be".^^1^^ Similarly the American press often admits that while the U.S. advocate free trade they practice protectionism. The main point, however, is that practically all capitalist countries have contributed to the intensification of "trade wars''.
It would be an oversimplification, of course, to infer from the increased frequency of such trade wars that the policy of liberalization has collapsed and that protectionism is generally growing, even though there is much evidence of this. As they define their foreign trade policies, bourgeois states find it necessary to recognize the contradictory factors on which contemporary protectionism is based. Protectionism is facilitated by socially demagogic positions, by slogans calling for the protection of domestic production from foreign competition, particularly in the case of old and relatively ineffective economic sectors (which are, moreover, the ones that are least internationalized), and by a wish to receive election votes associated with these sectors.
Yet protectionist tendencies are opposed by the interests of big business, and above all of transnational corporations, who seek to provide for an unimpeded movement of commodities within their own international industrial complexes. Account is _-_-_
~^^1^^ "A Missed Opportunity'', The Wall Street Journal, March 1, 1967, p. 16.
191 taken, moreover, not only of the internationally unpopular character of protectionist policies lm( also of the clanger of reprisals. Essentially all these processes may he viewed as a struggle between national forms of capital and monopolies. Within this struggle one of the major issues concerns protectionism.In stressing the contradictory character of capitalist liberalization and the intensification of protectionist elements while the general economic difficulties accumulate, let us consider the extent to which this does point to a radical shift in the long-term tendencies that govern policies relating to foreign trade. On the one hand, one may expect that the flaring of contradictions in the sphere of trade that has occurred since the early 1970s will be recorded in history not only as the sharpest one since the Second World War, and the one that extended to the greatest range of commodities, but also as the most prolonged one during that period. A coincidence of a number of specific circumstances during that time does not alter the essence of the matter, since the seeds of protectionism fell on receptive ground, thus only intensifying the disproportion within capitalism's world economic relations that appeared in the development of individual sectors. Generally it would appear that the crisis of 1974--1975 has not only impeded liberalization but has caused it to regress by several years.
On the other hand, it is hardly possible to view the successes of neo-protectionisrn as the final demise of liberalization policies, since there have been no fundamental changes in the most recent period in the objective need for a further internationalization of productive forces. One should not, of course, underestimate the seriousness of the numerous barriers to a normalization of international trade. There are no grounds, however, for overestimating them, as certain bourgeois theoreticians are inclined to do. For example, Richard N. Cooper writes that "world trade policy has entered an acute phase. Tariff reductions agreed under the Kennedy Round in 1967 are still taking place, but the future of trade policy beyond 1971 lacks direction. There are even dark mutterings of an impending `trade war' among the major trading nations. . .''^^1^^.
_-_-_~^^1^^ Richard N. Cooper, Issues for Trade Policy in the Seventies, p. 3.
192Yet it is precisely at a time of economic crisis, which stimulates protectionist measures, that world capitalism places its hopes on the further liberalization of external trade and regards it as a means for overcoming growing difficulties. It is by no means a coincidence that one of the first joint actions of capitalist countries, following the economic crisis, was to agree on a code of responsible behaviour (within the OEGD framework) designed to avoid counter-productive forms of competition through unilateral measures to limit imports and stimulate exports. Already at the first meeting in Rambouillet in 1975, the leaders of major capitalist countries were explicit in stating that "in a period where pressures are developing for a return to protectionism . . . we believe that the multilateral trade negotiations should be accelerated. . . They should seek to achieve the maximum possible level of trade liberalization therefrom.''^^1^^ The actual manner in which these good intentions are implemented is another matter, but the awareness that it is important to check protectionism in a critical situation is itself noteworthy.
Capitalist foreign trade policies generally are marked by an internally contradictory nature that has long expressed itself in the struggle between free trade and protectionism. The realities of the present situation confirm Lenin's conclusion that "it is not a fight between free trade and protection . .. but between two rival imperialisms, two monopolies, two groups of finance capital".^^2^^ Each step along the path of a liberalization of capitalist international trade as well as each impediment on that path should accordingly be viewed primarily as a new landmark in a struggle to redistribute the world market that records changing balances of forces among leading trade powers.
In analyzing the features that characterize the international trade of capitalist countries today one observes both definite achievements in trade liberalization and increasingly frequent eruptions of trade wars. This raises the following question: What _-_-_
~^^1^^ The New York Times, November 18, 1975, p. 14.
~^^2^^ V. I. Lenin, "Imperialism, the Highest Stage of Capitalism'', Collected Works, Vol. 22, p. 290.
__PRINTERS_P_193_COMMENT__ 13---872 193 is the relation of the present stage within the long-term evolution of external trade policies? On the one hand, it might appear that nothing is taking place that is new, and that all recent changes fit into the familiar pattern of struggle between free trade and protectionism that has been taking place for several centuries and is generally typical for capitalist external economic exchanges. On the other hand, it is also true that in the last several years protectionist tendencies are acquiring some kind of new and unfamiliar colouring in ways that offer grounds for referring to the emergence of a qualitatively new phenomenon rather than simply another intensification of contradictions on the world capitalist market.Above all, this signifies the development of new forms of protectionism and the application of new, less visible and more refined methods for impeding deliveries of foreign goods to the markets of developed capitalist countries. But another feature of the modernized instruments of protectionism concerns the fact that changes in the organizational forms of customs barriers are becoming discriminatory, and are directed against specific groups and countries and types of industrial output rather than simply against foreign commodities generally.
What is, then, the evidence for this new protectionism, what is its scope, and what are its methods? Above all one should note that aside from traditional methods that rely on unilaterally established import barriers, there is an increasing emphasis on a variety of internationally coordinated trade barriers. They include ``voluntary'' limitations on exports that are applied not only at the private level but primarily at the level of governments, as well as new methods for applying anti-dumping rules in regulating both the volume and prices of imported products. Voluntary export restraints are formalized as multilateral as well as bilateral agreements concerning either the volume of trade in particular industrial products (orderly market arrangements) or the share of individual countries in marketing these products (organized free trade). They may also take the form of special international agreements for regulating reciprocal trade in industrial products.^^1^^
_-_-_~^^1^^ Such agreements, which are primarily concerned with limiting exports and imports of certain industrial products for which competition __NOTE__ Footnote cont. on page 195. 194
An early instance of such ``voluntary'' restraints on exports was an international Long-Term Agreement on Cotton Textiles of 1962. In 1973 this was extended to all types of textiles ( MultiFibre Arrangement). According to its terms developing countries that had reached a certain ability to compete in a number of textile products were in effect assigned a system of quotas. In the event suppliers disregarded them Western countries would apply explicit import barriers. And although that agreement was presented as a means for ''organizing trade" and for serving the ``prosperity'' of its participants, even Western specialists admit that it was viewed as "a weapon for retaining and solidifying restrictions and, in some respects, for extending them".^^1^^
An illustration of the use of anti-dumping legislation to limit the competitive powers of foreign suppliers is provided by the trigger price mechanism on ferrous metals that was introduced in the United States in 1978. Under that arrangement imports at prices of 5 percent or more below the currently established level are subject to additional duties. A similar system of minimal import prices on these products was introduced by the Common Market countries in 1978. It was specified that these ``temporary'' measures would remain in force until foreign suppliers accept ``voluntary'' commitments to adhere to the price levels existing within the EEC and take appropriate measures to limit their exports.
The new forms of non-tariff barriers extend to a wide range of products. The latter include not only products of light industry, which have long been subjected to protectionism ( textiles, clothing, shoes, other leather goods) but also those of a number of other sectors. They extend to investment goods as well as to consumer goods, and include products that are _-_-_ __NOTE__ Footnote cont. from page 194. is particularly intense, should not be confused with international commodity agreements for various types of raw materials. The latter largely serve other objectives (primarily the regulation of prices rather than of terms on which access to the markets of importing countries is permitted). While the agreements concerning the industrial products that have been mentioned are a typical manifestation of contemporary neoprotectionism, raw material agreements bear almost no relation to it.
~^^1^^ Sidney Golt, Developing Countries in the GATT System, Thames Essay No. 13, Trade Policy Research Centre, London, 1978, p. 9.
__PRINTERS_P_195_COMMENT__ 13* 195 technologically complex (rolled steel, ships, radio receivers and television sets, electronic components, chemical products). Even according to a very conservative estimate prepared by GATT, such import barriers on the part of developed Western countries affected approximately 3-5 percent of international trade between 1975 and 1977 and amounted to 30 to 50 billion dollars.^^1^^ In 1976 such ``voluntary'' restraints were applied to trade in special steels, television sets, radio receivers, and portable calculators,^^2^^ let alone the international agreement on textile products, whose exports on the world's capitalist market in 1975 amounted to 37 billion dollars.^^3^^The emphasis on such restraining measures represents an additional factor in the crisis of the international capital division of labour itself, for as American specialists recognize, ''. . . this neo-mercantilism is a profoundly disruptive force in international relations".^^4^^ It has produced a growing concern among most of the participants in international trade. As UNGTAD V documents observe "the new wave of protectionism implies that a change in the character and emphasis of protectionism has taken place which includes the introduction of new protective devices''.^^5^^
All this reflects the new forms of competitive struggle in the international trade policies of developed capitalist countries which call for a separate consideration. They justly deserve such terms as "new protectionism" or ``neo-protectionism'' that are employed to describe them. It should be noted, however, that the term ``neo-protectionism'' has been used repeatedly during the prolonged history of capitalist world trade whenever import _-_-_
~^^1^^ U.N. Document TD/226, Manila, May 1979, p. 4.
~^^2^^ Tracy Murray, Wilson Schmidt, and Ingo Walter, "Alternative Forms of Protection Against Market Disruption'', Kyklos International Review for Social Sciences, Basel, Vol. 31, No. 4, 1978.
^^3^^ U.N. Document TD/B/C2/192, 23 March 1978, p. 2.
~^^4^^ Ilarald B. Malmgren, "Coming Trade Wars? Neo-Mercantilism and Foreign Policy'', Richard N. Cooper, Ed., A Reordered World. Emerging International Economic Problems, Potomac Associates, Washington, V.C., 1973, p. 26.
^^5^^ "UNCTAD V. Protectionism: Trends and Short-Term and LongTerm Policies and Actions to Deal with the Problem'', U.N. Document TD/226, 6 March 1979, p. 2.
196 restrictions were periodically increased. It is therefore more accurate to refer to the present measures as "new neo-protectionism''. But what is the essence of this phenomenon? How does it differ from the "old neo-protectionism"? And how does it relate to the general tendency towards the liberalization of international trade?Above all while there is no doubt concerning the negative influence of these forms of trade restraints on the development of world economic relations it should be recognized that this problem is so recent, so contradictory and also so carefully hidden that it is still very difficult to establish the essence of this most recent neo-protectionism. It would probably be simplest to view it as a change in the forms of protectionism and a replacement of import duties by new types of customs barriers. And indeed while tariff barriers decline non-tariff barriers become increasingly visible. Even when they remain constant their relative significance becomes greater.
The point, however, is that non-tariff barriers do not remain constant. On the contrary, they are becoming so refined that they remain increasingly immune to various liberalization measures that are directed against traditional forms of protectionism. It is precisely because they make it possible to ignore a system of international regulations and of integration of trade policy norms---in particular those established by GATT---that is functioning relatively well that the protectionist effect of such `` voluntary'' restraints on exports and similar devices is so significant. As specialists working in UNGTAD observe "more importantly, there has been increased use of measures lying outside the scope of GATT in the form of Voluntary export restraints' and ' orderly marketing arrangements', where the exporting sources `agree' to limit their exports, as well as new policies such as the extended anti-dumping procedures.. .''.^^1^^ It is because it is making especially visible the inappropriatcness of the existing system of world economic relations in truly overcoming the contradictory interests of participants in world capitalist trade that `` neoprotectionism'' is leading to an intensification of contradictions.
We believe that many of the neo-protectionist tendencies originate in the major geographic shifts in both the international _-_-_
~^^1^^ U.N. Document TD/226, 6 March 1979, p. 4.
197 division of labour and the composition of participating sectors and firms. But they also reflect the broader competitiveness of a number of consumer goods in developing countries, as well as the fact that developed capitalist powers are not ready to initiate a restructuring of their economies to adjust to the new conditions governing world trade. At first sight there is nothing fundamentally new in this respect, for as earlier, the principal objects of protectionism are old industries such as textiles, clothing, shoes, and the food industry, which are not so closely linked to technical progress.But the "new neo-protectionism" may also be viewed in the light of general tendencies toward a change in the structure of the division of labour between centres of imperialism and developing countries. In particular this refers to the efforts to relocate the most material-intensive and labour-intensive processes to developing regions. This includes a number of advanced industrial sectors representing incomplete technological cycles, as well as attempts on the part of imperialism to participate more actively in the industrialization of developing countries in forms that would primarily meet the interests of the developed countries themselves. Finally, and this is especially important, it is primarily through international monopolies that a policy of " technological neo-colonialism" is being carried out that transforms the new states into both industrial and raw material appendages of leading capitalist states.
The fact that historically progressive processes relating to the industrialization of developing countries and a deepening of the international division of labour are carried out on a privatemonopolistic basis creates sources of extremely deep, truly antagonistic contradictions whose consequences are destructive. In its turn, the dominant position of international monopolies influences the ways in which protectionism expresses itself. It produces a different impact on industrial sectors, depending on their monopolization by transnational corporations.
These general considerations acquire concrete dimensions when the actual results of the "new neo-protectionism" in individual areas of the economy are considered. In particular the influence of import restrictions on trade in textile goods is especially marked, as it is in the case of clothing and shoes. For these 198 products developing countries have reached a level of competitiveness in terms of both prices and quality that has permitted them to play an important role in meeting the internal needs of developed countries. For example, 52 percent of all imports of silk cloth into developed capitalist countries in 1976 originated in the developing states, as did 49 percent of their imports of cotton textiles, 46 percent of leather clothing, 43 percent of textile clothes, 33 percent of other types of knitted clothing, and 18 percent of shoes.^^1^^
It is not a coincidence, of course, that it is precisely the output of these sectors, which are less dependent on foreign capital, that encounters particular difficulties on the markets of Western powers and is subjected to the greatest non-tariff barriers. The reasons must apparently be sought in the protectionist policies of the powerful monopolistic associations of consuming countries.
A similar picture emerges in a number of metal-producing sectors (ferrous and non-ferrous metallurgy, shipbuilding, basic chemicals) where suppliers from developing countries and in some cases of developed countries as well (Japan, Australia, a number of West European states) are exposed to the competition of large monopolies that are primarily engaged in serving the needs of their own domestic markets.
All these elements of the current neo-protectionism of Western powers are especially harmful to the foreign trade position of developing countries, to say nothing of the clearly discriminatory nature of various restraining measures directed against the growing industrial exports of socialist states. In this connection Western specialists admit that "developing countries can acquire relatively easy access to OECD markets provided that they deal through the most powerful marketing and producing enterprises ... if, on the other hand, a developing country exporter chooses to 'go it alone' in an unskilled labour-intensive industry . . . he is likely to face trade barriers. . .".^^2^^
It should be added that this refers to only some of the several _-_-_
~^^1^^ U.N. Document UNCTAD/ST/MD/18, 30 March 1978, p. 9.
^^2^^ Gerald K. Ilelleiner, "The New Industrial Protectionism and the Developing Countries'', Trade and Development. An UNCTAD Review, United Nations, Geneva, No. 1, Spring 1979, pp. 27--28.
199 Emacs-File-stamp: "/home/ysverdlov/leninist.biz/en/1982/TACC284/20071009/284.tx" __EMAIL__ webmaster@leninist.biz __OCR__ ABBYY 6 Professional (2007.10.18) __WHERE_PAGE_NUMBERS__ bottom __FOOTNOTE_MARKER_STYLE__ [0-9]+ __ENDNOTE_MARKER_STYLE__ [0-9]+ sources of neo-protectionism. For even though products that are technically relatively complex, or else corresponding components, may be supplied by TNG subsidiaries in developing countries this does not yet provide them with an easy access to the markets of developed states. While it would seem that the TNCs are interested in an unimpeded movement of commodities within the framework of intracorporate international division of labour, developing countries find themselves in a particularly disadvantageous position in such cases, for they then bear the costs of the intermonopolistic competitive struggle. It often happens that the most powerful international monopolies, which are located primarily in developing countries, also seek to persuade their own governments to introduce protectionist barriers primarily against imports from developing countries. Such measures impede the effectiveness of those competitors who rely most on intracorporate cooperation with developing countries.This draws attention to the inconsistency of the most common argument employed by advocates of contemporary neo-- protectionism, namely that it does not harm the new states, since most of their industrial exports are concentrated in a small number of countries. Gerald Helleiner, who is a Canadian researcher, notes that "nothing could be further from the truth. Apart from the fact that in the long run every developing country aspires to a more diversified export bundle which includes industrial products, there is no country so poor that even today it is not affected by problems of market access at least for its processed raw materials.''^^1^^ Thus it makes no difference that some of the neo-protectionist measures affect primarily trade among developed countries (for example, the agreement concerning "organized marketing" in stainless and tool steels among the United States, the EEC, Japan, Canada, and Sweden; or concerning trade in television sets, radio receivers and portable calculators among Great Britain, Japan and the Benelux countries). Today some developing countries are already exporting these products, and in the future their number will undoubtedly increase.
The argument of advocates of neo-protectionism that import barriers are necessary to avoid unemployment is equally _-_-_
^^1^^ Ibid., p. 13.
200 inconsistent. They often describe unemployment almost as if it is attributable exclusively to a flood of foreign products. The purpose of such demagogic assertions is to conceal inherent deficiencies of the capitalist system itself, under which the costs of structural shifts produced by the scientific and technical revolution are transferred entirely to workers. Even calculations performed by American economists indicate that in the United States between 1963 and 1971 "the loss in job potential in import-competing industries due to foreign trade has averaged about 44,000 jobs per year---about 0.2 percent of total manufacturing employment, and an even more minute fraction of the total U.S. labour force. The loss of job potential due to increased labour production was about six to nine times as great as the loss due to foreign trade in import-competing industries.''^^1^^The manner in which various groups of countries react to the spread of new forms of contemporary neo-protectionism is symptomatic. While the Western powers simultaneously declare their condemnation of protectionist tendencies and justify their measures in limiting foreign imports by referring to internal economic difficulties and to the need to defend the interests of their own producers, developing countries are quite active in oppossing such policies, which restrain their exports and constitute a major impediment to their industrial development. As they support the just strivings of developing states socialist countries emphasize the discriminatory nature of this new form of limiting international trade, which is primarily directed against developing countries and the states of the socialist community. In such a context they seek to expose the relations that exist between neo-protectionist tendencies and the ``global'' policies of transnational monopolies.
The activities of international organizations responsible for opposing the growing restraints on international trade reflect different approaches to identifying the actual causes and objectives of the new neo-protectionism. A particularly visible clash occurred in the summer of 1979 at a session of UNGTAD _-_-_
~^^1^^ Charles R. Frank, Jr. with the Assistance of Stephanie Levinson, Foreign Trade and Domestic Aid, The Brookings Institution, Washington, 1977, p. 36.
201 between the advocates and the opponents of normalizing the world economic relations and reconstructing them on a just and democratic basis.At the conference in Manila the socialist countries proposed a constructive comprehensive programme for overcoming ' neoprotectionism. A joint document presented by these countries indicated persuasively that "an intensification of protectionism on the part of developed market economy countries exerts a negative influence on the development of international trade as a whole and serves as a major impediment to extending mutually advantageous economic exchange in ways that take into consideration the interests of all groups of countries. In creating additional artificial barriers to international trade developed capitalist countries impede its development on an equitable and truly democratic basis. Above all, new forms of protectionism harm the exports of developing and socialist countries and this causes them to be discriminatory.''^^1^^ Particular attention was given to the interrelations that exist between neo-protectionist tendencies and the very nature of capitalist economies, as well as to the current intensification in their contradictions. It is fairly evident that it is the serious consequences of the economic crisis of the mid-1970s that have served as "the immediate causes of an intensification of protectionism, with the help of which developed countries possessing market economies seek to solve their problems at the expense of the interests of other countries".^^2^^
This point of view, which is based on a well-structured argument, takes into consideration the interests of developing countries, which also stressed the responsibility of Western powers in spreading protectionism and called for decisive measures to overcome it. But in spite of the unambiguous position of the overwhelming majority of participants in the Manila conference, the obstructionist tactics of the Western powers made it impossible to develop a comprehensive programme designed to permit an effective struggle against neo-protectionism. Aside from an appeal to developed countries to adhere to earlier commitments concerning the freezing of import restrictions at their existing _-_-_
~^^1^^ U.N. Document TD/257, 14 May 1979, p. 2.
~^^2^^ Ibid.
202 level and to seek their reduction, the compromise resolution that was adopted (Resolution 131/V) forwarded all other problems bearing on a struggle against neo-protectionism to bodies in UNCTAD and in GATT.^^1^^ Past experience has shown that Western powers often use such types of postponement to delay solutions on many vital issues. One need not be a prophet to know that the struggle against the new neo-protectionism will be prolonged and persistent.Thus, a specific feature of the present stage in the evolution of capitalism's external trade policies is that the tendency towards liberalization generally intensifies rather than alleviates interimperialist differences in that sphere as it opposes countervailing tendencies towards protectionism. Clashes between these tendencies and interactions among them activate entire chains of trade policy conflicts and increase the tensions that exist throughout capitalism's entire system of international economic relations. It is the dialectical unity of these factors operating in different directions that defines further approaches to liberalization.
While prospects for the further development of that process will depend primarily on the objective needs of the international division of labour they will also largely depend on purposeful activities in formulating trade policies. These may either contribute to external trade or impede it. In spite of the highly contradictory nature of the practical measures that have been adopted in the field of trade policies in recent times, the accumulated experience---both positive and especially negative---has been such as to make bourgeois ideologists and political leaders increasingly aware of the importance of overcoming trade barriers for economic progress. Subjective though it may be, this factor cannot be neglected, particularly since its significance increases as statemonopolistic intervention in economies takes place.
In recent years the proposition that it is important to liberalize trade, and that trade is linked to the general problems of _-_-_
~^^1^^ U.N. Document TD/268, Part One, 13 July 1979, pp. 5--8.
203 the world capitalist economy has come to be generally accepted both at the theoretical level and in practice. It serves as a basis for the overwhelming majority of Western forecasts of international economic relations. For example, Harry Johnson, a prominent bourgeois specialist in that area, has observed that ".. . trade liberalization in the 1970s [will be] a crucial factor in the further progress of the whole world economy''. He called for a rapid development of a "bold conception of the global benefits of much enhanced freedom of trade, and a global strategy for working towards trade liberalization".^^1^^ Similarly William Diebold, Jr., an American researcher, has proposed ''. . . the removal of barriers to trade and payments" as an objective that "remains high on the list of objectives for the '70s'',^^2^^ while Hiroshi Kitamura, a Japanese researcher, believes that "the greatest task before the North Atlantic world is trade liberalization".^^3^^ In a report to the OEGD prepared by a group of experts under Jean Ray, one finds the collective point of view of the leading capitalist countries concerning the proposition that "these efforts [at liberalization] should be resolutely continued"^^4^^ in the decades that will follow.This last statement is symptomatic in the sense that such a formulation of the problem does not limit itself to pious wishes in favour of free trade but emphasizes the need for active international actions. In particular, William Diebold states that it is difficult to accept the view of traditional advocates of free trade, who believe that only a modest measure of coordination of policies of various countries is needed in order that free trade be effective.^^5^^ Gerald M. Meier, an American economist, stresses that "free trade is not a natural state of affairs, and trade warfare has to be averted by some form of multilateral _-_-_
~^^1^^ Harry G. Johnson, Ed., Trade Strategy for Rich and Poor Nations, London, 1971, pp. 6, 22.
~^^2^^ William Diebold, Jr., The United States and the Industrial World. American Foreign Economic Policy in the 1970s, Praeger Publishers, 1972, New York, p. 336.
~^^3^^ Hiroshi Kitamura, "Japan in the Community of Industrialized Countries'', Pierre Uri, Ed., op. cit., p. 92.
~^^4^^ The Future of Trade and Economic Relations. The Ray Report, The OECD Observer, October 1972, p. 20.
~^^5^^ William Diebold, Jr. op. cit., p. 326.
204 surveillance. ..''. He proposes a strategy of "peacekeeping ... in international economics as in political affairs" in order that ''. . . the real forces of international economic integration ... be allowed to operate and the gains from trade ... be shared among all nations. . .''^^1^^It should be emphasized that in many ways such conceptions resemble traditional slogans of advocates of free trade only superficially. While the ultimate objectives of ``old'' free traders and today's advocates of liberalization formally appear to coincide, there is a definite shift in emphasis from "free competition" in external trade to "freedom of economic activities" at the international level for ``global'' monopolies. It is these elements of ``merging'' of the internal and external spheres of contemporary economies that define the central approach of trade policies and the prospects for trade liberalization that has become vital to the further development of the international division of labour.
At the same time the laws that govern the capitalist mode of production have produced contradictions within liberalizing tendencies that express themselves through neo-protectionist barriers.
This takes the form of inconsistencies with regard to liberalization, as well as of an inclination to compromise in theoretical and practical questions of trade policy. An open pragmatism on the part of the advocates of free trade influences all initiatives in that area. It causes a deliberate slowness in liberalizing processes, their division into stages together with a specification of only limited objectives at each successive stage.
In particular such a strictly pragmatic approach to these problems has caused a full abandonment of customs duties on industrial products moving between developed capitalist countries to be defined as the major objective for the immediate future. This idea was proposed by a group of British businessmen and researchers, among others, that was established in order to develop a long-term strategy for the international economic relations of the Western world during the 1970s. A similar view has _-_-_
~^^1^^ Gerald M. Meier, Problems oj Trade Policy, Oxford University Press, Oxford, 1973, pp. 3, 4.
205 been expressed by Olivier Long, Director-General of GATT. He has pointed to the experience of the Common Market and of EFTA in arguing for tariffless trade in finished goods.^^1^^ Since practical steps to that effect have been taken to create a tariffless zone throughout nearly all of Western Europe, and since the average level of tariff duties today is relatively insignificant, such a prospect appears to be more or less realistic.Another area that has been emphasized in the efforts of corresponding governments and international organizations concerns non-tariff barriers. The need to liberalize them has become particularly evident following the tangible reduction in import tariffs as a consequence of the Kennedy Round. This refers primarily to quantitative restrictions. These are already relatively weak in many sectors of world capitalist trade and also readily lend themselves to international comparisons, thus facilitating joint measures designed to reduce them. On this issue advocates of liberalization display their militancy and propose, like the OEGD experts, a complete rejection of quantitative barriers, although with the usual loopholes that characterize "neo-free traders" generally (``except where they form part of safeguard measures, applied not arbitrarily or unilaterally but after multilateral discussions'').^^2^^ A campaign against non-tariff barriers has now become one of the major points emphasized by GATT. It is true that the outcome of the Tokyo Round, which took place under conditions that were considerably more difficult than during the earlier rounds, shows how much remains to be done in reducing non-tariff barriers, and how difficult it is to produce long-term forecasts of the liberalization of world trade.
Still, there are no longer any doubts concerning a number of factors. For example, in the case of trade in agricultural products interimperialist contradictions are extremely intense. As a result it is highly unlikely that the superprotectionist barriers that exist in this area can be reduced in the foreseeable future. Even in such an openly apologetic document as the Report of the Commission on International Development which proposes a _-_-_
~^^1^^ Towards an Open World Economy. Report by an Advisory Group, MacMillan, London, 1972, p. 158.
^^2^^ The OECD Observer, October 1972, p. 21.
206 ``new" external economic policy for imperialism, it is recognized that "no dramatic advances towards free trade in agriculture can be expected in the short run".^^1^^ Even after the limited measures proposed by the Tokyo Round are carried out, it is likely that the level of protectionism in the agrarian sector will remain extremely high and that trade liberalization in this area--- to the extent that it is at all possible, given the world capitalist economy's socio-economic structure---will remain a task for the distant future and will continue to be highly problematic.Still on the whole, in spite of the inevitable costs of a capitalist liberalization of trade it continues to develop. It is especially important that it already appears to be irreversible in the long run, for it has developed as far as has the process of internationalization of economic life on which it rests. It is not a coincidence that the ideologists of monopolistic capital are formulating their agenda not in terms of reducing trade policy barriers, but of liquidating them completely. This is viewed as a major condition for the capitalist economy's further development. That conception was first formulated comprehensively in a declaration of British economists, who emphasized that "if multilateral trade negotiations are viewed in an historical context, it can be seen that freer trade could be the only realistic objective of the free-enterprise world in the 1950s and 1960s. .. The 1970s should be the beginning, therefore, of a new phase in the movement towards an open world economy in which free trade can be regarded as not only a realistic but also a necessary objective."^^2^^ While this has partly turned out to be the case---as indicated by the outcome of the Tokyo Round---the intensification of neoprotectionism must also be recognized.
This also raises the following question: How should the _-_-_
~^^1^^ Lester B. Pearson et. al., Partners in Development. Report of the Commission on International Development, Praeger Publishers, New York, 1969, p. 85.
~^^2^^ Towards an Open World Economy, p. 11. It should be noted that its authors employed literally the same words to formulate their position after the beginning of the economic crisis and the growth of protectionist tendencies (Hugh Corbet and Robert Jackson, Eds., In Search of a New World Economic Order, p. 19.
207 current stage in liberalization be viewed within a long-term historical perspective on the evolution of the world capitalist market? Without considering the history of external trade policies,^^1^^ let us simply recall the long-term trends of customs duties in the U.S. Since there are no data concerning other elements of customs control, and keeping in mind that traditionally the United States has been a country with high protective barriers (Table 32) we will assume, for the sake of argument, that the level of import duties may be viewed as a criterion of the level of protectionism.Of course in no case can one view the current level of import duties in the U.S., which incidentally is generally similar to that __PARAGRAPH_PAUSE__ Table 33 Average Level of Import Duties in the U.S. (percent of value) Years On Imports Subject to Tariff Duties On All Imports 1890--1894 48 23 1894---1897 41 21 1897---1909 47 26 1909--1913 41 19 1913---1922 27 9 1922---1930 39 14 1931---1935 50 18 1936---1940 38 15 1940---1945 32 11 1946---1950 16 7 1951---1955 12 5 1956---1960 11 7 1961---1965 12 7 1966---1971* 8 6 1972---1979** 8 5 * Following the period set aside for implementing the measures under the Kennedy Round. ** Author's estimate. Source: United States International Economic Policy in an Interdependent World, Washington, July 1971, Vol. 2, p. 81. _-_-_
~^^1^^ See, for example, Gerard Curzon, Multilateral Commercial Diplomacy, Chapter One.
208 __PARAGRAPH_CONT__ of other developed capitalist countries, as a measure of the absolute level of contemporary protectionism. Yet no matter how one interprets these data it would be difficult to deny that with regard to the tariffs, at least, there has been significant progress in the liberalization of trade.It is hardly useful to attempt forecasting specific dates and magnitudes in world capitalist trade's liberalization over the long term. Instead, one can only define the principles underlying approaches to that problem, and weigh the relative importance of individual factors that govern the possibilities and limitations of a ``liberalization'' of international trade under capitalism.
At a very general level one may assume that the possibilities for liberalizing external trade are as broad as are the objective requirements for an internationalization of productive forces, and that the limits to liberalization are therefore defined by the internally contradictory nature of the international division of labour under capitalism. It is not unexpected that, as Western researchers have concluded in recent years, the economic interdependence of states "began to be seen by some as perhaps a source of more problems than benefits".^^1^^ Clearly the coexistence of two irreconcilable principles that express themselves in the mutual opposition of free trade and of protectionist tendencies will fully disappear only together with the world capitalist economic system itself.
Yet while protectionist elements may temporarily become even stronger at times of increased economic difficulties, the tendency towards a further emphasis on international economic exchange activities still appears to prevail, for it stems from the further enhancement of the role of the external sphere in economic life as further progress takes place in science and technology.
The experience of recent years has shown that in spite of the seemingly growing complexity of responding to the external economic problems of world capitalism resulting from unprecedented impediments, the tendency towards a liberalization of exchange _-_-_
~^^1^^ Richard Blackhurst, Nicolae M. Tumlier, Trade Liberalization, Protectionism and Interdependence, Geneva, November 1977, p. 1.
__PRINTERS_P_209_COMMENT__ 14---872 209 activities continues to prevail. At the present time one cannot see any forces that could alter that tendency.Even if one accepts the seriousness of the threats that are posed by the new neo-protertionism, one cannot neglect the outcome of the Tokyo Round, for in spite of its contradictory nature, this still represents a further step towards liberalization. It is also symptomatic that the negotiations under the Tokyo Round were completed towards the end of 1979, i.e., at the beginning of a new decade, that was marked from the very first by further intensification of all the economic and socio-political contradictions that characterize modern capitalism. The fact that in spite of this it was possible not only to arrive at an agreement on the second most significant reduction in tariff duties in postwar years, but to envisage concrete international measures for limiting non-tariff barriers for the first time points to an objective need for a liberalization of external economic exchange activities. This need increases, moreover, at times of difficulties produced by crises. For capitalism also seeks to overcome these difficulties through a further deepening of the international division of labour. It is of course true that because of the inherent contradictions of the capitalist system that tendency then also encounters an opposing tendency towards neo-protectionism, especially at times of crises. In the long run it would be difficult to deny the growing importance of the international division of labour and of the factors that are associated with it. For in the final analysis this corresponds to the interests of a further development of international production, and what is most relevant, to the interests of international monopolistic capital, which is acquiring an increasing influential role within world capitalism's economic hierarchy.
In spite of these contradictory factors one may therefore expect that improvement in conditions of international exchange in industrial products in the long run, especially of technically complex items, is more probable than a growth in impediments. Above all this refers to tariff duties and quotas.
In particular, it is possible that while the current cyclical crisis is overcome the large zones of tariffless or else preferential trade that already have or else are being established will continue to develop. These include the Common Market and countries 210 associatcd with it,^^1^^ the West European zone of tariffless trade in industrial products, the American-Canadian agreement concerning the free exchange of a number of industrial products, the system of general preferential terms for exports of manufactures and semi-manufactures from developing countries to developed capitalist countries, and individual preferential trade zones between developed and developing countries. But there will probably also be a tendency towards a gradual, although contradictory merging of such zones, most probably through the absorption of some by others, but ultimately resulting in a widening of the international "economic space" that will be available for the development of international production activities in advanced economic sectors, primarily in the interest of the TNCs.
But as nationally differentiated financial groups retreat under the blows of international monopolistic supergiants, they will probably shift the centre of gravity in the struggle against liberalization to the highly differentiated area of non-tariff and noncustoms protectionism, especially in order to hinder emerging industrial exports from developing states. Aside from the traditional instruments of agrarian protectionism, opponents of liberalization will most probably be able to take advantage of such new factors as the need of imperialist powers for imported fuel supplies and the growing commitment of developing countries to independent policies with regard to their natural resources. This makes the prospects of a substantial reduction in agrarian and raw material protectionism as problematic as in the past. Capitalism is even less able to arrive at fundamental solutions to these problems than with regard to trade in industrial goods.
This brings to mind the words of Adam Smith. Writing at the dawn of capitalism, and referring to Great Britain, he observed that to expect completely free trade would be as naive as to expect a Utopia. Today we can fully appreciate the realism of this great British scientist.
_-_-_~^^1^^ Initially the Lome Convention of 1975 concerning trade and economic relations between the EEC and countries of Africa, the Caribbean, and the Pacific Ocean included 46 developing countries. Following its revision in 1979 there were 57 new states.
211 __ALPHA_LVL2__ 2. Imperialism and Developing Countries:The advent of political independence by a large group of new states whose peoples freed themselves from colonial oppression has marked an important stage in the progress of mankind. The appearance of that powerful revolutionary force has strengthened the anti-imperialist struggle and has perceptibly weakened the position of imperialism.
A comprehensive characterization of that process is found in the CPSU Central Committee's Report to the 25th Party Congress.
``Glancing at the picture of the modern world one cannot help noticing the important fact that the influence of states that had only recently been colonies or semi-colonies has grown considerably.
``It may definitely be said about the majority of them that they are defending their political and economic rights in a struggle against imperialism with mounting energy, striving to consolidate their independence and to raise the social, economic and cultural level of their peoples.''^^1^^
The new balance of forces on the world stage, the increased power of the socialist community of nations, the successes of the national liberation movement, and the need for widening international economic exchange on the basis of genuine equality and mutual advantage pose new tasks in international economic cooperation. As these progressive processes gain in strength the disharmonies that exist between the new tendencies in developing world economic relations and the old norms that developed at a time when imperialism fully prevailed on the world market, are becoming increasingly evident.
_-_-_~^^1^^ L. I. Brezhnev, Report of the CPSU Central Committee and the Immediate Tasks of the Party in Home and Foreign Policy. XXVth Congress of the CPSU, p. 16.
212This produces an inherent need for decisive measures to achieve a progressive restructuring of international economic cooperation and create a more healthy climate for world trade that would accord with the spirit of the times. It is that need, which had already matured in the early postwar years, and became especially strong in the early 1960s when the colonial system was finally dismantled, that has brought the world to the threshold of a qualitatively new stage in the development of external economic policies. Their central concern is to formulate and then implement progressive norms of international cooperation. This was especially important for developing countries possessing backward economies marked by a one-sided orientation on external markets, and unable because of their unequal position within the international capitalist division of labour, to make effective use of the advantages of external economic exchange.
While these problems emerged first in the field of world trade, they acquired a broader content and eventually came to relate to a much wider set of issues as they were considered in various international organizations. Today, in fact, they bear on the entire complex of world economic relations, including various aspects of relations between capitalist states and developing countries. Faced with pressure from progressive forces capitalist countries have agreed to at least discuss problems that are vital to developing countries, such as the export of capital, the activities of international monopolies, the transfer of technology, the development of maritime shipping, the industrialization of new states, the diversification of their economies, the reform of the world monetary system, and the stabilization of export revenues in developing countries, not to mention foreign trade itself.
The problem of external economic relations between developing countries and capitalist countries is of particular interest to the present study. It is in such a context that the general background against which the struggle of the developing states for achieving equal external conditions for their economic development is taking place should be considered. The first major step along that course was the United Nations Conference on Trade and Development in Geneva, held in 1964. At the time it 213 represented an unprecedented large international economic forum whose decisions marked the beginning of the present stage of discussions and solutions bearing on the entire complex of problems. For the first time it drew the attention of world public opinion to the need for a decisive modernization of the obsolete conditions governing international economic activities. An influential majority of socialist and developing countries condemned the relevant policies of imperialism and neo-colonialism.
A major outcome was the adoption of principles governing international trade relations and trade policies contributing to development.^^1^^ For the first time in the history of international relations basic progressive norms of international economic relations were recorded in a single document. It is difficult to exaggerate the importance of such basic propositions as the unequivocal validity of the principles of sovereign equality of states, the right of peoples to self-determination, and non-interference into the internal affairs of other countries. They also included a condemnation of discrimination based on differences in social systems and a confirmation of the sovereign right of each country to freely trade with other countries and to freely dispose of their natural resources in the interest of the economic development and welfare of their peoples. An important role was also played by that Conference's decisions on organizational matters, which subsequently led to the creation of UNCTAD---the United Nations Conference on Trade and Development. This serves as the General Assembly's highest body in these matters.
The activities of UNCTAD whose representative and democratic character and orientation on solving practical problems by discussing them in a wide political context have made it a unique forum within the system of United Nations organizations in many respects, subsequently laid the basis for further advances in the struggle of progressive forces to reorganize international economic relations. Moreover, the discussions taking place within UNCTAD have contributed to a more concrete formulation of complex and occasionally very novel problems in this area, _-_-_
~^^1^^ Proceedings of the United Nations Conference on Trade and Development, Geneva, 25 March-lG June 1964, Vol. I, United Nations, New York, 1964.
214 and have clarified the positions of various groups of countries in the course of attempts to find mutually acceptable solutions.It is on the basis of ideas that first crystallized within UNGTAD's various bodies that it subsequently became possible to develop many United Nations programmes embodying complex solutions to the problems of the new states' economic development with the help of international measures. The next major step in that direction was the announcement in October 1970 of the Second United Nations Development Decade.^^1^^ While the corresponding programme contained a number of contradictory elements it also represented a further development of UNCTAD's fundamental principles.
In subsequent years the role of the United Nations became especially active in formulating a wide range of problems relating to a progressive reconstruction of the entire system of international economic relations.
A number of important documents were adopted, including the programme of action for achieving a "new economic order'', approved by the Sixth Special Session of the UN General Assembly in May 1974,^^2^^ the Charter of Economic Rights and Duties of State,^^3^^ and the resolution of the Seventh Special Session of the General Assembly concerning development and international economic cooperation.^^4^^
Among these programme-oriented documents those that were most consistent in expressing progressive strivings reflected a growing recognition of the importance of normalizing international economic cooperation for the more rapid socio-economic progress of newly-emerged countries, and also these countries' concern with the negative influence of the growing instability of the world capitalist system on their own economies. They were also intended to formalize at the level of international law the struggle of developing countries, which now extended to all external economic relations, for a full re-establishment of their sovereignty over their natural resources, against neo-colonialism, and against the oppressive power of international monopolies in _-_-_
~^^1^^ U.N. Document A/Res/2626 (XXV), 2 November 1970.
^^2^^ U.N. Document A/Res/3202 (S-VI), 1 May 1974.
~^^3^^ U.N. Document A/Res/3281 (XXIX), 12 December 1974.
~^^4^^ U.N. Document A/Res/3362 (S-VII), 16 September 1975.
215 world trade. In the words of United Nations experts it is not surprising that "confronted . . . with a world industrial and trading structure embodying oligopolistic and monopolistic practices, perpetrated to an important extent by transnational corporations of developed countries and supported directly and indirectly by governments . . . developing countries should now be seeking the establishment of a new international economic order".^^1^^It is important to stress that a more decisive protection of their national interests by developing states was made possible by the socialist countries' comprehensive support of the newlyemerged countries' just aspirations. Such decisive measures of developing countries as the nationalization of international monopolies' property, the re-establishment of control over their natural resources, and the implementation of independent price policies were made possible only by the changing balance of power on the world stage and imperialism's loss of its former monopoly in supplying other countries with advanced equipment and technology---and incidentally arms---in a situation in which reliance on direct military intervention to "punish the unruly" had in fact ceased to be possible. At an earlier time this would have been unthinkable.
A stronger unity of the new states, spurred by their common external economic interests, also contributed substantially to these developments. Its organizational basis originated in the establishment of the Group of 77 developing countries at the Geneva Conference in 1964. These countries seek to speak as a single group at international economic forums by first agreeing to a common platform on each major issue. That was the case in 1968, for example, just before UNGTAD's Second Session, at which the developing countries presented the so-called Charter of Algeria; at UNCTAD's Third Session in 1972, where the position of the new states was based on the Declaration of Lima; at that organization's 1976 Session, which was preceded by the adoption of the Manila Declaration; and at its Fifth Session in 1979, which considered the Arusha programme of the Group of 77 (which now in fact includes over 110 countries).
While recognizing the growing strength of this tendency _-_-_
~^^1^^ U.N. Document TD/185/Supp. 2, 30 December 1975, p. 16.
216 towards integrated actions by developing countries, whose most effective actions are directed against neo-colonialism and the oppressive power of TNCs, one should not neglect the factors that operate in the opposite direction. There are elements of inconsistency in the position of the Group of 77 that are attributable to such factors as differing interests on particular issues, which are largely explained by the economic dependence of a number of newly-liberated countries on former colonial powers; the political heterogeneity of the developing countries' group, which produces a tendency towards compromises; and in some cases an insufficiently clear conception of ways in which socio-- economic problems may be solved. In particular, this often leads to an overemphasis on external financial resources, and especially private foreign capital in economic development of young countries and to a failure to recognize, when asserting claims on developed countries, the fundamental differences that exist in their socio-economic structures and sources of wealth. It is also expressed in regressive tendencies to divide the world on the basis of a simplified and apolitical conception of "a rich North and a poor South''.The contradictory character of the group of developing states in relation to external economic problems reflects the differentiation and polarization of class forces that is taking place in these countries and the selection by individual countries of different approaches to their socio-economic development. Some differences among them arise from recent changes in the structure of world prices, as sharp increases in the prices of fuels and of some types of raw materials produced a deterioration of the external trade position of many developing countries importing these products. As a result internal groups of "rich and poor countries" are beginning to emerge within the developing world itself.
The specific features that characterize the position of developing countries are seen in the United Nations programme for "a new international economic order" that was adopted at their initiative. It should be emphasized that its main elements are generally progressive, anti-imperialist and democratic, and this is of the greatest importance. Nevertheless this should not hide a certain inconsistency and contradictory character that attaches 217 to a number of propositions within that programme for it represents a compromise between differing positions held by individual developing countries.
The fundamental principles underlying that problem were noted at the GPSU 26th Congress. It was observed that "in the mid-seventies the former colonial countries raised the question of a new international economic order. Restructuring international economic relations on a democratic foundation, along lines of equality, is natural from the point of view of history. Much can and must be done in this respect. And, certainly, the issue must not be reduced, as this is sometimes done, simply to distinctions between "rich North" and "poor South".^^1^^ Without considering its details (which have been examined in the proceedings of an international group of Marxist research scientists),^^2^^ let us simply note that it "provides only for a reform of the capitalist system of international economic relations. ..
``The total detachment of the programme for a new international economic order from the economic situation in the developing countries is an important omission.''^^3^^
While recognizing these contradictory traits within the common position of individual countries one should not lose sight of its most important characteristic, namely, its anti-imperialist direction. The Central Committee Report to the CPSU's 25th Congress notes that "the foreign policy of the developing countries has become visibly more active. This is seen in many trends--- the political course of the non-alignment movement, and the activity of the Organization of African Unity and of the various economic associations formed by the developing countries. It is quite clear now that with the present correlation of world class forces, the liberated countries are quite able to resist imperialist diktat and achieve just---that is, equal---economic relations.''^^4^^
_-_-_~^^1^^ L. I. Brezhnev, Report of the Central Committee of the Cl'SU to the XXVI Congress of the Communist Party of the Soviet Union and the Immediate Tasks of the Party in Home and Foreign Policy, p. 21.
~^^2^^ World Marxist Review, Vol. 22, No. 5, May 1979.
^^3^^ Ibid., p. 25.
~^^4^^ L. I. Brc/hnev, Report of the CPSU Central Committee and the Immediate Tasks of the Party in Home and Foreign Policy. XXVth Congress of the CPSU, p. 16.
218But one should also not underestimate the opposing policies of imperialist circles and international monopolies. Although they are no longer able to impede the tendency towards the unity of developing countries, they seek to weaken this unity in all possible ways and to take advantage of existing differences in serving their own interests, and also to adapt their tactical approach in relations with the developing states in the light of new conditions. As noted at the CPSU's 26th Congress, "The imperialists are displeased with the fact that the newly-free countries are consolidating their independence. In a thousand ways they are trying to bind these countries to themselves in order to deal more freely with their natural riches, and to use their territory for their strategic designs. In so doing, they make extensive use of the old colonialist method of divide and rule.^^1^^ And while developed capitalist countries frequently persist in openly impeding the implementation of progressive recommendations, adopted by a majority of members of the United Nations, in ways that lead to their increasing isolation, they also rely on increasingly refined and modernized methods in protecting their external economic interests. As they recognize that an exclusively negative position in these matters is both unpopular and ineffective they find it necessary to at least state their readiness to engage in constructive discussions on a number of problems, which in itself constitutes an important achievement of progressive forces, even agree to certain, if limited, concessions to developing countries.
The need for a more flexible approach to the developing states' demands is also recognized by bourgeois researchers, who note both the increasing vulnerability of capitalism's current "power centres'', which greatly depend on supplies of raw materials from developing countries, and the far-reaching political consequences that could result from an intensification of the corresponding struggle. The emergence of new conceptions in trade policy is illustrated by the report of a group of prominent U.S., _-_-_
~^^1^^ I,. I. Bnvlmev, Report o[ the Central Committee of the CPSU to the XXVI Congress of the Communist Party of the Soviet Union and the Immediate Tasks of the Party in Home and Foreign Policy, p. 20.
219 Japancse, and Common Market economists entitled "Commodities: The Global Outlook. The Choice: Conflict or Cooperation''. Its authors recognize that "policies should be designed to reduce confrontation and encourage development of mutually advantageous relations. The present situation is dangerous because it is highly charged politically and because positions on the issue tend to polarize. . . Future actions should be designed to meet the changing world conditions.''^^1^^Under such a "new approach" neo-colonialism applies its principal efforts to encourage capitalist relations in developing countries. In particular it seeks to achieve this through a largescale introduction of foreign capital into the developing states' economies, so that their role within the world capitalist economy derive from a subordinate position within integrated technological production cycles controlled by international monopolies, where their role is confined to serve as sources of supply for vitally needed types of raw materials. It also seeks to weaken the common position of developing countries both by relying on the most reactionary regimes and by taking advantage of the differing interests of some developing states in relation to particular aspects of their external economic policies. It is in the context of such tactics that developed capitalist states also seek to transfer discussions of vital aspects of their economic relations with developing countries from the wide forums of the United Nations to separate consultative meetings with limited participants. This is illustrated by the joint meeting of representatives of leading industrial countries and a number of new states, held in December 1975, in Paris, concerning problems of raw material supplies and economic cooperation. In a number of respects that conference sought to anticipate the initiatives that were envisaged within the Fourth Session of UNCTAD in May 1976, and to reduce the interest of developing countries in that forum by encouraging expectations that concessions would be made within the framework of the Paris meeting. In fact, however, its further activities proved to be fruitless.
It becomes clear in the light of these contradictory tendencies, both why developing countries are thus able to force _-_-_
~^^1^^ Economic Impact, No. 4, 1975, p. 16.
220 imperialism to offer certain concessions in its trade policy, and why such forced concessions have been of a limited character.That these concessions arc forced is amply evident and is recognized by many Western researchers, including Oscar Schachter, who is an American specialist in international law. He notes that they are "attributable . . . not to a sudden spread of altruism, but to a widely felt necessity. . .''.^^1^^
These changes in imperialism's tactical approach to developing countries should not be separated from the wider context of world capitalism's external economic policy. In our own opinion the forced concessions to new states express only one aspect of the deepening crisis of the entire system of modern capitalism's international economic relations and of its growing inconsistency with the objective needs of a further internationalization of production. In view of these requirements one may interpret the search for a new structure, new forms, and new norms governing world economic relations as an adaptation of imperialism's overall external economic structure to new conditions of international economic exchange and to an altered distribution of forces on the world's stage.
It would be difficult to deny that there is an increasing disharmony between the established system of world economic relations and the new conditions both from the point of view of the interests of developing countries and those of the developed capitalist powers themselves. A rapid mental survey of the postwar history of international economic relations makes this readily apparent.
In particular one may recall that the currently operating system was formed as an organized consolidation of the specific distribution of power within world capitalism's economic and political order that existed during the initial postwar years. It is not a coincidence that the two pillars on which it rested, namely the IMF in the monetary field and GATT in international trade, reflected, above all, the dominant positions of the United States in these two spheres, the hegemony of the American dollar, and the leading position of the United States in industrial and agricultural exports as well as in capital exports.
_-_-_~^^1^^ Oscar Schachter, Sharing the World's Resources, Columbia University Press, New York, 1977, p. 16.
221This is why the norms that govern the functioning of these organizations, which at first merely seemed to serve the development of international economic relations, are in fact designed to encourage the development only in ways that are advantageous to the United States.
In subsequent decades this situation has undergone fundamental changes. The completion of the political decolonization of a large group of developing countries and the first stages of their economic decolonization have produced new problems to which the norms of international economic relations now must adapt. These concern the legitimate needs of the newly-emerged states' independent development. At the same time the balance of power among the developed capitalist powers themselves has been altered. This refers primarily to the U.S.---Western Europe--- Japan triangle. That development has clearly not favoured the United States. Following the demise of the Bretton-Woods system the role of the American dollar as the capitalist world's leading reserve currency has greatly weakened, while in the field of trade such countries as Japan and West Germany, not to mention the Common Market, have joined the United States as leading exporters. In particular, the exports of the Common Market exceed those of the United States by three times and reflect the declining share of the United States in capitalist industrial production. (While it continues to be quite substantial the U.S. share declined from 49 percent in 1963 and 57 percent in 1950 to 40--41 percent in the 1970s.)
The resulting need for a restructuring of existing trade and monetary systems became increasingly apparent not only to the United States' imperialist partners and rivals but to the United States itself. This also concerns the need to adapt the existing monetary and trade systems to a new structure of relations with developing countries and a new and increasingly complex situation in matters of fuel and raw materials. Naturally, different Western powers hold different views of desired methods and approaches to such a restructuring, depending on their own interests, which are by no means always identical. But in spite of substantial divergences in concrete economic objectives there remains a common need to maintain the functioning of a system of economic relations that accords with a further 222 internationalization of production activities, the increased economic interdependence of the states, and a stable mode of economic growth.
Today the objective need is becoming a political and economic imperative that is increasingly recognized in the business circles and governments of developed capitalist powers. It is true, of course, that those forces that continue to find obsolete "rules of the game" convenient, remain influential. This is illustrated by the position of a senior official of the U.S. Treasury Department, G. C. Hufbauer, who defends the earlier world trading system because it "now facilitates the annual exchange of $1 trillion worth of goods".^^1^^ Increasingly, however, different voices are heard. These agree with Andrew Shonfield, Director of the British Royal Institute of International Affairs, in recognizing that the principles underlying the international economic relations of the Western capitalist world during the postwar period are increasingly inappropriate to changing conditions.^^2^^
It should be stressed that this does not primarily refer to reforms of individual institutions within the existing system, such as, for example, of the IMF and GATT. Such reforms are gradually taking place, and in particular one cannot deny that a certain democratization is taking place in the work of GATT as the number of developing countries in that organization has increased and as its membership has come to include several socialist countries. Far more important is the fact that the Western powers must now simultaneously resolve an entire complex of highly-complicated long-term problems in the field of international economic relations.
On the one hand, this refers to the problem of democratic changes in the very climate and norms of world economic relations, as advocated today by all progressive forces and the alliance of socialist countries with national liberation movements. No matter how unattractive such a prospect may be to imperialism it can no longer simply ignore these demands. On the other hand, it refers to developing states' concrete problems in improving their external economic relations. This, too, is reflected _-_-_
~^^1^^ The American Economic Review, New York, Vol. 68, No. 2, May 1978, p. 280.
^^2^^ Andrew Shonfield, et al., Ed. op. cit., p. 137.
223 in the concept of a "New International Economic Order''. Finally, this refers to the problems of adapting to the new conditions of interimperialist rivalries and to a search for compromises within the group of developed capitalist powers itself in order to strengthen its common positions. But this does not overcome interimperialist and intermonopoly contradictions. The increasing urgency of the situation with fuels and mineral raw materials is making imperialism's policies in all these areas even more contradictory.UNCTAD's Geneva Conference marked the first major step in meeting the demands of developing countries for specific advantages in their external economic relations with developed states. On the basis of the self-evident fact that the still weak economies of new states are unable to compete on the world market on an equal basis with developed countries, and that a successful development of their external economic relations requires special protective measures, that Conference concluded that such countries should be given special advantages. This was reflected in a resolution concerning the granting of the most-favoured-nation status to developing countries without requiring reciprocal concessions, that is on the basis of the principle of non-reciprocity.^^1^^
While all developed capitalist countries either voted against this resolution or abstained when it was accepted, the mere fact of its approval by an overwhelming majority at such a representative forum was an important event that led to wide _-_-_
~^^1^^ In particular the resolution defining the principles governing international trade policy states that within the framework of the mostfavoured-nation principle "developed countries should grant concessions to all developing countries and extend to developing countries all concessions they grant to one another and should not, in granting these or other concessions, require any concessions in return from developing countries" (Proceedings oj the United Nations Conference on Trade and Development, Geneva, 23 March-16 June 1964, Vol. I, p. 25).
224 international repercussions. Eventually developed capitalist states were also forced to recognize the principle of non-reciprocity. The latter was subsequently included in the text of GATT, though in a greatly truncated form. On the whole this was an important victory for developing countries.The Conference also listed other measures intended to liberalize developed states' trade and to provide for a freer access to their markets for products from developing countries. With regard to primary commodities the principle was adopted that " developed countries shall progressively reduce and eliminate barriers and other restrictions that hinder trade and consumption of products from developing countries".^^1^^ In furthering that principle a recommendation was adopted that called on developed capitalist countries to reduce, and whenever possible eliminate, import duties and products that are of special interest to developing states, and in particular to fully eliminate tariff duties on imports of tropical products. At the same time developed countries must not install new trade policy barriers, and in any case must not increase existing ones. Similar measures were recommended with regard to liberalization of trade in manufactured products.
At the same time, while realizing that the adoption of general propositions concerning liberalization of trade policies does not yet guarantee any actual increase in the competitiveness of their goods on the markets of developed economies, the developing states expressed particular concern for further measures to widen exports of their industrial products. While in the case of raw materials, whose primary importers are industrial powers, the level of tariff protection on many export items of developing countries, is relatively low, in the case of the products of the new states' emerging industries import barriers are frequently altogether prohibitive. And this is not a matter of the quality of these products, since many of them, especially in the case of products of the light industry, fully meet world standards, but of a discriminatory policy on the part of imperialist powers. It is obvious that if these products were inherently non-competitive, _-_-_
~^^1^^ Proceedings oj the United Nations on Trade and Development, Geneva, 23 March-16 June 1964, Vol. I, p. 24.
__PRINTERS_P_225_COMMENT__ 15--872 225 there would be no sense in creating additional barriers to their deliveries to markets.The basic reason for such a situation is that in this case the interests of industrial monopolies are directly affected. This is why the proposal of developing countries to establish special tariff preferences in developed countries for the manufactured products of developing states was decisively rejected by developed capitalist countries, and the principle of preferences, proved to be the only one on which there was an overt disagreement at the Geneva Conference.
At the same time even the adoption of the Geneva recommendations concerning liberalization of the imperialist powers' foreign trade and also the addition of new articles into GATT concerning measures to encourage the development of trade of the newly-emerged states did not in fact imply a genuine readiness on the part of developed capitalist countries to carry out the corresponding measures. Moreover, in a number of cases the level of tariff duties was even increased, as did neo-protectionist nontariff barriers.^^1^^ As a result the problem of liberalization has become even more urgent.
In seeking to postpone a solution on matters of substance, Western powers at first sought to oppose resolutions adopted by UNGTAD with what they claimed would be future advantages to developing countries from tariff duties reductions within the framework of GATT as a consequence of the Kennedy Round. While one cannot deny that this major trade policy measure has played a certain role in widening world trade, it is important to stress the extent to which this hinders the interests of developing countries and to which the de facto discrimination of the tariff policies of developed capitalist countries against developing countries has subsequently increased even more. It is not a coincidence that in 1967 even W. White, GATT's former Director-- General, found it necessary to admit that "in a number of cases, the action taken falls short of the expectations of the developing countries''.^^2^^
_-_-_~^^1^^ P. I. Khvoinik "Ot Zhenevy k Deli" (From Geneva to Delhi), Mlrovaya ekonomika i mezhdunarodniye otnosheniya, No. 12, 1967.
~^^2^^ The New York Times, 16 May 1967, p. 20.
226When the major developed capitalist countries finally recognized the ineffectiveness of relying on the Kennedy Round they turned to other means for widening their foreign trade policy instruments in relation to developing countries, and eventually found no other solution except to agree to the granting of preferences. In 1970, after three years of discussions, agreement was reached on a so-called system of general nonreciprocal and nondiscriminatory preferences for manufactured goods from the new states.^^1^^ These generally came into force in 1971. At the same time Western powers were able to greatly downplay the original idea contained in the proposal of developing countries and to follow a limited interpretation of the principles of preferences that was advantageous to themselves.
In particular the preferential systems of individual countries include various protective reservations "so as to retain some degree of control by preference giving countries over the trade''. This includes the right to reduce or even fully abandon preferences at the country's own discretion, to establish import quotas, etc.^^2^^ Above all, however, preferences are extended not to all industrial exports but to a relatively limited range of products that is defined by the importing country in each particular case at its own discretion. Nearly all Western countries have excluded from preferential lists such major industrial exports of the new states as textiles, footwear and also most types of processed agricultural and mineral raw materials. Moreover, a preferential status is by no means equivalent to a full abandonment of duties. It merely envisages their partial reduction in combination with relatively rigorous quantitative limitations on preferential imports. In the case of the corresponding Japanese legislation, for example, these must not exceed 10 percent of the overall imports of industrial products.
It is also characteristic that only some of the developed capitalist countries have implemented their preferential system on _-_-_
~^^1^^ Actually there does not exist a unified system as such. Instead there are independent systems of preferences granted by individual developed countries that are based on general principles. They differ both with regard to the products to which they relate and to the magnitudes of the tariff concessions that are granted as well as other conditions.
~^^2^^ U.N. Document TD/B/329; TD/BAC.5/36, 12 October 1970, p. 9.
__PRINTERS_P_227_COMMENT__ 15* 227 schedule (before January 1972). As usual, the United States displayed the least haste and granted preferential treatment only in 1976. The American scheme, however, provides a vivid illustration of the most vulnerable features of preferential systems. First, the U.S. excluded many developing countries from its preferential list on the basis of criteria that can only be interpreted as attempts to ignore the sovereignty of other states. For example, preferences are not granted to "communist countries'', except those that are not "dominated or controlled by international communism" (!); similarly they are not extended to countries that are members of OPEC, or to members of other similar organisations exporting raw materials; also countries nationalizing or establishing control over the property of American citizens and corporations "without prompt, adequate and effective compensation".^^1^^Secondly, preferential concessions are applied to only 54 percent of the total imports of the U.S. from developing countries that are subjected to duties (in relation to the actual volume of trade in 1973). But even that figure appears to be purely nominal, since preferences are automatically cancelled whenever the total imports of each individual type of commodity originating in developing countries exceeds 25 million dollars per year or 50 percent of the U.S. imports of that product. When these reservations are considered preferences may be extended in fact to only 24 percent of the imports that are subject to duties or 17 percent of all U.S. imports from those developing countries to which the system of preferences applies.^^2^^
Thus, the implementation of the long-awaited systems of preferences leads to conflicting thoughts. On the one hand, there is no doubt that in spite of the great complexity of the problem and the partial character of preferential measures, developing countries have been able to overcome the intense opposition of imperialist powers in many respects, and to achieve substantial progress in arriving at practical solutions to that important problem. Nor can one deny that these measures have made it possible for developing countries to enjoy some definite advantages _-_-_
^^1^^ Trade and Development, An UNCTAD Review, Geneva, No. 1, Spring 1979, p. 34.
^^2^^ U.N. Document TD/183, 14 April 1976, p. 37.
228 with regard to the tariff practices of developed capitalist states. Yet the limited character of the operating preferential schemes does not provide any grounds to developing countries for anticipating a fundamental improvement in their foreign trade positions. According to calculations of UNGTAD specialists, in 1976 such preferences extended to only one-seventh of those imports from developing countries into developed capitalist states to which duties apply, that is to a yearly turnover of 10.5 billion dollars. Even if one assumes that preferences can result in a completely tariffless import of the given products (although that is riot the case), for an average level of duties of less than 10 percent of value this represents a direct gain to developing countries of approximately 1 billion dollars per year (for a total volume of such exports of 257 billion dollars in 1976). According to other calculations increased exports of developing countries made possible by preferences amounted to 1.1 billion dollars (at 1974-- 1975 prices).^^1^^ That this system of preferences is complex and inadequate and that its positive aspects are limited is recognized by United Nations documents.^^2^^At the same time, even though these results are less than modest, they should not conceal the main political outcome, namely, the corresponding shifts in the external trade policies of developed capitalist states as they increasingly find it necessary to agree to concessions to developing countries, no matter how limited. This reflects the irreversible character of the process through which the influence of the newly-emerged states in international relations is increasing. It is also shown by the increasing range of demands that the developing states are addressing the developed capitalist powers, and jointly with socialist countries they are working for a progressive restructuring of the entire system of economic relations. In the detailed programme for such a restructuring that was embodied in the decisions in the Sixth and Seventh Special Sessions of the UN General Assembly, as well as in the Charter of Economic Rights and Duties of State, much emphasis was placed on problems of further _-_-_
~^^1^^ U.N. Document TD/B/G.5/38, 6 November 1975, p. 1.
~^^2^^ Op. cit., p. 44.
229 libcralization in the conditions that govern access of the products of developing states to Western markets and on problems relating to a substantial improvement in the system of preferences.For example, the Programme of Action on the Establishment of a New International Economic Order envisages measures designed to provide to developing countries "improved access to markets in developed countries through the progressive removal of tariff and non-tariff barriers and of restrictive business practices".^^1^^ It also envisages the "implementation, improvement and enlargement of the generalized system of preferences for exports of agricultural primary commodities, manufactures, and semimanufactures from developing to developed countries. . .''^^2^^. The Manila Declaration of the Group of 77 goes even further. It links the problem of liberalizing the conditions of access of the products of developing countries to markets of developed states with the tasks of contributing to the industrial development and diversification of the economies of newly-emerged countries. It also calls for a substantial improvement in the system of preferences by extending to all products exported by developing countries completely tariffless imports unregulated by quotas.^^3^^
The demands of developing countries were reflected in UNCTAD's Fourth Session, which took place in Nairobi in May 1976. That Conference's resolutions call for a further development of the preferential system. In particular they condemn explicitly attempts of imperialist powers to make use of that system "as an instrument of political or economic coercion or of retaliation against developing countries, including those that have adopted or may adopt, singly or jointly, policies aimed at safeguarding their national resources".^^4^^ This refers primarily to the discriminatory conditions that were attached to the preferential system by the United States.
At UNGTAD's Fifth Session developing countries proposed even more far-reaching demands extending to an entire complex of measures aimed at expanding their industrial exports. _-_-_
~^^1^^ U.N. Document A/Res/3202 (S-VI), p. 6.
^^2^^ Ibid.
^^3^^ U.N. Document TD/195, 12 February 1976.
~^^4^^ U.N. Document TD/Res/96 (IV), 16 June 1976, p. 4.
230 Moreover, the developing countries did not limit themselves to improvements in the system of preferences. In the Arusha Programme they raised the issue of "control [over] the operations of TNCs'', which are "a dominant factor in world production, marketing and distribution of manufactures and semi-- manufactures. . .''^^1^^ In this connection attention must be focussed on combating the so-called restrictive business practices because these practices "notably those of the transnational corporations have adverse effects on the economic development of the developing countries, particularly in the field of production and marketing of manufactures and semi-manufactures".^^2^^ Such a sharp antimonopolistic formulation of the issue led to open countermeasures on the part of Western powers, as a result of which the Conference was not able to agree on a resolution concerning the further development of the preferential system and control over the activities of the TNCs.In the Manila Declaration of the Group of 77 the developing countries expressed their deep disappointment with the slow progress of negotiations taking place within the framework of GATT, and stressed that the fundamental principles of trade policies towards newly-emerged states announced at the beginning of the Tokyo Round "have not yet been complied with".^^3^^ Once again they formulated their wish to see a further improvement in the trade policies of developed countries as they relate to the special needs of developing countries. This was stated even more explicitly in the Arusha Programme. Both corresponding documents of the Group of 77 also stressed that effective measures should be adopted for improving the external economic positions of developing countries with regard to a wide range of issues, including the stabilization of export prices and of revenues from exports, conditions of external financing, invisible trade, and technology transfers.
It may be that not all expectations of developing countries are equally consistent and realistic. This reflects the contradictory and complex character of the heterogeneous conglomerate _-_-_
~^^1^^ U.N. Document TD/236, 28 February 1979, p. 42.
^^2^^ Ibid., p. 45.
~^^3^^ U.N. Document TD/195, 12 February 1976, p. 19.
231 of developing countries that form the Group of 77 as well as differences in their socio-economic orientation. But there is no doubt concerning the anti-imperialist direction of major elements in the common basis of developing countries with regard to external economic problems. In view of the responsibility of neocolonialism for the backwardness and prolonged exploitation of the developing countries none of their claims on imperialism appear excessive when they are guided by a genuine concern for truly independent forms of development and for the interests of wide layers of the population in these states.The newly-emerged countries' progressive aspirations receive the support of the community of socialist nations, which understands the needs of these states struggling for a national revival and for political and economic independence. That policy, which is based on the fundamental principles, has been stated comprehensively in the Report of the CPSU's Central Committee to its 25th Congress. It noted, in particular, that "we do not conceal our views. In the developing countries, as everywhere else, we are on the side of the forces of progress, democracy and national independence, and regard them as friends and comrades in struggle.'' It noted further that "from the rostrum of our Congress we again emphasize that the Soviet Union fully supports the legitimate aspirations of the young states, their determination to put an end to all imperialist exploitation, and to take full charge of their own national wealth".^^1^^
At the 26th CPSU Congress it was again emphasized that "the CPSU will consistently continue the policy of promoting cooperation between the USSR and the newly-free countries, and consolidating the alliance of world socialism and the national liberation movement.''^^2^^
The socialist countries' consistent policy of supporting all progressive aspects of the external economic policies of newly-emerged states has contributed substantially towards the positive _-_-_
~^^1^^ L. I. Brezhnev, Report of the CPSU Central Committee and the Immediate Tasks of the Party in Home and Foreign Policy. XXVth Congress oj the CPSU, pp. 16, 17.
^^2^^ L. I. Brezhnev, Report oj the Central Committee of the CPSU to the XXVI Congress of the Communist Party of the Soviet Union and the Immediate Tasks of the Party in Home and Foreign Policy, p. 21.
232 outcomes of such major international economic forums of recent years as UNCTAD's Fourth and Fifth sessions. At these conferences socialist countries presented joint declarations emphasizing that they "support the developing countries' legitimate desire to safeguard their sovereignty over their own resources and economic activity, develop their economies for national ends and escape from neo-colonial exploitation by, inter alia, the establishment of control over the activities of foreign capital and, above all, of transnational corporations. . . It is on the basis of these positions that the socialist countries wish to express their favourable attitude to the Manila Declaraion and Programme of Action and their willingness to support all the provisions of those documents which are anti-monopolistic in nature and reflect the developing countries' Jawful aspirations to achieve the restructuring of the inequitable economic relations existing within the world capitalist economy.''^^1^^ In a joint declaration of a group of countries representing the socialist community at UNCTAD's Manila Conference emphasis was also placed on joint activities of both socialist and developing states, for "in view of the degree of economic rapprochement between countries, it would be illusory to believe that the patterns and standards of international trade can be restructured for one group of countries alone while restrictions and discrimination are maintained for another.''^^2^^ _-_-_~^^1^^ U.N. Document TD/211, 28 May 1976, p. 3.
~^^2^^ U.N. Document TD/249, 19 April 1979, p. 8.
[233] __NUMERIC_LVL1__ CHAPTER 5 __ALPHA_LVL1__ THE PRESENT AND THE FUTURE __ALPHA_LVL2__ 1. The Further DevelopmentThe current state of international trade leads one to consider once more the role of the present stage in the evolution of the capitalist world market. A retrospective appraisal also casts light on the future destiny of the entire external economic sphere, whose development will eventually reveal whether current changes represent anomalies or else fundamental shifts leading to some new long-term tendencies.
While forecasting world trade has always been a difficult task, it is especially complex today, when conditions are so contradictory. Moreover, it would appear that the conditions needed to provide comprehensive answers have not yet emerged, since time will be needed to accumulate and interpret data concerning new developments that have most probably not yet run their course.
But forecasting also calls for an approach to the systematization and analysis of empirical data that differs from the one employed in the present study. The latter was concerned with identifying problems rather than considering details. Let us therefore limit ourselves to a few general thoughts concerning the probable course of future developments in order to avoid a one-sided appraisal of the present. This only refers to a search for approaches to the major and debatable issues that arise within the framework of this study and to which thought may already be given today. In our opinion this includes, first, the general prospects of the world capitalist economy and the international division of labour; secondly, the terms on which raw material resources will be supplied; and finally, probable tendencies in world prices (neglecting, of course, those aspects of international 234 trade whose possible further prospects have already been considered in the corresponding sections of the present study).
The first set of questions, which is inherently the most difficult one, paradoxically appears to be the simplest in the present case. For indeed, what could be more difficult, it would seem, than a forecast of the overall economic situation that calls for examining a very large number of contradictory factors. In the words of an authoritative group of Western specialists on forecasting under Wassily Leontief, the American economist and a Nobel Prize Winner, "the future can rarely be predicted with precision; and the future of such a complex phenomenon as the world economy is particularly difficult to anticipate or even to visualize".^^1^^ The numerous errors that have marked this difficult field of studies speak for themselves. But if one avoids the illusory problem of identifying precise parameters in long-term economic development, then in the present context the major concern relates not to the precise course of capitalist reproduction but to the general principles that govern its impact on the external economic sphere.
There may, of course, be different views concerning the prospects of capitalist economy, and one may disagree concerning whether the relatively favourable conditions of the 1950s and 1960s will be re-established or whether the crisis of the 1970s will prove to be the forerunner of more frequent and deeper disruptions, as seems more probable to us. The general decline in the output of a number of developed capitalist countries at the turn of the 1980s appears to support such a view. But in any case it appears necessary to recognize both the irreversibility of economic, scientific and technical development and its uneven course under capitalism as the events of the last decade have shown.
The events of the mid-1970s have dealt a major blow to the conception that had begun to emerge in bourgeois science that the revolution in science and technology and an increasing statemonopolistic intervention into the economy make it possible to avoid the cyclical overproduction crises that are inherent in _-_-_
~^^1^^ The Future of the World Economy, United Nations, New York, 1976, p. 55.
235 capitalism. Today the earlier words of Gottfried Haberler, a prominent American economist, appear unjustifiably optimistic: "I do not say that the business cycle is dead. I do say that deep and long depressions are a thing of the past.''^^1^^Without seeking to forecast all the possible adventures that the world capitalist economy may continue to experience, nor the exact timing and extent of future crises, one must recognize the determining significance of the general economic situation in governing the development of external trade. If the growing importance of the international division of labour resulting from the revolution in science and technology is accepted as a point of departure, then one should expect that world trade will continue to grow at the very least at the same rate as capitalist economy, and probably more rapidly, as in the past. Just how high these rates may be at individual stages, or whether they may even be negative at times of economic difficulties, is not so important in the present context. What is important, in our opinion, is that in all situations |the world market will reflect the growing importance of the international division of labour. This is indicated by the tendency for export quota to increase, as was noted earlier, and by existing forecasts of its further growth.^^2^^
There is no need to try to guess when and in what way these processes will take place nor the forms and dimensions that they may assume. One can only assume that in the foreseeable future, and especially during the next few years, the development of international trade will be impeded not so much by problems of raw materials supply and ecological problems as by the ability of capitalism to secure for some time to come the rates of growth that are needed to maintain its continued existence as a world system. But this is another problem, whose solution is ultimately predetermined by the historical limitations of that social _-_-_
~^^1^^ Gottfried Haberler, Prosperity and Depression. A Theoretical Analysis of Cyclical Movements, Atheneum, New York, 1963, p. VII.
^^2^^ For example, in the opinion of the group headed by Wassily Leontief mentioned earlier, in the most probable forecast for 1970--2000 the export quota will increase from 10.6 percent to 14.5 percent, while the rate of growth in the physical volume of world trade will exceed that of the world's gross product by 25 percent. (The Future of the World Economy, p. 37.) In our opinion this is a relatively conservative estimate.
236 formation. In the words of the Report of the CPSU's Central Committee to the 25th Congress, "it is farthest from the Communists' minds to predict an 'automatic collapse' of capitalism. It still has considerable reserves. Yet the developments of recent years forcefully confirm that capitalism is a society without a future.''^^1^^This same set of problems also involves establishing the prospects for the further development of inflation, which at first sight appears to exert such a major influence on the level of world prices and on value measures of international trade. Without considering this subject in detail let us note that for reasons that are still not entirely clear inflation is increasingly escaping the control of current instruments of state-monopolistic economic regulation. It is not unexpected that bourgeois specialists should be so concerned with "this combination of inflation and economic recession ... a new phenomenon, the explanation of which presents an intellectual challenge to economists".^^2^^ They also recognize that they are currently seeking to solve the problems of so-called world inflation without having understood the nature of ordinary inflation.^^3^^
The main point, however, concerns not the lack of knowledge concerning the overall set of causes underlying inflation but its destructive influence on the course of capitalist reproduction. No matter how one interprets the mechanisms underlying inflation, the aggravation of internal contradictions related to capitalist reproduction is fully evident. Since one does not currently see any ways in which inflation could be checked, it is probable that it will be even more marked in the world capitalist economy in the future.
Yet it is unlikely that the irreversible inflationary processes, to which we should become accustomed, will influence international trade as much as it intensifies all the economic and social _-_-_
~^^1^^ L. I. Brezhnev, Report of the CPSU Central Committee and the Immediate Tasks of the Party in Home and Foreign Policy. XXVth Congress of the CPSU, p. 34.
^^2^^ Nicholas Kaldor, "Inflation and Recession in the World Economy'', The Economic Journal, Vol. 86, No. 344, December 1976, p. 704.
^^3^^ George L. Perry, "Understanding World Inflation'', The American Economic Review, May 1975, pp. 120--24.
237 contradictions of capitalism. Past experience has shown that inflation leads primarily to changes in the level of world prices and occasionally produces dramatic increases in the nominal value of trade, but that it affects much less both price proportions and the real volume of trade.The probable influence of capitalism's monetary system on the development of international trade may be viewed in a similar way. It is now clearly evident that this system's chronic disorganization and crisis, which has become especially pronounced in recent years, is a significant factor in destabilizing the world market, for "a sound trading order cannot exist in times of monetary disarray".^^1^^
But one must also recognize that ultimately international currencies play the role of an auxiliary mediating element in international economic relations, and that the latter, including foreign trade, are governed primarily by more general processes relating to economic development and the international division of labour. In this connection, it is characteristic that between 1971 and 1973---when the collapse of the Bretton-Woods system became fully apparent, the dollar was devaluated for the first time since the Second World War (on two occasions) and the proposition that rates of exchange should be stable was abandoned--- that it was precisely at this time that world capitalist trade in physical terms (not to mention value terms) attained its highest rate of development for the entire postwar period, reflecting substantial increases in gross product and a further deepening of the international division of labour.
It may of course happen that from time to time leading capitalist states will turn to painful compromises in order to somehow attenuate undesirable monetary problems and that they will seek to adapt the system of international settlements to a new balance of forces within the world capitalist economy. But whatever the fate of such measures may be, it is unlikely that they will either greatly encourage or impede a course of events in overall international trade that follows from fundamental economic factors.
_-_-_~^^1^^ Gerard Curzon, "Crisis in the International Trading System'', Hugh Corbet and Robert Jackson, Eds., op cit., p. 33.
238This does not imply that the prospects of international trade may be viewed independently of monetary problems. On the contrary, even in the event that the most urgent interimperialist contradictions within the monetary sphere may be managed, the uneven course of economic development that characterizes capitalism and the resulting fluctuations in the relative importance of individual currencies will continue to influence the situation of individual states within international trade as well as markets for individual products.
__ALPHA_LVL2__ 2. Commodity ProblemsWhile it is often asserted that one learns from a historical experience, in fact individuals tend to view events at any particular moment as something exceptional. This is illustrated by the lessons of the fuel and raw materials crisis: although the finite nature of natural resources has always been accepted as an axiom, it is only now that this has been dramatized.
It is true that ominous prophecies were also heard earlier, at a time when the prospects of a raw materials shortage were generally purely hypothetical. During the Second World War, for example, while forecasting economic development for the coming two decades, Colin Clark, a British economist, stated that because of the more rapid development of processing industries and of their greater attractiveness for entrepreneurs the production of raw materials would lag increasingly behind demand.^^1^^ While this did not happen during the time envisaged in the forecast, Gerald M. Meier, an American economist, was already pointing to the possibility of a relative decline in raw material resources.^^2^^
As the scale of raw material utilization increased very substantially in recent years, and as symptoms of (real or imagined) shortages multiplied, such views offered fertile grounds for the concept of "zero growth'', associated with the unalterable nature of ecological limits. That point of view, whose most _-_-_
~^^1^^ Colin Clark, The Economics of 1960, McMillan and Co., Ltd., London, 1943, p. 54.
~^^2^^ Gerald M. Meier, "International Trade and International Inequality'', Oxford Economic Papers, Vol. 10, No. 3, October 1958, pp. 277--89.
239 comprehensive formulation was produced by a group of bourgeois scientists sponsored by the Club of Rome,^^1^^ has gained wide currency in the West. Scott Gordon, for example, who is an American professor, asserts without reservation that "one thing, however, is certain: population and economic growth cannot continue forever . . . and man will learn to live in a no-growth world".^^2^^At first, some of the underlying propositions concerning the non-renewable character of certain natural resources appear to be self-evident. It is equally clear, however, that the true source of such a doctrine is the impossibility of a cardinal solution to the ecological problem under capitalist conditions. These pessimistic views reflect the growing uncertainties of world capitalism. It is symptomatic that the theory of zero growth preceded the most destructive economic crisis since the Second World War, in which the world capitalist economy's numerous contradictions were greatly intensified.^^3^^ It should also be noted that the conception of zero growth carries a particular threat to developing countries, for even in the view of Western researchers, to call for a halt to further economic growth in the developed world _-_-_
~^^1^^ Donella H. Meadows, et al., The Limits to Growth. A Report for the Club of Rome's Project on the Predicament of Mankind, Universe Books, New York, 1972.
^^2^^ Scott Gordon, "Natural Resources as a Constraint on Economic Growth. Today's Apocalypses and Yesterday`s'', The American Economic Review (Papers and Proceedings of the 85th Annual Meeting of the American Economic Association, Toronto, Ontario, December 28--30 1972), May 1973, p. 110.
~^^3^^ Equally symptomatic are attempts by some bourgeois scientists to justify the appearance of the zero-growth theory in terms of the scientifically unproven view that ten-year periods of intense economic development occur every 50--60 years. Peter F. Drucker, an American professor, infers such a ``regularity'' from rates of economic growth during the last 250 years. He observes decades of intense development in 1710--1720, around 1770, after 1830, around 1870, around 1910, and in the 1960s. Such a non-historical approach in which periods that are different by their very nature are compared in a mechanical fashion (he compares the period of capitalism's early manufacturing stage with that of modem imperialism) is intended to suggest that there is a natural sequence of reversals of optimistic and pessimistic views concerning the future, for "every 'go-go decade" believed that there would be no limit to growth. After every go-go decade prophecies of zero growth became popular''. (Peter F. Drucker, Economic Impact, No. 4, 1975, p. 38.)
240 would imply that the possibilities for economic growth in developing countries would practically vanish altogether.^^1^^But advocates of zero growth also base their view on a lack of faith in the possibilities of scientific and technical progress. This has produced objections even by bourgeois scientists, who recognize, like Wilfred Malenbaum, that "the current threat of resources imbalance, that can impose limits to growth, actually poses problems not different in kind from those man and society confronted in their pasts".^^2^^ In the opinion of Kermit Gordon, President of the Brookings Institution, which is a major research centre in the United States, "it is necessary to take note of the view of those who would halt economic growth as a means of saving the natural environment and slowing the depletion of resources. This could be a prescription, not for throwing out the baby with the bath water, but for throwing out the baby instead of the bath water.''^^3^^
It is, of course, true that raw material problems and ecological problems are quite complex and call for serious concern, but this makes one-sided and occasionally amateurish approaches inappropriate. In fact, as the problem's complexity becomes evident, a number of Western researchers, including authors of other reports to the Club of Rome, have leaned towards a more balanced view of natural resources and possibilities for their utilization. That evolution in view is following two principal lines of _-_-_
~^^1^^ Gerard Curzon and Victoria Curzon, Eds., op. cit., p. 13.
~^^2^^ Wilfred Malenbaum, "World Resources for the Year 2000'', The Annals of the American Academy of Political and Social Science, Philadelphia, Vol. 408, July 1973, p. 32. It should be noted that the ecological problem did not emerge just recently, and that one may find convincing evidence of its existence in many countries in distant medieval times as well. In the case of ancient Russia we learn from the Novgorod birch bark manuscripts that in the fourteenth century as much as 20 salmons were collected from each peasant as a tax, while in the sixteenth century only 2-3 were collected from an entire district (see Priroda, No. 8, 1976, pp. 72--73). But even though the ``quality'' of the environment has since continued to deteriorate, ecological limits cannot be said to have imposed limits on the human development which has proceeded within clearly improved conditions, with a longer life expectancy, and a wider diversity of material and spiritual wealth.
~^^3^^ Kermit Gordon, "Some Conjectures on Policy Problems of the 1970s'', The American Economic Review, May 1974, p. 128.
__PRINTERS_P_241_COMMENT__ 16---872 241 development, namely, a more cautious approach to the threat of natural resource depletion, and a recognition of the importance of socio-political aspects of the problem. The latter is particularly important.The authors of the Third Report to the Club of Rome, for example, which was prepared under the guidance of Jan Tinbergen, conclude that "recent analyses have shown that the fears expressed in recent years concerning the exhaustion of natural resources may well be exaggerated, at least in some cases".^^1^^ Similarly the forecast of world economic development prepared under Wassily Leontief for the United Nations asserts explicitly that "known world resources of metallic mineral and fossil fuels are generally sufficient to supply world requirements through the remaining decades of the century, and probably into the early part of the next century as well".^^2^^
It is especially important, in our opinion, that one can discern a movement away from a rigidly ``technocratic'' interpretation of that problem, towards an awareness of its social substance. Objectively this undermines many of the questionable foundations of the conception of zero growth. In particular this seems to be an appropriate interpretation of the statement that "the principal limits to sustained economic growth and accelerated development are political, social and institutional in character, rather than physical".^^3^^ We find almost the same words in one of the later reports to the Club of Rome, whose authors stress that they ''. . .conclude, therefore, by reaffirming [their] conviction that the real limits to growth, rather than being scientific and technological, are political, social and managerial".'^^4^^ And while these conclusions do not contain any direct reference to the capitalist system of economic organization, it is quite clear that the principal impediments both to economic growth generally, and especially to economic growth in the context of the increasingly complex problems relating to natural resources result _-_-_
~^^1^^ Jan Tinbcrgen, et al., Reshaping the International Order. A Report to the Club of Rome, p. 37.
~^^2^^ The Future of the World Economy, p. 24.
~^^3^^ Ibid., p. 48.
^^4^^ D. Gabor, el al., Beyond the Age of Waste. A Report to the Club of Rome, Pergamon Press, Oxford, 1978, p. 229.
242 precisely from its internally contradictory nature and the unresolvable conflict between the interests of overall society and the selfish interests of monopolies.While stressing the importance of the socio-political aspect of this problem let us note that many of its technico-economic aspects are still insufficiently clarified. The often sensational estimates of expected depletion times of mineral resources that are so fashionable in the Western press at the present time produce a picture that is distorted in many ways and that does not reflect the full diversity of relevant factors. As pointed out by the Senior Economic Advisors at a seminar of specialists on the problems of economic growth "these fears have been expressed more widely in the past few months and have been extensively echoed by public opinion, which is more willing to listen to cries of alarm, even from unqualified sources, than to the objective and reassuring judgements of the experts".^^1^^
Without pretending to express definitive views on such a contradictory problem one may nevertheless express the opinion that if it is to be tackled constructively in the technico-economic aspect, sober estimates are needed of the way in which two mutually opposing groups of factors influence each other. On the one hand, as is increasingly evident today, the Earth's resources are by no means unlimited and the rapidly increasing consumption of non-renewable mineral resources makes it increasingly important to examine that question not from an academic perspective but in practical terms. But one should also fully recognize the influence of opposing tendencies resulting from scientific and technical progress that leads to a diversification of mineral raw materials as well as to more rational methods of production and consumption.^^2^^
A few general observations may be appropriate in this _-_-_
^^1^^ Factors and Conditions of Long-Term Growth, New York, 1974, p. 121.
^^2^^ A typical example concerns the insufficiently recognized tendency to recycle raw materials. Already in the mid-1970s this accounted for 40 percent of all copper production in capitalist countries, 27 percent of aluminum production and 22 percent of zinc production, while in the case of ferrous metals that share was 45 percent already in 1970 ( Rohstoff Rundschau, No. 12, 1975, S. 267).
__PRINTERS_P_243_COMMENT__ 16* 243 connection, particularly concerning existing estimates of mineral deposits, since it is above all with possibilities for the supply of mineral resources rather than of agricultural resources that today's raw material problem and its ecological aspects are primarily concerned. The available data concerning proven world zinc deposits indicate that at current rates of consumption they are sufficient for 21 years. The corresponding figures are 27 years for lead, 30 years for tin, 54 years for copper, 151 years for nickel, 180 years for bauxites and 230 years for iron ore.^^1^^ These figures are, of course, a cause for concern, particularly since actual rates of consumption are likely to be higher.But one should also recognize, first, that even if these data are reliable (in fact that they are often biased), they relate only to proven reserves corresponding to the current level of geological exploration activities. But past experience has been that increases in newly discovered mineral resources nearly always greatly exceed increases in its consumption, producing revisions in the earlier forecasts. In many cases it is also not only the absolute magnitude of new deposits but also their rates of increase that exceed corresponding indicators of industrial raw material consumption. In particular this has been true, between the end of the 1940s and the end of the 1960s, of the known geological deposits of iron ore and a number of metallic alloys, as well as of copper and lead.^^2^^ Moreover, the energy crisis provided an additional impetus to the search for more mineral fuels: between 1963 and 1976 proven natural gas reserves in the capitalist world increased by 2.4 times. It is this fact which underlies the thought that "reserves are discovered as and when required".^^3^^
Secondly, existing estimates concerning proven and probable deposits inevitably reflect current conceptions of our planet's geological structure and the possibilities for extracting and processing its resources. But even under current conceptions some specialists believe that potential raw material resources may exceed _-_-_
^^1^^ "Basic Products and Energy: Long-Term Problems and Future Work Prospects'', U.N. Document EG. AD. (XI)/R. 3, 21 December .1973, Annex III, p. 12.
~^^2^^ U.N. Document E/C.7/40 Add. 2, 5 December 1972, p. 4.
~^^3^^ Factors and Conditions of Long-Term Growth, p. 123.
244 proven reserves by a factor of several hundred.^^1^^ While they are far from conclusive, the estimates of William D. Nordhaus, a Professor at Yale University, provide some notion of that problem's dimensions. Assuming that only 0.01 percent of the minerals located in the Earth's upper one-kilometre layer may be utilized he finds that this should provide copper for 340 years, (as opposed to 45 years on the basis of proven deposits), molybdenum for 630 years (as opposed to 65 years, respectively), lead for 162 years (as opposed to 10), zinc for 618 years (as opposed to 21), iron ore for 2657 years (as opposed to 117), sulphur for 6897 years (as opposed to 30), and bauxites for 68066 years (as opposed to 23).^^2^^The prospects of further progress in corresponding areas of science and technology also call for caution and even reserve with regard to assertions that all resources will soon be depleted. In particular the Report of the United Nations Secretary-General to the Seventh Special Session of the General Assembly notes that it is often very difficult to establish technical possibilities both in the field of energy and in other fields, and that all attempts to arrive at technical forecasts are still at an early stage of development.~^^3^^ It should be noted that the forecasts of economists as well of the probable level of consumption of raw materials are also highly questionable.^^4^^ The studies of U.N. experts also confirm "the uncertainties of estimating both future stocks of mineral resources and the future demands of minerals".^^5^^
This is particularly relevant to the interpretations of the present energy crisis which lies at the heart of the matter. Without attempting to consider all its various aspects and possible consequence,^^6^^ let us try to at least slightly raise the veil hiding _-_-_
~^^1^^ Donald Brobst, W. Pratt, Eds., The United States Mineral Resources, Washington, 1973, p. 24.
^^2^^ William D. Nordhaus, "Resources as a Constraint on Growth'', The American Economic Review, May 1974, p. 23.
~^^3^^ U.N. Document E/5536, 24 June 1974, p. 11.
^^4^^ Yu. A. Yershov, Syryo, toplivo, politika (Raw Materials, Fuel and Politics), Mysl, Moscow, 1975, pp. 30--35 (in Russian).
~^^5^^ The Future of the World Economy, p. 22.
^^6^^ For a detailed analysis see, Energeticheski krizis v kapitalisticheskom mire (The Energy Crisis in the Capitalist World), Mysl, Moscow, 1975 (in Russian).
245 the future. If one approaches this without biases the situation does not appear to be so tragic.Without questioning the view of specialists that proven reserves of natural gas, for example, may be depleted by the year 1996 let us recall that according to the same estimates, if one considers expected additions to proven reserves there will still remain 65 percent of accessible deposits of natural gas by the year 2000.^^1^^ By that time only 13 percent of coal deposits will be depleted, and only 19 percent of brown coal deposits, while reserves of bituminous sands and oil shale, whose heat potential exceeds that of petroleum reserves by four times, will still not have begun to be utilized.^^2^^ To this one may add the vast still unutilized sources of geothermal energy, which are equal to those of all coal deposits, and also the boundless sources of solar energy, winds, and tides, whose development for industrial uses is already feasible at the present level of technical knowledge. It would therefore seem that those researchers are closer to the truth who believe that the world is not exceeding its energy resources.^^3^^
Generally, it would seem that the problem of finding alternative sources of energy reduces to the technico-economic aspects of developing the most effective and convenient methods for obtaining energy. In the view of the authors of one of the most recent reports to the Club of Rome "a further development of nuclear fission energy today represents an unavoidable choice for the industrialized countries. . . The development of nuclear energy is then to be regarded as a choice limited in time and space, to be utilized to fill the energy demand gap during the passage from today's oil era to a new one based on a wide spectrum of primary sources".^^4^^ It remains true, of course, that any substantial restructuring of energy balances will call for a corresponding change in the entire economic structure and generate _-_-_
~^^1^^ Oil & Gas Journal, Vol. 70, No. 52, December 25, 1972; U.N. Document E/C.7/40/Add. 1, 5 December 1972.
~^^2^^ U.N. Document EC. AD. (XI)/R. 3, Annex II, pp. 23, 24.
~^^3^^ H. S. Houthakker, "Policy Issues in the International Economy of the 1970s'', The American Economic Review, May 1974, p. 139.
~^^4^^ D. Gabor, et al., op. cit., p. 97.
246 corresponding costs. Ultimately this appears to be merely a matter of time and of the relative competitiveness of various energy carriers.The relatively limited nature of mineral fuels constitutes only one side of the energy problem which acquires increasingly pronounced ecological aspects. The other side concerns the fact that even if carbohydrate resources were infinite, sooner or later, it would still be necessary to reduce current rates of growth of their consumption because of major disruptions in the ecological environment. Specialists have expressed the view that "the direct and indirect influences of modern energy production on the environment already exceeds all admissible limits'', and that this may be avoided only through a "restructuring of energy production activities in such a way that all possible measures be taken to reduce its production from mineral fuels".^^1^^
In this connection prospects of a reliance on nuclear energy are especially promising. For the present this appears as the most realistic alternative to natural hydrocarbons. This example illustrates the interplay of three major components within the present raw materials problem, namely the availability of resources, the economic effectiveness of their extraction, and the possibilities of technical progress. Currently available estimates indicate that proven and probable reserves of uranium-bearing deposits yielding uranium oxide at a cost of less than 10 dollars per pound will be depleted by 1997, while deposits whose extraction costs range from 10 to 15 dollars will be depleted by the year 2000.^^2^^
At that time only half of currently available resources will remain, whose costs of production range from 15 to 30 dollars, and which may still become economically viable in this century at the present price level for uranium of the order of 20 dollars for delivery in the second half of the 1980s.^^3^^ Beyond this, in view of the already relatively difficult situation that exists with regard to uranium resources, the opinion has been expressed by Lenin and Nobel Prize Winner Academician N. N. Semenov _-_-_
~^^1^^ N. M. Svatov, Osnovy planetarnogo geograficheskogo prognoza (Fundamentals of Worldwide Geographical Forecasting), Nauka, Moscow, 1974, p. 182 (in Russian).
~^^2^^ U.N. Document EC. AD(XI)/R. 3, Annex II, pp. 23, 24.
^^3^^ BIKI, 1975, Appendix 2, p. 246.
247 that both technically and economically mankind is already at the threshold of deriving uranium from sea water, where its reserves are a thousand times larger than within the Earth's crust.^^1^^ Finally the appearance of fast breeder reactors, which are currently under development, and later of regulated thermonuclear processes will fully eliminate the problem of raw material supplies for nuclear sources of energy.^^2^^It should also be recognized that by uncovering the vulnerability of imperialism's energy base the oil crisis has served as a powerful stimulus to the search for alternative sources of energy, while the successes achieved by the struggle of developing countries for a full sovereignty over their natural wealth have objectively stimulated a response on the part of imperialism, for whom the problem of meeting its needs for raw materials has acquired a strategic significance. Already in 1975 the United Nations World Economic Survey for the previous year noted that rapidly growing prices and uncertainty concerning sources of supply had intensified autarchic attitudes in many countries.^^3^^
In view of the appearance of such ``autarchic'' attitudes it is useful to consider more closely two different, even though close^ ly interrelated, aspects of the problem of ensuring the developed capitalist countries' self-sufficiency in fuel and raw materials. The first concerns measures to solve that problem through national means, while the other relates to joint actions on the part of the entire bloc of imperialist powers.
With regard to the first of these there is a tendency to develop one's own resource base and adapt overall economic activities to the more complex situation relating to deliveries of raw materials and sources of energy. While the outlines of such a policy have become apparent already some time ago, the dramatic events of the first half of the 1970s on commodity markets, _-_-_
~^^1^^ Nauka i zhizn, No. 11, 1972, p. 31.
~^^2^^ It is the view of the other major Soviet specialist, Academician P. L. Kapitsa, a Nobel Prize Winner in Physics, that "it is now generally accepted that all hopes for solving the global energy crisis depend on the utilization of nuclear energy. For its part physics gives us every reason to believe that this hope is realistic" (Priroda, No. 2, 1976, p. 75).
~^^3^^ U.N. Document E/5681, 9 May 1975, p. 6.
248 especially in the case of petroleum, as well as a rapid increase in the price of liquid fuels at the beginning of the 1980s, have served as a strong stimulus to its intensification. It is these factors that have made the energy problem the major economic task of many countries. In the words of the former President of the United States, Jimmy Carter, this represents "the greatest domestic challenge that our Nation will face in our lifetime".^^1^^Different countries seek to solve this problem in different ways, depending on the specific characteristics of their economic structure and the extent to which they possess domestic energy resources. Yet in spite of all the differences that exist in the concrete situations of individual countries there are also many common features. These are illustrated by the case of the United States.
The energy programme that was proposed by the Garter Administration towards the end of the 1970s defined rather ambitious objectives for increasing the country's self-sufficiency in energy. In particular it envisaged a reduction in the yearly increment in energy consumption to 2 percent by 1985, as opposed to 4-5 percent in 1979 and a reduction in the consumption of gasoline by 10 percent. At the same time the potential importation of oil was to be reduced by more than one-half and a strategic reserve of liquid fuels was to be established, large enough to supply the country's needs for a period of 10 months. It also envisaged an increase in coal production by more than twothirds, to a level of one billion tons per year; improvements in the heat-retaining properties of 90 percent of existing residential units and in all new buildings, and the use of solar energy by more than 2.5 million residential units.
To achieve these objectives three types of measures were generally envisaged: an economizing of energy; extended rational production of traditional sources of fuel; and the development of alternative sources of energy.
With regard to the economizing of fuels, which is generally the most well-elaborated approach, a major emphasis was placed on increasing the effectiveness of the use of gasoline. The _-_-_
~^^1^^ National Energy Program. Presidential Documents: Jimmy Carter, 1977, Washington, 1977, Vol. 13, No. 17, p. 566.
249 latter accounts for nearly a half of the country's total consumption of petroleum. By introducing new standards for passenger cars it is expected that the distance run on a gallon of gasoline will be 27.5 miles by 1985, as opposed to 18 miles for the latest models, and to a current avegare of 14 miles per gallon for the country as a whole. It was recommended that a progressive tax be levied on low performance cars that do not meet government standards of fuel consumption, and that a new additional tax on gasoline of five cents a gallon be introduced for all forms of transportation. In order to improve the heat-retaining capacities of buildings it was proposed to introduce tax credits up to 25 percent of investment expenditures for such purposes, while in order to stimulate capital investments designed to economize fuel in industries, a 10 percent redunction in taxes was proposed. Similar measures were proposed to improve the utilization of heat generated in electric power stations.Measures that are common to all developed capitalist countries include the encouragement of research activities and expenditures on projects seeking to utilize solar and geothermal energy and also ecologically pure and technically convenient methods of utilizing coal (in liquid or gas form). According to the terms of a special programme for intensifying the use of renewable sources of energy that was presented to the U.S. Congress in the summer of 1979 it was proposed to increase the share of renewable resources within the overall energy balance to 20 percent by the year 2000, as opposed to 6 percent towards the end of the 1970s.
It should be noted that even that relatively modest plan, which provided for only the initial stages of solving the energy problem by 1985, and primarily through an economizing of energy, met with substantial opposition on the part of the petroleum monopolies interested in uncontrolled increases in prices. It was, therefore, adopted in a greatly amended form. The vacillations and inconsistency of the U.S. government's energy policy, and its preference for indirect measures of state-monopolistic regulation are explained by that power of the major firms within the energy complex. This leads to a substantial deterioration in the living standards of the working people and intensifies social conflicts.
250In such a contradictory situation one may hold different views of the prospect that such government programmes will in fact be implemented. In particular, it is quite probable that the United States will not succeed in achieving the goals that have been established in the relatively short period remaining before 1985, and that the country's dependence on imports of petroleum will increase still further, as many specialists believe, and the energy problem will become even more pressing. Most probably this is what will in fact take place.
It is also possible that at a later stage, should an excessive dependence on imported petroleum threaten the country's entire economy and even the existence of American capitalism, a substantial increase in the role of government policy may follow. Past experience has shown that in cases when the state-- monopolistic and private sectors in the United States were able to combine their efforts they were able to solve relatively major problems in science and technology, such as the flight to the Moon and back. The question is precisely at what point such a radical shift at the national level will become unavoidable in the field of energy production---if it does indeed take place. All present indications suggest that the U.S. is still at the beginning of such a road, which in any event appears to be neither short nor direct, nor free of the economic, political and social obstacles that are inherent in the very structure of capitalism.
In Western Europe, where the energy problem is especially pressing, one finds a strong emphasis on measures to economize fuel and also on programmes for developing domestic resources. In West Germany, for example, it is expected that by 1985 the energy-saving measures will reduce the consumption of liquid fuels by 35 percent. It is also expected that the relative share of petroleum in the country's energy balance will decline from 55 percent to 44 percent, while the relative weight of nuclear power will increase from 1 percent to 10--15 percent and higher subsidies will be paid to the coal industry.^^1^^ Similarly funds from the state budget assigned to the development of nuclear power and the coal industry were included in the French government's "priority programme" for the years 1976--1980.
_-_-_~^^1^^ Wirtschajtswoche, No. 5, 1977.
251 While in Great Britain, where it is expected that planned rates of exploitation of the North Sea deposits will deplete petroleum reserves in 30 years, much importance is given to encouraging the mining of its relatively large coal resources. Corresponding government investments of 8 billion pounds sterling are envisaged by 1985.^^1^^ It is also expected that new sources of energy (solar, wind, geothermal, tidal) will provide up to 8 percent of the overall consumption of energy by the year 2000, rather than 1.5 percent as in the late 1970s.^^2^^In Japan the government Sunlight programme provides the assigning of 4 billion dollars between now and the year 2000 for developing solar, geothermal, tidal, and other "ecologically pure" sources of energy. Plans for developing nuclear energy are under study: it is expected that by 1985 the share of nuclear power in overall energy consumption will be increased to 9.6 percent, as opposed to 0.6 percent in 1973, while the share of imported petroleum will be reduced from 77.4 percent to 63.3 percent.^^3^^
It should be stressed that most government programmes for increasing energy self-sufficiency are still at a stage of development and elaboration, and even those that are beginning to be implemented are largely recommendations of an indicative nature and are by no means always supported by effective government measures. Yet it is also true that the first modest although important step has already been taken: between 1973 and 1978 the share of petroleum and natural gas in the capitalist world's energy balance declined from 67.8 percent to 61.8 percent, while that of hydroelectric power and nuclear power rose from 2.7 percent to 10.4 percent.^^4^^
This has been accompanied by a tendency on the part of imperialist powers to coordinate their efforts in solving the raw materials problem and in increasing the raw material self-- sufficiency of that group of countries as a whole. If one considers 1970, as a reference year still free from the distorting influence of irreg' ular price increases attributable to the raw materials crisis, it is _-_-_
~^^1^^ Daily Express, 18 February 1977, p. 10.
~^^2^^ The Times, 5 May 1977, p. 26.
^^3^^ Asahi News, 24 August 1973; Japan Times, 17 December 1977.
~^^4^^ British Petroleum Co. London, Statistical Review of the World Oil Industry, London, 1973, 1978.
252 clear that the position of developed capitalist states as suppliers of raw materials has become substantially stronger since the early 1950s: their share in corresponding world capitalist exports increased from 50 percent in 1953 to 56 percent in 1970, while exports of non-energy raw materials increased from 53 percent to 66 percent. It is only in the case of fuels that one sees a further increase of the already high relative share of developing countries, namely from 63 percent to 70 percent. At the same time mutual trade among industrial countries increased at an accelerated rate. During that same period its share within their raw materials exports rose from 52 percent to 58 percent, and if one disregards fuels, from 55 to 68 percent. Between 1959 and 1974 as the imported share of non-energy raw materials consumed by the leading capitalist powers (the founding six members of the European Economic Community, plus the United States, Japan, and Great Britain) increased from 40 percent to 59 percent, the contribution of developing countries rose from 19 to 25 percent, while that of developed countries rose from 20 to 33 percent, that is by twice as much.^^1^^The tendency towards a growing self-sufficiency in raw materials through imports from within the group of imperialist powers was not interrupted by the energy crisis. It merely served to emphasize the particular vulnerability of the energy sector within modern capitalism's raw material base. It has already been noted that in 1970 developed countries met 69 percent of their total imports of non-energy raw materials from non-socialist countries by importing from each other. In 1975 this figure rose to 72 percent, and only in the case of fuels did it decline from 31 to 21 percent. It is even more striking that similar processes appear to be developing in the case of trade in liquid fuels as well. In particular the share of imports from developed capitalist countries in the aggregate imports of petroleum of the three leading powers (United States, West Germany and France) between 1972 and 1976 increased from 1.4 percent to 5.9 percent.^^2^^
_-_-_~^^1^^ UNCTAD, Handbook of International Trade and Development Statistics, 1976, p. 433.
^^2^^ Calculated on the basis of customs data of the corresponding countries.
253Equally suggestive is the fact that by the early 1970s the rate of increase in the proven reserves of such major types of mineral raw materials as iron ore, copper, tin, manganese, and bauxites, rose more rapidly in developed capitalist countries than in developing countries,^^1^^ while the share of developed countries in expenditures on geological explorations within the capitalist world rose from 65.4 percent in 1961--1965 to 85.6 percent in 1971-- 1975.^^2^^
In consolidating their efforts to increase their self-sufficiency in raw materials developed capitalist countries rely on both the existing mechanisms for coordinating their economic policies ( especially the Common Market and the OEGD) and the new forms for arriving at integrated policies in the external economic sphere. In particular a long-term plan was developed in 1974 within the EEC framework that sought to increase that group's energy self-sufficiency from 31.3 percent to 54--61 percent between 1973 and 1985, and to reduce the share of imported petroleum within its energy balance from 52.9 to 28--37 percent. In 1976 that plan was revised in the direction of more modest targets: the degree of self-sufficiency that was now forecast was only 44--51 percent, while the share of imported petroleum was to be 40--47 percent.^^3^^ In addition industrially developed countries coordinated a number of measures to be taken in the event of a new oil embargo. That possibility continues to haunt the West, which fears that "the industrial countries will again deliver themselves into the hands of OPEC if they continue on their present course".^^4^^
Within the OECD, where the development of joint forecasts of the energy balance and modest recommendations have become traditional, more decisive measures were proposed by various groups of experts following the oil crisis. An International Energy _-_-_
~^^1^^ Mirovaya ekonomika I mezhdunarodniye otnosheniya, No. 8, 1976, p. 150.
~^^2^^ U.N. Document E/C. 10/38, 20 March 1978, p. 67.
~^^3^^ European Economic Community Background Information, 18 October 1976. Between 1973 and 1978 petroleum imports into the EEC declined from 588 million tons to 470 million tons.
^^4^^ New Scientist, London, 24 February 1977, p. 479.
254 Agency, based on OECD, was organized in November 1974, whose members were 16 OECD member-states.The material basis of the Western countries' common raw materials policy is a growing internationalization of production and capital. This is proceeding especially intensively within the developed part of the capitalist world. A greater use of natural resources located on the territories of the developed countries themselves and mutual exchanges among them accord with the current production and distribution structure of international monopolies. They are largely pressed in such a direction by a deterioration of the general investment climate in developing countries, particularly in the extractive sectors. It is symptomatic that between 1972 and 1976, when U.S. foreign investments increased by 27 percent, their capital investments into Western Europe increased by 96 percent, of which the larger part (5.1 billion dollars out of 13.4 billion dollars) was associated with British petroleum production in the North Sea.^^1^^
The tendency of imperialist powers to pursue joint policies in relation to raw materials is becoming more evident, as is its socio-economic essence. It would be difficult to find a more explicit motivation for a call to develop that group's raw material base than the one that is stated in the conclusions of a Report of Experts of the Trilateral Commission---an organization of prominent representatives of government and business circles from the U.S., Western Europe, and Japan. It states that "the real challenge of the energy problem is not a struggle with outside adversaries, as in most great crises of the past, but within and among our respective societies. Our governments must provide bold and far-sighted leadership in their domestic and foreign policies to face the challenge. Our peoples . . . should be prepared to tighten their belts and to share sacrifices among themselves ---because it will be a long, uphill struggle.''^^2^^
Yet such a tendency for a "collective neo-autarchy'', as it were, does not seek to isolate the national economies and the Western _-_-_
~^^1^^ Obie G. Whichard, "U.S. Direct Investment Abroad in 1976'', Survey of Current Business, Vol. 57, No. 8, August 1977, pp. 32--47.
~^^2^^ Trilateral Commission Task Force Reports: 1-7, New York, 1977, p. 121.
255 countries as a whole from the external world. Today, given the growing economic interdependence of states due to the internationalization of production activities resulting from the revolution in science and technology, such a policy would be not only destructive but often simply impossible.It would seem that while within the group of states being considered such a further deepening of the international division of labour in raw materials serves to strengthen their internal resource base, its purpose is not only to increase their selfsufficiency but also to gain additional possibilities for influencing developing countries. This may be described as an effort on the part of world capitalism's various centres to consolidate their activities although this would neglect the fact that it is also an expansionist policy, seeking to achieve new objectives through internal means, designed to expand the scope of existing neocolonialist methods.
It should be noted that Western strategists openly admit the importance of that objective in providing access to the natural resources of developing countries. A senior West German diplomat, for example, responsible for negotiations with developing countries on raw material matters has stated that ".. .national concepts can be secured in international negotiations only if one has allies . . . for we cannot stand up to the developing countries without the EEC and without a Western accord".^^1^^ Moreover, as they blame the increasing tension in international economic contradictions on the developing countries, Western political leaders do not hesitate to use threats. For example, the former U.S. Secretary of State Henry Kissinger observed that "the organization of one group of countries as a bloc will, sooner or later, produce the organization of potential victims into a counterbloc".^^2^^
The wide campaign initiated in 1979--1980 by the United States against Iran under the pretext of the struggle for freeing diplomats taken hostage in the American Embassy in Teheran _-_-_
~^^1^^ Peter Hermes, "International Raw Material Policy in the Agricultural and Industrial Sphere'', Intereconomics, No. 7/8, 1977, p. 176.
~^^2^^ The Department of State Bulletin, Vol. LXX, No. 1819, 6 May 1974, p. 477.
256 illustrates the manner in which such threats are carried out. In particular it shows that when faced with a direct threat to its external political and economic interests the United States readily turns to a direct show of military force. But it also points to the existence of contradictions within the imperialist bloc in carrying out economic sanctions against Iran. In spite of direct pressure from the United States many of its allies adopted a more moderate position. This partly reflects the relatively greater dependence of Western Europe, and especially of Japan, on supplies of Iranian petroleum.The holding of regular meetings of leaders of major capitalist countries to analyze major international economic problems and arrive at joint solutions is an important new development. Such meetings of the Seven were held in Rambouillet in 1975 (without Canada), in Puerto Rico in 1976, in London in 1977, in Bonn in 1978, in Tokyo in 1979, and in Venice in 1980. Not only the holding of summit conferences to consider almost exclusively economic rather than political problems, as before, is a new development, but so is the open display of a prior coordination of basic positions to be subsequently implemented as a common Western approach. While such methods were also employed in the past, this was never done so openly and explicitly.
The new development reflects strong aggravation of external economic problems especially with regard to energy supplies. This is pressing the countries concerned to adopt extreme measures in order to salvage the positions of world capitalism. As noted at the 26th GPSU Congress, "imperialist circles think in terms of domination and compulsion in relation to other states and peoples.
``The monopolies need the oil, uranium and non-ferrous metals of other countries, and so the Middle East, Africa and the Indian Ocean are proclaimed spheres of U.S. Vital interests'.''^^1^^
_-_-_~^^1^^ L. I. Brezhnev, Report of the Central Committee of the CPSU to the XXVI Congress of the Communist Party of the Soviet Union and the Immediate Tasks of the Party in Home and Foreign Policy, p. 29.
__PRINTERS_P_257_COMMENT__ 17--872 257Since forced measures of collective self-sufficiency cannot produce very much over a short period of time, it is the external aspects of raw material policy that are becoming extremely important, especially those that involve the relations of the entire group of developed capitalist states towards developing countries. It is on the deliveries from developing countries that imperialism relies in order to gain the time that it needs to develop an internal resource base and restructure its entire economy for meeting the new conditions governing the supply of fuels and raw materials.
Naturally, such a tendency towards coordinated actions does not yet imply the existence of a genuine unity, for it develops in the presence of interimperialist contradictions and an intensification of the intermonopoly struggle. Nevertheless, as they face a common threat the West's major states are prepared to accept temporary compromises among themselves in order to achieve world imperialism's common strategic objectives.
Thus, it could be said that the developed capitalist countries are evolving a long-term strategy to adapt their resource economy to the new conditions governing the course of global problems in natural resource utilization and to the new relations with newly-emerged countries. It is too soon to conclude that there now already exists such a complex strategy for many of its elements are only beginning to emerge. It is also difficult to view that strategy as comprehensive since it largely concerns non-renewable mineral resources, for the problems in agriculture, animal husbandry, forestry and fisheries are different and are also solved in a different way.
The tendency towards ``neo-autarchy'' is illustrated by the project for developing a new energy base in the U.S. in order to reduce its dependence on the imports of liquid fuels. This is already partly carried out. Another example is the growing energy self-sufficiency of the Common Market countries from 37 percent in 1973 to 50--60 percent in 1985. Still another is Great Britain's development of petroleum production in the North Sea in order to transform Great Britain from a petroleum-importing country to a petroleum-exporting country by 1980. Similarly capital investments into nuclear power have increased sharply following the intensification of the fuel crisis. For all developed 258 capitalist countries they increased from 3.5 billion dollars to 7.4 billion dollars between 1970 and 1976.
Naturally one may question both the realism of available forecasts and the future fate of current measures initiated by developed capitalist countries to increase their self-sufficiency in raw materials and energy resources. And there is no doubt that any major reorganization of the existing structures of raw materials production and consumption, and the corresponding adaptation of the economy in the physical and technical sense, will require a considerable time.
It is also probable that such shifts will closely interact with other structural shifts produced by aggravating ecological problems. Some estimates suggest that expenditures in developed capitalist countries on protecting the environment will reach 1-3 percent of the gross national product already in the next few years, and that in some cases this figure may be 5-6 percent.^^1^^ In the United States, for example, measures to protect the environment were 14.8 billion dollars or more than 1 percent of the GNP, already in 1973. Corresponding expenditures between 1973 and 1982 are estimated at 325 billion dollars. In 1982 they are expected to reach a yearly level of more than 46 billion dollars.^^2^^ Expert estimates developed by Wassily Leontief's group suggest that if carried out at the level of U.S. standards environmental protection throughout the world would require from 1.4 to 1.9 percent of their gross national product. While this is a considerable sum it is also true that these standards are still far from ideal in maintaining enviromental quality.^^3^^ Changes in its raw material base and the development of environmentally ``clean'' production technologies may place a heavy burden on the economy. But an additional factor leading to its growth _-_-_
~^^1^^ Ferrier Lullin et Cie., "Possibilites de placement dans le secteur de la lutte centre la pollution aux Etats-Unis'', Geneva, 17 January 1972, p. 1; "De Nederlandse Ondernemig'', 7 January 1972, pp. 5, 8, 22; Proceedings of the United Nations Conference on Trade and Development. Third Session, Vol. IV, p. 186.
~^^2^^ Charles Pearson, "Implications for the Trade and Investment of Developing Countries of United States Environmental Controls'', U.N. Document TD/B/C.2/150/ Add. I/Rev. 1, New York, 1976, p. 13.
~^^3^^ The Future of the World Economy, p. 29.
__PRINTERS_P_259_COMMENT__ 17* 259 may also result from an increased demand for the products of such new industrial sectors.All this, of course, largely refers to the future, while the worsening of capitalism's raw material problem is a reality today. It is possible to anticipate already now, however, that at some stage of development of their raw material basis the influence of scientific and technical progress in capitalist countries in neutralizing present tendencies towards mineral raw materials shortages will increase. This may result from a growing role of nuclear power, the exploitation of ocean resources, the discovery of new mineral deposits, the utilization of sources that are not profitable at the present time, a greater reliance on recycling, the introduction of technological processes that produce very little waste, and the reduction of the material-intensity and energy-intensity of industrial production. Relative shortages of raw materials will be increasingly influenced by progress in science and technology.
In short it is necessary to weigh the balance resulting from the operation of these forces acting in different directions, and to judge the extent to which the increasingly rapid revolution in science and technology will be able to compensate for the growing depletion of natural resources. Will it result in increasing difficulties with regard to raw materials at the global level, or will a discovery of new possibilities for obtaining raw materials, together with more rational ways for utilizing them, permit a still greater satisfaction of the needs of expanding production? Such are the questions for which only largely hypothetical answers may be provided at the present time. There may, of course, exist different and even mutually exclusive points of view on these matters, but we would like to base our own view on a faith in the power of human reason which is "... as infinite as technical developments".^^1^^
In such a context it seems appropriate to present a number of wider considerations bearing not only on the most recent tendencies in the development of the capitalist economy but also on _-_-_
~^^1^^ V. I. Lenin, "On the So-Called Market Question'', Collected Works, Vol. 1, p. 100.
260 the way in which one should interpret the changes that are taking place, and consider ways to overcome the fuel and raw materials crisis and find comprehensive solutions to ecological problems. It is in recent decades that there has been a serious evolution in the general understanding of these processes. Its scope and depth has perhaps been even greater than the real changes that have taken place in raw materials and fuel supplies. Following abstract discussions concerning the hypothetical inevitability of a depletion of natural resources at some distant future time, there followed a paniclike exaggeration of that threat, as if raw materials were about to be fully depleted in the immediate future. This partly represented a psychological reaction to a sudden sharp intensification in the energy crisis. Later a more balanced approach began to develop, based on a recognition of a need for restructuring of economies in ways that match the new conditions governing supplies of minerals.This evolution in views has been noted in one of the most recent reports to the Club of Rome: "A painful interruption in growth has been caused by the crisis of oil and raw materials . .. Even if we overcome this crisis by intensive efforts in research and development, we must avoid returning to the old trend, which would again lead to catastrophe. .. The trend must therefore be towards an economy based, wherever possible, on practically inexhaustible sources of energy, on the use of widely available or renewable raw materials, on a repeated recycling of scarce materials, on a responsible management of food resources and of environmental quality, and on low energy-intensive and low materials-intensive technologies.''^^1^^
It is also significant that the study of these problems is moving beyond the sphere of academic discussions and positions of different schools of thought. It increasingly affects practical activities and is becoming a real factor in goal-oriented economic policies, both of private firms and of governments and intergovcrnment organizations. Today it would appear that the question is no longer whether it is possible or necessary to effect a cardinal restructuring of the entire economic mechanism in accordance with changing conditions in raw materials utilization, _-_-_
~^^1^^ D. Gabor, ct al., op. cit., pp. 2, 3.
261 for there simply is no other alternative. The question is rather: how, and how consistently will such a restructuring be carried out.But what are the features that characterize the present stage in this regard, and what are the prospects for the immediate future. Many answers seem to be self-evident. Indeed, few people today will doubt that following a real depletion of economically viable natural petroleum deposits the future of the world economy requires a greater use of both coal resources and alternative sources of energy, as well as saving of energy, and a reduction in the unit energy intensity of industrial production and household appliances. It is not so much the technical complexity of that problem as its social and economic complexity that is becoming apparent.^^1^^ So far the results of government programmes aimed at improving the energy self-sufficiency of Western countries point to a clear lag of actual efforts, no matter how broadly they were publicized. This has been amply illustrated by major disruptions in energy supplies and a reduced rate of economic development in most capitalist countries.
Yet, while it is clear that until now only a short and perhaps insignificant distance has been covered towards a radical adaptation of economies to the new conditions governing the supply of raw materials and fuels such a movement has in fact begun to take place. The intensification of many of the world capitalist economic contradictions may itself be viewed as the beginning of such a restructuring. Since that extremely complex and prolonged process is associated with major economic and social difficulties, it may well be that it is precisely its initial stage, that will be the most difficult one, for experience in carrying out measures is not yet available.
Aside from technico-economic difficulties one should also consider impediments of a subjective order. These include traditions _-_-_
~^^1^^ That it is possible to solve many energy and ecological problems with the present level of scientific and technological knowledge is indicated by the following example: in 1979 the Mercury Capri automobile began to be produced, whose new diesel engine requires only 2.9 litres of fuel per 100 kilometres (as opposed to the current average of 17.8 litres) and produces exhaust gases whose toxic characteristics are 4 times less harmful than those of any other models.
262 in forms of consumption as well as in production, the inertia of consumer demand, and the role of established criteria in evaluating the usefulness and "prestige value" of things. Today, for example, efforts are made to persuade American consumers that the need to abandon large automobiles and to reduce speed limits on highways should be blamed on egotistical petroleumexporting countries. Presumably in the future, when they will be viewed in the light of new norms relating to the rational utilization of energy resources today's measures for saving energy will be perceived in the same way as we now view the early ``daring'' flights at the dawn of civil aviation. But in the future, too, the major burden of a structural reorganization of capitalist economies will continue to be transferred to workers for the sake of maintaining the profits of major corporations.It would thus appear that it is precisely today that the foundations are being laid for a radical reorganization in the further development of the entire economic structure that will make it possible to meet the new conditions governing the supply of raw materials and fuels. The full implications of such a reorganisation are yet to become apparent.
Whatever the actual solutions of these fundamental problems will prove to be, they will exert a direct influence on the international division of labour and most probably cause its further intensification. This is likely to occur both in the event of a general reduction in the degree of raw material self-sufficiency of industrial capitalist powers, resulting in a growth in corresponding imports, and in the event of a partial widening of their raw material base, which presupposes a greater degree of international specialization and cooperation. It is also likely to occur in the event of further economizing of raw material expenditures per output of final product. In relation to the prospects of the world capitalist market these problems may be viewed in terms of the distribution of natural resources among individual groups of countries; occasionally this produces substantial adjustments in the overall picture.
Current estimates indicate thai the situation in developed capitalist countries is favourable in the case of coal, brown coal, uranium, lead, zinc, and chrome. These countries possess more than one-half of the total reserves of these minerals. It is true 263 that these same countries are also the major consumers of raw materials, and that they are primarily concentrated in North America. The position of developing countries is much more favourable in the case of petroleum resources, natural gas, tin, nickel, and bauxites. This is why even if one assumes that there will be an increase in the raw material self-sufficiency of major capitalist countries over the longer term, their needs for importing many vitally important minerals in the immediate future will remain at least as high and will quite probably grow. One may therefore expect a further development in international trade in raw materials and fuel in a context that will be governed by the factors that have been mentioned as well as by the balance of forces between developed capitalist countries and developing states.
__ALPHA_LVL2__ 3. Additional Observations Concerning PricesLet us state the problem clearly: is it actually possible to arrive at a reliable forecast of changing absolute price levels for all world prices over a prolonged period of time---of the order of several decades? The answer is unequivocal: this is impossible, for it would require that an enormous number of factors pertaining to concrete relations between demand and supply be taken into consideration. Most of these cannot be anticipated.^^1^^
The problem is that the absolute level of all world prices taken together largely reflects fluctuations in the purchasing power of currencies and the intensity of inflationary processes. Accordingly any such attempt will in fact reduce to determining the prospects of inflation---a problem that is equally difficult. As a working hypothesis let us simply assume that inflationary tendencies will continue to develop and to exert corresponding influences on the average level of commodity prices.
But if one abstracts from the distorting influence of inflationary factors that alter the magnitude and nominal level of prices, it is quite feasible to estimate future value proportions, at least _-_-_
~^^1^^ In the words of Paul A. Samuelson, "Economists can forecast (well, almost forecast) everything but prices" (Paul A. Samuelson, " Lessons from the Current Economic Expansion'', The American Economic Review, May 1974, p. 76).
264 in general terms. For other conditions being equal, they reflect a variety of situations relating to specific goods. Initially, we shall consider the prospect for changes in the relative prices of primary commodities and manufactured goods.Let us again turn to historical experience. During the past 100 years, within each of the major stages of development of the world capitalist economy---before the First World War, during the interwar period, and in postwar years---the ratio of these prices has followed a clear tendency favouring manufactures (see Table 8 in Chapter 1). Only rarely, usually at the highest point of an economic cycle, or at times of short-term growth in the demand for raw materials under the influence of non-cyclical factors, do we observe the reverse trend.
That tendency reflects primarily the gradual reduction in the relative importance of raw materials in the world economy, as a greater rate of growth occurred in processing industries and as the material intensity of production declined. It is not surprising that it was particularly prolonged and stable in postwar years, when these processes began to develop with particular intensity, even though the balance of forces between importing and exporting countries was already more favourable to the latter than before the collapse of the colonial system. To some extent this relative decline in the price of raw materials was made even more pronounced by differences in the position of suppliers of raw materials and suppliers of industrial products and by the omnipotence of international monopolies in all sectors of the world capitalist system of production and trade. This last point should be considered more closely.
The colonial system and contemporary neo-colonialism, as well as the formation of monopolistic prices continue to influence the deviation of raw material prices from their value in a single direction, namely that which is advantageous to imperialism. Over a prolonged period of time a very large number of divided small-scale raw materials producers in underdeveloped countries faced a small number of very powerful capitalist countries and monopolistic associations possessing a diversity of means for exerting pressure on exporters of raw material. Even the bourgeois press has long admitted that "the underdeveloped countries, poor as they are, have been contributing, involuntarily, to Western 265 prosperity".^^1^^ The foreign trade policy of imperialist powers has stuck to the following rule: ``Don't let the developing countries get at your markets with goods they can produce cheaply. And if you have to buy stuff from them, make sure you are getting it as cheaply as possible.''^^2^^ Even at the height of the energy crisis when the Western press was seeking to shift the responsibility on petroleum exporters some economic observers were stating that "indeed we have to thank the Arabs and other primary producers for having underwritten the Western world's prosperity in the years following the Second World War".^^3^^
The unequal economic conditions in which producers of raw material and manufactured goods find themselves under capitalism also contribute (together with some other factors of a technico-economic nature) to the relatively greater instability of raw material prices, which is amplified even further by the policies of monopolies. In the words of Nicholas Kaldor, a British economist, the ability of monopolies to control the prices of their products leads to a situation in which ''. . .the burden of any maladjustment between the growth of primary production and the growth of manufacturing activities is thrown almost entirely on the commodity markets, the behaviour of which is erratic. . .".^^4^^
But one should also not forget that underlying the unfavourable ratio of raw material prices to those of manufactures is a growing difference in labour productivity between developed and developing countries. For value (including international value) is determined not by individual expenditures of labour but by those expenditures of labour that are socially necessary. While monopolistic price formation enhances the negative consequences of such differences, one should not overemphasize such possibilities, for, as K. Marx observed, "... a monopoly price _-_-_
~^^1^^ "Commodities in Search of Stability'', The Economist, London, 12 February 1963, p. 131.
~^^2^^ "But It Pays to Be Nice'', The Economist, London, 15 February 1969, p. 79.
^^3^^ Frances Cairncross and Ilamish McRae, The Second Great Crash. How the Oil Crisis Could Destroy the World's Economy, Methuen, London, 1975, p. 11.
~^^4^^ Nicholas Kaldor, "Inflation and Recession in the World Economy'', The Economic Journal, December 1976, p. 705.
266 becomes possible, which rises above the price of production and above the value of the commodities affected by such a monopoly, then the limits imposed by the value of the commodities would not thereby be removed. The monopoly price of certain commodities would merely transfer a portion of the profit of the other commodity-producers to the commodities having the monopoly price.''^^1^^This provides a key to understanding the way in which the operation of monopolies, while not overruling the law of value, can bring about a redistribution of profits at the international level. In other words even though deviations of monopoly prices from the values of raw material and manufactured goods usually take place in opposite directions that are unfavourable to developing countries, and while monopolistic pricing remains an important factor that must be taken into consideration, it is still value, and in the case of the world market---international value ---that ultimately determines the boundaries of these fluctuations. It is another matter, of course, that a recognition of the objective character of the economic laws governing capitalist price formation does not absolve imperialism from its responsibility for the low productivity of labour and the general economic backwardness of developing countries. This was the result of their unequal status within the world capitalist economic system.
In our opinion the main question relating to the dynamics of price proportions concerns the duration and intensity with which the opposing factors that have been mentioned operate. Particular attention should be given to those new tendencies that derive from changes in the general conditions governing the development of the world capitalist economy. Let us attempt to apply such a perspective to the net outcome of processes operating in different directions.
On the one hand, it is likely that those tendencies that contribute to a relative decline in the importance of raw materials in production and in foreign trade will continue to operate, and perhaps even become stronger. This concerns, first of all, the fact that manufacturing industries, particularly in the case of advanced and technologically complex sectors that are not raw _-_-_
~^^1^^ K. Marx, Capital, Vol. Ill, p. 861.
267 material-intensive, would grow more rapidly than the others.^^1^^ Such factors as the depletion of mineral deposits, the exploitation of remote and less productive deposits, and the search for alternative sources of energy and synthetic substitutes for natural products will of course contribute to higher production costs of primary materials. At the same time they will objectively stimulate the development of industrial sectors associated with the production of the equipment that is needed to apply new methods for processing raw materials, introducing waste-free technology and protecting the environment.Second, as the relative level of prices for raw materials will increase, and thus the profitability of extracting them, so will the stimuli for increasing production, including their production in developed countries, and for bigger supplies of raw materials, which, in turn, brings prices down.
Third, the growing shortage of certain types of natural resources will provide an additional stimulus for expanding the production of synthetic and artificial products in developed countries and for improving their quality and increasing their competitiveness. It will also encourage recycling.^^2^^
Fourth, these same causes will inevitably intensify tendencies leading to the economizing of raw materials and to a reduction in the energy-intensity and material-intensity of industrial production. They will contribute to an acceleration of technological _-_-_
~^^1^^ In the opinion of V. Rymalov, a Soviet economist, by the mid1980s the output of manufacturing industries may exceed by at least 4 times the value of agrarian and other raw material products (in constant prices). This compares with a threefold increase in the mid-1970s (V. V. Rymalov, Strukturniye izmeneniya v mirovom kapitalisticheskom khozyaistve (Structural Changes in the World Capitalist Economy), Mysl, Moscow, 1978, pp. 312--13.
^^2^^ It is in the light of these two considerations that one may interpret the threat by the United States to raw materials exporters that "in the longer run, major restrictions imposed by producer nations on the supply of any commodity---or large price increases---will tend to prove counterproductive for the producers. Consumers will undoubtedly find it in their best interests, for both economic and national security reasons, to further exploit their own domestic sources of raw materials, develop synthetics or find substitute products" (International Economic Report of the President. Transmitted to the Congress February 1974, Washington, 1974, p. 23).
268 progress and to a reduction in unit raw materials and fuel expenditures.Fifth, these same processes will be reflected in a general reorganization of the structure of production as well as consumption, and in an adaptation of economies to the production of some fundamentally new types of products that are more suited to the changing conditions governing the supply of raw materials and fuels.
Sixth, even in the presence of greater difficulties in extracting raw materials and with a reliance on less abundant and less accessible deposits, technological progress itself will contribute to an increase in labour productivity and create a tendency to reduce production costs and prices. It is still not clear, at this point, whether that tendency will in fact be weaker than the opposing tendency towards increasing costs in the course of depletion of natural resources.
At the same time the adaptation to a new structure of production costs associated with possibly increasing costs of primary materials will proceed not only autonomously through the efforts of private firms, but also, it would appear, through a growing participation of the state-monopolistic mechanism.^^1^^ The prospect of a depletion of their own natural resources and of a growing dependence on developing countries that are less and less amenable to control by imperialism will inevitably encourage a mobilization of all available reserves in solving the more general strategic problem of maintaining capitalism as a world system.
Finally, in spite of the loss of many political and economic levers of neo-colonial dominance, the position of foreign monopolistic capital within the raw materials production and trade activities of developing countries continue to be quite substantial. The very laws that govern the capitalist mode of production _-_-_
~^^1^^ In this connection Theodore H. Moran, an American researcher, observes that in the future it is probable that "the policies of the industrial countries will increasingly encourage or subsidize the restructuring of international industries by multinational corporations to suit their `joint' needs" (Theodore II. Moran, "New Deal or Raw Deal in Raw Materials'', Richard N. Cooper, Ed., A Reordered World. Emerging International Economic Problems, Potomac Associates, Washington, 1973, p. 179).
269 create and reproduce relations of inequality between developed and economically backward countries.^^1^^ And, in spite of the irreversible character of the struggle of developing countries to achieve full economic sovereignty, further successes in that struggle will force developed capitalist states to seek more flexible forms for influencing the socio-economic development of the newly-emerged countries in the presence of a new balance of power.In particular, as the role of foreign monopolistic capital within the developing countries' industries has increased, one can already see a tendency to impose a technological dependence on industrial powers and transform developing countries not only into dependent suppliers of raw materials but of industrial products as well, through a subordinate position within the capitalist system of international industrial cooperation.^^2^^ Moreover, the very concept of the so-called "Third World" may also undergo substantial changes both as a result of increasing tendencies towards a non-capitalist development in a number of newlyemerged states, and also in the event of shifts to the capitalist camp of developing countries following a capitalist orientation who will find themselves closely linked with the leading capitalist states through joint forms of capital.
This suggests that the further intensification of the struggle of developing countries for their economic independence and for a full sovereignty over their natural resources is likely to encounter increasing opposition on the part of imperialism, partly through a greater emphasis on agrarian and raw materials protectionism. And it is likely that the material basis for carrying out such autarchic tendencies will continue to increase as further _-_-_
^^1^^ In the words of Robert W. Tucker, an American professor, "the laws of the market insure that between states unequal in economic power and at very different stages of development there can only be further inequality" (Robert W. Tucker, The Inequality of Nations, Basic Books Publishers, Inc., New York, 1977, p. 68).
^^2^^ In this connection John Diebold, an American economist, considers it likely that 'much export-oriented manufacturing production will be switched in the period 1973--93 to the LDSs. . .'' (John Diebold, "Multinational Corporations: Why Be Scared of Them?'', Richard N. Cooper, Ed., A Reordered World. . ., p. 147).
270 scientific and technical progress takes place in advanced capitalist countries. For if one accepts the view that developing countries seek to reduce their dependence, then one should also accept the view that capitalist industrial powers, too, may seek to reduce their already declining dependence on the developing countries' lagging economics, consolidate their own economic potential and increase the mutual complementarity of their economic complexes through an internationalization of production and of capital. Of course, this issue is debatable in many respects, but it seems to us that such a course of events is quite probable, or at least that it cannot be wholly excluded.In spite of clear aggravation of the raw materials problem in developed capitalist countries and of a progressive depletion of their natural resources one should therefore not ignore tne possibility that leading capitalist countries may attain self-- sufficiency in raw materials.
At the same time one observes a growing importance of factors contributing to a strengthening of the position of raw materials suppliers in the world economy, especially in international trade. This refers, first, to the depletion of non-renewable natural resources, which remains a hard fact, no matter how one interprets it. Accordingly, until there are radical shifts within the structure and technology of production the influence of this factor will remain very substantial, at least in the immediate future. One may even assume that for some time, at least, the threat of a shortage of raw materials will in fact increase, since the " psychological potential" of that factor may express itself in many ways, and only further achievements in scientific and technical progress will accustom individuals to such a course of events.
Secondly, taken by itself, a relatively more rapid development of less energy-intensive and raw materials-intensive sectors and a decline in the material-intensity of production resulting from improvements in the technologies of manufacturing industries by no means implies a general proportional reduction in the utilization of raw materials. Even if their relative weight within the world economy should decrease, the latter's further development will very probably be accompanied by increases in the absolute scale of natural resources utilization for a prolonged period of time. It is doubtful that a decline in material-intensity 271 can in fact compensate for growing absolute volumes of raw materials if and when economic development proceeds rapidly.
Third, a transition to the extraction of less economic deposits, the development of new, relatively inaccessible sources of raw materials, and the search for more competitive synthetic materials will all contribute to an increase in raw materials costs. For example, in spite of low production costs in African and the Middle Eastern countries, where petroleum is abundant, the expanding of costly off-shore petroleum production has contributed to an increase in the international cost and world petroleum prices. The policies of importing countries also contribute to this development since they are becoming interested not only in acquiring low-cost imported raw materials but also, paradoxical as it may seem, in maintaining prices at a relatively high level in order to increase the competitiveness of their own raw materials base.^^1^^ Yet this factor should not be overemphasized since "it is only in extraordinary combinations that commodities produced under the worst, or the most favourable conditions regulate the market-value".^^2^^ A decisive role will therefore be played by increases in the average level of international costs as the relative weight of high-cost materials continues to increase.
Fourth, the natural monopoly of individual countries over sources of raw materials, whose volume cannot be increased through capital investment, raises the absolute rents that derive from possessing these resources in conditions of growing demand.
Fifth, the struggle of developing countries for achieving full control over their natural resources is accompanied by tendency towards a unity of these states in matters relating to external economic policies and to the development of joint positions by the countries exporting raw materials. While it is true, of course, that in such cases as well the long-term upper limits of world prices are determined by the law of value, the growing strength of associations of raw materials exporters---operating as a kind of ``anti-cartel''---in opposing international monopolies, curbs the _-_-_
~^^1^^ It is from such a point of view that one should consider the attempts of the International Energy Agency, whose members include the major capitalist countries, to define minimal (rather than maximal) petroleum prices.
^^2^^ K. Marx, Capital, Vol. Ill, p. 178.
272 power of imperialism in dictating conditions of world trade for its own benefit.Yet all these considerations relate primarily to mineral raw materials, and especially to fuels which are threatened with depletion. To some extent they also apply to agricultural raw materials, although in view of the renewable nature of agricultural products, animal husbandry, forestry, and fishing, the problem there is somewhat different. Because of potential possibilities for increasing productivity it is inherently subject to fewer tensions. This is especially true of temperate zone for which developed capitalist countries have already achieved a high degree of selfsufficiency (particularly in food products) and which are especially vulnerable to the competition of synthetic raw materials (raw materials for light industries).
Even this incomplete list of factors that operate in different directions shows how difficult it is to establish the future result of such contradictory tendencies. On the one hand, it seems that the fuel and raw materials boom of the 1970s marked a collapse of the existing system of the international capitalist division of labour, and thus the end (or else the beginning of the end) of a particular stage in the development of the world capitalist economy, marked by an uncontrolled access to the raw materials in developing countries. On the other hand, changing conditions, irreversible as they are, for obtaining mineral raw materials that go in combination with a real prospect of natural resource depletion and an aggravation of ecological problems confront imperialism with an inescapable dilemma, namely, either to adapt to the new situation or to accept a progressive weakening of all its positions on the international stage.
The answer to that problem will depend on how rapidly developed capitalist countries will be able to carry out a restructuring of not only their own raw materials base but of their entire economic structure versus the changing raw materials situation. Either this will be achieved, even though, as has already been noted, such an adaptation will inevitably be long and painful and further complicated by economic and social conflicts, or the nonviability of capitalism as a world system will finally manifest itself. Since this second possibility depends on solutions to more general problems and lies beyond the framework of the present study __PRINTERS_P_273_COMMENT__ 18---872 273 we will limit ourselves to the hypothesis that events will develop in accordance with the first of these two courses.
It is then likely, we believe, that those tendencies will initially prevail that increase the cost of raw materials, or, to be more precise, impede its relative loss of value by comparison with that of manufactured goods. The duration of that period will depend on the intensity of the resulting structural reorganization of economies and the magnitude of corresponding costs. Eventually, however, there will be greater opportunities for a declining material-intensity of production and the application of more effective methods for extracting raw materials as well as for rationalizing their use.
To survey the arguments of other researchers for or against such an assumption, is probably not very useful since in the case of such complex problems truth is not determined by simple majority vote. It is nevertheless true that with immediate future nearly all specialists agree that ''. . .on a purely technological basis and taking into account the relative scarcity of some minerals, the prices of natural resources would tend to increase, relative to the prices of manufactured goods, in the closing decades of this century".^^1^^ That view does not seem to require any particular reservations, except, perhaps, concerning the presumed continuation of current tendencies, to the very end of the century.
Another point, however, is of fundamental importance. One can agree with the widely held view that a return to the past level of prices is impossible---in the sense of both their general nominal level and their patterns in world trade, particularly since the age of unimpeded access to sources of raw materials at the periphery of the capitalist world by international monopolies is irrevocably receding into the past. For under the hypnotic influence of a continual increase in all commodity prices during the past decade, some economists are either consciously or unconsciously confusing the influence of inflationary factors with the problem of value proportions and adhere to the hypothesis that it is a rising trend in world prices that prevails. This approach, if adopted with no appropriate reservations, is equivalent to accepting the view that there will be an endless increase _-_-_
^^1^^ The Future of the World Economy, p. 40.
274 in the international value of all products---a proposition that is difficult to defend both theoretically and practically.The hypothesis that in future prices will only increase does not accord with the tendency towards an increasing productivity of labour under an accelerated progress in science and technology. It ignores an entire complex of factors that influence price formation.
It also fails to be persuasive when it relies on monopolistic price theory for support. For the latter, too, cannot exceed the boundaries defined by value. In this connection V. I. Lenin emphasized that ''. . . monopolies, which have grown out of free competition, do not eliminate the latter, but exist above it and alongside it.. .".^^1^^ This is especially true of the formation of international value, since in spite of all barriers to the reallocation of capital, competition on world markets is substantially more intense than within national boundaries, and there is not a single industry at the international level in which only one firm possesses a true monopoly. This is possible only for individual technically advanced products, and only for a short time.
One could, of course, point to the example of the international petroleum cartel, which kept the price of crude oil at a relatively low level for a prolonged period of time. Its aim was to reduce royalty payments to petroleum-producing countries and increase, through the use of intracorporate prices, its own share of profits from the sale of petroleum products, derived from inexpensive primary raw materials. Yet, no matter how complex the corresponding circumstances may be, ultimately the recent increase in petroleum prices reflects changes in the objective conditions governing extraction, increases in the international costs of production, resulting from an increasing reliance on formerly inaccessible deposits, and large expenditures to develop alternative sources of energy, i.e., an increase in the value of energy resources generally. Secondly, it is precisely in recent years that the ability of international monopolies to control the petroleum resources of developing countries has declined as many of these countries have begun to pursue independent policies.
_-_-_~^^1^^ V. I. Lenin, "Imperialism, the Highest Stage of Capitalism'', Collected Works, Vol. 22, p. 266.
__PRINTERS_P_275_COMMENT__ 18* 275Let us therefore stress essential dimensions of the shifts that are taking place in mutual relations between developing countries and the imperialist powers. The continuing process of economic decolonization has affected the ultimate basis of exploitation, namely, the dominance of foreign monopolies within the developing countries' economies. While one may recognize all the negative consequences that result from the power of foreign capital within the domestic and external trade of many developing countries in banking operations, insurance, transportation activities and other economic sectors, it is nevertheless the extraction of surplus value within the production sphere itself that operates as the principal source of profit of international monopolies, while in the circulation sphere that surplus value is merely redistributed. It is in the sphere of production that one finds the sources of the unequal position of developing countries within the system of international capitalist division of labour, although a number of authors in other countries assert that exploitation is a characteristic of the distribution sphere.^^1^^
It is true that the position of foreign monopolistic capital in the economies of newly-emerged nations is still strong. With regard to future prospects, however, it is significant that it has been considerably weakened in a number of sectors, and especially in extractive industries. It is therefore especially inappropriate to exaggerate the future possibilities of monopoly price formation in the case of raw materials. The fact that international monopolies are seeking to compensate for their weakened role in this area by penetrating the manufacturing sphere of new states and linking it to their own international production complexes is another matter. But leaving aside other contradictory aspects of that problem, this does not necessarily operate as a factor that increases world prices. In fact, with regard to intracorporate deliveries just the reverse appears to be true. This is also true of the growing role of international industrial monopolies within the economies of developing countries.
Even if one considers the possibility that world prices will _-_-_
~^^1^^ Arghiri Emmanuel, Unequal Exchange. A Study of the Imperialism of Trade, Monthly Review Press, London, 1972, p. 329.
276 be influenced by monopolies of a fundamentally different character, namely the monopoly of individual countries over sources of raw materials---even then no simple outcome seems possible, suggesting a continuing tendency towards higher prices. It is true, of course, that the irreversible character of the process through which the newly independent countries have begun to re-establish control over their natural wealth, especially at a time when demand for raw materials is increasing, makes it easier for them to raise absolute rents. This is also enhanced by the coordination of actions by raw materials exporting countries and by their striving to establish stable proportions between prices for their exports and those for their imports. But one should recognize that such possibilities for regulating prices are unavoidably limited by the unorganized character of price formation on the world capitalist market and that ultimately they, too, are governed by the law of value.It is therefore not possible to reduce the very complex dimensions of the problems that bear on the current situation relating to prices to an unequivocal assertion that only increasing tendencies can result. As for proportions between raw material prices and those of industrial products it is possible that, following a period of further improvements in the relative purchasing power of certain types of raw materials, there may be a tendency towards a return to the earlier proportions. Of course this only refers to a tendency that is countered by other tendencies produced by the increasingly complex raw material situation. While only a few years ago, for example in the mid-1970s, such a prospect would have appeared highly questionable and based on abstract logic, recent developments provide grounds for considering it seriously. In particular, even though the ratio of price indices of industrial goods to all raw material products in 1979 was nearly twice as advantageous for raw materials suppliers as in 1972, that indicator has already returned to its initial level if one exchides petroleum (as noted earlier there are no United Nations data on the aggregate index of prices for non-energy raw materials for earlier periods).
Such a view concerning the future is in accord with the general principles that govern price formation on the world capitalist market, where the mechanism of supply and demand 277 continues to operate in the context of the revolution in science and technology and even when non-renewable natural resources are being depleted. There do not exist any specific conditions that can annul the operation of the laws of capitalist competition according to which "supply and demand determine the marketprice, and so does the market-price, and the market-value in the further analysis, determine supply and demand".^^1^^ So long as the capitalist mode of production exists it is inherently unavoidable that ''. . . on account of the protracted rise in the price of the raw material and of all commodities of which it is an element, ...a reaction in the price of raw material [occurs]".^^2^^ The Marxist-Leninist interpretation of the mutual interaction of production and prices through the regulating role of the law of value contributes to understanding the further dynamics of price proportions on the world capitalist market.
__ALPHA_LVL1__ Conclusions __NOTE__ Heading "Conclusions" is in middle of page, instead of at top of new page, even though "Conclusions" in the Table of Contents is a LVL1.In summarizing this study it seems appropriate to turn once more to the objectives that the author had in mind and consider the extent to which he has succeeded in achieving them. It is true, of course, that the aspects that were examined by no means encompass all problems of international capitalist trade. Beyond this the results of this study (as well as its level) may meet with different evaluations. But while leaving this to the reader, it seems important to draw attention to a specific vital characteristic of the present stage in world economic relations to whose development all other problems were subordinated in the present work.
It seems to us that the last few years have been so unique in the economic history of imperialism that their implications for analysis are of great interest in themselves, quite aside from _-_-_
~^^1^^ K. Marx, Capital, Vol. Ill, p. 191.
~^^2^^ Ibid., p. 118. It is appropriate to note that precisely such a response took place in 1975--1976. The ratio of the raw material prices index to that of finished goods---the "exchange coefficient of raw materials" declined from a maximal value of 193 in the fourtli quarter of 1974 to 159 in the third quarter of 1976 (U.N., Monthly Bulletin of Statistics, December 1976).
278 their obvious relevance to current concerns. It is true, of course, that the entire post-war period in the history of international economic relations is in many ways highly specific and calls for the most careful studies, for which much remains to be done. But while in spite of its diversity, the main part of the postwar period produced only further data for establishing and analyzing more closely new tendencies that were already relatively clear, today the complex fate of the capitalist economy has given us test data, as it were, for considering the extent to which the new tendencies were truly long-term in character.It was purely accidental that the completion of work on this subject coincided with a sharp deterioration in the energy, raw materials, monetary and ecological problems of world capitalism, whose interaction served to extend the scope of the current economic crisis. But, it would be sinful, in the words of a comfmon expression, not to accept such a gift, and it is not difficult to understand the position of an author, who, after devoting many years to clarifying the concept of accelerated development and the new role of the external sphere in modern economies is suddenly offered a chance of testing his views. To refuse such a challenge in the context of the extreme conditions that currently exist would also violate, in fact, the norms of scientific objectivity which exclude attempts to adapt actual developments to a prespecified scheme. This is why the main question for the present study is whether today's stage in the development of world economic relations represents a structural shift or whether it reflects the continuing operation of long-term tendencies that were already in existence.
While this question is important in itself it also carries farreaching implications. The cataclysms that have taken place in the capitalist economy during the 1970s have greatly undermined the conception, that had begun to be accepted, that together with highly fashionable means of state-monopolistic regulation and scientific and technical progress it would be possible for modern capitalism to avoid disruptive worldwide cyclical crises. It is precisely in the light of the unstable character of capitalist economic development, which has now been so clearly confirmed, that one should examine the basis of the particular ``viability'' of the external economic sphere and its prospects. It is important, 279 in short, to establish whether the increased growth in international economic exchange activities should be attributed only to the relatively favourable conditions governing the economic development in the 1950s and 1960s or whether it expresses a more fundamental tendency that holds for the entire period of the present revolution in science and technology.
There is no single answer to that problem. It is important to carefully weigh the possible consequences of the new contradictions within the capitalist world economic system that have appeared so vividly during the crisis of the mid-1970s. It appears increasingly important that the struggle of developing countries for genuine sovereignty over their natural wealth and for joint actions on the world market continues to gather strength, and that the role of non-renewable sources of raw materials is enhanced as ecological problems become more urgent, particularly since this encourages a relocation of labour-intensive and material-intensive production activities in countries of the developing world. It seems probable that this will serve to improve the position of raw materials suppliers and especially of newly-emerged states and thus influence relative prices in international trade.
But these same factors may also encourage opposing tendencies. And while the means that are available to imperialism for influencing developing countries are continually declining, there exist many ways at the technico-economic level to adapt to new conditions of raw materials supply. Aside from a greater emphasis by imperialist powers in increasing their self-sufficiency in raw materials one should also view realistically the role of neocolonialist methods in consolidating the dependence of new states within the framework of a technologically based "new partnership''. One should also consider the possibility for incorporating into the world capitalist system the upper crust in those developing countries, who have been made rich by the petroleum boom, or have simply linked the fates of their economies with an excessive participation in the capitalist forms of international cooperation in production. This raises the problem concerning the forms and scope that the increasingly complex raw materials problems may assume on individual commodity markets and whether the dramatic events that have taken place on the petroleum market are representative of future situations relating to 280 supplies in other types of raw materials or reflect the characteristics that are specific only to petroleum.
Generally, we believe that estimates of the prospects for world trade and especially its geographic and commodity composition largely depend on specific interpretations of the raw materials problem, and especially of the problem of mineral raw materials. Will the increasingly rapid revolution in science and technology succeed in compensating for the progressive depletion of natural resources? Will it eventually lead to an aggravation of the raw materials problem on the global scale? Or will the discovery of new sources and methods for extracting raw materials, together with more rational methods for utilizing them, ensure the meeting of the growing needs of production even more fully? These are the problems that must, for the present, be considered in strictly hypothetical terms. Each hypothesis may be supported by relatively persuasive arguments pointing both to an eventually inevitable depletion of the traditional sources of natural raw materials and to the boundless possibilities of technical progress, whose role, we believe, will ultimately be decisive. Generally, both progress in geological exploration and the new technological developments in the field of raw material extraction suggest that the thin layer of resources enveloping the globe is in fact continuing to stretch as needs increase.
Nevertheless, in view of the current state of scientific knowledge, it is hardly appropriate to advance categorical assertions in this respect. Eventually this issue will be settled by the course of events. Today one may merely observe that the entire range of imperialism's economic arrangements has begun to experience a forced adaptation to the new conditions governing the supply of fuels and raw materials, and a new structure of prices. This has produced a search for more advanced technologies as well as changes in the mix of capital and consumer goods. It is clear that this road is neither short nor easy, and that it is made painful by the numerous contradictions that are inherent in a capitalist mode of production. But it is also clear that corresponding developments are generally taking place within the main stream of progress in science and technology, and that they will help overcome the raw materials shortage and influence correspondingly the relative prices of raw materials and finished goods.
281Thus under the contradictory conditions characterizing the present stage, the debatable nature of some of the deeper causes underlying current developments, and especially since they are still incomplete, it is therefore not yet possible to answer these questions fully. It will be sufficient to identify the characteristics that are most representative of the recent period and to establish, at least in general terms, its role within the longer-term tendencies in the development of the world capitalist market.
Under such an approach one observes both an intensification of tendencies that are already apparent and the emergence of new aspects of international economic relations and external trade activities whose role will probably grow.
The first development concerns the growing importance of the external economic sphere, the intrusion of transnational industrial monopolies into the structure of international trade, the growing role of new products, the increasing influence of statemonopolistic intervention into the regulation and stimulation of external trade, and the increasing emphasis on wide-scale international measures designed to bring order into the conditions governing external economic exchange and liberalize them.
The second set of developments includes the evident irreversibility of such recent processes as the aggravation of a number of raw materials, energy and ecological problems, the growing role of newly-emerged countries in international political and economic relations, the striving of new states to achieve a full sovereignty over their national resources and initiate collective measures for defending their external economic interests. It also refers to their struggle, together with socialist countries, for a progressive restructuring of the established system of international economic relations and for expanding business relations between countries with different social systems in conditions of detente.
But it may also be assumed that these new and very important characteristics of modern world economic relations do not at all overcome a number of long-term tendencies in international trade, even though they may influence them and may encourage their modernization in certain respects. This refers to the general tendency towards the industrialization of the commodity composition of external exchange as a result of the more rapid rate 282 of development of modern industrial sectors and reductions in the material-intensity of manufacturing through scientific and technical progress; to the concentration of trade within developed countries and within integration groupings, especially in industrial goods; and to a further rapid development of new forms and areas of international economic relations (scientific and technical exchanges, engineering consulting services, leasing, etc.)
On the whole, in spite of the unavoidable contradictions and uneven rates of development of the external economic sphere that characterize capitalism, it seems likely that further changes in the foreseeable future will be governed by the dominant tendency towards intensification of the international division of labour. From such a point of view the 1970s appear as highly distinctive but still ordinary years rather than as a stage of sharp changes in capitalist world trade. In any event, it is not surprising that as the most recent economic crisis is being overcome one observes tendencies in a number of basic parameters of international trade to return to their initial level at the beginning of the last decade. This is taking place even though the fuel and raw materials problem has not become less complex, and even though the threat of a progressive depletion of natural resources seems even more real, while international monetary problems and inflation in the capitalist world continue.
These are, we believe, the principal conclusions that may be inferred from this study, although it is of course true that its findings and especially the facts to which it refers may be given a different interpretation. One may hope that the future will prove those variants for solving the problems that have been mentioned to have been realistic, or will at least justify their formulation. If this work should contribute to drawing the attention of the new generation of researchers to these problems the author will consider his efforts to have been a success.
There is no doubt, however, that many global problems touching on the interest of all peoples may be brought nearer to a solution by developing international economic relations on the basis of the principles of democracy and equality. In this connection, speaking at the 26th CPSU Congress, the General Secretary of the GPSU Central Committee, L. I. Brezhnev, stressed that "life requires fruitful cooperation of all countries for solving the 283 peaceful, constructive tasks facing every nation and all humanity. . . Not war preparations that doom the peoples to a senseless squandering of their material and spiritual wealth, but consolidation of peace---that is the clue to the future.''^^1^^
In following a consistent policy of struggling for peace and reducing international tensions, the 26th CPSU Congress has formulated specific tasks in developing external economic relations as component elements of the Guidelines for the Economic and Social Development of the USSR for 1981--1985 and for the Period Ending in 1990. In particular, the document that has been adopted on this issue envisages "the further development of foreign trade and economic, scientific and technical cooperation with foreign countries".^^2^^ This includes both developing "on a long-term and equal basis the mutually beneficial exchange of goods and the all-round economic, scientific, technical and other contacts of the Soviet Union with the developing countries'', and, "proceeding from the principles of peaceful coexistence of states with differing social systems and from the need to consolidate detente, maintaining stable, mutually advantageous trade, economic, scientific and technological contacts with advanced capitalist countries showing interest in cooperation with the Soviet Union.''^^3^^
In addition to formulating a constructive programme for developing economic relations with various groups of countries--- socialist, developing, and capitalist---the 26th CPSU Congress gave much attention to problems relating to strengthening international economic cooperation on a wide international basis, and formulated the task of an active participation "in the solution of international problems involving raw materials, fuel and energy, food, environmental protection, peaceful uses of outer spape, exploitation of the resources of the World Ocean and improvement of international economic relations on a fair and equal footing".^^4^^
_-_-_~^^1^^ L. I. Brezhnev, Report of the Central Committee of the Communist Party of the Soviet Union and the Immediate Tasks of the Party in Home and Foreign Policy, pp. 35, 41.
~^^2^^ Moscow News, Supplement to Issue No. 49, 1980.
^^3^^ Ibid.
^^4^^ Ibid.
284Such is the long-term prospect for the development of the USSR's external economic relations. In carrying out the historical targets of the 26th CPSU Congress, the Soviet Union, together with other countries of the socialist community, will effect its considerable positive contribution to the further development of international economic cooperation on the basis of the principles of equality and of a maximal use of its possibilities as an instrument for consolidating peace and accelerating the economic and social progress of all peoples.
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