II. Facts which Have Contributed to the Obsolescence of Traditional Theories on Asymmetry and Dependence in World Economic and Political Relations

The Dimension of Capital
The Dimension of Labor
Some consequences of the new forms of Capital expansion, the organization of Labor and the relations between Capital and Labor

 

A starting point for an improved understanding of the nature of the changes currently taking place in the worlds of economic and political reality would be to reflect on some of the reasons underlying the obsolescence of some of the theories which sought to explain in depth the dynamics of relations between Capital and Labor and their repercussion in the international scenario.

It is evident that I do not propose to exhaust such a complex theme in so short a time. My objective is merely to trace some lines whereby to allow us a better understanding of that which is taking place in the world today.

The extraordinary changes which have occurred since 1989, one of which has been the acceleration of the effects of Globalization, reveal the limitations of the theories and hegemonic ideologies of this century. This is true not only of Marxism; both classical liberalism (by virtue of the changes in the theory of comparative advantages), and social-democracy (which suffers from the criticism of the exhaustion of the welfare state) require a radical reformulation which has as yet not been forthcoming. Obviously: the historical perspectives available to the founders of these schools of thought were quite different and were based upon the premises of certain specific forms of dialectic between the internal and external, and even between relations of capital and labor, which no longer exist.

The world has changed; the nature of Capital has changed; the nature of Labor has also changed. The instruments necessary for achieving increasing levels of social inclusion have likewise changed.

What History has not rendered obsolete in the ideologies principally of the left is a generous aspiration to the effect that change should have the objective of incorporating the weak, the disadvantaged. It is for this reason that the theme of inequality persists and occupies a necessary space in the reflection on globalization.

The Dimension of Capital

In the dimension of Capital one of the aspects to be highlighted is that we are witnessing a veritable atomization of its property. Today pension and investment funds, for example, hold a strategic position in the control of Capital and in the definition of its utilization. This is diluting and depersonalizing the relations between employer and employee in the most dynamic and modern sectors of the economy, though in Brazil, as in a great many other developing countries, most employment is provided by small and medium companies.

Even the relation between entrepreneurs and companies is changing: in place of the "Schumpeterian" businessman, the visionary entrepreneur, is now being replaced by those who control some form of specialized and innovative knowledge, or otherwise, by the managers whose decisions are guided by standards of efficiency and competitiveness. The trend is not new and has been described since the 1950s, but it has most certainly become more marked in recent years.

To give but one example which confirms these trends: in Brazil, pension funds have become the greatest investors in the process of the privatization of the economy. The managers of these funds now retain vast power, in terms of the choice of options for investment in the economy. The majority of these managers have come from the staffs of state companies.

How then can one with any clarity speak of capitalist exploitation, of the attainment of surplus value in the classical Marxist sense if a significant portion of the workers are beginning to be Capital's partners? Undoubtedly, there are specific groups of workers who have been better at achieving means of access to capital precisely because they were capable of becoming organized in a modern manner.

And here we have a first question, more of a sociological than of an economic nature: does the differentiation of labor, derived from the ease of access to capital _and as I shall point out, there are other determining factors in this differentiation _ admit only modern forms of organization, or does it also serve those who, by political artifice, have managed to consolidate corporatist arrangements?

Another crucial element is the increasing mobility of international capital flows and their impact on the monetary and exchange policies of national economies. It becomes increasingly difficult to identify the origin of capital and, above all, the intentions of the managers who deal in it. An analysis of how profits are distributed and of who benefits there from also becomes a complex matter.

This does not mean that we are helpless in the face of the volatility of capital. The awareness of this trend cannot lead us to passivity. The internationalization of capital flows should correspond to new international arrangements to discipline them. And this is perfectly possible.

The Dimension of Labor

I recall that in classical economic theory Labor, Capital and Land were considered the three basic factors of production. The factor Labor was characterized as being static, homogeneous. Technology was associated directly with the factor Capital , not with Labor. Nowadays, as production has become more "knowledge intensive", it is the worker himself who possesses this knowledge to a far greater extent than the company. A significant example of this is the case of Silicon Valley in the United States, which grew from a knowledge base, to which capital flowed a posteriori. Though this example may be somewhat schematic, it serves to illustrate the point which I wished to stress: that in the terminology of Marx, variable capital rises in importance in relation to constant capital, to the degree that the productive process becomes more knowledge intensive.

This fact has deep implications for our countries and economies. Knowledge has become a factor of differentiation in labor. Physical strength and general aptitudes have lost importance as elements which differentiate labor. High-level, qualified and creative manpower has become a "scarce" element, in comparison to the relative abundance of capital in circulation around the world. This is even more important for developing countries: any comparative advantage which peripheral countries might enjoy in terms of cheap and abundant labor has practically disappeared, or to be more precise, it is now located in the less modern sectors of the economy. This reinforces the difficulty of dealing with internal differences in complex developing countries, such as our own. It has become necessary to combine public policies that preserve areas which are modern and competitive by international standards, with a permanent effort to incorporate backward, more labor-intensive sectors.

There is another point which has had an extraordinary impact upon the relations between Capital and Labor. The modernization of the economy has led industrial manpower _ in Marxist terms the proletariat par excellence _ to lose ground to jobs to the tertiary sector; a sector which has a low capacity to mobilize (for the purpose of bargaining with the holders of capital), greater informality and greater differentiation in terms of variety in the types of jobs and in pay scales. It is as a result of this change in the profile of jobs that there has been a move towards greater flexibility in labor standards throughout the four corners of the world.

Many consider that this migration of jobs from the manufacturing sector to the service sector has been a negative phenomenon. Conceptually however, this is a mistake: it is a fallacy that only industry can provide high-quality jobs. Also equally outdated is the notion that only the manufacturing sector has the potential to generate exports, and thus, the capacity to promote growth more easily.

Some consequences of the new forms of Capital expansion, the organization of Labor and the relations between Capital and Labor

Some significant consequences stem from the implementation of the new forms of Capital expansion, the organization of Labor and the relations between Capital and Labor.

First: if on the one hand the mobility of capital flows across national borders may bring real opportunities for growth to emerging economies, on the other, the volatility of this short-term capital and the possibility of its being used in speculative attacks against currencies constitutes a real threat to economic stability and to the level of employment in these countries. (Mexico and all of South America, and even the more distant financial markets, are well aware of the undesirable impact that this volatility can cause).

Second: knowledge, as we know, has become a decisive factor in the differentiation between workers, rendering the position of those who occupy most of the least-qualified jobs vulnerable, especially in developing countries. On this question I would like to make an aside: this internal differentiation among the working class is reminiscent, at first sight, of the notion of a "proletarian bourgeoisie", which in Marxist thought is linked to imperialist exploitation. However this is no longer the case: the rise of specific sectors may be a positive factor and represent productivity gains and the capacity to organize. The problem emerges when the benefits crystallize in corporatist mechanisms, resulting in unequal advantages which owe much more to the political skills of certain groups than to advances in methods of production. What had appeared at first sight to be modern may thus in reality be conservative, not healthy competition at all, but rather identified with the perquisites of political patronage. This occurs above all, in certain sectors of the State; in some countries this has led to the situation whereby the traditional left is used by these groups to defend causes which are paradoxically conservative, in that they preserve situations of privilege.

Third, and perhaps most alarming: in the face of this scenario of transformation, who are to be the new social protagonists for the construction of the future? No longer will it be the "conquering bourgeoisie", since capital has become depersonalized; no longer will the middle class act as the privileged bearer of democratic values; and neither will it be the proletariat, the orphan deprived of its revolutionary utopias after the downfall of real socialism. Further along I shall return to this theme, which I believe to be essential.

Parallel to the transformations which have occurred in the dimensions of Capital and Labor and in their inter relations, other elements contribute to the obsolescence of the theories which sought to explain the system of economic and political relations on the basis of the Marxist concept of imperialism.

When Enzo Faletto and I worked on the building of the Theory of Dependence, the sub-strata of development on the periphery of capitalism, especially in Latin America, was the internationalization of the markets. However, at that moment, another phenomenon was emerging, one which was still hard to perceive in all its aspects from the conceptual view-point of the 1960s. While markets were being internationalized, in Latin America and the developed West production was also being internationalized, which was to cause an impressive expansion of the flows of international trade, which grew far more than did the growth rates of the national economies. Formerly, the prevailing rule had been that all phases of production of a given good took place in the same country. This merchandise was either consumed locally or else exported. Tariff and non-tariff protection, in association with the strategy placing priority on the development of the domestic market, fed a series of national development projects based upon protected industrialization, or import substitution, as the process became known in Latin America. (I recall that the Asian strategy was different, since it was based upon a better income-distribution profile, and it was aimed at the domestic accumulation of capital and technology, which would, at a later stage, lead to more efficient models for meeting the issues of globalization).

But let us go back to the model of import substitution: its exhaustion stemmed basically from the fact that the national content of the majority of goods diminished and their phases of production became internationalized. The more technologically advanced the product, probably the greater the number of countries that had participated, all the way from its conception and design up to its production and marketing. This trend grew stronger, and this was not only as a consequence of the lowering of production costs (resulting from the technical and technological revolution), of the greater mobility of the factors of production, and furthermore, of the fall of transport and communications costs.

It was also the result of the progressive reduction of tariff and non-tariff protection, in successive rounds at multilateral fora such as GATT, sponsored mainly by the developed countries, but which also began to engage the more recently developed countries, who craved new markets. In this particular, the countries which joined the GATT latest, as is the case of Mexico, had to consolidate their tariffs at a lower level than those who had joined in an earlier period. It is symptomatic that of late there has been a broadening of the themes treated by GATT, many of which were formerly restricted to internal jurisdiction.

As a result of the sum of these developments, there has been an exponential growth of intra-firm trade, which is today responsible for the most significant portion of international trade. If, a few decades back, what interested the multinational conglomerates was the legislation in force in the countries receiving their investments regarding the remittance of profits, now, they seek to give priority to the capacity of a given nation to produce intermediate or final products at competitive prices, within the framework of globally defined corporate strategies. Countries are now selected to receive investment from these multinational corporations on the basis of the estimate of the comparative advantages which they can offer, among which are qualified labor which has increasingly become a decisive factor.

These developments result in various consequences, the first of these undoubtedly being the weakening of the national development projects based on state-owned companies which had excluded the external market. The second was the intensification of competition among countries _ especially of developing countries _ for foreign investments. To a great extent countries have reformulated their policies in the economic field in order to attract capital, to complement their own insufficient rates of internal savings, thus obliging them to offer a more attractive and predictable domestic environment.

This once again is nothing new. What is now occurring, however, is different from the 1950s, since the model has changed, and there is no longer "specialized" investment for the Third World, while local economic activity has become linked to these transnational chains of production. Not always is this link to the outside world homogeneous, especially in extremely large countries in which the process of modernization cannot reach the nation as a whole. "Separating" certain parts of the national territory for differentiated types of foreign links has been the solution adopted by some countries.

The intensification of competition between countries has not, however, excluded cooperation, which may take various forms. The main form has been regional integration. The creation of expanded markets, either in the form of free trade zones or, on a more advanced plane, customs unions, has become a fundamental instrument for developing countries within the context of Globalization. In the case of Brazil, in less than a decade MERCOSUR has become the main project for national diplomacy. MERCOSUR today attracts to the region as a whole a growing volume of large-scale investments, which have a significant impact upon the generation of new jobs. I am thus convinced that regional integration projects can be an effective mechanism for combating the most pernicious effects of Globalization.

The third consequence is the emergence of an increasing uniformity in the institutional and regulatory frameworks of all countries. For the globalization of production to advance, the hegemonic notion of the standardization of economic and commercial rules has begun to prevail, so as to impede the creation of artificial advantages in a given country. An illustration of this has been the introduction within the World Trade Organization of international parameters for intellectual property rights and the Agreements for the Protection and Promotion of Investments. It is evident, however, that more homogeneous normative framework will only achieve its objective if, in the application of the standards, there is a greater sense of balance and, above all, if the unilateral abuse of economic power is stopped.

Also intimately linked to the issue of Globalization is the limitation which is imposed upon the capacity of States to choose differentiated development strategies, to adopt heterodox macroeconomic policies, or even more, to support rigid formulas with regard to Capital and Labor. The capital markets then act as veritable monitors of national activities; any measure, however correct it may be from the domestic view point, which might signal a false step or upset foreign investors, leads to short-term capital flight, which in turn seriously affects the financial system of the country.

The orthodoxy or conservatism of this type of insubstantial though influential tribunal places constraints the capacity of governments to operate, since, on the one hand, governments cannot simply ignore these factors which condition contemporary reality, and on the other hand, they are obliged to seek among the contradictions and inconsistencies, and also in the windows of opportunity of the emerging system, strategies capable of reaffirming the priority of the national interest, of strengthening the vocation of countries such as our own for sovereign self-determination and, above all, consolidating our capacity to influence the building of the future.

Globalization is far from being a phenomenon that advances in a uniform manner on the international plane. Its pace obeys a variety of movements. The financial paradigm, for example, is different from the commercial one. In the latter, the areas of resistance are much more pronounced, especially in the developed countries, as has proven to be the case in the issues of agricultural products, fish, and so many others. There is a clear contradiction between the discourse of globalization and what happens in practice, a reality in which the regulation of limitations is dictated by diplomatic negotiations. In the financial area, the opening is certainly greater, but this does not mean that it is exempt from regulatory mechanisms, which are normally established by the Central Banks of each country.

Globalization has also made a contribution to changing the role of the State: the emphasis of governmental action is now directed towards the creating and sustaining of structural conditions of competitiveness on a global scale. This involves channeling investments for infrastructure and for basic public services, among them education and health, and removing the State from the role of the producer of goods with primary responsibility for the productive system.

At several moments I have mentioned that one of the sociological consequences of the modernization induced by Globalization is the dispersion of interests, the fragmentation of Labor and of Capital. The core of political action today is precisely the creation of a political space in which these interests can be harmonized rationally. It is in this respect that I consider it essential to understand that, with Globalization, the State needs to recompose its functions. Thus the mission of the State to provide steering capacity for development becomes much more important than the patently ineffectual attempt to take the place of private enterprise in the production of goods and services which are not of an eminently public nature.

This small grouping of contemporary developments in international economic relations, in my opinion, provides powerful elements which place in check all the theories which sought to explain reality, and above all, the traditional political and economic strategies which States sought to follow in their quest for growth. The challenges of facing a new reality are vast and increasingly complex, since it has become unfeasible to separate the internal and external conditioning factors. Besides this, a paradoxical situation is created, since while on the one hand the demand for equity increases in democratic regimes, among other things as a consequence of the globalization of information, it is directed at a State which, due to its new role, should intervene less often and more effectively, as it has increasingly restricted options in terms of economic policy, as a consequence of the necessary fiscal discipline and austerity in public spending.

Precisely for this reason, never has the quality of political work been so important. In what manner, and based pon what values should governments combine the internal and the external elements; how to conciliate the cattered pressures with the imperative of defining clear goals; how to make the classical mechanisms of epresentation compatible with the growing desire for the direct participation of citizenry in the decision-making process; how to coordinate the thrust of transnational economic values with the need for a sovereign perspective? (I could provide a great many more of these dichotomies). We know that today there are no ideological formulas which coherently spin the threads of a changing reality. A merely pragmatic attitude on the part of the Government is an insufficient and simplistic attitude in the face of problems which involve complex options and values.

In this respect it becomes evident that the essential work of the politician in our respective countries is connected to themes of social justice. His or her principal mandate derives from those who possess little or nothing. In societies such as our own we cannot fool ourselves and accept Globalization as being a natural fact of life, or as a new form of ideology, while allowing internal dichotomies to become aggravated. Inequality, though feeding upon the asymmetries and injustices of relations among states, is still basically a national problem. It is our capacity to overcome this, and with intelligent measures to adapt to the new situation, which mark the action of the modern statesman. Whether the proponents of neoliberal ideologies like it or not, the State is still an essential reference, as an instrument for organizing the transformations, and the modern politician cannot and should not abdicate this responsibility.