Preface to the English Edition

Dependency, Neoliberalism and Globalization in Latin America was first published seven years ago in Latin America. It seeks to articulate Marxist dependency theory with world-systems analysis and thereby contribute towards a Marxist theory of the modern world system capable of analysing the three thematic axes referred to in the title, especially with respect to Latin America. We have substantially updated this English edition and completely reworked Chapter six. The passage of time also provides the distance we need to take stock of its theses in light of current conjunctural dynamics.

The book’s first main thesis is that our analysis of conjonctures (‘conjunctures’ or cyclical phases) should proceed from the specific ways in which structural and cyclical time combine in the longue durée. The contemporary period should be understood in terms of the articulation of three key movements: the techno-scientific revolution, the B-phase of the systemic cycle of US hegemony and the A-phase of the post-1994 Kondratiev cycle. We argue that their combination heralds a period of civilisational crisis in the capitalist world system. It is a conjunctural crisis linked to the crisis of the world system’s mode of production, which has been contained by the high growth rates in the world economy guaranteed by the current Kondratiev A-phase. The A-phase’s exhaustion in upcoming years is likely to open the way to a period of systemic chaos. Unlike other such periods such as in 1618–48, 1792–1815 and 1914–45, this one will call into question not only the modern world system’s hegemonic centre but also its very foundations, signalling a period of transition to a new system, which will have to be built in the heat of deep social conflicts between bifurcating powers. Socialism and fascism can be expected to assume leading roles in these conflicts, hastening the decline of political liberalism as a centrist force.

We can see typically a combination of factors at play in a period of systemic chaos: the hegemonic decline of political liberalism, an upsurge in armed conflicts in the world system, and the collapse of the dominant monetary standard. But while all the signs suggest that we are heading towards such a period, we disagree with Giovanni Arrighi’s proposition in Adam Smith in Beijing (2007) that the systemic chaos began with George W. Bush’s response to 9/11, which led to the hawks dominating US government, the Patriot Act, the doctrine of pre-emptive action and the invasions of Iraq and Afghanistan. For Arrighi, that is when hegemony started to fall apart, giving way to a new period of domination without hegemony. At a world system level, Bush’s victory actually turned out to be rather limited and never really threatened global political liberalism. Whilst he was in power, so too was New Labour in Britain (until 2010) and the spd in Germany (until 2005). This period was succeeded by the election victories of Barack Obama (2008, 2012) and François Hollande (2012), who relaunched the social democratic Third Way offensive. The Bush administration mostly kept within the parameters of neoliberal globalization, pushing free trade agreements and Chinese membership of the wto, although it did engage to some degree in military imperialism and the economic annexation of the Middle East and South Asia.

However, since the mid-2010s, the neoliberal globalization process that began in 1979 and was driven forth politically from 1994 by alternating governments of the neoliberal right and the Third Way centre-left has been showing signs of exhaustion. Falling global growth figures indicate it can no longer mitigate the sharp rise in accumulated levels of inequality by containing or limiting poverty. This has meant the accelerated decline of its driving forces. The end of political liberalism and centrism has initially benefitted the far right, whose alternative to liberal globalization is an internationalisation based on the political power of the State, the US state in particular, which comes across as more immediate and powerful than the left’s alternative. The dominant versions of social democracy cling to abstract universalist formulas and fear breaking with their concrete neoliberal expressions, while some of the national-popular experiences have been isolated by capital flight, financial blockade at the hands of the Atlanticist powers, and the restructuring of US imperialism in order to confront the nationalisation of strategic resources such as Venezuelan oil. Political setbacks in Brazil and South Africa have so far restricted the potential of the brics to articulate the global South and offer a geopolitical alternative to the world hegemony of the United States and its chief allies. Nonetheless, the powerful dynamics of the Chinese, Indian and Russian economies now occupy the spaces vacated by American unilateralism, expanding their Silk Road, Asia-Pacific and Global South projects in the process. Intensified social struggle in Latin America and Africa in the years ahead could change the political makeup of those regions and strengthen the brics again. In the coming systemic chaos, class struggle is poised to determine the geopolitical potentialities of the different power blocs, with intrastate conflict heavily conditioning interstate conflict and international alliances.

Through the Trump administration, an ascendant US right sought to weaponize the State to resist the competitive pressures of globalized production and against corporate relocation overseas, free trade, the wto, Chinese expansion, European Union exports, Mexican and Central American immigration, organised labour, social rights and multiculturalism. While the US state’s repressive capabilities are an important instrument of international power, they can hardly halt or undo the world economy’s most deep-rooted tendencies. They do however suggest a new form of regulation. The emergence of a radical right plays a leading role in the US in fuelling the far right’s rise globally. In Europe, electoral victories in Hungary, Norway and Italy, the Brexit referendum in the UK and voting patterns in France, Germany, Holland, Austria, Sweden, Ukraine and Greece are evidence of this trend. In Latin America, we could see a similar pattern in the coups in Honduras (2008), Paraguay (2012) and Brazil (2016); Colombia’s joining of nato and rejection of the peace deal with the farc, the election of Macri in Argentina (2015), and above all the victory of far-right Jair Bolsonaro in Brazil (2018). These developments ushered in governments that restrict political liberalism and workers’ rights whilst subordinating themselves to neoliberalism and the Trump administration’s extreme version of imperialism.

Although global military spending has fallen in the 2010s compared to the 2000s, a closer look reveals an intensification of interstate competition. Between 2001 and 2017, China and Russia’s growth rates were markedly higher than those of the United States. US military spending expanded by 2.3% in this period, compared to 10% for China and 7% for Russia. This meant their combined military expenditure jumped from 16% to 48% of US military spending in 2000–2017. If these rates are maintained there is a real possibility of China and Russia achieving military parity over the next 15–20 years. Attempts in the Trump administration to regain the military initiative, as Republicans have attempted since the 1980s, has invariably come up against the tightening budgetary constraints imposed by the expanding US public debt. This prospect compounds US imperialism’s structural limitations, elevates global tensions and the risk of conflict, and reinforces the bifurcating tendency of global power projects. Lastly, another aspect of the impending systemic chaos, the collapse of the existing monetary standard, could in the coming years be combined with the exhaustion of the expansive phase of the Kondratiev cycle, which we return to below.

Our second major thesis was that the expansive A-phase of the current Kondratiev cycle would be weaker than its 1950–73 equivalent in terms of its capacity for material and political change. Despite displacing power towards a new geopolitical axis led by China, its transformative potential is severely curtailed because of its link to the downturn in the US systemic cycle and to the techno-scientific revolution. This renders it incapable of dismantling the neoliberal model, financing strategies, the dollar hegemony and the US cycle’s institutional bases, although it does further weaken them. The splintering of the world system today confirms our hypothesis.

Starting in 1994, the expansive Kondratiev drove world gdp per capita growth rates and profit rates up significantly, but not to 1950–73 levels. Between 1994 and 2010, gdp per capita growth stood at 2.4% p.a. This was double the 1973–93 rate but below the 2.9% p.a. achieved in 1950–73 – a gap that widened in the 2010s due to the slowdown in economic growth. This long phase consists of three periods: resumption (1994–2000), prosperity (2002–2008), and maturity (2010-). 21st century global crises have centred on the US and the European Union, slashing economic growth there. The 2001 crisis erupted due to the Nasdaq and dotcom speculative bubbles bursting, as well as the attack on the Twin Towers and the Pentagon, whilst the 2008–09 crisis was related to the end of the housing bubble in the US but also seriously affected the EU.

In the mid-1990s China’s heightened world-economic presence began to drive up the US trade deficit and public debt, which came increasingly under the control of international actors and the Chinese state especially. China’s high growth rates and resulting surpluses enabled it to promote a productive circuit that articulated exports to the US, internal market expansion and a rising demand for raw materials and commodities on the world market, whilst simultaneously maintaining a financial circuit based on US parasitism. This process intensified in the first decade of the 2000s when the commodity boom brought Latin America and Africa into the long phase of economic expansion. But the crisis of 2008–09 showed there were limits to the compatibility of these two circuits. China redirected its developmental model, which was export-based between 1994 and 2008, towards its internal market and hinterlands. At the same time, it led the formation of the brics and followed an agenda of promoting the global South through public investment and financing national balances-of-payments in Latin America, the Caribbean, Africa and Asia. China also abandoned its 2002–2011 policy of buying up US bonds in public debt, which made it the US Treasury’s chief creditor and saw the US through the 2008–09 crisis, in favour of freezing and even reducing its ownership of such assets.

At the root of these policy changes lies the negative impact of the US/EU crisis on China’s economic growth, which has fallen from double digits in 2005–11 to 6–7%. The slowdown in growth has made it less effective in reducing poverty and has thrown a light on the alarming rise in inequality that occurred during the Chinese and US economies’ articulation. This has pressured the Chinese government into looking for a new model of development. The whole process looks set to intensify as the current expansive phase comes to an end. The US’s deepening financial imbalances and aggressive protectionist policies could combine with a Chinese policy of containing the trade balance and restricting the conversion of its reserves into US bonds to devastating effect. The China surpluses dwindle in the face of the growing financing needs of imperialist parasitism and the political and social pressure from its huge working class to direct those surpluses towards tackling inequality – pressure which typically accumulates at the end of a long expansive phase – and could collapse the flexible dollar model. The Chinese government is a political actor and bases its decision-making on political criteria, rather than calculating the valuation/devaluation of assets in the manner of private investors who can influence market prices.

Our third thesis is that of the crisis of US hegemony. This thesis was formulated by Immanuel Wallerstein, Theotonio Dos Santos, Andre Gunder Frank, and Beverly Silver, and finds its maximum expression in Giovanni Arrighi. The social, political, economic and ideological evidence of recent years weighs heavily in its support. Under the Trump administration, financial deregulation, a regressive fiscal policy, rising military expenditure and the abandonment of political liberalism combined with a unilateralist and protectionist foreign policy to hasten the trajectory of US decline instead of reversing it. Trump’s attempts to reactivate a national industrial policy had a very limited impact. This compounded US isolation in the world and created space for its rivals to assert themselves. It did not even succeed in containing the pace of expansion of the trade deficit, which, tied to cutting-edge technology, is growing far more consistently than in the opening decade of the 21st century, when it was mainly associated with the oil account.

But this decline is primarily of US imperialism and it is intensifying social conflict within North American society. It threatens a financial crisis which in putting the flexible dollar standard at risk means there might be only two ways to reorganise public policies and the world system: either by reprioritising military spending, which was restricted when the public budget was diverted into financialisation; or by massively boosting social spending on welfare, infrastructure and environmental sustainability. Over the course of the 20th century, each new developmental model has seen public expenditure as a proportion of gdp rise, and the next stage of development could see it surpass the 50–60% figure. The liberal Victorian state was succeeded by the protectionist state and state capitalism of the 1930s and 1940s. This was followed by military Keynesianism and the postwar welfare state, which in turn gave way to neoliberalism. In the 21st century, the first reorganising option will tend towards fostering fascist forms, while the second will tend to develop forms of transition to socialism.

Our fourth thesis concerns the post-capitalist character of the techno-scientific revolution. This was first formulated by Radovan Richta, who drew on Marx’s writings in the Grundrisse and Capital and was introduced to Latin American thought by Theotonio Dos Santos. We note that the globalization of the techno-scientific revolution from the 1970s on has transformed labour power’s knowledge and subjectivity, and therefore value, into the main productive force. The education of the labour force is now limitless and is reducing the gap between the value of labour power and the value of labour, plunging the rate of surplus value and laws of capital accumulation into crisis. This reverses the logic of surplus value production. Under this logic, machinery deskills labour power, whose knowledge is incorporated into the new technology, making it ever more intensive and a mere appendix. This creates the social conditions necessary to devalue it and increase the rate of surplus value. Faced with new material conditions imposed by the productive forces, generating a crisis for its mode of production, capital reacts by generalising labour super-exploitation and paying workers less than the value of their labour power. This means using the State to produce fictitious capital, maintain high levels of structural unemployment and delocalise production in order to use the labour force in the periphery to level down the wages of the majority of workers in the central countries. Financialisation arises not only as a cyclical feature of global capitalism but as a structural one, and the substitution of the mechanical principle for the automatic one contributes to it. This gradually weakens the relationship between technological innovation and saving on labour power and conflicts with the production of extraordinary surplus value because the latter depends on demand being transferred from workers to capital to keep prices above value.

The techno-scientific revolution’s productive forces are far more suited to producing public goods than those of the industrial revolution. The industrial revolution was focused on producing individual, tangible consumer goods, and was driven by the textile, civil construction, food, automotive, and electro-domestic industries. In contrast the techno-scientific revolution is focused on producing knowledge and intangible assets, and developing services around health, education, culture, leisure and environmental protection. It is driven by communication technologies, microelectronics and biotechnology. Whereas the industrial revolution came about in a world of scarcity and therefore separated the products of processes as private property, the techno-scientific revolution drastically reduces the cost of producing use values due to the greater use of immaterial goods. This means prices are increasingly an expression of monopoly. As workers get used to a consumption structure based on access to public goods, they create a new subjectivity that capital seeks to limit or deny, breaking with full employment policies and artificially imposing scarcity.

The socialism of the 21st century should embody an antisystemic alternative at various different levels and present itself as a political force that (a) goes beyond the periphery/semi-periphery and forges a new global geopolitical axis based on the hinterlands and linked to a project of the global South, whose transnational nature enables it to isolate and defeat imperialism via class struggle both without and within the old central powers; (b) internationalises social movements and is active in the struggle for peace; (c) is linked over a long period to the market just as capitalism was linked to the State, but moves in the opposite direction by subordinating the market to public objectives under the eye of a participatory democracy that socialises power structures and promotes emancipation; and (d) overcomes scarcity.

Our fifth thesis is that neoliberalism is the precursor of fascism. Fascism is a regime of terror unleashed by big capital in order to destroy working class social and democratic gains whenever it feels threatened by them. Fascism, as a state form, is the product of a historical bloc being formed which unites fascists, liberals and conservatives under fascist leadership against a common enemy. Regardless of the local forms it might take, fascism always includes those labelled as communists and socialists among its main targets. The most important historical processes to lead to the rise of fascism developed in liberal institutional environments, as with Mussolini and Hitler, and were ratified by Parliament. Liberalism and fascism can combine in a variety of ways: thus under the kind of regimes established in Italy in 1922–25 and Germany in January-June 1933, multi-party political liberalism was able to continue to some extent on a formal level, but it was crippled by its subordination to an arbitrary decision-making structure that used the State’s powers of coercion to act extrajudicially.

We call neoliberalism the ideology of the crisis of capital. What it shares with fascism is a desire to take a big civilisational step backwards by decimating the rights conquered by workers. Although it does not explicitly seek to suppress political freedom, it admits such a possibility when it loses its legitimacy to guarantee what it calls economic freedom, i.e. to support big capital’s monopolistic corporations and the rules of competition that favour them on the world market without restrictions being imposed by the working class via their social and political organisations and control over state policy. In 1927, Ludwig von Mises asserted in Liberalism in the Classical Tradition that fascism and similar movements were full of good intentions and had saved European civilisation from the threat of communism. Years later, both Friedrich Hayek in The Road to Serfdom (1944) and Milton Friedman in Capitalism and Freedom (1962) affirmed that new liberals, unlike the old ones, only arrive at political freedom from the economic one. Both men actively supported the Pinochet government in Chile.

Neoliberalism differs from fascism in that it only permits a totalitarian state on a temporary basis. Then once the political threat to big capital has been extinguished, it seeks to either reinstate liberal democracy or else impose a permanent hybrid formula in the shape of a restricted multi-party system that provides legal and political assurances to the monopolist bourgeoisie. However, the time limits in question are not theoretically defined and the difference between neoliberalism and fascism becomes blurred during bifurcations determined by major historical confrontations. Neoliberalism also differs from fascism in its defence of the minimalist State, but again does not define the limits of this State in the abstract. The minimalist State only does what is needed to guarantee capital’s profitability and security. But faced with a working-class social offensive, neoliberalism ramped up state intervention in order to protect profits. It did this by using public debt to produce fictitious capital, slashing employment rates, and bringing the unions to their knees. To safeguard capitalist property rights, it agreed to the use of the military, the police and paramilitary forces against political opposition and social movements. In principle, fascism’s defence of permanent political monopolies makes it more inclined than neoliberalism to expand state expenditure. The story of Hjalmar Schacht, a German banker and one of Hitler’s key allies among the country’s business and financial elite illustrates this point. Schacht was appointed president of the Reichsbank in March 1933 and then Minister of Economics and General Plenipotentiary for the War Effort in 1935. But he then lost these positions after clashing with Göring over what he saw as an excessive and inflationary increase in military expenditure and became minister without portfolio. In 1939 he was accused of conspiracy and in 1944 was deported to Dachau.

Our sixth thesis is that neoliberal globalization and imperialism drive dependency towards its most extreme forms. The crisis of the Washington Consensus fuelled the growth of the centre-left and left, who were elected to run the most important governments in the Southern Cone. The rise of this historical bloc based on national-popular or Third Way state capitalist projects coincided with a commodity boom across South America that was closely tied to China’s influence on the world economy and the region’s foreign trade. It was thus handed a one-off chance to build up reserves on the back of large current transaction surpluses and slash external debt. This meant that over the 1999–2009 period of foreign capital outflows it was relatively capable of shaping its own destiny and designing its own public policies whilst overcoming or reducing any resistance encountered. Despite financial and productive limitations, it laid out an ambitious agenda of Latin American integration centred on unasur and the Banco del Sur; a Mercosur reorganised around social objectives and cooperation, and the Bolivarian Alternative for the Americas (alba). It boosted popular consumption levels enormously and reduced rates of super-exploitation.

We argue, however, that this historical bloc’s relatively peaceful advance – coup attempts notwithstanding – and the growth and leftward turn of the political centre had to do with a specific historical context highly favourable to international insertion and the deeply demoralised state of the neoliberal forces. In the first edition of this book, we argued that this state of affairs was nearing its end and there would be a resurgence of conflict, making it incumbent on the left to radicalise its programme. The 2010–14 period allowed the popular and democratic camp’s offensive to continue up to a point, but its exhaustion put huge obstacles in the way of further progress. Foreign capital inflows recovered, increasing reserves, but they were mainly channelled towards Brazil. Commodity prices peaked in 2011 and then slowly receded until, along with foreign capital inflows, they crashed in 2015. This provoked a major crisis of hegemony among the political forces in question, who were then the targets of a counter-offensive by local oligarchies and imperialism. As we anticipated, the reversal of the terms of trade has led to increased pressure from various fractions of big capital to bring back policies favouring super-exploitation, which has squeezed any room for centrism. The governments of Maduro (Venezuela) and Cristina Kirchner (Argentina) were strangled by balance-of-payments deficits, and the coups in Paraguay and Brazil, the election of Macri and Bolsonaro, and the isolation suffered by Venezuela’s Bolivarian revolution have inaugurated a new period of conservative ascendancy in which an increasingly global right is bringing neoliberal and fascist forces together with the beginnings of the most radical forms of imperialism.

A range of errors and omissions contributed to the defeat of the left(s). Among them, we would highlight the following:

1. a.Its agenda for regional integration based on sovereignty and cooperation remained largely unfulfilled. It was applied far more to alba than unasur or Mercosur, and the Banco del Sur never got off the ground. Neither did it succeed in its aim of creating a regional stabilisation fund for international crises or a regional alternative currency to the dollar for local exchange purposes;
2. b.Joining Mercosur did little to diversify Venezuela’s foreign trade and more to help Brazil’s trade surpluses as it continued to provide the latter with just 1% or so of its oil needs. Venezuela remained vulnerable to the restructuring of US imperialism that drastically reduced its oil account deficit and Latin American countries failed to use surpluses obtained during the commodity boom to diversify their production and export patterns;
3. c.The room for consensus opened up by the commodity boom made the left lean in far too moderate a direction and postpone confrontation just when the time was ripe for it. This even happened to Venezuela, which failed to nationalise the financial system, financed through its trade balance a capital flight to the tune of around 150 billion dollars between 1999 and 2015;
4. d.In Brazil’s case, the tendency towards moderation ran far deeper. The PT (Worker’s Party) never impeded fictitious financial capital from playing a lead role and instead tied it to specific industrial policies and the expansion of domestic demand among the poorest sectors. Despite high levels of international reserves and a healthy balance of payments, Dilma responded to the 2015 crisis by ending social policies and adopting austerity measures closely tied to rentierism instead of confronting it. Subsequently her popularity plummeted, paving the way for a coup d’etat.

Latin America has little to gain from the neoconservative offensive. As neoliberal globalization approaches its limits, foreign trade and foreign capital inflow cycles are losing their dynamism. Each new cycle is weaker than the previous one, while the high stocks caused by asset denationalisation are systematically speeding up decapitalisation across the region. Regional development can only be revived by restoring the public investment, so harshly cut under neoliberalism and the neoconservatives, and gearing it towards stimulating internal demand from the working majority. But that can only come about through intensified social struggle.

The seventh and last thesis that we highlight is that we need to develop a Marxist theory of the world system. This work indicates how this might be achieved. We started from the Marxist theory of dependence and bring it closer to world-system approaches, especially those of Braudelian inspiration, led by Immanuel Wallerstein and Giovanni Arrighi, seeking points of convergence and resignification. We do this by constructing analytical mediations that dialectically articulate, in broader totalities, a whole range of concepts that communicate with each other via different narratives, namely: capitalist mode of production, modern world system and historical capitalism; structural time, primitive accumulation, industrial and techno-scientific revolution; relative surplus value, absolute surplus value and superexploitation; imperialism, hegemony and sub-imperialism; centre, semiperiphery, periphery and dependency; and systemic cycles, Kondratiev cycles and foreign capital cycles in dependent countries.

We trust that our analytical proposals put forth in this revised English edition will bear fruit not only in terms of understanding the huge structural transformations taking place before our eyes, but also in developing our strategic thinking in the struggle for a new world amidst the uncertainty and deep crisis that is currently unfolding.