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SEMIPERIPHERAL STATES IN
THE WORLD .. EcONOMY
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SEMIPERIPHERAL STATES
IN THE WORLD,.EcONOMY
EDITED BY
William G. Martin
STUDIES IN THE POLITICAL ECONOMY
OF THE WORLD-SYSTEM
Immanuel Wallerstein, ADVISORY EDITOR
@.CONTRIBUTIONS IN ECONOMICSAND
ECONOMIC HISTORY, N UMBER 113
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GR.EENWOOD PRESS
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Library of Congress Cataloging-in-Publication Data
Semi peripheral states in the world-economy / edited by William G. Martin.
p.
cm. - (Studies in the political economy of the world-system)
(Contributions in economics and economic history,
ISSN 0084-9235 ; no. 113)
Papers from the Thirteenth Political Economy of the World-System Conference held at the
University of Illinois at Urbana-Champaign, April 1989, and co-sponsored by the American
Sociological Association and the University's Dept. of Sociology.
Includes bibliographical references.
ISBN 0-313-27489-4
1. Economic history-1945- -Congresses. 2. International
economic relations-Congresses. 3. Capitalism-Congresses.
4. Competition, International-Congresses. 5. Developing countries­
Foreign economic relations-Congresses. I. Martin, William G.,
1952- . II. Political Economy of the World-System Conference
(13th : 1989 : University of Illinois at Urbana-Champaign)
III. American Sociological Association. IV. University of Illinois
at Urbana-Champaign. Dept. of Sociology. V. Series. VI. Series:
Contributions in economics and economic history, no. 113.
HC13.S47 1990
330.9172 '3-dc20
90-36779
British Library Cataloguing in Publication Data is available.
Copyright © 1990 by William G. Martin
All rights reserved. No portion of this book may be
reproduced, by any process or technique, without the
express written consent of the publisher.
Library of Congress Catalog Card Number: 90-36779
ISBN: 0-313-27489-4
ISSN: 0084-9235
First published in 1990
Greenwood Press, 88 Post Road West, Westport, CT 06881
An imprint of Greenwood Publishing Group, Inc.
Printed in the United States of America
The paper used in this book complies with the
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CONTENTS
ILLUSTRATIONS
SERIES FOREWORD
Vll
IX
Invna nuel Wallerstein
ACKNOWLEDGMENTS
xi
Part I. The Place of the Semiperiphery in the Modern World-System
1.
Introduction: The Challenge of the Semiperiphery
William G. Martin
2.
The Developmentalist Illusion: A Reconceptualization of
the Semiperiphery
Giovanni Arrighi
3
Part II. Semiperipheral Success Stories?
3.
Commodity Chains and Footwear Exports in the
Semiperiphery
Gary Gereffi and Miguel Ko rzeniewicz
4.
State, Market, and Agriculture in Pinochet's Chile
Walter Goldfrank
5.
Limits on a Semiperipherai Success Story? State Dependent
Development and the Prospects for South Korean
Democratization
David A. Smith and Su-Hoon Lee
45
69
79
vi
Contents
6.
The Limits to Semiperipheral Development: Argentina
in the Twentieth Century
97
Roberto P. Korzeniewicz
Part III. Semiperiphery or Core?
7.
The Republic of Ireland in the World-Economy : An
Exploration of Dynamics in the Semiperiphery
125
Richard Grant and Donald Lyons
8.
Periphery in the Center: Canada in the North American
Economy
141
Jorge Niosi
Part IV. Ethnicity: Propelling or Checking Advance?
9.
The Contradictions of Semiperipheral "Success":
The Case of Israel
161
Beverly Silver
10.
Ethnic Divisions and State-Centered Development:
Malaysia and Nigeria Compared
183
Paul M. Lubeck and Donna Rae Palmer
11.
From NIC to NUC: South Africa's Semiperipheral
Regimes
203
William G. Martin
BmLIOGRAPHY
225
INDEX
227
ABOUT THE C ONTRIBUTORS
237
ILLUSTRATrONS
FIGURES
2. 1
Percentage of World Population in the Three Zones
20
2.2
Trends i n Relative Economic Command (Weighted Averages
and Ranges of GNP Per Capita of Organic Members)
23
2.3
Trends in the Degree of Industrialization
25
3.1
Footwear Commodity Chain
52
3.2
Index of Industrial Upgrading for Footwear, Selected
Countries
6.1
Per Capita Product, Selected Countries, 1 9 1 3-1982
7. 1
Trends in Modal GNP Per Capita of the Three Zones and
Irish GNP Per Capita
11.1
South African GNP Per Capita as a Percentage of Organic
Core GNP Per Capita
1 1 .2
GNP Per Capita of Selected Semiperipheral States as a
Percentage of South African GNP Per Capita
207
TABLES
2. 1
3.1
Positions of States in 1 975- 1 983 Compared to Their
Positions in 1 93 8- 1 95 0
21
Market Share of U . S. Footwear Imports from Selected
Countries (SITC 85 1), 1 967- 1 987
53
viii
3.2
Illustrations
Composition of Footwear Exports to the United States,
Selected Countries, 1970-1987
62
7.1
Sectoral Origin of Irish GDP
129
7.2
Structural Change in Irish Manufacturing Industry
130
7.3
Ireland's Direction of Trade Exports
133
7.4
Ireland's Direction of Trade Imports
133
7.5
Ireland: Levels of Processing of Exports (LPE)
134
7.6
Ireland's Trading Partners: A Breakdown of LPE for 1987
136
8.1
GDP in Manufacturing Industries at Market Prices , 1986
148
8.2
Manufacturing Productivity (1984) in Current U.S. Dollars
149
8.3
Foreign Direct Investment Stock, Main Countries, 1984
150
8.4
Foreign Control of Canadian Industry, 1979 and 1986
150
8.5
8.6
8.7
8.8
Exports of Manufactured Goods, Selected Countries in
Market Economies, 1975 and 1986
151
Manufactured Exports Per Capita, 1975 and/1986
152
Developed Countries , 1987: Main Foreign Market and
Supplier
153
Government R&D Expenditures by Objective in 1987
154
SERIES FOREWORD
Immanuel Wallerstein
The Political Economy of the World-System Section of the American Sociological
Association was created in the 1970s to bring together a small but growing number
of social scientists concerned with analyzing the processes of world-systems in
general, and our modern one in particular.
Although organizationally located within the American Sociological Association,
the PEWS Section bases its work on the relative insignificance of the traditional
disciplinary boundaries. For that reason it has held an annual spring conference,
open to and drawing participation from persons who work under multiple disci­
plinary labels.
For PEWS members, not only is our work unidisciplinary, but the study
the world-system is not simply another " specialty" to be placed beside so
others. It is instead a different "perspective" with which to analyze all the
tional issues of the social sciences. Hence, the themes of successive
ferences are quite varied and cover a wide gamut of topics. What they
the sense that the isolation of political, economic, and sociocultural ' ·.,",..i",hl'i'
is a dubious enterprise, that all analysis must be simultaneously historical
systemic, and that the conceptual bases of work in the historical social SClen(;eS
must be rethought.
ACKNOWLEDGMENTS
This volume is the product of the Thirteenth Annual Conference on the Political
Economy of the World-System held at the University of Illinois at Urbana­
Champaign in April 1 989. ill addition to the authors of the essays, I would like
to thank all the other participants, whose contributions played an important part
in making the conference a lively success and sharpening the analyses presented
here.
Organized under the auspices of the Political Economy of the World-System
section of the American Sociological Association, the conference was cospon­
sored by the University of Illinois's Sociology Department and generously sup­
ported by International Programs and Studies, the College of Liberal Arts
Sciences, the Center for African Studies, the Center for East Asian and
Studies, the Russian and East European Center, the Center for Latin
and Caribbean Studies, and the Program in South and West Asian Studies,
ly, generous thanks are owed to those who provided invaluable aMIM.HIIi.
preparing and running the conference, especially Theodore Tsoukalas,
Hill, Suzanne Wilson, Ann Reisner, and the staff of the Sociology
and the Center for African Studies.
PART 1
THE PLACE OF THE
SEMIPERIPHERY IN THE
MODERN WORLD.. SYSTEM
1
INTRODUCTION: THE CHALLENGE
OF THE SEMIPERIPHERY
William G. Martin
SITUATING THE SEMIPERIPHERAL DEBATE
We live in an unstable and uncertain world. Since the late 1 960s the world­
economy has been marked by economic stagnation, rivalry in the interstate system,
anarchy in international monetary relations, and outbreaks of political and social
instability across the globe . Such anomalous phenomena on so many fronts have
swept away not only the stability of the post-World War II world order but also
the intellectual and ideological certainties of Western social science .
No better example of this condition exists than in the attention paid by social
scientists over the course of the last decade to rapidly industrializing, Hl1'UUJ"<O� "
income " countries. It is not hard to understand why this should be so.
a condition of economic stagnation in core areas, the newly '
'
tries (NICs)-and especially the East Asian examples-stand out in stark
Such cases become even more spectacu lar when set against the food
pant along the periphery of the world-economy. Finally, it is often nrp'{,1�pl
the middle-income countries that one finds the signs not only of rapid eC()flo'nuq
advance but of continuous outbursts of social and political
By the late 1 980s we thus faced a burgeoning literature on the so-cai led NICs.
For many, they provided the subject matter of unique historical developments,
explored through highly specific cultural, political, or historical heritages. For
some, the NICs reveal the fundamental failure of dependency perspectives and
the reaffirmation of not only the possibilities but also the benefits of progress
and capitalist development. Other, more tempered analyses have attempted to
discern replicable developmental patterns, generating models of "state-centered
development," "bureaucratic-authoritarian-industrialization regimes , " or free­
enterprise, pro-Western, export-oriented industrialization. For yet others, the NICs
herald a fundamental reorganization of the international economic and political
4
The Semiperiphery in the Madern Warld-System
hierarchy-indeed, nothing less than a rupture in the world order we have known
over the last fifty years.
All of the chapters presented in this volume intersect this literature, but they
do so from a distinctive and shared world-historical perspective. It is not, of course,
simply that these chapters pay attention to the international division of labor-in
the late twentieth century it has become impossible to deny the central impor­
tance of this arena. For most, however, this recognition takes the form of pro­
viding an international "context, " linking "internal" with "external" factors,
comparing isolated and selective nation-state paths and policies, or ranking over
time individual countries by developmental critera such as industrialization. The
analyses contained in this volume, the result of the Thirteenth Annual Conference
on the Political Economy of the World-System, diverge quite sharply from such
interpretations. Even as we study the trajectory of individual countries, these paths
are interpreted as part and parcel of a larger historical process: the contradictory
development of a singular, capitalist world-economy.
To place the novelties of today's middle-income countries within this historical
unit of analysis reduces their individual importance even as it enhances their col­
lective importance for understanding modern capitalism. World-systems analysts
have long stressed the existence of a middle zone of the world-economy. Where
other short-term analyses see countries in spectacular transition between core and
periphery, world-systems researchers have argued that a stable group of
"semiperipheral" states has been in existence since the earliest day s of the modern
world-economy. This stable tripartite partition is, moreover, constantly subject
to waves of the redivisioning of the tasks associated with, and indeed individual
states' positions within, the global division of labor. Seen in this light, the move­
ment of twentieth-century Japan or South Korea across the zones of the world­
economy is no less surprising a phenomenon than the path of the nineteenth-centul)'
United States or sixteenth-century northwestern Europe. Finally, the much­
heralded centrality of contemporary states in propelling such movements has been
constantly stressed by almost all work in this area.
Approached from a historical and global perspective, the sense of startle­
ment induced by present-day NICs thus seems to disappear: neither the ex­
istence of areas between core and periphery nor movement between the zones
of the world-economy is a surprising discovery. Yet to recognize the endurance
of the semiperiphery raises far more questions than it answers in at least three
ways. First, the shape, size, and methods of membership within-and entrance
into and exit from-the zone remain an unexplored realm. If semiperipheral
states sit astride core-peripheral networks, how is such a position attained and
maintained in the face of the strongly polarizing forces of the world-economy?
Second, if the semiperiphery is more than simply a statistical cutting point
on developmental indices, how has the zone itself operated over time as part
of a developing capitalist world? Indeed, what does the study of the zone itself
reveal about the cross-cutting structure and processes of the global division
of labor and the interstate system? Finally, how and why has the semiperiphery,
Introduction
5
at least in the twentieth century, operated as a primary locus for social, labor,
nationalist, and antisystemic movements?
HOW DO WE KNOW THE SEMIPERIPHERY
WHEN WE SEE IT?
Of all these issues, none has proved more intractable and generated more debate
than the shape and stability of the zone itself. As several of our authors note,
past arguments regarding the outer boundaries of the semiperiphery have pin­
pointed a vast array of semiperipheral states, from the most obvious cases of Brazil,
the East Asian NICs, and South Africa to the more contestable instances of China,
Canada, Australia, Eastern Europe, and the Soviet Union. The initial source of
such conflicting assessments can be illustrated straightforwardly: If the
semiperiphery is approached as exhibiting a mix of core and peripheral
characteristics, it is quite simple to generate multiple, opposed classifications
depending upon one's definition of core-like or peripheral-like features. Further
complicating such judgments is the ability to locate countries between core and
periphery either in terms of the global division of labor or by standing in the
interstate system; contestable cases along one dimension may thus find inclusion
in the zone along a different dimension. The result is often a bewildering array
of what might be termed semiperipheral states and, as a consequence, divergent
assessments of the existence and dynamics of the zone.
Giovanni Arrighi's contribution directly tackles this issue by eschewing such
individual determinations. He endeavors instead to discern the stability and shape
of the semiperiphery through an assessment of the worldwide struggle to ap­
propriate the benefits accruing from the operation of the global division of labor.
In procedural terms this entails an analysis of long-term trends in the distribution
of global income. This demarcates, for the first time, the long-term �'-�""J
the core-semiperipheral-peripheral divisioning of the world-economy (as
to arguments regarding an even gradation from core to periphery) and
at the same time individual countries in the three zones.
Arrighi's arguments generated considerable debate at the conference.
have been expected, both the methodology of utilizing GNP per capita
location of individual countries were seriously contested. Two additional "n,c111Afllrp
far-reaching issues also emerged, reverberating through the chapters in this
tion. First, many authors sought to locate contemporary semiperipheral
through an analysis of the relational networks associated with the global
of labor and/or processes of unequal exchange (either narrowly construed, follow­
ing Arghiri Emmanuel, or more broadly interpreted as relationships of surplus ex­
traction associated with networks such as those composing commodity production,
trade, investment, and so on) . Richard Grant and Donald Lyons, for example, ex­
plicitly set Arrighi's arguments against other measures in examining Ireland's place
in the world-economy, while Gary Gereffi and Miguel Korzeniewicz analogously
utilize the concept of the commodity chains in the production of footwear to
6
The Semi periphery in the Modem World-System
examine semiperipheral mobility. Jorge Niosi similarly examines the economic
location and relationships of Canada and selected "late industrializers" to argue
the case that while not semiperipheral, such countries remain along the border
between core and semiperiphery as "central-peripheral" states.
Second, considerable discussion emerged over the specification of the zone and
individual states by their location in the interstate system. Distinguishing world­
systems analysis in this domain is the assumption that the modern world-economy
contains one economy and mUltiple political structures-and, conversely, that states
do not contain or control economies. While a clear parallel exists between the
wealth derived from a position in the global division of labor and relational state
power in the interstate system, many states' geostrategic positions belie any sim­
ple correlation. Whether and to what extent interstate relations may specify a
semiperipheral status or be utilized to move between zones of the world-economy
remains very much a contestable issue. This is easily illustrated by debates over
classification: Are economically marginal states such as India or China peripheral,
and highly dependent but economically advanced states such as Canada core? More
substantively, such debates raise critical discussions of the tensions between in­
terstate struggles and global accumulation. To what extent, for example, can highly
specialized, geostrategic positions assist upward movement, as in the relatively
privileged ability of the South Korean or Israeli states to avert constraints from
core states or capital in the post-World War II period?
SEMIPERIPHERAL MOVEMENTS: SUCCESS AND
FAILURE WITHIN THE WORLD-ECONOMY
Such debates indicate that it is not self-contained, semiperipheral processes that
engender the zone, but rather the encapsulation of global processes of, and strug­
gles over, wealth and power. It is here that the studies of individual states find
their task: the exploration of the semiperiphery through the examination of multiple
states' struggles to attain, retain, and move beyond semiperipheral status in the
world-economy and not to fall from core to semiperipheral or semiperipheral to
peripheral standing.
As each and every one of our studies indicates, the exercise of state power has
long been essential to such struggles. As should be evident, this is a far different
exercise than charting and comparing the developmental trajectories of individual
nation-states and national economies. One need only take the issue of industrializa­
tion, so central to the examination of advancing noncore states and the subject
of considerable debate in the contemporary conjuncture. Approached from a
perspective of national development, industrialization charts significant advances
in, even a replication of, the stages of core countries' growth. A world-historical
perspective substantively recasts such developmentalist accounts. As our authors
document, the process of innovation and creative destruction in core zones dur­
ing the current global depression has accelerated the ongoing relocation of sim­
ple industrial production processes from core countries toward the semiperiphery.
Introduction
7
Seen from the perspective of core states, deindustrialization may mark a successful
defense of their status. For semiperipheral states, the challenges are quite differ­
fent. As Gereffi and Korzeniewicz indicate, for example, already-existing
semiperipheral states are confronted by an intensifying struggle to upgrade their
position within global industrial production and marketing networks. For
semiperipheral states, rapid industrialization may mark little more than running
very fast to stay in the same place. Failure to keep apace of these developments
can-as Walter Goldfrank charts for Pinochet's Chile, William Martin for South
Africa, and Beverly Silver for Israel-lead to downward movement through suc­
cumbing to polarizing forces emanating from core areas.
For peripheral areas marked by highly competitive primary production, the
capture of standardized and highly competitive industrial production for the world
market may, of course, carry forward a movement toward the benefits of a
semiperipheral position in the global division of labor. It is in this circumscribed
arena that most discussion of the newly industrializing countries falls, and it is
here that one perceives, in multiple ways, just how difficult such a transition is
to achieve. In a conjuncture marked by an ongoing redivision of core and peripheral
activities, significant if selective opportunities to seize more remunerative tasks
do indeed exist. As David Smith and Su-Hoon Lee argue, South Korea
demonstrates a remarkable case of filling an opening niche for export-oriented
industrial production. The South Korean example of vigorous state action is,
moreover, replicated in almost every case of such upward movement, including
those of earlier historical periods, as indicated in the chapters on Canada, South
Africa, and Argentina.
For those seeking replicable models, such instances mandate a theory of state­
centered action. What our studies indicate, however, is the relatively rare set of
conditions that make such actions both possible and successful. Advance seems
most marked in a state able to break with local, invariably peripheral, accumula­
tion patterns and the local and transnational classes they support; the
recognition and promotion of specialized niches in the global division of
and favorable conditions in the interstate system (either geostrategic
as for South Korea and Israel, or conditions of rivalry amidst the
hegemonic orders, as during the interwar period for South Africa and
Latin America).
While the desire for capturing core-like accumulation patterns is common along
the periphery of the world-economy, rarely indeed do these social and political
conditions coalesce to make upward movement within the global division of labor
possible. While exceptional cases capture contemporary attention, the historical
analysis of states within the semiperiphery or along its borders indicates a far
more common outcome: the failure of semiperipheral states to move toward core
status and the daunting prospects for states located in the periphery. In large part
such conclusions emerge from the investigation of forces, derived from the im­
brication of national and global class formation, that vigorously delimit or pre­
vent the initiation of innovative state intervention in the accumulation process.
8
The Semiperiphery in the Modern World-System
Not the least of these obstacles, as Paul Lubeck and Donna Rae Palmer argue,
may be constituted by the historically forged relationship of ethnicity, local ac­
cumulating classes, and statepower. Even where the rupture of a deeply entrenched
relationship between peripheral accumulation and political power may be effected
on the basis of ethnic mobilization-as, for example, in Israel and South Africa­
such a transition often generates countervailing ethnic mobilizations. These in
turn can either undermine whatever advance has been achieved or prevent adap­
tations to future alterations in the interstate system or the distribution of core and
peripheral activities.
THE LIMITS
AND CONTRADICTIONS OF THE
SEMIPERIPHERY AND THE WORLD-ECONOMY
As our authors stress, it is an enduring irony that semiperipheral states-both
new and long-term members of the zone-find forward movement blocked by
the very forces that generated or sustain their membership in the zone. As Roberto
Korzeniewicz argues for Argentina and other nations of recent European settle­
ment, the very social and institutional ruptures necessary to achieve semiperipheral
status quite often create social and political forces that prevent any further ad­
vance. Coupled with and complicating such impediments are the obstacles im­
posed by the collective struggles of semiperipheral states and the secular develop­
ment of the world-economy as a whole. If semiperipheral states have managed
to escape the highly competitive and marginally remunerative production pro­
cesses of the periphery, they confront in the semiperiphery a zone of far more
intense and capable political competition. Given the competitive pressures of lower
wage rates and more attractive subsidies offered by other non core states, as well
as unremitting pressures from core states and capital, semiperipheral states' further
advance is quite often undercut by competitive struggles within or between
members of the zone itself. In this sense the semiperiphery bears the burden of
a modern Janus: facing oligopolistic and political pressures from core zones and
economic competition from the periphery below.
Such conclusions curiously rebound upon widespread notions of "bringing the
state back in" and "state-centered dependent development." For even as the study
of the semiperiphery necessarily highlights the role of state power in achieving and
maintaining semiperipheral status in the world-economy, it reveals at the same time
the interrelational character of state power in the world-economy and the highly cir­
cumscribed possibilities of state-led movements across the zones of the world­
economy. How one traces and interprets this condition remains a matter of con­
siderable debate, as is revealed in the chapters by Roberto Korzeniewicz and by
Smith and Lee . Yet it remains evident that even the rare cases of highly autonomous,
interventionist, and successful transition indicate that semiperipheral states remain
captives of the polarizing relationships that constitute the capitalist world-economy.
Such observations are further underlined if one recognizes the degree to which
the development of the world-economy successively recasts the possibilities and
Introduction
9
strategies of semiperipheral advancement. While the completion of the interstate
system since 1945 has, for example, widened semiperipheral possibilities to a
much larger group of states, it has simultaneously heightened the competitive
character of such interstate struggles among semiperipheral and peripheral states.
In addition, the transition to a world-economic order increasingly organized by
capital and international organizations had undercut state strategies typical of the
nineteenth century or even the period between World War I and World War II.
As the South African study suggests, maintenance as well as attainment of a
semiperipheral status after 1945 has required quite radical shifts in localized
regimes of accumulation and state power. Or, as Goldfrank reminds us, the demise
of the self-regulating market economy has everywhere imposed upon the state
the necessity to regulate the economic and political order.
One returns at this point to our opening observations. It is all too apparent that
the anomalous phenomena surrounding the semiperiphery can hardly be
understood, much less explained, by using individual "success" stories to create
widely applicable models of national progress or development. Located at the
crossroads of global accumulation networks and the interstate system, the
semiperiphery reveals instead the very limits of what is commonly called "pro­
gress" or " development" in the modern world. This is, moreover, a dangerous
location, encapsulating and compressing as it does central contradictions of both
the global division of labor and the interstate system.
Nowhere is this more evident than in the political and social upheavals of this
epoch of global crisis and the collapse of the ideological fault lines associated
with the fleeting era of U.S . hegemony. Indeed, for those struggling to under­
stand and change the contemporary world, the most striking of contemporary
developments is the rising tide of political struggle in noncore zones. It takes
but a moment's survey to indicate that contemporary social, labor, nationalist,
and antisystemic movements are primarily, if not wholly, erupting in semi­
peripheral states .
Such movements signal both a crisis o f semiperipheral regimes and
wide contradictions. The most heralded of these movements are those
under the rubric of "democratization," ranging from East Asia to Latin
and Eastern Europe to South Africa. The features stressed by Smith and
examination of democratization in South Korea-the forces unleashed by the
and economic transformation of the semiperipheral zone in the nuclear
endemic through most of the areas studied in this volume. Given the centrality
of semiperipheral industrialization, it is hardly surprising that it is precisely within
the semiperipheral zone that one finds, for example, the center of world labor
unrest and politically engaged trade union movements.
For many developmentalists, the confluence of both industrialization and
demands for democratic participation glibly trumpets the arrival of the wisdom
of following in the footsteps of Western parliamentary democracies. This is not
a conclusion that our contributions would sustain. While the ongoing redivision
of core and peripheral activities has generated powerful social forces-sustaining
10
The Semiperiphery in the Madern Warld-System
not only labor but diverse social, national, and civilizational movements-it has
hardly provided the means to meet the swelling demands of the peoples of the
semiperiphery (not to mention the periphery) and thus provide legitimacy to in­
creasingly embattled states. Resolving labor-capital-state conflicts along the lines
achieved in core countries-the so-called Fordist model-would require, for ex­
ample, far greater resources than can possibly be tapped within the semiperipheral
zone. Meeting the demands for national sovereignty in the face of the increasing­
ly stringent demands of international fInancial organizations similarly undermines
both semiperipheral states' stability and the very models being imposed by core
states and capital.
Under these conditions the volatility that marks the semiperipheral zone promises
to be of long-standing importance. In interpreting the trajectory of this situation,
the implications of our authors' analyses clearly diverge. For some, the evidence
reveals the semiperiphery as the central location if not the fount of antisystemic
movements. This can be seen in several ways: either as the semiperiphery emerging
as the locus of demands for a new international economic order, or in antisystemic
movements finally realizing the charade of the notion that demands for equality
and social justice can be met by the capture and utilization of state power within
national boundaries. For others, mounting allegiances to free enterprise and col­
laboration with international capital lay the seeds of a prosystemic stabilization
of a world-economy. For yet others, the coalescence within the semiperiphery
of such explosive forces and the clear-cut inability to defuse them portend con­
stant upheavals not of the world-economy but endemic civil war within
semiperipheral states. Arrighi's depiction of Israel and South Africa as an arche­
typical semiperipheral future is but one example of this.
The elaboration of the fate of antisystemic movements is far beyond the task
set by the authors in this volume. Yet to the extent that the following chapters
shed light on the underlying global forces that have amalgamated such turbulent
forces in the semiperiphery, they will have succeeded in their purpose: not only
to engender a more world-historical understanding of the transformation of par­
ticular areas of the world-economy, but to advance our understanding of the
transformation and transformational possibilities of the capitalist world itself.
2
THE DEVELOPMENT ALIST ILLUSION:
A RECONCEPTUALIZATION OF THE
SEMIPERIPHERY
Giovanni Arrighi
THE BLIND ALLEY OF UNEQUAL EXCHANGE
When we speak of "semiperiphery," we refer to an intermediate position in the
core-periphery structure of the capitalist world-economy. Most studies assume
that this core-periphery structure consists of networks of " unequal exchange"
through which some states (often identified as "industrial" or "industrialized")
appropriate a disproportionate share of the benefits of the international division
of labor while most other states reap only such benefits as are necessary to keep
them in the relationship of unequal exchange. The former states are said to con­
stitute the " core" of the capitalist world-economy and the latter to constitutejts .
" periphery. " Semiperipheral states (often referred to as " semi-industrial"
" semi-industrialized'') are then defined as states that occupy an
tion in this network of unequal exchange: they reap only marginal OelleI:ltS
they exchange with core states, but they reap most of the net benefits
exchange with peripheral states.l
This conceptualization is based on a number of assumptions that in my
are highly questionable on both a priori and historical grounds. The first
tionable assumption is that " industrialization' , is the equivalent of "
and that "core" is the same as "industrial. " Interestingly enough, this assump-·
tion cuts across the great divide between the dependency and the modernization
schools. For both schools, to "develop" is to " industrialize" by definition .
Needless to say, the two schools strongly disagree on how and why some coun­
tries have industrialized and others have not or have deindustrialized, but most
of their practitioners take for granted that development and industrialization are
one and the same thing.
This view is so ingrained that it has remained unchallenged notwithstanding
the recent wave of deindustrialization among the wealthiest states of the capitalist
12
The Semiperiphery in the Modern World-System
world-economy. The corresponding rapid industrialization of comparatively poor
states has been generally taken at face value as the equivalent of "development."
To my knowledge, no one from within these schools has raised the question of
whether these joint processes of deindustrialization and industrialization have been
matched by a corresponding narrowing of the gap between the wealth, power,
and welfare of the wealthy but deindustrializing group of states, on the one side,
and the not-so-wealthy but industrializing group of states, on the other. No doubt,
dependency and modernization practitioners would both agree that industrializa­
tion is generally pursued not as an end in itself but as a means in the pursuit of
either wealth, or power, or welfare, or combinations thereof, and that this ques­
tion is therefore quite legitimate. But in order to be able to raise the question
at all, it is necessary to abandon the postulate that industrialization is the equivalent
of development.
A second questionable assumption in this conceptualization is that core-periphery
relations consist of relations of "unequal exchange" and that the core-periphery
structure of the world-economy consists of a network of exchanges, typically a
trade network. For one thing, it is not always clear what "unequal exchange"
means to those who use the term. The standard reference is Emmanuel (1972),
but very few of those who refer to it seem to be aware of what Emmanuel's con­
cept of unequal exchange involves and does not involve.
Emmanuel's concept of unequal exchange has nothing to do with position in
a network of trade. It refers to trade between states characterized by different
wage levels but by the same rate of profit and level of productivity. It is premised
on a lack of mobility of labor resources and a high mobility of capital resources
between the trading partners, and it results in the appropriation of the benefits
of trade by the partner with the higher level of wages, regardless of its position
in trade networks.
More importantly, unequal exchange has not been the only mechanism involved
in core-periphery polarization, nor have its effects on the core-periphery structure
of the world-economy been as unambiguous as those who use the term imply.
I am not in any way denying the decisive role played by unequal exchange in
creating and reproducing the core-periphery structure of the capitalist world­
economy. Historically, capital has been far more mobile than labor across the
space of the capitalist world-economy, and wage differentials among the territories
incorporated in the latter have been not only larger but growing faster than dif­
ferentials in productivity and in rates of profit. It is hardly conceivable that core
states could have achieved their present standards of power, wealth, and welfare
without a previous long history of direct and indirect exchanges of commodities
with comparatively low-wage states and territories.
Granted all this, it does not follow that unequal exchange has been the only
or even the main mechanism of core-periphery polarization, or that core-periphery
polarization is necessarily its outcome. Unequal exchange is only one of several
mechanisms of core-periphery polarization. Equally important have been two other
mechanisms, which we may designate as unilateral transfers of labor, on the one
The Developmentalist Illusion
13
hand, and o f capital, on the other hand. Unlike unequal exchange, these unilateral
transfers do not presuppose the existence of a trade relation and of a trade net­
work. Hence in principle, unilateral transfers from one state or territory to another
are compatible with a complete absence of relationships of unequal exchange be­
tween the states or territories involved. 2
Historically, unilateral transfers of labor and capital have been both forcible
and voluntary. Forcible transfers are transfers prompted by the use of violence
or the credible threat thereof by the receiving state and its agents. The slave trade
and the transfer and use of prisoners of war as workers are examples of forcible
unilateral transfers of labor resources, while the extortion of monetary instruments
from colonies or of war reparations from defeated enemies is an example of for­
cible unilateral transfers of capital resources. Voluntary transfers, in contrast,
are transfers based exclusively on the self-interest of the owners of the resources
that are being transferred, the most prominent examples being the emigration
of workers and the " fl ight of capital. "
Both kinds of unilateral transfers have been crucial in the constitution and
reproduction of the core-periphery structure of the capitalist world-economy,
although, over time, the importance of forcible transfers has been declining relative
to that of voluntary transfers. The fact that voluntary transfers are considered
morally less objectionable than forcible transfers does not mean that they are less
efficacious as mechanisms of core-periphery polarization. On the contrary, volun­
tary transfers are far more efficacious than forcible transfers wherever and
whenever differentials between and among locales in the level and security of
rewards have become large enough to create a widespread and strong incentive
for owners of labor and capital resources to transfer such resources to sites in
which the returns are highest and most secure .
Unilateral transfers of this kind have been far more important than unequal
exchange in the expansion of the core to include most of the so-called lands
new settlement, the United States in the first place, in the late nn·let(�erlth.�
early twentieth centuries. The effects of these transfers on the " sending "
tries were not at all uniform. Overall, however, the effect was an ullpn:cedel
polarization in the hierarchies of wealth, power, and welfare of the
world-economy.
Unequal exchange is thus only one of several mechanisms through which
core-periphery structure of the world-economy has been created, reproduced,
deepened. But this is not all. As already mentioned, its effects on the core-periphery
structure of the capitalist world-economy are far more contradictory than is nor­
mally supposed. A country that sells commodities embodying high-wage labor
in exchange for commodities that embody low-wage labor can continue to do so
and reap the benefits of the exchange only to the extent that the relationship in
production and consumption between the two kinds of commodity is one of com­
plementarity rather than of competition. If for any reason the relationship of com­
plementarity weakens and that of competition becomes stronger, unequal exchange
in this sense becomes the weapon of the " exploited" country to gain wealth,
14
The Semiperiphery in the Modem World-System
power, and welfare relative to, and possibly at the expense of, the "exploiting"
country. Under these circumstances Warren's (1980) thesis that the "exploita­
tion" of low-wage countries by high-wage countries may be better than no ex­
ploitation at all contains an important element of truth.
In this connection, it should be noticed that the most striking instances of up­
ward "mobility" in the capitalist world-economy since World War II (Japan,
South Korea, and Taiwan) have all relied heavily at one point or another of their
ascent on the export of commodities embodying comparatively low-wage labor
in exchange for commodities embodying comparatively high-wage labor. It does
not follow from these historical experiences that all peripheral and semiperipheral
states could or can enrich themselves in the same way as Japan, South Korea,
and Taiwan did. As we shall see, this is out of the question. But it does follow
that unequal exchange can cut or work both ways (toward polarization and toward
depolarization) and that, therefore, the assumption of a fundamental identity be­
tween core-periphery relations and relations of unequal exchange is unwarranted.
Mutatis mutandis, what has just been said of unequal exchange applies to
unilateral transfers of capital and labor resources as well. Historically, the
systematic export of capital resources has been as much a mechanism of "cor­
ification" as it has been of peripheralization. From sixteenth-century Holland
to present-day Japan, the investment abroad (primarily in the form of interest­
bearing capital) of an ever-expanding share of a nation's capital resources has
been a major instrument in the formation and consolidation of core positions.
As for the unilateral transfer of labor resources, suffice it to note that the ascents
to core position of Britain in the seventeenth and eighteenth centuries and of
Switzerland and Sweden in the late nineteenth century were both preceded or
accompanied by massive out-migration of labor resources.
In sum, unequal exchange and unilateral transfers of labor and capital resources
have all contributed to the formation and reproduction of the core-periphery struc­
ture of the world-economy. However, they are not essential features of core­
periphery relations. If core-periphery relations pertain, as I think they do, to some
fundamental and self-reproducing inequality in the distribution of wealth among
the states and peoples of the capitalist world-economy, then unequal exchange
and unilateral transfers of labor and capital resources are purely contingent at­
tributes of such relations , just like industrialization and deindustrialization. They
may or may not coincide with core-periphery relations, depending on the par­
ticular circumstances of time and place under investigation. In and by themselves
they can never tell who is benefiting and who is not benefiting from the struc­
tural inequalities of the capitalist world-economy.
THE WEALTH OF NATIONS IN WORLD-SYSTEMS PERSPECTIVE
World-systems analysis provides us with an easy way out of the theoretical
impasse in which we are bound to find ourselves if we insist on identifying the
core-periphery structure of the capitalist world-economy on the basis of networks
The Developmentalist Illusion
15
of exchange, or, worse still, on the basis of comparative degrees of industrializa­
tion. Following Marx and Schumpeter, world-systems analysis conceives of
capitalism as an evolutionary system in which the stability of the whole is premised
on the perennial change in an d of the parts. Core-periphery relations are no ex­
ception. The kinds of inputs, outputs, and techniques of production and distribu­
tion and the positions in networks of trade and resource allocation that endow
states with differential capabilities to appropriate the benefits of the world divi­
sion of labor are assumed to change continually as a consequence of the introduc­
tion and diffusion of political, economic, and social innovations.3
In this kind of conceptualization, what is a core and what is a peripheral mix
of activities vary continually over the time and space of the world-economy. A
particular mix of activities (e. g . , specialization in manufacturing; export of com­
modities embodying high-wage labor and import of commodities embodying low­
wage labor; export of capital and import of labor) may enable a particular state
at a given time to appropriate a disproportionately large share of the benefits of
the world division of labor, but other states may not be able to do the same at
the same time, nor may the same state be able to do the same at another time .
Core-periphery relations are determined not by particular mixes of activities,
but by the systemic outcome of the perennial gale of creative and not-so-creative
destruction engendered by the struggle over the benefits of the world division
of labor. The central theoretiCal claim of world-systems analysis concerning this
systemic outcome is that the capability of a state to appropriate the benefits of
the world division of labor is determined primarily by its position, not in a net­
work of exchanges, but in a hierarchy of wealth. The further up in the hierarchy
of wealth a state is, the better positioned its rulers and subjects are in the struggle
for benefits. Their opportunities to initiate and control processes of innovation
or to protect themselves from the negative effects of the processes of innovation
initiated and controlled by others are distinctly better than the opportunities
the rulers and subj ects positioned further down in the hierarchy of
In addition, world-systems analysis claims that this hierarchy of
sists of three distinct layers or clusters. States positioned in the upper
routinely appropriate a disproportionate share of the benefits of the
sion of labor and, in this sense, constitute the core of the capitalist WC)nCl-el�orlorr
States positioned in the lower cluster reap benefits that at most cover the
term costs of participation in the world division of labor and constitute
periphery of the capitalist world-economy. States positioned in the mterr:necllat.e
cluster (semiperipheral states) appropriate benefits in excess of the long-run costs
of participation in the world division of labor but less than what is necessary to
keep up with the standard of wealth set by core states.
These three positions are defined not just in quantitative terms (that is, as an
upper, a lower, and an intermediate position on a scale of wealth) but qualitative­
ly as well (as relational capabilities to appropriate the benefits of the world divi­
sion of labor). They parallel the concepts of " oligarchic" and " democratic"
wealth first introduced by Harrod (195 8) and rescued from oblivion by Hirsch
16
The Semiperiphery in the Modem World-System
(1976). Even though these concepts were formulated to explicate differentials in
personal wealth, they can be used to explicate wealth differentials among nations.
Harrod (1958) distinguishes two kinds of personal wealth, "democratic" and
,
"oligarchic, " and maintains that they are separated by "an unbridgeable gulf.'
Democratic wealth is the kind of command over resources that, in principle, is
available to everyone in direct relation to the intensity and efficiency of his or
her efforts. Oligarchic wealth, in contrast, bears no relation to the intensity and
efficiency of the efforts of its recipients and is never available to all no matter
how intense and efficient their efforts are. This is so, according to Harrod, for
two main reasons. The first reason corresponds to Emmanuel's concept of unequal
exchange but refers to exchanges among persons. We cannot all command ser­
vices and products that embody the time and effort of more than one person of
average efficiency. If someone does, it means that somebody else is laboring for
less than what he or she should command if all efforts of equal intensity and effi­
ciency were rewarded equally. The second reason is that some resources are scarce
in an absolute or relative sense or are sub ject to congestion or crowding through
extensive use. Their use or enjoyment, therefore, presupposes the exclusion or
crowding out of others either through a pricing or a rationing system and leads
to the formation of rents and quasi-rents.
The struggle to attain oligarchic wealth is thus inherently self-defeating. As
underscored by Hirsch, the idea that all can attain it is an illusion.
Acting alone, each individual seeks to make the best of his or her position. But satisfac­
tion of these individual preferences itself alters the situation that faces others seeking to
satisfy similar wants. A round oftransactions to act out personal wants ofthis kind therefore
leaves each individual with a worse bargain than was reckoned with when the transaction
was undertaken, because the sum of such acts does not correspondingly improve the posi­
tion of all individuals taken together. There is an "adding-up" problem. Opportunities
for economic advance, as they present themselves serially to one person after another,
do not constitute equivalent opportunities for economic advance by all. What each one
of us can achieve, all cannot. (Hirsch 1976, 4-5)
World-systems analysis maintains that states pursuing national wealth in a capitalist
world-economy face an "adding-up" problem similar to, and in many ways more
serious than, the one faced by individuals when they pursue personal wealth in
a national economy. Opportunities for economic advance, as they present them­
selves serially to one state after another, do not constitute equivalent opportunities
for economic advance by all states. As Wallerstein (1988) insists, development
in this sense is an illusion. The wealth of core states is analogous to Harrod's
oligarchic wealth. It cannot be generalized because it is based on relational pro­
cesses of exploitation and relational processes of exclusion that presuppose the
continually reproduced poverty of the majority of the world population.
Processes of exclusion are as important as processes of exploitation. As used
here, the latter refer to the fact that the absolute or relative poverty of peripheral
The Developmentalist Illusion
17
and semiperipheral states continually induces their rulers and subjects to participate
in the world division of labor for marginal rewards that leave the bulk of the
benefits to the rulers and subjects of core states. Processes of exclusion, in con­
trast, refer to the fact that the oligarchic wealth of core states provides their rulers
and subjects with the means necessary to exclude or crowd out the rulers and
subjects of peripheral and semiperipheral states from the use and enjoyment of
resources that are scarce or subject to congestion.
The two processes are distinct but complementary. Processes of exploitation
provide core states and their agents with the means to initiate and sustain processes
of exclusion. Processes of exclusion generate the poverty necessary to induce
the rulers and subjects of peripheral and semiperipheral states to continually seek
reentry into the world division of labor on conditions favorable to core states.
If the wealth of core states corresponds to Harrod's concept of oligarchic wealth,
the wealth of semiperipheral states corresponds to Harrod's concept of democratic
wealth because, in principle, it could be generalized. If all human efforts of equal
intensity and efficiency were rewarded equally and if all human beings had equal
opportunities to use scarce resources, all peoples could enj oy the kind of com­
mand over resources that is already enjoyed, on average, by the peoples of the
semiperiphery. In reality, however, the most essential feature of the capitalist
world-economy is the unequal reward of equal human efforts and unequal op­
portunities to use scarce resources. As a consequence, only a minority of the world
population enj oys democratic wealth and does so only by means of a perennial
struggle against the exclusionary and exploitative tendencies through which the
oligarchic wealth of core states is created and reproduced.
The struggle against exclusion and the struggle against exploitation are different
in kind. Some semiperipheral states rely more on one than on the other, but most
alternate or combine the two. A struggle against exclusion is a struggle for a com­
paratively secure niche in the world division of labor. Success in this kind of
struggle generally implies ( 1) greater specialization in activities in which
semiperipheral state has or can acquire some kind of competitive
an active involvement in relations o f unequal exchange in which the seIlliI>erlph
state supplies commodities embodying low-wage labor to core states in
for commodities embodying high-wage labor, and (3) a more thorough vA',lU"lVJll.
of peripheral states from the activities in which the semiperipheral state seeks
greater specialization.
Struggles against exploitation move in the opposite direction. They are strug­
gles aimed at the creation of divisions of labor as autonomous as possible from
the axial division of labor of the capitalist world-economy. The success of this
kind of struggle generally implies ( 1) the undertaking by the semiperipheral state
of a wide range of activities regardless of comparative advantage, (2) the self­
exclusion of the semiperipheral state from relationships of unequal exchange with
core states, and (3) an active involvement in relations of unequal exchange in
which the semiperipheral state supplies commodities embodying high-wage labor
to peripheral states in exchange for commodities embodying low-wage labor.
a,6
::, "" -�:-">\,
I'\ J
V�.
'-:
';:3,
.x
\
" I
18
The Semiperiphery in the Madern Warld-System
By struggling in these two directions, semiperipheral states can keep ahead of
the poverty of peripheral states but, as a group, can never bridge the gulf that
separates their wealth from the oligarchic wealth of core states. Success in each
kind of struggle has its inherent limitations. The very success of struggles against
exclusion leads to a more intensive or extensive exploitation of semi peripheral
states by core states and thereby enhances the capabilities of the latter to exclude
the former from the most rewarding activities and from the use or enjoyment
of scarce resources. The very success of struggles against exploitation leads to
self-exclusion from access to the wealthiest markets and the most dynamic sources
of innovations.
Individual states can and do succeed in crossing the gulf that separates the modest
wealth of the semiperiphery from the oligarchic wealth of the core, as Japan has
recently done and a few others did before Japan. But individual successes lead
to a tightening of the exclusionary and exploitative tendencies of core states and
thereby deepen and widen the gulf for those who are left behind. It therefore
becomes inherently more and more difficult to change status upward.
This does not mean that the struggles of semi peripheral states against exclu­
sion and exploitation are ineffectual. On the contrary, it is precisely their capability
to wage successfully these struggles that keeps semiperipheral states from falling
into the abysmal poverty of peripheral states. Unfortunately, this is nothing to
be proud of, at least from a humanitarian point of view. As we have seen, suc­
cess in the struggle against exclusion generally implies a more thorough exclu­
sion of peripheral states from the activities in which semiperipheral states seek
specialization; and success in the struggle against exploitation generally implies
a greater exploitation of peripheral states by semiperipheral states.
Either way, a worsening of conditions f or peripheral states as a group is a re­
quirement of the success of semiperipheral states to attain and retain democratic
wealth. Hence not all states can be or become semiperipheral. Individual states
can cross the gulf that separates the periphery from the semiperiphery, but also
in this case the opportunities for economic advance, as they present themselves
serially to one peripheral state after another, do not constitute equivalent oppor­
tunities for economic advance by all peripheral states. What each peripheral state
can achieve, others are thereby denied.4
ILLUSIONS OF DEVELOPMENT: 1938-1983
Wealth is long-term income. If the claims of world-systems analysis have any
validity at all, observation of the distribution of incomes among the various political
jurisdictions of the capitalist world-economy over relatively long periods of time
should reveal the existence of three separate standards of wealth corresponding
to the oligarchic wealth of core states, the democratic wealth of semiperipheral
states, and the nonwealth, that is, the poverty, of peripheral states. It should also
reveal that the vast majority of states have been unable to bridge the gulfs that
separate the poverty of peripheral states from the modest wealth of semiperipheral
The Developmentalist Illusion
19
and the modest wealth 0 f semiperipheral states from the oligarchic wealth
core states.
This is precisely what an investigation by Arrighi and Drangel ( 1 986) has
By inspecting the distribution of world population by the log of gross
national product (GNP) per capita for the years 1938, 1 948, 1 95 0, 1 960, 1 965,
1 970, 1 975, 1 980, and 1 983, they observed a recurrent trimodal pattern in the
data.5 They took the income values corresponding to the three modes to be in­
dicative of peripheral, semiperipheral, and core positions, and the income values
corresponding to the troughs in the distributions to be indicative of gulfs or
thresholds separating the periphery from the semiperiphery and the semiperiphery
from the core. They labeled the first �d of threshold " perimeter of the periphery"
(PP) and the second kind "perimeter 0 f the core" (PC). A total 0 f five positions
were thus identified: ( 1) the periphery, (2) the perimeter of the periphery , (3)
the semiperiphery, (4) the perimeter of the core, and (5) the core.
The distribution of world population among the five positions over the period
1938- 1 983 is shown in figure 2. 1. The spaces separating the periphery from the
semiperiphery and the semiperiphery from the core correspond to the perimeter
:-of the periphery and the perimeter of the core, respectively . The break between
· "
1 940 and 1 95 0 designates a change in the source of the data. The most striking
feature of this distribution is its long-term stability in spite of considerable changes
in the relative size of the three zones in the shorter run. If one bears in mind
that wealth is long-term income, this discrepancy may be interpreted as an
indication of a greater stability of the distribution of world population by classes
of wealth than by classes of income. Year-by-year or even decade·by-decade
variations in the distribution of world population by classes of income are not
necessarily symptomatic of a change in the three-tier structure of the capitalist
world-economy. Only longer-term variations in income distribution can give
some insight into this structure. As can be seen from figure 2. 1 , half a {,PT,nrnt'
is probably the shortest period we should take in order to avoid major
of the trends.
Figure 2. 1 tells us nothing about " gulfs" separating the core, periphery
semiperiphery, nor does it tell us anything about whether these gulfs, if they
are "bridgeable " or not. To gain some insight into these issues, we
vestigate the composition of periphery, semiperiphery, and core in terms
states included in each zone and how it has changed over the period
The relevant information is given in table 2.1.
States that did not change position at all are located in the cells that run along
a diagonal from the upper left core-core cell to the bottom right periphery­
periphery cell. The diagonals on each side of this main diagonal (entries on the
diagonals from the two core-perimeter of the core cells in the upper left to the
two periphery-perimeter of the periphery cells on the lower right) contain states
that moved, but only from a zone to its contiguous perimeters-without crossing
the boundary itself. By adding up the entries in the cells along these three diagonals
we find that 88 out of 93 states, accounting for 94 percent of total population,
2.1
60
80
20
Source:
�
S
'0
C 40
Q)
::
<1)
�
0
CL
-c
5.
"
'"
"
100
1948
1950
Arrighi and Drangel (1986, 39).
1938
Percentage of World Population i n the Three Zones
Figure
1960
1965
1970
1975
1980
1983
'"
>­
CL
.�
.<:
Cl.
The Developmentalist Illusion
21
Table 2 . 1
Positions o f States i n 1975-1983 Compared t o Their Positions i n 1938-1950
Position in 193 8 - 1 950
Core
�
0
u
u
("0
00
0�
tA
Cl..
r:-
.S
<.l
..c
P·c
<.l
Cl..
Cl..
Cl..
0-
r-C\
�
§
:S
0
r:;!!
P.,
·c
II)
Cl..
0;
�
(a)
(b)
(c)
11
13.1
10 . 4
(a)
PC
4
2.6
1.8
3
5.6
4.3
1
4
.1
.1
(b)
(c)
1
(a )
(b)
(c)
periphery
.6
.8
PP
23
1 8.6
17.6
5
0.8
1.0
1
0.8
1.0
2
2.7
3.5
2
0.5
0.7
4
(a)
(b)
(c)
1
0.2
0.3
4
11
1 3 .1
6
3.3
Total
1.4
1.2
( a)
(b)
(c)
(a )
(b)
(c)
Periphery
33
26.3
0.3
0.5
1.2
1.5
27
51.6
55.5
13
2.3
30
5 5 .1
18
(+7)
1 6. 5
(+3.4)
5
(-1)
1 .3
(-2.0)
30
(-3)
20.4
(-3.9)
8
4.7
(- 5 )
(+2.4)
32
(+2)
57.3
( +2 . 2 )
93
100.1
100.2
(0)
Source: Arrighi and Drange1 (1986, 43).
Notes:
(a) Number of states
(b) Percentage of population in 1950
(c) Percentage of population in 1970
were in 1 975-1 983 still on or within the boundaries of the zone in which they.
were located in 1 93 8- 1 95 0.
In the period as a whole, upward and downward "mobility" in the hierarchy
of wealth of the capitalist world-economy has been truly exceptional. Apart from
the dubious case of Libya,6 the exceptions were two cases of upward mobility
from semiperiphery to core (Japan and Italy) , one of transition from periphery
to semiperiphery (South Korea, to which Taiwan would probably be added if
data for the later years were available) , and one case of downward mobility from
semiperiphery to periphery (Ghana).
22
The Semiperiphery in the Modern World-System
Even more interesting is the fact that mobility has been greater over short periods
than over the whole period. By comparing positions of states as in table 2.1, but
for two sub periods (1938-1950 to 19 60-1970 and 19 60-1970 to 1980-1983),
Arrighi and Drangel show that both sub periods were characterized by greater
overall mobility than the whole period 1938-1950 to 1980-1983-the first sub­
period being characterized by greater overall downward mobility and the second
subperiod being characterized by greater overall upward mobility. This finding
is interesting for two related reasons. For one thing, it confirms the observation
made earlier that the distribution of wealth (that is, of long-term income) is more
stable than the distribution of short-term income. Ups and downs in relative in­
come may mean very little from the point of view of the underlying hierarchy
of wealth, which in fact may remain quite stable.
If this is the case, then the finding is interesting also because it unravels an
important source of the developmentalist illusion. By taking relatively short periods
as the unit of analysis (and periods of twenty to twenty-five years do indeed seem
to be the norm), studies of development may easily mistake for generalized
economic advancement what in fact is just an upswing in a pendulum-like move­
ment that simply brings things back to where they were forty to fifty years bef ore.
In the course of the pendulum-like movement, there may be some reshuffling
of states in the various positions (South Korea up, Ghana down), or even some
genuine cases of upward mobility (Japan and Italy). Nevertheless, when the dust
has settled, true cases of economic advance prove to be the exception, while the
idea that many were advancing proves to have been an illusion.
The analysis of the composition of core, periphery, and semiperiphery and of
its changes over time allows us to identify groups of states that have consistently
remained within or on the boundaries of a given position throughout the forty­
five year period. Arrighi and Drangel identify 75 such states out of the 93 in­
cluded in their analysis and call them "organic" members of the three structural
positions of the world-economy-lO in the core, 21 in the semiperiphery, and
44 in the periphery. 7 The data of these organic members are then used to con­
struct indices of coreness , peripherality, and semiperipherality that presumably
reflect sk'uctural (long-term) rather than conjunctural (middle-term) characteristics
of the three positions.
The first set of indices concerns''relative economic command," as measured
by the logged weighted average and the range (mean plus/minus standard devia­
tion) of the GNP per capita of the organic members of the three positions. These
indices are plotted in figure 2.2 and provide us with a striking visual image of
the unbridgeable gulfs that separate the oligarchic wealth of core states from the
democratic wealth of semiperipheral states and the latter from the poverty of
peripheral states.
When we look at groups of states rather than individual states, the hierarchy
of wealth of the capitalist world-economy appears to be as well entrenched today
as it was fifty years ago. During the period as a whole, the relative economic
command of the core vis-a-vis the periphery and the semiperiphery has increased,
Figure 2.2
0Z
(J
(J
0
u
...J
0-
2.0
3.0
I
I
�I
-
19481950
�I
I
-� �
--'-
---
"" ":>
It
>
+t� ' �
GNP Per Capita of Organic
1960
1965
1970
1975
1980
0-
9�
�
.c
1983
¥ @{�:�:t���:��;�:��:t.��:t�:�t��t��::� ::.; ,':::�:���:�t���:�:��:�::
:: "'
._.,..._
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. ...."
...."'
..:.:"
. �.I!
. .",
�. .:.,
..::"'
�:.::::
.,
. "'
__.,:::""
,
,:",
::� "', :.:::�
: ""
:
.::t:
. "'
.,i;-- -=--=-.:.:.::. �Y,," ���\ I
,-'----'---'-'�..;....�
1938
.
........,..,
� 13
···.·. · .·
""""",,,,,,,,.,_
Trends in Relative Economic Command (Weighted Averages and Ranges of
Members)
24
The Semiperiphery in the Modern World-System
while that of the semiperiphery vis-a-vis the periphery has remained about the
same. Core, periphery, and semiperiphery, as structural positions, are as wide
apart today as they ever were.
To be sure, in this picture there have also been periods in which either or both
of the two gaps were narrowing (e. g. ,
1950-1960, when they were both narrow­
ing). But whenever a narrowing took place, a widening soon followed to reestablish
the gap. Particularly striking in this respect is the absolute and relative collapse
of both indices of the semiperiphery (weighted average and range of GNP)-a
collapse, incidentally, that has been confirmed by trends since
1983. This col­
lapse shows how the absolute and relative gains of thirty years can be wiped out
in the short span of three years.8 Since the collapse has been closely associated
with the explosion of so-called world-debt crisis, it also shows that unilateral
transfers of monetary resources are as effective a weapon in keeping peripheral
and semiperipheral states in their place as any other.
2.2 with those
2.3 is highly instructive. Figure 2.3 displays two alternative indices of
In this connection, a corn parison of the indices plotted in figure
in figure
the degree of industrialization of the organic members of the three zones. They
show, at first, a widening of the gap between core and both periphery and semi­
periphery, and then a progressive and marked closing of the gap that, according
to one index, culminates in the overtaking of the core by the semiperiphery in
degree of industrialization.
For those who cannot tell the difference between industrialization and economic
advance, this narrowing of gaps is taken as evidence of widespread development
and catching up. In fact, the focus on industrialization is another source of
developmentalist illusions. By comparing figure
2.2 and figure 2.3, we can clearly
see that the narrowing of the industrialization gap has been matched by a basic
stability of the gap in relative economic command, and that the final overtaking
of the core by the semiperiphery in degree of industrialization corresponds to
the collapse of the absolute and relative economic command of the latter. From
this perspective, the spread of industrialization appears not as development of
the semiperiphery but as peripheralization of industrial activities.
[The] industrialization of the semiperiphery and periphery has ultimately been a channel ,
not of subversion but of reproduction of the hierarchy of the world-economy. This find­
ing illustrates the process . . . whereby the generalized attempt by political and economic
actors to capture what at any given time are core activities stimulates competition that
turns these activities into peripheral ones . . . . In the 1940s, industrial activities (or at
least many of them) were indeed core activities. In the 1 950s, lured by the "spectacular
prizes " thrown at such activities , political and economic actors of the periplle ry and
semiperiphery threw themselves into' 'industrialization. " At first, they reaped some benefits
and thereby induced others to follow suit. In the 1960s and 1970s, however, industrial
activities became increasingly overcrowded so that not only the spectacular prizes disap­
peared, but even the smaller benefits reaped by the early-late-comers progressively turned
into the widespread losses of the 1980s . (Arrighi and Drangel 1986, 56-57)
30
40
20
30
10
Semlperlphery
Core
. 1938
Source:
�
0
!! 10
"-
'0
0
<.:J
"-
�
�
0
.
�
�
0
"-�
1l
o
'0
.D
(;
::i 20
o
u.
!!
�
"C
o
�
al
1948 1950
Per tphery
.-­
1965
19tiO
Periphery
1�)65
S.!I1III>CIII>hery
Core
--­
1960
Core
1970
197�
1980
1983
Periphery
...
Semlpertphery
______
(or9<1nIC memhersJ
�910
___ e
1975
1980
;::-:-:,.c:::-
1!l83
Per Iphery
Core
.......
$t!nl\per tpher y
hi �Imple avl!fi:lge 01 the �hi:lre at GOP In manufacturing (organic member')}
.-.
�
____
e-------....
S"Hnple allelilges of the percent of Idbor force t'mp!oYL'<t In "ul<lmlry"
Figure 2.3
Trends in the Degree o f Industrializat ion
26
The Semiperiphery in the Modern World-System
THE POLITICS OF SEMIPERIPHERAL DEVELOPMENT
The fact that the industrialization of the semiperiphery has not changed the core­
periphery structure of the capitalist world-economy does not mean that nothing
has changed. On the contrary , the industrialization of the semiperiphery has been
part of a wider social revolution that has radically changed the conditions of accumu­
lation on a world scale. As Eric Hobsbawm has remarked, "The period from 1950
to 1975 . . . saw the most spectacular, rapid, far-reaching, profound, and world­
wide social change in global history. . . . [This] is the first period in which the
peasantry became a minority, not merely in industrial developed countries, in several
of which it had remained very strong, but even in third world countries" (198 6, 13).
This quantum leap in the proletarianization of the world has created tensions
and contradictions that will decisively influence the politics of the world-economy
for generations to come. The semiperiphery is the epicenter of these tensions and
contradictions. Widespread processes of proletarianization and industrialization
have endowed the industrial proletariat of the semiperiphery with a social power
comparable to that previously enjoyed only by the proletariat of the core but in
a national context of relative deprivation long forgotten (if ever experienced) in
core states. This combination of proletarian social power and relative depriva­
tion is at the roots of the general "crisis of dictatorships " that has swept the
semiperiphery in the 1970s and 1980s.
Parliamentary democracy has never been at home in the semiperiphery. The
last f orty years have been no exception. Of the twenty-two states that qualify as
organic members of the semiperiphery, only two comparatively small states (Costa
Rica and Ireland) have been ruled throughout the last forty years by a parliamen­
tary democracy akin to that of core states. Another two small states (Jamaica
and Trinidad and Tobago) have had a similar experience, but only since they at­
tained independence from Great Britain in the early 19 60s. Apart from these four
states , which account for 1.3 percent of the total population of the organic
semiperiphery , all the other states positioned in the intermediate layer of the hier­
archy of wealth of the capitalist world-economy have been ruled by authoritarian
regimes for some or all of the last f orty years.
Leaving aside the special cases of Hong Kong (a British colony throughout the
period) and of Israel and South Africa (to be dealt with in the final section of
the chapter), the other fifteen states, which account for 92. 6 percent of the total
population of the organic semiperiphery , have experienced two kinds of
authoritarian regime. One kind has been experienced for varying lengths of time
by every organic semiperipheral state of Latin America and Southern Europe with
the exception of Costa Rica (Argentina, Uruguay, Chile, Venezuela, Panama,
Mexico, Portugal, Spain, Greece, and Turkey). The other kind has held sway
f or the entire period over the USSR and the "popular democracies" of Eastern
Europe, some of which also qualify as organic members of the semi periphery.9
Notwithstanding their different origins, forms, and designations (fascist, cor­
poratist, bureaucratic-authoritarian, military, and so on), the authoritarian regimes
The Developmentalisc Illusion
27
of the first kind have been characterized by a common predisposition that sets
them clearly apart from the authoritarian regimes of the second kind. This common
predisposition has been (1) to preserve extreme class inequalities in the distribu­
tion of personal wealth within their domains, and (2) to perform subordinate func­
tions in global processes of capital accumulation.
The fact that semiperipheral states as a group can never attain the national stan­
dards of wealth set by core states does not mean that particular classes or groups
within the semi periphery cannot enjoy standards of wealth analogous to those
of their counterparts in the core. On the contrary, fractions of the upper and mid­
dle classes of the Southern European and Latin American semiperiphery have
traditionally enjoyed standards of wealth that compare quite favorably with those
of their counterparts in core states. These fractions are less numerous relative
to total population than in the core, but they are just as wealthy. The other side
of the coin has been a mass poverty for the lower classes of the semiperiphery
that resembles or even exceeds that of their counterparts in the periphery.1O
Faced with this kind of extreme inequality in the distribution of personal wealth,
the authoritarian regimes of the Southern European and Latin American semiperi­
phery have generally performed one of two functions. They have either protected
the accumulation and enjoyment of oligarchic wealth by the upper and middle
classes from the demands and struggles of the excluded and exploited masses,
or they have regulated the ..ansfer of oligarchic wealth from one fraction to another
of the upper and middle classes. In any event, the authoritarian regimes, unlike
the authoritarian regimes of the USSR and Eastern Europe, have seldom, if ever,
purposefully undermined the structural foundations of oligarchic wealth and mass
poverty within their domains. To the extent that these foundations have been under­
mined, the main force at work has been the unfolding of world-systemic tenden­
cies, which the ruling elites of these states neither initiated nor controlled.
These world-systemic tendencies can be traced to the long-term effects of
acute intracore hegemonic rivalries of the first half of the twentieth
rivalries gave a tremendous impulse to the development of organized
core states and of national liberation movements in the periphery. As
of these parallel developments, which came to fruition after World W
states and capitalist enterprises were forced to make major concessions to
labor, while their capabilities to counterbalance these concessions with
extensive and intensive exploitation of the human and natural resources
periphery became more constrained than they had previously been. Under th'ese
circumstances it became increasingly profitable for core capitalist enterprises to
set up and expand production facilities in the semiperiphery and/or to recruit labor
in the semiperiphery for exploitation in the core itself.))
The authoritarian regimes of the Southern European and Latin American semi­
periphery actively encouraged both the relocation of production facilities to their
domains and the recruitment of labor from their domains, in sharp contrast with
the authoritarian regimes of the USSR and Eastern Europe, which actively op­
posed them (with the partial exception of Yugoslavia insofar as labor recruitment
28
The Semiperiphery in the Modern World-System
was concerned). As a matter of fact, from the early 1950s to the middle 1970s,
the provision of safe and profitable production sites for core capitalist enterprises
and the supply of comparatively cheap and disciplined labor power for exploita­
tion within their domains or, via migration, in core states became the main voca­
tion of the authoritarian regimes of the Southern European and Latin American
semiperiphery. The main attraction of this vocation was that it promised, and
in most cases actually delivered, temporary but substantial surpluses of hard cur­
rencies, which could be used to maintain, reproduce, and expand the oligarchic
wealth enjoyed by the most fortunate fractions of the upper and middle classes
of these states. In the longer run, however, this "openness" of the authoritarian
regimes of the Southern European and Latin American semiperiphery has been
self-defeating.
The more semiperipheral states competed with one another in the provision
of safe and profitable production sites and of cheap and disciplined labor sup­
plies, the worse the terms that each and every one of them obtained for the per­
formance of these subordinate functions in the global accumulation of capital.
Furthermore, the spread of urbanization and the ever-widening participation of
their labor forces in core processes of production and exchange, at home or abroad,
progressively exhausted their comparatively large reserves of nonwage labor on
which the competitiveness of their labor supplies had previously rested. As the
labor supplies of the Southern European and Latin American semi periphery
became less competitive, absolutely and in comparison with the labor force of
select core and peripheral locales, the benefits to core capital of expanding pro­
duction in these regions or of recruiting labor from them decreased correspon­
dingly, and the previous surpluses of hard currencies turned into soaring deficits.
Up to a point, the increasing social power of the expanding proletarian mass
of these regions could be and was kept in check by a more intensive and exten­
sive use of coercive methods. Over time, however, coercive methods could not
keep up with the ever-increasing contradiction of a process of proletarianization
and industrialization that increased the social power of the lower classes without
significantly alleviating their mass misery. The progressive displacement of
authoritarian regimes by parliamentary democracies that has characterized the
Southern European and Latin American semiperiphery since 1974 can be inter­
preted as evidence of the inability of coercive rule to keep indefinitely under control
the
contradictions
of prosystemic semiperipheral development. 12 Whether
parliamentary democracy with its greater reliance on consent can control these
contradictions more effectively than authoritarian regimes is a question to which
we shall return in the concluding section of the chapter.
F or now, let us notice that the prosystemic authoritarian regimes of the Southern
European and Latin American semiperiphery are not the only ones to have ex­
perienced a crisis. The crisis has lately caught up also with the authoritarian
regimes of the USSR and of the Eastern European semiperiphery. As already
mentioned, these authoritarian regimes have pursued policies vis-a-vis class ine­
qualities within their domains and vis-a-vis processes of capitalist accumulation
The Developmentalist Illusion
29
in the world-economy that contrast sharply with those pursued b y the authoritarian
regimes of Southern Europe and Latin America, at least up to the present crisis .
If the orientation of the latter can be characterized as " prosystemic, " that of the
former may well deserve the designation of "antisystemic. "
This anti systemic orientation has not been pure rhetoric. In intrastate relations
it has found expression in a more or less thorough revolution in the distribution
of personal wealth, which has been extensively " democratized" in the sense that,
comparatively speaking, oligarchic wealth has been largely eliminated and mass
poverty considerably alleviated. In interstate relations it has found expression in
a refusal, backed by force, to play the kind of subordinate role in global pro­
cesses of capital accumulation that has been played by the Southern European
and Latin American semiperiphery. Up to very recently, their "doors" have been
kept as closed as they could possibly be both to foreign direct investment and
(with the exception of Yugoslavia) to recruitment of labor for exploitation abroad.
The coercive character of these regimes has been closely related to the pursuit
of these antisystemic objectives.
The purpose and dynamics of processes of proletarianization and industrializa­
tion in the Soviet and Eastern European semiperiphery have accordingly been
quite different from what they have been in the Southern European and Latin
American semiperiphery. As already noted, in the latter these processes have
been primarily the expression of world-systemic forces that local ruling elites
neither initiated nor controlled but tried to exploit in order to create, reproduce,
or expand within their domains one form or another of oligarchic wealth. In the
Soviet and Eastern European semiperiphery, in contrast, proletarianization and
industrialization were the expression of purposive actions undertaken by local
ruling elites in order (1) to revolutionize social relations domestically and (2)
to restructure power relations internationally.
Domestically, the one-sided and forcible pursuit of proletarianization
dustrialization was aimed at restructuring social relations so as to "'W'''''''''"
power of the newly established antisystemic regimes over their rpcnp,'tn,TPcl
societies. While proletarianization was used to destroy all possible
autonomous social power for the bourgeoisie ("great" and "petty" alike),
alization was used to create a proletariat thoroughly dependent for
protection on the new ruling class.
Internationally, proletarianization and industrialization were aimed at
turing interstate relations so as to enhance the power of the regimes in
in the world-system at large. While industrialization was used to develop
capabilities comparable to those of core states, proletarianization was a key in­
strument in providing the resulting military-industrial complexes with the human
and natural resources required by their development, maintenance, and competitive
expansion.
The success of antisystemic semiperipheral development in furthering these ob­
jectives has been considerable and accounts for the historically greater power
and stability of the authoritarian regimes of the Soviet and Eastern European
30
The Semiperiphery in the Modern World-System
semiperiphery in comparison to the authoritarian regimes of the Southern Euro­
pean and Latin American semiperiphery .13 In particular, the main contradiction
of prosystemic proletarianization and industrialization-the fact, that is, that they
increased the social power of the lower classes without significantly alleviating
their mass misery-has affected to a much lesser extent, or not at all, the
authoritarian regimes of the Soviet and Eastern European semiperiphery, primarily
because the alleviation of mass misery has been part and parcel of their
developmental strategy. But this developmental strategy had contradictions of its
own that are coming to a head in the present crisis.
As foreseen by Isaac Deutscher (19 67) with special reference to the Soviet
Union, the most important such contradiction results from the fact that pro­
letarianization and industrialization bring about an increasing divergence between
the power interests of the ruling elites (officials and clients of the various Com­
munist parties in power), on the one side, and the material interests of the in­
dustrial proletariat, on the other. As long as the industrial proletariat was a
powerless and small minority of the subject population, the increase in its size
due to proletarianization and industrialization was a factor of consolidation and
enhancement of the political power of the ruling Communist parties, as the latter
anticipated. However, the more the proletariat has come to include the vast ma­
jority of the population, the more difficult it has become for the ruling Com­
munist parties to claim credibly to represent it against the interests of groups and
classes that have been by now largely or completely eliminated.
The coercive methods of rule practiced by Communist parties have thus ap­
peared less and less a means to the end of protecting the interests of a weak pro­
letariat vis-a-vis more powerful social groups and classes, and more and more
a means to the end of protecting the power and privileges of party officials and
their clients from the effects of generalized proletarianization. At the same time,
it has become more difficult f or the ruling Communist parties to improve further
the standards of living of the expanding proletariat. The initial improvements were
due primarily to the forcible "democratization" of national wealth. Once national
wealth had been "democratized," improvements came to be constrained by
systemic conditions (first and foremost the semiperipheral position of these states
in the hierarchy of wealth of the capitalist world-economy), which these ruling
elites could do little to change.
This contradiction was compounded by the increasing difficulties the Communist
regimes had in keeping up with the power of core states in the world-system.
Initially, authoritarian rule could be presented as necessary in order to reallocate
forcibly resources from the reproduction of the oligarchic wealth of the upper
classes to the construction, maintenance, and reproduction of military-industrial
complexes capable of protecting the subject population in general, and its lower
classes in particular, from powerful and aggressive foes. But as this reallocation
was completed, and the aggressiveness of neighboring and distant foes was suc­
cessfully tamed, the social costs of keeping up with the military-industrial com­
plexes of core states sharply increased, and its social benefits sharply decreased.
The Developmentalist Illusion
31
Social costs increased sharply because the resources necessary to keep up with
the military-industrial complexes of core states could no longer come from the
curtailment of oligarchic wealth, which had largely vanished from the domains
·.,.ofthese regimes. Rather, they had to come from a curtailment of democratic
wealth, that is, from the long-term income of a thoroughly proletarianized civil
. society. Social benefits decreased sharply because once the aggressiveness of
neighbors had been tamed, the endless accumulation of means of war brought
less and not more security to the sub ject population.
THE SEMIPERIPHERY AND THE FUTURE OF THE
WORLD-ECONOMY
In introducing the concept of semiperiphery, hnmanuel Wallerstein maintained
that the existence of the semiperiphery is essential to the stability of the capitalist
world-economy. Politically, a system polarized in a small distinct high-status and
high-income sector, on the one side, and a large, relatively autonomous, low­
status, low-income sector, on the other side, would lead quite rapidly to acute
and disintegrating struggles. The major political means by which such crises are
averted is the creation of "middle" sectors, which tend to think of themselves
primarily as better off than the lower sectors rather than worse off than the upper
sector. This obvious mechanism, operative in all kinds of social structures, serves
the same function in world-systems (Wallerstein 1979, 69).
In addition to this political function, the semi periphery performs the economic
function of relieving capital from congestion in the core.
For individual capitalists, the ability to shift capital, from a declining sector to a rising
sector, is the only way to survive the effects of cyclical shifts in the loci of the
sectors. For this there must be sectors able to profit from the wage-productivity
of the leading sector. Such sectors are what we are calling semiperipheral
they weren't there, the capitalist system would as rapidly face an economic
would a political crisis. (Wallerstein, 1979, 70; emphasis in the original)
In contrast but not necessarily in contradiction to this view, Chase-Dunn
1990) has recently advanced the thesis that semiperipheries have been eX(;epIUOIlatt
fertile grounds for antisystemic and transformative action. In his view,
true of the capitalist world-economy as it has been true of all previous
systems. The analysis developed in this chapter can be used to reconcile these
contrasting emphases and to throw some light on the possible implications of the
current crisis of authoritarian rule in the semiperiphery for the future of the
capitalist world-economy.
As a first approximation, we may say that over the last half century or so the
experience of Southern Europe and Latin America provides evidence in support
of Wallerstein's thesis of a prosystemic orientation and function of the
semiperiphery, whereas the experience of the USSR and Eastern Europe provides
32
The Semiperiphery in the Modern World-System
evidence in support of Chase-Dunn ' s thesis of an antisystemic orientation and
function of the semiperiphery .14 If the existence of a prosystemic semi periphery
is essential to the stability of the capitalist world-system, what are the implica­
tions of the general crisis of prosystemic and antisystemic authoritarian regimes
in the semiperiphery? Is this general crisis likely to increase or to decrease the
stability of the capitalist world-system?
At the moment, the dominant trend seems to be a propagation to the entire
semiperiphery of the prosystemic and stable parliamentary regimes that have been
the norm in the organic core since World War II. Over the last fifteen years the
Southern European and Latin American semiperiphery has moved with unpre­
cedented determination toward parliamentary democracies without any noticeable
change in the prosystemic orientation of its governments. At the same time, the
regimes of the Soviet and Eastern European semiperiphery have greatly relaxed
their antisystemic orientation and have begun to experiment with various forms
of parliamentary democracy.
This trend is an expression of the general crisis of coercive rule in the
semiperiphery that, if our previous analysis is correct, has deep structural roots
and therefore can be expected to continue into the foreseeable future. Yet this
trend is more an expression of the crisis than a solution of the crisis. The even­
tual outcome of the crisis remains unclear. In particular, it is not clear what will
happen to prosystemic parliamentary democracy as it becomes the rule rather
than the exception in the semiperiphery.
One possibility is that the semiperiphery will simply follow in the footsteps
of the core without introducing any major innovation in the form and substance
of parliamentary democracy. This possibility is unlikely. The close association
since World War II between prosystemic and stable parliamentary democracies,
on the one side, and the oligarchic wealth of the states that have experienced such
regimes, on the other, has not been accidental. Abundance of means creates
possibilities for mobilizing and reproducing prosystemic consent among the lower
classes that are simply not available under conditions of relative or absolute scar­
city. Under the conditions of abnormal abundance that characterize and define
core positions, the pursuit of power and wealth by the upper classes can be easily
reconciled with the pursuit of livelihood by the lower classes. As the historical
record shows, it is under these conditions that stable prosystemic parliamentary
democracies have prospered, almost regardless of the historical peculiarities of
the states and peoples involved. But under the conditions of relative and absolute
scarcity typical of the periphery and semiperiphery , such democracies have been
the exception rather than the rule.
As already mentioned, among organic semiperipheral states there have been
cases of stable prosystemic parliamentary democracies. The most stable have been
Ireland, and Costa Rica, followed by Jamaica and Trinidad and Tobago. Among
the most recent acquisitions to the prosystemic parliamentary camp, Spain, Greece,
and Portugal seem at the moment the most likely to replicate faithfully and lastingly
the experience of the core. Elsewhere it is too soon to tell.
The Developmentalist Illusion
33
Except for Spain, the states just mentioned are all very small. Including Spain,
they account for less than 10 percent of the total population of the organic
semiperiphery. Given their small individual and aggregate size and, above all,
the peculiarities of their geography and history, it has been possible for these
states to work out special deals, either with the North American or with the West
European core (or both), that have strengthened simultaneously their parliamen­
tary institutions and their prosystemic orientation. However, it is doubtful that
deals of this kind can be extended to the majority, let alone to the totality, of
semiperipheral states.
All available evidence seems to suggest that large parts of the semiperiphery
are likely to be left out of such deals. A new and enlarged Marshall Plan would
be required for most of the semiperiphery to be included. However, core states
seem neither willing nor capable of such an undertaking. For one thing, they lack
the collective will and intelligence that the conception and execution of such a
plan require. The crisis of U .S. hegemony has left behind rather ineffectual world
agencies whose main preoccupation is the day-to-day, case-by-case management
of world monetary resources rather than the use of such resources to promote
long-term, large-scale institutional change.
In addition, the current trend toward greater " openness" on the part of the
antisystemic semiperiphery can be expected to have a negative effect on the chances
of semi peripheral states in general to squeeze advantageous deals out of the core.
This trend weakens the predisposition of core states to make special deals with
semiperipheral states, because much of that predisposition was previously due
to the need to keep at least part of the semi periphery open to the global activities
of core states and enterprises. But even if the predisposition of core states to of­
fer special deals to some semi peripheral states remains unchanged, the increase
in the number of states offering special deals to the core reduces what semiperi­
pheral states can, on average, squeeze out of the core. What a few might
all cannot.
Last but not least, the acute economic competition among core
states that has followed the full reconstruction of world-market rule-a
tion completed in the early 1 970s-is inducing core states and enterprises
the ante in the race to cut costs. Among other things, this has meant a
of the semiperiphery (whose competitiveness has been exhausted anyway
cessive exploitation and self-exploitation) and a search for closer links with
peripheral locales. The recent economic " miracles" of South Korea and
(their ascent from periphery to semiperiphery) are an expression of this tendenc
cy. Far from providing a model for the future of the semiperiphery , these suc­
cessful transitions to the semiperiphery have aggravated the present troubles of
the states that already were in the semiperiphery. 15
For all these reasons it is highly unlikely that the post-Franco experience of
Spain will be replicated by many other semi peripheral states of comparable size.
A few Eastern European states may replicate this experience, but for each new
Spain the chances are that there are going to be a few more Argentinas-the state
34
The Semiperiphery in the Modern World-System
that better than any other epitomizes the political impasse of a structural situation
in which neither authoritarian rule nor parliamentary democracy can deliver the
goods it promises .
16
Worse still, for each new Spain and a few more Argentinas, the current trend
toward prosystemic parliamentary democracy in the semiperiphery may generate
many South Africas and Israels. South Africa and Israel are organic semiperipheral
states. Yet neither of them fits into any of the three main groups of organic semi­
peripheral states identified in the previous section (stable prosystemic parliamentary
regimes, prosystemic authoritarian regimes, and antisystemic authoritarian
regimes). Rather, they are hybrid regimes combining traits typical of the other
three kinds of regime.
Over the last forty years , South Africa and Israel have been stable prosystemic
parliamentary regimes, like Ireland and Costa Rica. Nevertheless, particular
groups among their sub jects (blacks in South Africa and Arabs in Israel) have
been excluded from effective participation in the parliamentary process. Toward
the groups deprived or excluded from the enjoyment of full political rights, both
regimes have used methods of rule as coercive as those used by prosystemic and
antisystemic authoritarian regimes.
This use
0f
coercive methods 0 f rule combined with a strong prosystemic orien­
tation has made these regimes resemble the prosystemic authoritarian regimes
of the Southern European and Latin American semiperiphery. However, they have
differed sharply from these regimes, not just because of the stability of their
parliamentary institutions, but because their social base has consisted of a par­
ticular ethnonation (the Afrikaner ethnonation in South Africa , the Jewish ethnona­
tion in Israel) rather than of particular fractions of the upper and middle
classes.
17
A s a matter o f fact, from this point o f view the regimes o f South Africa and
Israel present important analogies with the antisystemic authoritarian regimes of
the Soviet and Eastern European semiperiphery. Like the ruling elites of the lat­
ter, the ruling elites of the f ormer have been actively engaged in a policy of in­
dustrialization aimed at restructuring to their own advantage both social relations
within their domains and power relations in the interstate system. In the process,
they have considerably improved the life chances of the ethnonations on which
their power rests (the life chances of the lower classes of such ethnonations in
particular) and have built small but highly effective military-industrial complexes
that have turned these states into regional powers of great significance.
Up to the present, this kind of hybrid regime has been an anomaly among organic
semi peripheral states. Nevertheless, it is quite possible that the ongoing crisis
of the prosystemic and antisystemic authoritarian regimes of the semiperiphery
will become a breeding ground of new varieties of extreme ethnonationalist
democratic regimes, more or less parliamentary and more or less prosystemic
according to circumstances. Unable either to satisfy or to repress popular demands
for livelihood and democracy, an increasing number of regimes of the semiperi­
phery may be tempted to seek a way out of this political impasse by satisfying
The Developmentalist Illusion
35
these demands selectively on the basis of racial, ethnic, and religious discrimina­
tions among their subjects. 18
To be sure, this kind of " solution" of the crisis of legitimacy faced by semiperi­
pheral authoritarian regimes has its own contradictions. Over time, exploitative
and/or exclusionary ethnonationalisms tend to generate countermovements that
effectively undermine the power of the dominant ethnonations, as witnessed by
the current crisis of both the South African and the Israeli regimes. Nevertheless,
as the experience of these regimes shows, the emergence of effective counter­
movements takes long periods of time during which human hatred and suffering
may escalate beyond what is in anyone's power to control.
What kind of world-system will emerge out of this turmoil is hard to say. On
the one hand, the escalation of racial, ethnic, and religious animosities in the
semiperiphery may link up with and enhance similar trends in the core and
periphery. Left unchecked, this tendency may well plunge the world into a situa­
tion of systemic chaos worse than that of the first half of the twentieth century.
On the other hand, the attempts and struggles to contain and counteract this escala­
tion may create in the semiperiphery new forms of popular democracy capable
of laying the foundations of a less exploitative and exclusionary world-system.
What these new forms of democracy will look like, no one can tell. Like all
innovations, they will emerge out of a long-drawn-out process of trial and error
and will come to seem obvious and " natural"· only after their consolidation. All
we can say for now is that they will look neither like the ' 'popular democracies "
that are being swept away by the general crisis 0 f coercive rule in the semiperiphery
nor like the parliamentary democracies of the core that have been built on an
abundance of means that cannot be generalized.
NOTES
In revising the chapter for publication I have benefited from comments and
by Christopher Chase-Dunn, Walter L. Goldfrank, Terence K. Hopltins, William G.
Gonzalo Santos, Beverly J. Silver, and Immanuel Wallerstein.
1 . This characterization sums up the stated and unstated premises of most
have made use of the concepts of core, periphery, and semiperiphery . Very few
studies have actually attempted to identify core, peripheral, and semiperipheral states on
the basis of their positions in trade networks. Notable exceptions are Snyder and Kick
( 1 979), Nemeth and Smith ( 1 985), and Smith and White ( 1 9 89) .
2. On the distinction between peripheralization through the mobility of capital (or
transfer of surplus) peripheralization through the mobility of goods (or unequal exchange),
and peripheralization through the mobility of labor (or direct surplus extraction) , see Ar­
righi and Piselli (1987, 687-97). These authors show that each mechanism of peripheraliza­
tion is associated with a particular kind of social structure and social conflict.
3. See Arrighi and Drangel (1 986) for sources and arguments supporting this claim.
To simplify matters and make exposition easier, I posit here that " states" rather than
capitalist enterprises are the key actors in processes of capital accumulation. For the purposes
36
The Semiperiphery in the Madern Warld-System
at hand this simplification is legitimate because it does not affect significantly the conclu­
sions of the analysis. Moreover, the assumption that states are the key actors in processes
of capital accumulation is relaxed in the sections on "The Politics of Semiperipheral
Development" and "The Semiperiphery and the Future of the World-Economy , " which
focus on the class and ethnic structure of states .
4. As Wallerstein remarks (1979, 76) , developmental ideology is merely the global
version of R. H. Tawney's Tadpole Philosophy : "It is possible that intelligent tadpoles
reconcile themselves to the inconveniences of their position, by reflecting that, though
most of them will live and die as tadpoles and nothing more, the more fortunate of the
species will one day shed their tails, distend their mouths and stomachs , hop nimbly on
to dry land, and croak addresses to their former friends on the virtues by means of which
tadpoles of character and capacity can rise to be frogs. This conception of society may
be described, perhaps, as the Tadpole Philosophy, since the consolation which it offers
for social evils consists in the statement that exceptional individuals can succeed in evading
them . . . . And what a view of human life such an attitude implies! As though oppor­
tunities for talents to rise could be equalized in a society where circumstances surround­
ing it from birth are themselves unequal ! As though, if they could, it were natural and
proper that the position of the mass of mankind should permanently be such that they can
attain civilization only by escaping from it! As though the noblest use of exceptional powers
were to scramble to shore, undeterred by the thought of drowning companions! " (Tawney
as quoted in Wallerstein 1979, 1 0 1 ) .
5 . Since the use o f GNP per capita to identify the position of states i n the core-periphery
structure of the world-economy has been widely questioned (among others by Chase-Dunn
1989; Smith and White 1989; Glenday 1 989) , two clarifications on its use by Arrighi and
Drangel are in order. First, they use GNP per capita only as a measure,ment of relative
economic command over world resources by the residents of different political jurisdic­
tions. That is to say, they try to measure the command exercised by the residents of a
given jurisdiction over the resources owned by the residents of all other jurisdictions, relative
to the command exercised by the latter over the resources owned by the former. No
significance is accordingly attached to the GNP per capita of a state except in relation
to all the GNPs per capita of the other states in the system, each GNP being assigned
a weight corresponding to its share of world population.
Second, relative economic command in this sense is used to assess the position of a
state in the core-periphery structure of the world-economy only through multiple obser­
vations covering as long a period of time as allowed by the availability of data. The dif­
ferent zones (or layers) of the world-economy are defined by the distribution of world
population by GNP per capita at particular points in time. But a state is defined as an
organic member of a given zone only if it appears to have been positioned in a given zone
for the entire forty-five-year period covered by the analysis . The rationale of this pro­
cedure is that only over time can relative GNP per capita be taken to measure "wealth"
rather than "income . "
6. For some reason, which would be interesting to investigate, Libya has the power
of arousing strong emotions, not just among politicians , but among social scientists as
well. The fact that according to Arrighi and Drangel ( 1 986, 44) , Libya rose to core posi­
tion in the 1970s has been considered by many as sufficient reason for dismissing as in­
valid their entire methodology. An Italian journal turned down the article apparently for
this reason alone. Glenday states squarely that he is " skeptical of a methodology that would
lead one to include Libya in the core while relegating the U . S . S . R . to the semiperiphery "
The Developmentalist Illusion
37
(1989, 2 12) . I n a more serious but similar vein, Chase-Dunn ( 1 9 8 9 , 209) has stated that
" [the] fact that Arrighi and Drangel . . . claim that Libya has moved into the core (based
on their use of GNP per capita as a measure of core status) reveals the weakness of their
identification of core activity with short-run returns based on any kind of activity . Libya
sits on a fortune in oil but, by any other measure besides GNP per capita, Libya is clearly
not a core state . "
Since the position assigned to Libya seems to b e the ultimate test o f the validity o f the
Arrighi and Drangel analysis, I shall quote at length from a letter that I wrote on May
20, 1987, to Chase-Dunn in response to his criticism.
Let me point out first of all that we do not include Libya (or for that matter Italy or Japan) among
the organic members of the core zone. Personally, I have serious doubts that it will ever become
one, just as I am certain that Japan already has. (I have no strong views on Italy one way or another) .
. . . However, ifby any chance Libya's GNP per capita of the 1990's or ofthe 2000's will still place
Libya within the core zone, I see no reason for not including it among the organic members of the
core zone, regardless of the way in which its core position was conquered initially and reproduced
subsequently .
Your assertion that at the moment Libya is where it is in the GNP per capita ranking because it
sits on an oil well is indisputable. Yet, I cannot help but ask, "so what? " Of the ten states defined
in our article as organic members of the core (p. 69), at least four (Australia, Canada, New Zealand
and the U.S.A.) and possibly another two (Norway and Sweden) originally entered the core zone
thanks (among other things) to the fact that they were "sitting" on an extremely favorable endow­
ment of material resources per head of population. At the same time, there are at least as many states
(Argentina, Russia, South Africa and Brazil being only the most obvious instances) that at one point
or another of their history had an equally favorable endowment but never became temporary, let alone
organic, members of the core zone. In short, "sitting" on particular resources (or on particular loca­
tions) is neither a necessary nor a sufficient condition for stable membership of the core zone.
In order to stabilize its present core position, Libya must meet a whole series of requirements which
only in part depend on the "will and intelligence" of its political and economic entrepreneurs. To
be skeptical about the chances of such stabilization means to be skeptical about the power of this
"will and intelligence" in relation to systemic forces beyond the control of Libya's entrepreneurs .
Only time can tell whether this skepticism is well founded. In the meantime, the more or less tern"
porary core position of Libya is very real and is measured adequately by its GNP per capita.
Libyan residents have a command over world-economic resources which is equal to that of
members of the core zone (organic or not). This command has been exercised not only
ports of commodities but also through the acquisition of foreign labor power for
Libya and of claims over the profits of core enterprises (e. g. , Fiat). The command has
been there. The particular way in which it has been (is being) used is a different matter
the reasons why I thiok that the chances of Libya to become an organic member of the core
To this I have only to add that the latest World Development Report (World Bank
reporting GNP per capita for 1 987) gives figures for Libya's GNP per capita that
back in the semiperiphery, as anticipated by the skepticism expressed in the letter.
7. The exact procedure followed in classifying states in these three categories is detailed
in Appendix III of the Arrighi and Drangel article, which also gives a complete list of
the organic members of the three zones (1986, 65-7 1 ) .
8. This finding shows the serious limitations o f Robert W. Jacnan' s empirical test
of what he calls the Matthew Effect (from Matthew 1 3 : 1 2 , "For whosoever hath, to him
shall be given, and he shall have more abundance: but whosoever hath not, from him shall
be taken away even that he hath " ) . By regressing average annual growth rates in per capita
GNP, 1960 to 1978, on per capita GNP, 1 960, he finds that "there is little evidence of
the commonly-argued Matthew effect where the core has experienced higher rates of growth
38
The Semiperiphery in the Modern World-System
than the periphery . " Instead, his estimates "suggest a modified Matthew effect within
Third World countries , such that the initially wealthiest of these have grown more rapidly
than the West which, in turn, has grown faster than the poorest countries of the Third
World. It is important to remember, however, that even this modified Matthew effect is
not a strong one" (Jackman 1982, 193-95). As can be seen from Figure 2 . 2 in the text,
Jacnan's findings concern a period (1960-1978) in which the organic semiperiphery (and,
hence, the wealthier Third World countries) performed exceptionally well relative to both
the organic core and the organic periphery . But Figure 2 . 2 also shows that if we were
to extend Jackman ' s analysis beyond 1980, we would probably find strong support for
the hypothesis of a Matthew effect not just between the wealthy and the poor but also
between the superwealthy and the moderately wealthy .
9. In this and in the next section I shall focus on the twenty-one states that Arrighi
and Drangel identify as organic members of the semi periphery . To these I add Poland,
which was excluded from their analysis, with four other Eastern European states (Ger­
man Democratic Republic, Czechoslovakia, Bulgaria, and Albania) , for lack of reliable
data. The data that we do have suggest that Poland has almost certainly been an organic
member of the semiperiphery like Hungary , the USSR, and Romania. The German
Democratic Republic and Czechoslovakia have probably been' 'precarious " members of
the core and Bulgaria and Albania either " precarious " members of the semiperiphery
or more or less upwardly mobile members of the periphery .
By "precarious " members of the core (semiperiphery) I mean states that were in the
core (semi periphery) at the beginning and at the end of the period 1938-1983 but were
temporarily demoted to semiperipheral (peripheral) status somewhere in the middle of the
period. The most important precarious semiperipheral states have been Algeria, Brazil,
Colombia, Iran, Iraq, Malaysia, Nicaragua, and Syria. These states, together with up­
wardly mobile semiperipheral states, are excluded from consideration in this and in the
next section because my purpose is to construct a preliminary typology of semi peripheral
political regimes controlling for stability in the hierarchy of wealth of the world economy.
Future research should verify whether and how this typology can be usefully extended
to include precarious and upwardly mobile semiperipheral states .
1 0 . This statement is consistent with the widely observed "inverted U-curve" that
describes the relationship between levels of "economic development" and income ine­
quality (see Bornschier and Chase-Dunn 1985; Kuznets 196 3 ; Nolan 1983 ; Weede 1980).
1 1 . The historical preference of core enterprises for the serniperiphery over the periphery
(once the latter had been decolonized) as production site and source of labor, notwithstand­
ing the lower wages of the periphery, has been due to several reasons . Some are purely
geographical: most semiperipheral states happen to be closer to core regions than peripheral
states. Some are cultural: most semi peripheral states happen to be civilizationally closer
to core states than most peripheral states. Some are strictly economic: the domestic markets
(including the labor markets) of most semi peripheral states are more developed than those
of most peripheral states. As we shall see, however, all these comparative advantages of
the semiperiphery vis-a.-vis the periphery are subject to erosion through extensive use and
become less important with the intensification of competitive pressures on core enterprises
to cut labor costs.
1 2 . The rapid succession of "crises in dictatorship" in Southern Europe (Greece, Por­
tugal, Spain) can be taken as the watershed between the "authoritarian" and the
"democratic " phases of prosystemic semiperipheral development.
The Developmentalist Illusion
39
1 3 . The much greater power and stability of the authoritarian regimes o f the antisystemic
semiperiphery in comparison with the authoritarian regimes of the prosystemic
semiperiphery have not received the careful attention that they deserve. Most current discus­
sions of the ' 'failure of communism" implicitly assume that the relevant comparison in
assessing "success" and "failure" is between the economic performance of the antisystemic
semiperiphery and that of the core (when they do not assume, more crudely, that the size,
geography , and history of states matter little in determining their "life-chances" in the
capitalist world-economy). This implicit assumption does not take into account the long­
term stability of the core-periphery structure of the world-economy and the practical and
theoretical impossibility of large-scale replicas of the historical experience of the core.
A less biased comparison would be between the experiences of the antisystemic and
prosystemic semiperipheries as regions of the world-economy of comparable size, popula­
tion, and natural resources. This comparison would probably reveal that these two regions
of the world-economy, each taken in its totality, have fared equally well in keeping ahead
of the poverty of the periphery and equally badly in catching up with the wealth of the
core. In the aggregate, that is to say, " closure" or "openness" probably made little or
no difference in advancing or retarding the relative economic command of the semiperiphery
in the world-economy.
Nevertheless, it is difficult to deny that "closure" has made a big difference in pro­
moting the power of semiperipheral states in the world-system and social justice within
semiperipheral states. Recent setbacks notwithstanding, the increase in the relative
capabilities of the antisystemic semiperiphery to shape and influence world politics, on
the one side, and the equalization of life-chances among classes and ethnic groups within
its territories, on the other, have been incomparably greater than that of the prosystemic
semiperiphery . As argued in the text, the crisis of authoritarian rule in the antisystemic
semiperiphery must in fact be interpreted as the joint result of its failure to catch up with
the standards of wealth of the core and of its successes in restructuring world politics and
national societies .
14. Wallerstein's thesis, however, must be reformulated to take into account the social
polarization typical of unreformed semiperipheries. The main reason why the semiperiphery
or parts thereof show a prosystemic orientation and perform pro systemic functions is
the "optical illusion" whereby semiperipheral states tend to see themselves �_;_r._".
better off than peripheral states rather than worse off than core states, as �l1(H,,·�tF'jj
Wallerstein ( 1 979, 69). This illusion may have played a role in the
hegemony over some semi peripheral states some of the time. But it is doubtful
states could have been fooled in this way for long periods of time unless those who
trolled the coercive and ideological apparatuses of these states had some real prosystemic
interest.
According to our previous analysis, this real prosystemic interest has been the possibili­
ty afforded by the capitalist world-system to particulat'fractions of the upper and middle
classes of the semiperiphery to enjoy standards of wealth that compare very favorably
with those of their counterparts in the core. This possibility is not an illusion but a very
real privilege that its actual or potential beneficiaries have always tried to protect from
the antisystemic predispositions of the lower classes with whatever mix of coercion, cor­
ruption, fraud, and consent could be mobilized effectively for the purpose. However, the
mobilization of prosystemic-consent among the lower classes has always been problematic
on account of their mass poverty, which, as noted, has often resembled or even exceeded
40
The Semiperiphery in the Madem Warld-System
that of their counterparts in the periphery . As a consequence, the typical mode of rule
of prosystemic semiperipheral states up to the recent crisis of coercive rule has consisted
primarily of a mix of coercion, fraud, and corruption and has been substantively oligar­
chic even when it has taken a parliamentary form (see Mouzelis 1986) .
1 5 . On the geopolitical and historical specificities of the South Korean and Taiwanese
"miracles, " see Cumings (1984, 1989) . Besides these specificities, we should bear in mind
that the competitiveness of South Korea and Taiwan has been a significant factor in the ' 'real­
ization" crisis of the industrialization efforts of the organic members of the semiperiphery .
When these efforts were first undertaken in the 1960s and early 1970s, it was generally
expected that future exports to core markets would provide the hard currencies necessary
to pay back the debts incurred to step up industrialization . An important reason why these
expectations are not being realized is that the actual or prospective exports of the organic
members of the semiperiphery have been "crowded out" of core markets by the exports
of upwardly mobile former peripheral states, of which South Korea and Taiwan are the
two most prominent and successful examples. Organic semiperipheral states have thus been
stranded with obsolete industrial apparatuses and debts in hard currencies on top of them.
1 6 . Argentina has been the "leader" among the organic members of the prosystemic
semiperiphery in processes of proletarianization and industrialization. If the thesis that
for each new Spain there will be a few more Argentinas holds true, Peronism may be
more relevant than social democracy for the future of the semiperiphery .
17. This difference between South Africa and Israel, on the one side, and other
semiperipheral states, on the other, should not be exaggerated. Many prosystemic (and
some antisystemic) regimes of the semiperiphery have reJied heavily in the past, and still
do, on particular ethnic groups as the central base of their rule. Particularly significant
in this respect has been the success met by ethnicities of European extraction in monopolizing
the wealth and power of many Latin American states at the expense of large ethnic groups
of Amerindian and African extraction. The main difference between these states, on the
one side, and South Africa and Israel, on the other, is that discrimination in favor of or
against particular ethnic groups is sanctioned and enforced through market mechanisms
rather than through more visible instruments of rule.
1 8 . For an important case study of the rise of ethnonationalism from the ashes of an
authoritarian anti systemic regime (Yugoslavia), see Magas (1989) . The trend has begun
to be noticed with some preoccupation by core media. An editorial of theN ew York Times
(June 25, 1989, 26E), entitled "Perilous Tribalism in the Balkans," mentions ethnic tensions
and conflicts in Bulgaria, Romania, Poland, Yugoslavia, the USSR, Turkey , Northern
Ireland, and Spain and goes on to warn about what might lie ahead: "As superpower recedes,
nationalism rises. As the Soviet empire unravels, nationalist rivalries resurface, sometimes
angrily . . . . The unstable mix of national chauvinism and international hate has fueled
much conflict and can again. The cold war is over, but war can erupt just as surely from
tribal chaos as from superpower confrontation. "
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The Semiperiphery in the Modem World-System
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PA R T II
SEMIPERIPHERAL SUCCESS
STORIES?
3
COMMODITY CHAINS AND
FOOTWEAR EXPORTS IN THE
SEMIPERIPHERY
Gary Geref/i and Miguel Korzeniewicz
THE DECLINING SIGNIFICANCE OF INDUSTRIALIZATION
There have been striking changes in the structure and dynamics of the world­
economy during the past several decades. The international division of labor has
evolved beyond the classic pattern by which developing nations exported primary
commodities to the industrialized countries in exchange for manufactured goods.
Industrialization today is the result of an integrated system of global trade and
production. International trade has allowed nations to specialize between industry
and other sectors, between different branches of manufacturing, and increasing­
ly even between different stages of production within a single industry. This
cess, fueled by an explosion of new products and new technologies since
War II, has led to the emergence of a global manufacturing system in which
duction capacity is dispersed to an unprecedented number of developing as
as industrialized countries (Gereffi 1989a).
This process of tne globalization of production has had uneven COlnS{:qulence�
however. One set of countries that has done exceedingly well in the postwar
is that of the East Asian countries. Japan, and its regional neighbors South
Taiwan, Hong Kong, and Singapore not only registered record economic
rates during the prosperous 1960s when international trade and investment was
expanding worldwide but also managed to sustain their dynamism throughout the
1970s and 198 0s in the face of severe oil price hikes, a global recession, and
rising protectionism in their major export markets. This rapid economic growth,
furthermore, has been accompanied by a relatively egalitarian distribution of in­
come that in large part is a result of significant programs of agrarian reform under­
taken in Japan, South Korea, and Taiwan in the late 1940s and early 1950s.
The rapid growth of the East Asian economies stands in sharp contrast to the
experience of Latin America, which was the most industrialized region in the
46
Semi peripheral Success Stories?
developing world in the 1950s and 1960s. In the past decade, however, Latin
American nations have found it difficult to maintain their previous levels of
economic growth as they confront mountainous external debts, high rates of in­
flation, shortages of investment capital, and the growing social and economic
marginalization of large segments of their population. A particularly dramatic
indicator of this decline is the fact that the gross national product (GNP) per capita
of the four newly industrialized countries (NICs) in East Asia has increased sharply
during the 1980s, while the GNP per capita of the three Latin American NICs
(Brazil, Mexico, and Argentina) has stagnated and declined during these years
(see Gereffi and Wyman, 1990) .
The disparate social and economic consequences of industrial growth in the
East Asian and Latin American NICs over the past couple of decades underscore
the fact that "industrialization" and "development" can no longer be treated
as synonymous . Despite similarly high levels of industrialization in the NICs from
both regions, the East Asian nations have performed significantly better than their
Latin American counterparts in terms of standard indicators of development such
as GNP per capita, income distribution, literacy, health, and education (see World
Bank 1988, tables 1, 26, 30) .
Just as industrialization can not be equated with development, neither can it
be equated with proximity to core status in the world-system. By the late 1970s
the NICs not only caught up with but overtook the core countries in terms of
degree of industrialization (Arrighi and Drangel 1986, 55; World Bank 1988,
table 3) . This achievement, however, has not necessarily led to a substantive
change in the position of the NICs in the hierarchy of nations in the world­
economy . Core countries now accumulate wealth by concentrating on the ser­
vice sector and on the most productive, high-value-added segments of manufac­
turing. While industrialization may be a necessary condition for core status in
the world-system, it no longer is sufficient. Continued innovations by the most
developed nations make core status an ever-receding frontier.
The central objective of this chapter is to use the dynamism and heterogeneity
of the East Asian and Latin American NICs to address a key issue in world-system
theory : the diverse sources, paths, and consequences of mobility in the
semi periphery . To explore this topic, we focus on the footwear industry. As a
basic consumer good, footwear has been a central building block in the NICs'
construction of linkages to the world-economy. This study provides u s with new
insights about short-term patterns of semi peripheral mobility and their broader
significance for the changing structure of the world-economy .
Our discussion is organized as follows. First, we review the world-system
literature in order to identify key concepts and propositions about semiperipheral
mobility . Second, we use the notion of "commodity chains" to spatially map
the location and sequence of "core" and "peripheral" economic activities across
national boundaries f or the global footwear industry. Third, we describe the
emergence of South Korea , Taiwan, and Brazil as the world 's leading footwear
exporters in the late 1970s and the 1980s .
Commodity Chains and Footwear Exports
47
Fourth, we show how an analysis of the four segments of the commodity chain
footwear-raw material supply, production, exports, and retail marketing­
Wloes a broader understanding of the opportunities and constraints for mobili­
� "r..
the NICs within the footwear industry. Fifth, we identify two key elements
NICs ' strategy for export success: the establishment of specialized export
e
th
': . '
/
es
in the U.S. footwear market and industrial upgrading (i. e . , an increase
h
, nic
" .
in the unit value of footwear exports) within these niches to stay ahead of their
, � comp etitors. Sixth, we relate our findings about relative mobility in the
semiperiphery to the larger issue of the significance of industrialization for the
changing structure of the world-economy.
EM
� \ " )' THE SEMIPERIPHERY AND MOBILITY IN THE WORLD-SYST
The concept of the semiperiphery is simultaneously a crucial constituent unit
: , : , of world-system theory and one of its least explicated parts. It is a crucial con­
< cept because the countries grouped within this category encompass some of the
, most turbulent and dynamic areas of the world-economy. The term semiperiphery
_ ", .identifies countries undergoing extraordinary economic growth (South Korea,
Taiwan, Hong Kong), processes of political democratization (Argentina, Brazil,
Spain, Portugal) , control over key natural resources (Venezuela, Mexico, Saudi
Arabia) , and regionally critical ethnic conflicts (South Africa, Israel, Iran).
Many features of the semiperiphery remain unclear, however. Part of this am­
biguity is the consequence of the conventional tendency to treat the semiperiphery
as a negative or residual category (not core/not periphery). Other problems with
the concept of the semiperiphery include the sheer diversity of the countries it
'
encompasses, the tendency to generalize what is true of specific countries to the
, . conceptual aggregate, and a pattern of emphasizing similarities and disregarding
differences (Gereffi 1989b) .
The question of semi peripheral mobility is one of the least clearly
and understood topics in world-system theory. In an effort to shed more
on this phenomenon, we will address three sets of related issues: (1)
the structure of core-periphery relations through which mobility is defined?
How prevalent is sustained mobility between the core, semiperipheral,
peripheral zones in the world-economy? (3) What is the significance of the shortterm mobility that occurs via the competition among nations within a world-system
zone, such as the semiperiphery?
. "; l
·
·
·
The Structure of Core-Periphery Relations
The core-periphery dichotomy designates the unequal distribution of rewards
among the various economic activities in the single overarching division of labor
that defines and bounds the world-economy. All these activities are assumed to
be integrated in commodity chains, which are made up of nodes that combine
different factors of production (labor, capital, and entrepreneurship) . According
,
48
Semiperipheral Success Stories?
to Arrighi and Drangel (1986, 11-12). "Core activities are those that command
a large share of the total surplus produced within a commodity chain and peripheral
activities are those that command little or no such surplus. "
From a world-system perspective in which all states enclose within their boun­
daries both core and peripheral activities, "core states" contain predominantly
core activities and "peripheral states" encompass mainly peripheral economic
activities, while "semiperipheral states" are those that contain a more or less
even mix of core-peripheral activities within their boundaries. This balance of
core-peripheral economic activities is what gives semiperipheral states "the .chance
to resist peripheralization by exploiting their revenue advantage vis-a-vis peripheral
states and their cost advantage vis-a-vis core states" (Arrighi and Drangel 1986,
26-27) .
One of the major implications of this framework is that it allows us to disen­
tangle the concept of core-periphery relations from any particular kinds of pro­
ducts, industries, countries, or regions. Peripheral states do not just specialize
in traditional (resource-intensive and labor-intensive) industries, nor do core states
solely contain modem (capital-intensive and skill-intensive) industries. Every com­
modity chain encompasses some products and techniques that are core-like and
others that are periphery-like at any one time.
Mobility between Zones
Mobility from the semi periphery to the core or from the periphery to the
semi periphery , therefore, is not defined in terms of degree of industrialization,
but rather by a country's success in upgrading its mix of core-peripheral economic
activities. Here the role of the state can make a real difference. World-system
theory predicts that semiperipheral states will actively seek to upgrade their core­
peripheral mix by protecting the core activities within their boundaries and by
intensifying their competition for the core activities located outside of their boun­
daries. Paradoxically, however, this competition actually may be counterproduc­
tive to the extent that it turns core-like activities into peripheral ones with relatively
low levels of value added, thus keeping the mix of the semiperipheral zone more
or less even (Arrighi and Drangel 1986, 27).
Upward structural mobility or ascent is possible for individual semiperipheral
or peripheral states that pursue a particularly innovative combination of economic
policies and/or are favored by a world-economic conjuncture that gives them some
strong competitive advantage. These exceptions, though, tend to reinforce the
rule that mobility between the three separate zones in the world-economy is ex­
tremely difficult, in large part because the development frontier represented by
the most advanced activities of the core zone is continually receding.
The exceptional nature of lasting upward or downward mobility in the world­
system is dramatically illustrated by the findings of Arrighi and Drangel (1986,
44) , who attempted to measure mobility in the world-system over the past fifty
years. They found that 95 percent of the states that were classified in the boundaries
Commodity Chains and Footwear Exports
49
of one of the three world-system zones in 1938-195 0 were in the same zone in
1975 - 19 83 . Among the few exceptional cases of mobility were Japan and Italy,
which moved from the semiperiphery to the core, South Korea and Taiwan, which
moved from the periphery to the semipheriphery, and Ghana, which moved
downward from the semiperiphery to the periphery.
Competition and Mobility within Zones
Whereas studies like that by Arrighi and Drangel tend to give us a clearer picture
of the limited mobility that occurs in the long run between zones in the world­
system, they are not particularly useful in studying the patterns of intense com­
petition and short-term mobility that occur within a particular zone, such as the
semiperiphery. The latter kinds of issues have been of utmost importance in the
comparisons of the uneven development of the East Asian and Latin American
NICs during the past quarter of a century. Serious questions are being raised about
whether the distinct development strategies associated with the East Asian and
Latin American NICs will have a lasting impact on their industrial competitiveness,
social welfare, and potential to enter the core (see Gereffi and Wyman, 1990).
While we believe that these issues of short-term mobility and change are
important, they should be studied within a world-system context. The competi­
tion among the NICs, which all fall within the semiperipheral zone of the
world-economy, has become especially significant in the current era of global
manufacturing characterized by dramatically new patterns of international pro­
duction, subcontracting, and export specialization. Increasingly the export-oriented
NICs are battling one another, and core countries as well, for access to core­
country markets.
In the remainder of this chapter, we will explore some of the world-system
issues raised by a closer examination of the pattern of competition and
among the NICs in the global footwear industry. Although our focus on
Asian and Latin American NICs during the past twenty-five years will not
questions of long-run mobility and change in the world-system, it
provide us with insights about the strategies semiperipheral states are
to upgrade their mix of economic activities and also about some of the
tunities and constraints they face in the contemporary capitalist
COMMODITY CHAINS
In the global manufacturing system of today, production of a single good com­
monly spans several countries, with each nation performing hisks in which it has
a cost advantage. This is true for traditional manufactures, such as footwear and
garments, as well as for modem products, like automobiles and computers (Gereffi
1989a) . In order to analyze some of the implications of this worldwide division
of labor for specific sets of countries like the East Asian and Latin American
NICs, it is very helpful to utilize the concept of commodity chains.
50
Semiperipheral Success Stories?
A "commodity chain," as defined by Hopkins and Wallerstein
(1986 , 15 9),
refers t o " a network of labor and production processes whose end result i s a
finished commodity." One must follow two steps in building such a chain. First,
to delineate the anatomy of the chain, one typically starts with the final produc­
tion operation for a consumable good and moves sequentially backward until one
reaches the raw material inputs. The second step in constructing a commodity
chain involves identifying four properties for each operation or node in the chain
(1) the commodity flows to and from the node and those opera­
(2) the relations of production
(i.e., forms of the labor force) within the node; (3) the dominant organization
of production, including technology and the scale of the production unit; and (4)
the geographic loci of the operation in question (Hopkins and Wallerstein 1986,
160-63).
(except for labor):
tions that occur immediately prior to and after it;
The NICs are pivotal production sites i n the commodity chains that cut across
national boundaries and help define core-periphery relations in the world-system.
However, the complexity of commodity chains for the kinds of export-oriented
manufacturing industries in which the NICs are predominant today requires us
to extend the model proposed by Hopkins and Wallerstein in several ways.
First, the dynamic growth of the NICs has revolved around their success in
expanding their production and exports of a wide range of consumer products
destined mainly for core-country markets. This ll}eanS that it is extremely impor­
tant to include forward as well as backward linkages from the production stage
in the commodity chain. In the footwear industry a full commodity chain takes
us across the entire spectrum of activities in the world-economy: the agroextrac­
tive sector (cattle for leather and crude oil as the basis for plastic and synthetic
rubber inputs) , the industrial sector (footwear manufacturing) , and the service
sector (the activities associated with the export, marketing, and retailing of shoes).
Second, the extension of commodity chains beyond production to include the
flow of products to the final consumer market has important implications for our
ability to detect where economic surplus is concentrated in a global industry . In
the case of footwear, the comparative advantage of the NICs lies primarily in
footwear production because of the relatively low labor costs in these non core
countries . A corollary of this fact, however, is that the main source of economic
surplus within the footwear commodity chain generally is not at the production
stage but rather at the last stage of the chain, where service activities predominate
(i.e., the marketing and retailing of shoes). Product differentiation by means of
heavily advertised brand names (e.g. , Nike, Reebok, Florsheim) and the use of
diverse retail outlets allows core-country firms, rather than those in the semiperi­
phery, to capture the lion's share of economic rents in this industry.
Third, our focus on an export-oriented industry like footwear provides us with
a convenient baseline for measuring the relative success of countries as they com­
pete with one another for shares of the world market. We will concentrate on
footwear exports to the United States, which is the world's largest market for
manufactured consumer exports from the NICs (Keesing
1982). By mapping the
Commodity Chains and Footwear Exports
51
changing shares of the major footwear exporters in the U .S. market during the
past two decades, we get a remarkably clear picture of competition not only among
the East Asian and Latin American NICs, but also between these NICs and core­
country exporters like Japan and Italy.
Figure 3 . 1 outlines our depiction of a commodity chain for the global footwear
industry. It is composed of four maj or segments : (1) raw material supply; (2)
production; (3) exporting; and (4) marketing and retailing. In addition, we in­
clude the maj or footwear export niches in the U.S. market in order to illustrate
the specialized nature of the competition that occurs among the maj or footwear
exporters.
STEPPING INTO CORE MARKETS: FOOTWEAR EXPORTS
BY THE NICs
The footwear industry is a very instructive case for exploring semi peripheral
mobility in the contemporary world-economy. It has been a key component of
the NICs' extraordinary export success in recent years. Footwear was the top
export item from South Korea, Taiwan, and Brazil to the United States throughout
most of the 1980s . Although each of these countries has a very diversified pro­
file of manufactured exports, it is notable that footwear continues to be a leading
export commodity, along with more sophisticated products such as automobiles,
computers, and color television sets.
The United States is the largest footwear market in the world. During the past
two decades imports have steadily displaced local production within the American
market. In 1967 imports accounted for 18 percent of all nonrubber footwear con­
sumed in the United States; ten years later, in 1977, one out of every two pairs
of shoes purchased in the United States was imported; and by 198 7, 80
of all shoes bought in the United States were imported (U.S. Department of
merce, 1989; Mutti 1980).
The pattern of footwear exports to the American market shows very clear
This can be seen in table 3 . 1 , which designates with boxes the years in
the maj or footwear exporters to the United States had an overall market
of 10 percent or higher. Japan, Spain, and Italy were the main exporters to
American market during the late 1960s and early 1970s. In 1971 these three m:l",""
tions accounted for two-thirds of the $760 million in footwear that was
to the United States.
In 1972 the East Asian and Latin American NICs began to play an increasingly
prominent role as U.S. footwear suppliers. First Taiwan, then South Korea in
the mid-1 970s, and finally Brazil in the early 1980s began to make major inroads
into the American footwear market. By 1987 these three NICs accounted for two­
thirds oftotal American footwear imports, thus reversing the dominance establish­
ed sixteen years earlier by Japan, Italy, and Spain. The stakes were also much
higher, however, since the U.S. market for footwear imports in 1987 was valued
at over $7.6 billion, an increase of more than tenfold since 1971 (see table 3 . 1 :
"
',i · .
V,
N
3.1
I
m
' 'w';o "
Figure
-
chem icals
.
l
Pelro-
(PYC)
Symhetlc
-
(S BR)
Rubber
Production
FInootegtwratedr
Produclion Network
S uPVly
Parts
Footwear
fr
"
;
H "�
Raw Material Supply Network
--
I H
011
'",0'
-
Footwear Commodity Chain
I
I
I
I
Small
amI
Export
Network
Wholesalers
international
Importers
Tlaocrs
Exporl
Marketi n g Network
Stores
Shoe
Specially
Stmes
DeparUllent
"-
�
r-
Niches
E x port
Shoe s
Plastic
Shoe s
Leather
Men's
Shoe s
Leather
Women's
Shoes
IIthletie
I
�
Table 3 . 1
91 5,014
1 ,079 , 1 66
1 , 1 53,391
1 972
1 973
1 ,805 ,824
2,584 ,979
2,859,446
3 ,0 1 9 ,374
1 97 7
1978
1 979
J 98 1
6, ! 03 ,679c
6 ,472,89 1
7 ,654 ,055c
1985
J 986
1987
0
0
I
.b
1
1
1
1
1
1
5
6
II
13
5
6
7
7
6
7
32
II
13
13
23
32
14
23
15
19
31
15
17
13
19
29
16
21
22
30
27
18
17
18
!O
9
17
27
17
30
19
7
7
8
13
21
28
10
7
7
8
9
15
16
16
!O
8
8
23
24
21
16
15
I
3
4
9
2
2
2
I
2
2
5
2
2
I
I
I
I
I
2
6
9
0
2
4
5
I
I
22
20
20
26
28
34
37
38
2
0
3
4
3
Hong Kong
3
Brazil
K o re a
Taiwan
11
12
14
18
19
17
42
41
15
13
41
12
39
Ital y
851 , 1967-1987)
t·
C . I .F. value.
b Data not available.
a Customs value except where noted.
United S lates Department of Comm.:rce. V a ri ou s years; United S ta tes Department of Comll1erce. 1 987.
5 ,034 ,436
1 984
SOl/rees:
3 , 4 3 7,455
4 ,009 ,54 1
1 982
1983
1 9 RO 2,807 ,937
1 ,724 ,547
1 976
1975
2
7 5 8 ,095
1971
I
1
629,402
1 9 70
1 ,3 0 1 ,404
17
48 8 , 1 72
1 969
1 974
18
388, 1 3 5
9
263,220
1 968
Spain
1 967
Japan
of uol lars);!
Year
(1lJollsnnds
Total
Market Share o f U . S . Footwear Imports from Selected Countries (SITC
2
1
I
.b
0
0
1
0
0
0
0
0
0
P.R.C.
I
.b
2
2
2
2
2
2
I
2
2
I
I
I
I
I
I
I
Mexi c o
0
0
0
0
0
0
0
0
0
1
1
0
0
2
2
0
0
0
0
0
0
Argentina
54
Semiperipheral Success Stories?
SITC signifies Standard International Trade Classification and C.I.F. means cost,
insurance and freight).
This dramatic increase in the role of the East Asian and Latin American NICs
in the American footwear market during the late 1970s and 1980s, a period when
they displaced their Japanese and European competitors, is evidence of substan­
tial semiperipheral mobility in a dynamic global industry. In the following sec­
tions of this chapter, we try to identify some salient aspects of the successful
strategies pursued by footwear exporters in the NICs. To put this in an appropriate
context, however, we first need to outline several distinctive features that affect
mobility in the footwear industry.
Mobility within the world-system is tied to a country's ability to upgrade its
mix of core-peripheral economic activities. In order to advance in the world­
economy, countries typically strive to play a major role in those segments of com­
modity chains with the highest ratio of core to peripheral activities-that is, where
the economic surplus is greatest.
The location of economic surplus in the footwear commodity chain is condi­
tioned by four factors: labor, core and peripheral capital, the state, and economic
organizations. First, footwear production is a relatively labor-intensive activity.
Labor costs thus tend to drive the competitive strategies of footwear exporters
and are a major factor in explaining geographical shifts in the industry. Relative­
ly inexpensive labor in the NICs is the key reason these nations acquired a signifi­
cant cost advantage vis-a-vis core rivals like Japan and Italy. Since labor costs
in the NICs (especially in East Asia) have been rising quite rapidly, however,
these semiperipheral nations have had to select export niches that allow them to
economize on labor and attain higher levels of value added in the industry. This
offers some measure of protection from cheap-labor footwear exporters like those
in China, Mexico, and Thailand.
Second, the footwear industry forces us to take a new look at the roles of core
and peripheral capital in contemporary consumer-goods export industries in the
world-economy. The footwear industry is highly competitive at the international
level, with little direct involvement by multinational corporations in the produc­
tion and exporting of footwear. Local private capital, usually made up of small
and medium-sized firms, is the principal actor in the footwear industry in the NICs.
Core capital does play a significant role, however, in the distribution and
marketing stage of the footwear commodity chain. Unlike capital- and technology­
intensive industries where multinational corporations frequently set up facilities
for overseas production, core capital shapes the growth and evolution of the
footwear industry in a more indirect way, mainly as a subcontractor and buyer
of footwear made to the specifications of shoe companies and retail outlets in
the United States.
The available information suggests that the most profitable segment of the
footwear commodity chain is the distribution and marketing of shoes rather than
footwear production. The distributors' margins in the core countries are very large.
In the United States these margins averaged 50 percent in the mid-1970s but were
Commodity Chains and Footwear Exports
55
closer to 60 percent for imported goods. In Japan "the price [of footwear] ap­
proximately doubles between the departure of the goods from the factory and
their purchase by the consumer. The successive increases appear to be as follows:
factory 55 percent, wholesaler 70 percent, and retailer 100 percent" (OECD 1 976,
3 9). A similar situation seems to prevail in Europe, where distribution costs amount
to at least 1 00 percent of the manufacturers' price. The economic surplus that
accrues to footwear distributors and retailers in core countries undoubtedly is
much higher when production is done overseas rather than domestically.
Third, the state so far has maintained a relatively low profile in the footwear
industry in both the semiperiphery and the core, contrary to the expectation in
world-system theory that semiperipheral states will play a leading role in upgrading
the mix of core-peripheral economic activities. Within the semiperiphery the state
has no involvement in footwear production at all (in contrast to the prominence
of state enterprises in heavy or strategic industries such as steel, oil, petrochemi­
cals, and mining). The main impact of the state on manufactured exports from
the NICs is in the area of exchange-rate policies, export-promotion schemes, and
protection for domestic producers. State policies in a core country like the United
States are primarily important in terms of selectively restrictive trade measures
such as tariffs, quotas, and other nontariff barriers that could impede footwear
imports.
Until recently, state policies in both the semiperiphery and the core have fostered
a rapid expansion of footwear exports from the NICs. There is a growing percep­
tion, however, that the more or less open trading environment that has been sup­
ported by core states in the postwar world-economy will become more closed.
In particular, the favorable access to the U.S. consumer market on the part of
East Asian manufacturers may be reduced as the geopolitical map of Asia is
redrawn. An even more drastic scenario that has been mentioned is the _ � " " ;·L..l �
emergence of regional trading blocs (Garten 1 989). This would
alter the role of the NICs in the world-economy and transform the structure
export-oriented industries like footwear.
Finally, the footwear industry demonstrates convincingly the importance of
ing at economic organizations and other institutions within the NICs to
their individual patterns for export success. Footwear firms in South
Taiwan, and Brazil are quite different from one another in organizational terms ,
reflecting their distinct national industrial structures and social contexts. These
contrasts help us understand why these three nations have targeted diverse footwear
export niches in the U.S. market and why their future strategies in the industry
are likely to vary.
THE FOOTWEAR INDUSTRY: A COMMODITY-CHAIN
ANALYSIS
Our analysis of the footwear industry will be organized around the four main
segments of a commodity chain outlined in figure 3. 1 : raw material supply,
56
Semiperipheral Success Stories?
production, exporting, and marketing. A crucial feature of this commodity chain
is that each of the segments encompasses a variety of differences in terms of the
geographical locus of operations, the forms of the labor force, the technology
used, and the scale and type of production unit. These characteristics all affect
the distribution of economic surplus throughout the commodity chain, which is
a key factor in determining the degree of mobility of semiperipheral states in the
footwear industry.
Raw Material Supply Networks
There are two fundamentally different raw materials used in the production
of footwear: livestock and crude oil. The f ormer is converted into leather and
other animal hides, while the petrochemicals derived from crude oil are used to
make plastics and synthetic rubber for shoes.
Leather and petrochemicals are linked to distinct regional clusters of footwear
exporters. Latin American and European producers have specialized in leather
shoes and thus rely on tanned leather as the key input, while East Asian pro­
ducers have specialized in footwear products that require synthetic materials.
The flows of raw materials into footwear production have always tended to
be problematic and unstable. There are at least four different sources of instabili­
ty : price, quantity, quality, and geographical origin.
The footwear industry has to cope with broad fluctuations in the price of its
raw material inputs because footwear accounts for a very small percentage of
the total demand for crude oil and cattle. The major sources of demand for oil
are energy consumption and a wide range of finished consumer goods based on
petrochemical inputs. The bulk of synthetic rubber output, for example, is used
to manufacture automobile tires, with only a fraction going to shoes. Similarly,
rawhides account f or only about
5 percent of the total sale value of bovines; the
demand for cattle is mainly determined by patterns of beef consumption, which
depend on factors such as a country's caloric intake, income levels, and volume
of beef exports .
The primary materials used for footwear are subject to fluctuations i n the quantity
of supply. Oil is a nonrenewable resource whose supply has been extremely
vulnerable to political changes and control by economic cartels. The supply of
rawhides and skins is dependent on so-called " cattle cycles " : Over a relatively
long period of time, when the price of beef drops below a certain level, the number
of bovine kills increases and the stocks are reduced. This leads to a higher price
for beef and the recomposition of stocks until the cycle commences again.
While the quality of petrochemicals is generally uniform, differences in the
texture, thickness, and color patterns in leather are a potential source of difficulties
for footwear producers. The quality of rawhides and tanned leather is affected
by a variety of factors: cattle-slaughtering techniques, climatic change, pests, and
other environmental conditions. Footwear producers, and particularly those who
export to world markets, need to find means to insure not only an adequate supply
Commodity Chains and Footwear Exports
57
of leather a t predictable prices but also consistent quality, a condition that is dif­
ficult to establish with precision in leather transactions. Many Argentine producers,
for example, argue that Argentine-made shoes lack international competitiveness
because the best grades of Argentine-produced leather are shipped abroad
(Korzeniewicz, 1 990) .
In the last two decades there have been important shifts in the geographical
location of rawhide and tanned-leather production in the world-economy. Non­
core countries have sharply reduced exports of unprocessed rawhides and skins,
while core countries have increased them. Argentina, for example, exported 65
percent of its rawhides in 1 970, but only 12 percent in 1 980 and none in 1 985.
Brazil exported 20 percent of its total production in 1 970, but none in 1 98 0. Con­
versely, core countries have increased their rawhide exports. The United States
exported 42 percent of its production in 1 970 and 59 percent in 1 980 (FAD 1 983,
1 5-24, 55-69). The trend for tanned leather is in the opposite direction: produc­
tion and exports have rapidly shifted in location from core to developing coun­
tries. In Latin America alone, exports of tanned leather increased from an annual
average of US$9.6 million in 1 961- 1 965 to $400 million in 1 980 (FAD 1 98 3 ,
122-23) .
The fluctuations in the price, quantity, quality, and geographic origin of the
raw materials used in footwear production create an organizational imperative
for the shoe manufacturers to create stable and effective networks for the supply
of raw materials. There are at least two options available to manufacturers. The
first option is vertical integration. In Brazil the largest footwear manufacturers
have purchased local tanneries in order to control the flow of rawhides and leather.
Vertical integration of footwear producers with petrochemical firms is much less
likely, given the scales involved. The second option is the establishment of stable
procurement networks. The stability of these networks may rest upon personal
ties, common ethnic backgrounds, and a history of previous common uUW"'¥",
tions. Footwear producers in the Vale dos Sinos area of southern Brazil,
ample, rely upon ties based on common Germanic descent (Korzeniewicz,
Production Networks
This section will focus on the organizational characteristics and the
of production in the three most important semi peripheral footwear exporters .
the U.S. market in the past decade: Taiwan, South Korea, and Brazil. Size of
firms and labor patterns are the key variables that define production networks.
In terms of size, the Taiwanese footwear industry is composed mainly of small
firms, the Brazilian industry is made up of a combination of small and medium­
sized firms, and the Korean industry is dominated by relatively large firms. In
Taiwan the number of establishments with 500 workers or more comprised about
20 percent of the value added in the footwear sector in 1 976, while in South Korea
establishments of this size provided 90 percent of all value added in the footwear
industry (Levy 1 988). In Brazil there is a mix of both small and medium-sized
58
Semiperipheral Success Stories?
firms. In a survey of 112 Brazilian firms, 75.9 percent employed between 11
and 500 employees (qualifying as small and medium), and 27 firms, or about
25 percent of the total, were classified as large (500 employees or more) (Fadigas
de Almeida 1983).
Footwear production and exports hinge upon the availability of cheap labor.
There is a sharp contrast between labor costs in the footwear industries of core
and semi peripheral countries. In 1987 the average hourly wage in the U.S.
footwear industry was just over $6.00, compared with about $4.50 in Italy, but
additional benefits raised the average salary for footwear workers in both coun­
tries to around $8.00 an hour. Among serniperipheral countries, Hong Kong's
average hourly wage was about $2.00 (U.S.) in 198 7, compared to $1.20 in
Taiwan and $0.90 in South Korea. Average hourly wages in Brazil, Mexico, and
Argentina were about $ 0.65 (BancomextiSecofi 1988, 69; ILO 1988, 810-71 ).
The evolution 0 f labor costs in the semiperiphery between the mid-1970s and
the mid-1980s shows a very interesting trend. The relative cost advantage of Latin
American and East Asian countries was reversed during this period. In 1976 labor
costs in the footwear industries of Brazil and Mexico were about one-fifth of those
in the United States, while labor costs in South Korea and Taiwan were about
one-tenth of the U.S. average. By 198 7 labor costs in Brazil and Mexico had
declined to about one-tenth of U.S. costs, while the salaries of footwear workers
in South Korea and Taiwan rose to about one-fifth of the U.S. level (Bancomextl
Secofi 1988, 69). These figures suggest that low wages are a necessary but not
sufficient condition for footwear exports, given the relatively poor perf ormance
by the three main Latin American countries during the 1980s (see table 3.1).
Wages i n the footwear industry are considerably lower than wages in other
manufacturing sectors. In South Korea, for example, footwear wages were only
about one-half of the average wage for all industrial sectors combined (U.S.
Department of Labor 1986, 4).
The f ootwear sector extensively employs f emale workers whose wages and
working conditions are inferior to those of their male counterparts. In Brazil the
use of f emale labor is widespread in the export-intensive regions in the from of
semiclandestine " footwear ateliers, " where workers concentrate on labor-intensive
activities such as cutting and light stitching. In South Korea it is estimated that
up to 62 percent of footwear workers are female. They earn less than male footwear
workers (the wage differential of female to male earnings in South Korea was
estimated at 43.4 percent in 1972), and they are typically less protected by laws
that regulate extensive overtime and night work (Chang 1988; 16-2 1; U.S. Depart­
ment of Labor 1986, 4-12). As a result of labor organizing, the wage differential
by gender has become less dramatic, but it still is significant. In 1985 female
footwear workers in South Korea earned $233 per month, compared to $2 73 for
their male counterparts. In Hong Kong male footwear workers earned about $384
per month , compared to $299 for f emale workers (ILO 1988, 795).
In short, the organization of production networks has crucial consequences for
export competitiveness and for semiperipheral mobility. Our analysis of firm size,
Commodity Chains and Footwear Exports
59
location, and the relations of production in the footwear sector not only helps
us exp lain why some semiperipheral countries have been successful until now,
but it also allows us to identify opportunities and constraints that semiperipheral
countries may confront in the future.
The size of firms, in particular, seems to have important consequences for the
capturing and consolidation of export niches. The Taiwanese producers' greater
organizational flexibility permits them to be responsive to design and fashion
changes in core-country consumer markets and thus to respond more rapidly to
shifting consumer preferences. This may account for the relative success of the
Taiwanese footwear industry in diversifying its range of footwear products.
The Korean producers' concentrated industrial structure has been enormously
helpful in the mass production of athletic footwear that followed the rapid boom
in the demand for jogging shoes and the entry of Nike into South Korea in 1 976
and Reebok in the early 1 980s (Levy 1 988, 9-1 0). However, the Korean footwear
sector as a whole has remained dependent on this one product (athletic footwear) ,
which has shown cyclical patterns o f growth. It is reasonable to assume that the
relative concentration and productive rigidity of Korean footwear producers may
have prevented South Korea from breaking effectively and successfully into other
segments of the world footwear market.
Based on this clearly contrasting pair of productive structures, one would tend
to predict a more highly diversified Brazilian industry since, similar to Taiwan,
it is dominated by small and medium-sized firms and by a more flexible produc­
tive structure. But Brazil has not successfully diversified. Perhaps part of the ex­
planation rests in the currency instability that has affected Brazil since 1 984.
Export Networks
Export networks contain the different forms of export intermediation
producers in the manufacturing location and the distribution networks in
sumer markets. They describe the specific organizational forms that
porting firms and countries to capture segments of the world footwear
There are two main features of export networks that help explain the U�'"W�,��
South Korea, Taiwan, and Brazil in becoming major exporters to the U.S. m,rrket>
First, the initial impulse for the creation o f export networks was to a large
a consequence of increasing demand in the core countries. Second, each country
has adopted a strategy of export intermediation that best reflects its industrial
structure and the composition of the product niche in which it specializes.
The initial impetus for footwear exports from East Asia in the mid-1 960s
originated in the decision of Mitsubishi (the leading Japanese trading company
dealing in footwear) to relocate the manufacture of plastic sandals for the U.S.
market from Kobe, Japan, to Taiwan and the production of all-rubber shoes to
South Korea, given a long-standing Korean experience in manufacturing rubber
footwear dating back to the Japanese occupation. This background and experience
was crucial in the evolution of South Korean manufacturers toward the production
60
Semiperipheral Success Stories?
of vulcanized rubber and "cold-process" athletic shoes that was to become their
successful niche in the 1980s (Levy 1988, 10). The main f actor behind the ex­
pansion of the Brazilian footwear export industry was the increasing demand for
leather shoes in the U. S. market in the early 1970s and the inability of Italy and
Spain to fully meet that additional demand (Fadigas de Almeida 1983).
The shape of export networks in the NICs is closely associated with their in­
dustrial structures and patterns of product specialization. The Taiwanese and
Brazilian footwear industries, composed mostly of small and medium-sized sup­
pliers, have relied extensively on small export traders. In Taiwan the number
of export traders grew from a total of 2, 777 in 1973 to 20, 597 in 1984. In that
span of time the average value of industrial exports per trader remained virtually
constant at US$1, 400, 000 (Levy 1988, 8-9). Small export traders also are very
common in Brazil (Fadigas de Almeida 1983).
Small export traders are typically individuals or small firms that operate as
a linkage between the manufacturers in the producing countries and the retailers
in the destination markets. They channel demand for export orders to local pro­
ducers, oversee the subdivision and subcontracting of large orders among smaller
suppliers, perform quality control on outgoing orders, and attempt to anticipate
future trends in fashion and marketing in the most important core markets.
The scope of these functions changes from country to country and also within
the footwear industry in each country, but small trading agents retain two basic
purposes. First, they help isolate individual and small footwear producers from
the potentially disruptive demands of international markets and international com­
petition by parceling big orders among many suppliers, thereby allowing the size
of firms to remain small. Second, the flexible and dynamic relationship between
trading agents and small producers has permitted a greater adaptation to fashion
and marketing changes in core footwear markets.
The South Korean footwear industry has relied on a far more concentrated struc­
ture of export networks. The number of export traders in South Korea has grown
more slowly than in Taiwan, from 1,200 in 1973 to 5, 300 in 1984. In that span
of time the average value of industrial exports per trader rose from US$2, 400,OOO
to US$5,200,000 (Levy 1988, 8-9).
The relatively small number of traders reflects three features that are particular
to South Korea: (1) the firm size of the Korean footwear industry is itself more
concentrated; (2) large and diversified general trading companies (modeled on
Japan's giant trading companies, or sogo-shosha) are very active in South Korea's
trade in manufactures; and (3) South Korea has specialized in the production of
large volumes of brand-name athletic footwear, such as Nike and Reebok, which
have a more direct route from production to marketing.
Distribution and Marketing Networks
The specialized footwear products of South Korea, Taiwan, and Brazil reach
the final consumers through distinct marketing channels, which are the end point
Commodity Chains and Footwear Exports
61
of our footwear commodity chain. There are two main components to this
marketing network: distributors and retailers.
In the u . s . market footwear imports are distributed by two major kinds of
organizations: generic distributors/wholesalers and brand-specific distributors such
as Nike or Gucci. From these two major distribution points, shoes reach the
U . S. consumer through department stores and specialty shoe stores (Keesing,
1 982).
Well-known upscale department stores, such as Saks Fifth Avenue, Bloom­
ingdale' s and Harrods, sell shoes to the upper segment of the American footwear
market, typically Italian leather shoes. Chain discount stores such as J . C. Pen­
ney and K Mart, sell a large number of relatively inexpensive plastic and rubber
footwear, manufactured mostly in Taiwan, and the low-end leather shoes that
Brazilian producers make. Small specialty shoe stores generally sell either ex­
pensive, top-of-the-line shoes (such as the Gucci brand) or athletic footwear made
in Taiwan and South Korea.
EXPORT NICHES AND INDUSTRIAL UPGRADING IN THE
FOOTWEAR INDUSTRY
Each of the four segments of the footwear commodity chain that we described
in the preceding section is a key component in the process by which semiperipheral
states establish export linkages to global markets. The final outcome of this se­
quence is the creation and consolidation of export niches. Export niches are
segments or shares of world and national markets captured by firms of a single
nationality within an industrial sector.
The concept of export niches is a crucial analytical node in understanding the
trajectories of semiperipheral mobility. It is closely tied to the notion of a com­
modity chain because it is the consequence of the specific configuration of
chain. It also is related to the broader outcomes of market penetration.
niches help explain how South Korea, Taiwan, and Brazil captured large
of the American footwear market by specializing in products that were well
to their raw material supply networks and domestic industrial
Export Niches
The total value and product shares of footwear exports to the United States
by the three NICs, Italy, and the world as a whole between 1 970 and 1 987 are
depicted in table 3.2. One of the most interesting phenomena is the shift toward
athletic footwear as a growing share in overall U.S . footwear imports. The sub­
category of plastic and rubber shoes increased steadily, but not as dramatically
as athletic footwear, which rose from 3 percent in 1 970 to 2 1 percent in 1 987.
From a $20 million market in 1 970, athletic footwear evolved into a $ 1 . 5 billion
industry seventeen years later. The shares of leather footwear, for both men and
women, have declined significantly since 1 970.
Semi peripheral Success Stories?
62
Table 3.2
Composition of Footwear Exports to the United States, Selected Countries,
Sch. A Code
Description
Total Exports
85 1 0 1 80/90
CUSS thousands)
P1astic/Rubber
8 5 1 0242
Athletic
8 5 1 0243
Leather, Men
1970-1987
8 5 1 0246/48/52
Leather, Women
World
1 970
1975
1980
1985
1987
3
9
13
21
15
15
20
19
22
629,402
1 ,3 0 1,404
2.969,982
6, 1 03,679
7,236,496
21
17
18
10
11
12
37
34
23
33
29
1
12
1
I
Republic of Korea
1 970
1975
1980
1985
1 987
7
1
1
4
12,965
1 29,163
472,379
1 , 1 70,426
1 ,750,700
9
3
6
8
I
3
3
o
4
1
4
o
I
2
Taiwan
1970
1975
1980
1985
1 987
55
39,974
206,2 1 1
53
50
50
50
834,390
1 ,886.789
2,4 1 1 ,4 8 1
o
4
7
21
17
6
6
II
46
21
17
13
14
41
23
61
Brazil
1 970
1 975
1980
1 985
1987
o
o
o
o
o
6,535
1 2 1 ,528
244,244
9 3 5 , 1 05
920,262
o
o
o
o
o
75
76
85
83
Italy
1 970
1 975
1980
1985
1987
Source: U.S.
4
14
267,445
336,666
520,560
18
9
9
928,858
852,373
o
2
2
2
2
19
17
17
19
54
53
68
64
Department of Commerce. Various years.
The boxes in table 3.2 highlight the specialized niches for each of the four leading
footwear exporters to the United States. South Korea has specialized in athletic
footwear, which comprised close to two-thirds of all Korean footwear exports
to the American market by
1985. Although Korean footwear producers have made
inroads into other types of footwear, such as leather shoes for men, these attempts
to diversify remain modest.
A consistent one-half of Taiwan's footwear exports are concentrated in the sub­
category of plastic and rubber shoes. In contrast to South Korea, however, Taiwan
Commodity Chains and Footwear Exports
63
has shown a steady trend toward diversification into other subcategories of
footwear products. It has made successful inroads into the athletic footwear seg­
ment that South Korea dominates. Between 1 980 and 1 985 Taiwan tripled its ex­
ports of athletic footwear to the United States. Taiwan' s shoe producers also are
moving into the women's leather footwear segment that Brazil has focused on.
Brazil and Italy show clear trends toward product concentration in their footwear
exports to the American market. About 85 percent of all Brazilian footwear ex­
ports are in the women's leather category, and over two-thirds of Italian exports
fall within this same niche (which is the largest subcategory of footwear products
within the Standard International Trade Classification [SITC] 851 product code).
In terms of their shares of the U.S. market, both Italian and Brazilian producers
are more concentrated in a single type of product that their East Asian counterparts.
Industrial Upgrading
An important dimension of export niches is the unit value of footwear exports
in these product markets. The size of a niche in terms of market share does not
necessarily tell us about the mix of core-peripheral activities or economic surplus
that it represents. This is best reflected in trends and comparisons of the average
price for different kinds of shoe imports.
The unit value of American footwear imports is derived by dividing the total
value of footwear imports by the quantity of shoes imported (usually expressed
as pairs of shoes). This was done for each of the four main subcategories of
footwear imports into the United States at five-year intervals from 1 970 to 1 985,
plus 1 987. To come u p with a unit-value measure for each of the NICs and Italy
that reflects the major footwear subcategories presented in table 3.2, the average
unit value for each of the four market niches was weighted by the share of the
niche in total U. S. footwear imports. The results of this calculation are Uv"'�""l<i,,; ,;" H
in figure 3.2 and constitute an " industrial-upgrading index" for exporters
American footwear market.
The figure shows that all four countries have upgraded the unit value
footwear exports, even when one controls for the growth in the average unit
of all footwear exported into the United States in these years. Between
1 987 Italy upgraded the unit value of its footwear mix well above the
average. South Korea and Brazil remained close to the world average,
unit value of Taiwan' s footwear exports was below the world average. Italy
South Korea both doubled the average unit value of their footwear exports during this period, and Brazil went up by about 25 percent, while the unit value
of Taiwan' s exports rose by about 450 percent, although its base value in 1 970
was quite low.
An even more telling pattern emerges if we differentiate the 1 970- 1 987 inter­
val into two discrete periods: the first half of the 1 970s and the 1 980s. The trend
lines show that in the first half of the 1 970s, all four countries upgraded their
activities at a somewhat similar rate despite the different points of takeoff. In
64
Semiperipheral Success Stories?
Figure
3.2
Index of Industrial Upgrading for Footwear, Selected Countries
250
200
8
.."
II
-c:
0
:::::
1 50
1 00
... . ...
. _
. -.
.-
0
' -.­
.-'
.
-'
_. _. -
...
.
0
'·'· ' ·' · ' · '·'· ' ·
0
,.
, '
'­
-/Itt - - _ _ _ _
. 0 · ·· ······ ·· ··· ·······0 ·· ·-·
· · ·
·· · ·
·
50
. ."".
··· ·· ·· · · ·
·
· ·· · · ·
·· -··.
.......... ..•....
·
�
. .. ... 0
···-.
--�
-- �
. .�··�
··�
•· �
0. �
_�
• �
- -.
. 0•
--�
r�
�
j-O,
.. . . .-,
.....�
1 970
1 9 85
1 980
1 9 75
_
_-------
-
___
World
-'.
.
.
-
<'1
Taiwan
S. Korea
•
Italy
Brazil
.
.
9'" "
-0
- 0- '.'
•
........-6-0 .......
• •
.
Source: U.S . Department of Commerce. Various Y=s.
.
the 1980s, however, the patterns diverge sharply: while the upgrading trends of
Taiwan and Italy
_ keep growing at a steady rate, the upgrading trajectories of Brazil
and South Korea are relatively stagnant. In short, ·the "industrial-upgrading in­
dex" shows us that all four countries upgraded their manufacturing activities be­
tween 1970 and 1987, but South Korea and Brazil reached a peak around 1980,
while Taiwan and Italy grew consistently throughout the 1980s.
Three Paths to the Consolidation of Export Niches
The empirical evidence presented here helps piece together three interesting
"stories" about global footwear production in the 1970s and 1980s. Three
semiperipheral countries-South Korea, Taiwan, and Brazil-came to dominate
substantial niches of the U.S. market, whereas the other East Asian and Latin
American NICs (Hong Kong, Singapore, Argentina, and Mexico) did not.
However, the three countries that succeeded in capturing important segments of
the U.S. market did so in different ways.
South Korean producers captured an extraordinarily dynamic market for athletic
footwear at the time when the fitness boom hit a peak in the United States. South
Korean producers showed an amazing ability to dominate a niche that in a few
years grew to comprise about 20 percent of the overall U.S. footwear import
market. On the other hand, South Korea has not diversified to a great extent into
exporting other footwear products. South Korea upgraded the unit value of its
footwear production mix throughout the 1970s, but there was no further increase
in the average value of Korean footwear exports in the 1980s.
Taiwanese producers captured a rapidly growing market that was already in
place, that of plastic and rubber shoes, and competed most directly with American
Commodity Chains and Footwear Exports
65
;;"..I",..,pr� .
In contrast to South Korea' s shoemakers, Taiwanese firms have been
to diversify their exports into other footwear sectors (particularly athletic
and to upgrade the unit value of their overall footwear exports.
, Brazilian producers showed a capacity to capture a very large niche
exports of women's leather footwear, in effect cutting Italy's share of
product market by more than one-half between 1 970 and 1 987. This is an
ve record, even if part of this outcome reflects Brazilian producers fill­
niche s that the Italian producers abandoned by moving to higher-value shoes.
a pattern resembling that of the Korean producers, Brazilian firms upgraded
unit value from 1 970 to 1 980, but the " upgrading index" remained stag­
throughout the 1 980s.
USIONS AND IMPLICATIONS
What conclusions can we derive about semiperipheral mobility in the world­
study of the international footwear industry? Has the export suc­
of South Korea, Taiwan, and Brazil in footwear during the past ten years
these semiperipheral countries any closer to the core? Or has it merely
to consolidate their position within the semiperiphery?
To answer these questions, we need to return to the notion of " core" and
'peripheral" economic activities within the world-economy. The footwear in­
is not homogeneous. Like all industries, footwear is stratified according
the economic value added created by different sets of producers. Italy has suc­
in capturing the upper end of the footwear market in the United States
an emphasis on expensive, fashionable leather shoes. South Korea, Taiwan,
and Brazil are in the middle stratum of the footwear industry in terms of value
added, with each country carving out distinctive export niches in the U.S. market
through subcontracting arrangements with well-I.Iown footwear firms.
countries like China, India, and Thailand are becoming major exporters of
pensive shoes at the lower end of the market. Thus the stratification of
footwear exporters within the American market replicates the core, setIDI)eripli¢
and peripheral position of these countries in the world-economy.
Our focus on footwear commodity chains provides us with an aU'UH<V<W<
for understanding the dynamics of this international industry. The footwear
dustry actually encompasses the full spectrum of economic activities from
agroextractive sector (cattle and crude oil as raw materials) to the industrial sec­
tor (footwear production) and the service sector (the exporting, marketing, and
retailing of shoes). The amount of economic surplus in the industry varies by
sector. The " core" activities with the highest economic surplus overall are at
the marketing and retail end of the commodity chain, where American and Euro­
pean shoe companies and retailers are able to reap the profits generated by footwear
brand names, control over retail chains of department stores and specialized shoe
outlets, and the steady growth in U. S. consumer demand for a wide range of
shoes. The ' 'peripheral" economic activities, on the other hand, are concentrated
, 'S." �UOIH from the
66
Semiperipheral Success Stories?
at earlier stages of the commodity chain, including footwear production in develop­
ing nations.
The bulk of the profits in the footwear industry thus is concentrated in the core
countries. While the NICs have been extraordinarily successful in footwear pro­
duction and exporting, their share of the total economic surplus in footwear has
not grown proportionately. This supports Arrighi and Drangel's view that in­
dustrialization itself has become peripheralized.
This conclusion does not mean that there is no mobility by semiperipheral coun­
tries, nor that this mobility is unimportant. Our "industrial-upgrading index"
showed that Italy, Brazil, South Korea, and Taiwan all made substantial gains
in the unit value added of their footwear exports since 1970, although only Italy
and Taiwan were able to sustain these increases throughout the 1980s. While the
relative ranking of these four countries remained unchanged in value-added terms
during this period, and in fact the gap between Italy and the other three nations
widened considerably, each of the NICs has surpassed Italy in its share of the
U.S. footwear market. The mobility we see is twofold: (1) the NICs are climb­
ing the value-added ladder in footwear, with some countries like Japan jumping
off the ladder when they are at the top, while other nations clamber to get on
the lower rungs; and
(2) the NICs have succeeded in capturing larger world ex­
port shares in specific product niches.
Industrialization in the world-economy is a very �omplex process. The footwear
industry was one of the earliest export sectors th rough which semiperipheral na­
tions sought to maintain or improve their position in the international division
of labor. The NICs that have been successful in exporting footwear are versatile
and diversified; they also manufacture and export a wide range of technology­
intensive products, such as computers, automobiles, and industrial machinery.
International competitiveness in the semiperiphery has spread from traditional
to more sophisticated goods.
Whether the East Asian and Latin American NICs will get closer to the core
countries, or whether any of them will actually enter the core, ultimately depends
on their capacity for technological and institutional innovation and their ability
to adjust to the changing opportunities and constraints in the international political
economy. What succeeded in the past is no guarantee for the future. The open­
ness of the u.S. market has been a key factor in the rapid economic growth of
all the export-oriented NICs, especially those in East Asia. Continued easy ac­
cess to the American market is very much in doubt, given the staggering trade
deficits that confront the world ' s leading core nation. For semiperipheral coun­
tries to ascend in the world-economy, they will have to find new ways to move
to the most profitable end of commodity chains. This requires a fundamental shift
from manufacturing in the semiperiphery to marketing in the core, a daunting
task indeed.
Commodity Chains and Footwear Exports
67
NOTE
The authors would like to thank Immanuel Wallerstein and Bill Martin for their helpful
comments on an earlier version of this paper.
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. 1989b. " Rethinking Development Theory : Insights from East Asia and Latin
America. " Sociological Forum 4, 4 : 505-33 .
Gereffi, Gary, and Donald Wyman. 1990. Manufactured Miracles: Development Strategies
in Latin America and East Asia. Princeton, N.J. : Princeton University Press.
Hopkins, Terence K . , and Immanuel Wallerstein. 1986. "Commodity Chains in the World­
Economy prior to 1 800 . " Review 10, 1 : 157-70.
__
International Labor Office. 1988. Yearbook ofLabor Statistics. Geneva: International
Office.
Keesing, Donald. 1 982. "Exporting Manufactured Consumer Goods from De,velloo
to Developed Economies: Marketing by Local Firms and Effects of
Country Policies . " Washington, D . C . : World Bank. Mimeo.
Korzeniewicz, Miguel. 1990. "The Social Foundations of International rnmr,p.ti,ti
Footwear Exports in Argentina and Brazil 1973-1989. " Ph.D . diss. Duke
Levy, Brian. 1988. " Transaction Costs, the Size of Firms and Industrial Policy:
from a Comparative Case Study of the Footwear Industry in Korea and Taiwan.
Research Memorandum Series, Williams College.
Mutti, John H. 1980. Output and Employment in a "Trade Sensitive " Sector: Adjustment
in the U. S. Footwear Industry. Washington, D . C . : The World Bank.
Organization for Economic Co-operation and Development (OECD). 1976. The Footwear
Industry: Structure and Governmental Policies. Paris: OECD.
U.S. Department of Commerce. Various years. U.S. General Imports. Washington, D . C . :
Bureau o f the Census.
U.S. Department of Commerce. 1987. U. S. Foreign Trade Highlights 1 987. Washington,
D . C . : Bureau of the Census .
68
Semiperipheral Success Stories?
U.S. Department of Commerce. Various years . U.S. Industrial Outlook. Washington, D . C . :
Bureau o f the Census .
U . S . Department of Labor. 1986. Foreign Labor Trends: Korea. Washington, D . C . : U . S .
Department 0 f Labor.
World Bank. 1988. World Development Report, 1988. New York: Oxford University Press.
STATE , MARKET, AND AGRICULTURE IN
PINOCHET'S C HILE
Walter Gold/rank
The fascist solution of the impasse reached by liberal capitalism can be de­
scribed as a reform of the market economy achieved at the price of the extir­
pation of all democratic institutions, both in the industrial and in the political
realms.
Polanyi 1 944, 237
In The Great Transformation Karl Polanyi accounts for the rise and spread of
European fascism-in which the state assumed a perversely protective role vis-a­
vis the market-in terms of the interwar crisis of the world-economy and a par­
alyzing stalemate of the class struggle. Roughly speaking, his orientation
to frame the rise and spread of military-led bureaucratic-authoritarian
in the Southern Cone of South America, starting with the Brazilian coup
and culminating in Argentina in 1 976. In each of the four cases, 1IDIDOIt-SUO!>UU
industrialization as a mode of insertion in the world market had reached
expressed most visibly in uncontrollable inflation. In each, the organized
of the working class, exercised through unions and parties, had reached a
at which it threatened-but fell well short of being able to dislodge-the
rogatives of capitalists and their allies. In each, military regimes seized
in the names of national security and national salvation-General Pinochet was
recently chastised by two bishops for comparing his defeat in the 1988 plebiscite
to the crucifixion of Jesus Christ. In spite of nationalist rhetoric, however, each
military regime increased significantly the roles of multinational capital and in­
ternational financial institutions. Economic reorientations toward neoliberalism,
weakest in Brazil and strongest in Chile, were accompanied by states of siege,
ferocious political repression, and severe restrictions on the organization of labor.
In a sense, Polanyi's formulation was reversed, in that the antidemocratic methods
of fascism were applied so that market mechanisms could have wider rather than
70
Semiperipheral Success Stories?
narrower scope. Rather than protecting society from the market, the state would
become the market's instrumentality, institutionally and ideologically.
In this project, as in its folk reputation among the Southern Cone countries ,
Chile stands out for its thoroughness. In both the extent and duration of its repres­
sion and in the transformation of its economy, Chile went considerably farther
than its neighbors. This comparison holds true for other institutional realms as
well: the state's role as welfare provider was drastically cut back, and the ideology
of free-market liberal individualism was promulgated with a vengeance. Marx­
ism, socialism, communism, and even populism were constantly attacked. Before
the revival of political parties in the mid- 1 980s, the Catholic church remained
as the sole effectively functioning national-level organization with a commitment
to the priority of community well-being over individual enrichment. (Perhaps those
of us who are sociologists should take pride in the fact that our discipline, with
its theoretical commitment to the societal level , was banished from the univer­
sities.) Due in part to this ecclesiastical steadfastness , the Christian ethic of each
individual's worth, which Polanyi identified as a major basis of Western civiliza­
tion, seems to have survived Pinochet's ideological onslaught. But support for
heavy governmental involvement in the economy, an increasingly prominent
feature of Chile up to 1 973, has not survived fifteen years of reorientation. To
judge from the press and from personal observations during the electoral cam­
paign of summer/fall 1 988, one would conclude that only on the left-and even
there without f ervent conviction-would one find the desire for a return to the
previous state-centered economy. Most Chileans recognize the major institutional
economic changes as permanent (for the medium term, at least) and hope rather
to reduce the burdens these changes have loaded onto the poorer half of the
population.
This chapter, then, will discuss the transformed relationship between state and
market under Pinochet's military dictatorship, with special reference to the
agricultural sector. The role of the state in giving wider scope to the market and
the distributional consequences of this change will be reviewed. Prospects in the
current democratic transition for the reconstruction of national community and
the reduction of the negative effects of the market will be assessed.
STATE AND MARKET BEFORE 1973
P ?puIist developmentali sm, with its emphasis on import-substituting industrial­
.
�zatlOn, took hold in Chile as elsewhere in the 1 930s, a response to the depression­
mdu ced colla�se of foreign trade. Of forty-nine primary-exporting countries
.
.
studIed by TnantIs ( 1 9 67, 1 9), Chile ranked first in the percentage decline of
exports between 1 928- 1 929 and 1 932 - 1 93 3 and was in fact the only country with
mor � than an 80 percent drop
y the �id-19 60s the state controlled, either directly
:
or VIa parastatals, many baSIC mdustnes and either subsidized or otherwise con­
�
trolled the prices of basic commodities. High tariffs protected small and medium­
sized industrial producers as well as large-scale monopolies that supplied the
State, Market, and Agriculture in Chile
71
domestic market, shielding them from competition with multinational firms whose
technologies had advanced well beyond Chilean levels. Imported capital goods
(over two-thirds from the United States) were bought with foreign exchange from
a stagnating copper sector. Inflationary pressures would not succumb to monetarist
remedies in the mid- 1 95 0s; as a showcase of the Alliance for Progress (United
States's response to the Cuban revolution), Chile under the Christian Democrat
Eduardo Frei ( 1 964- 1 970) would attempt structural reforms.
To this point, the agricultural sector had been dominated by large landowners
with a disproportionately large role in national politics. In a pact with the devil,
urban-based radical and leftist parties had for several decades assented to severe
legal restrictions on rural labor organization in return for price controls on basic
foodstuffs (Loveman 1 974). This arrangement perpetuated hacendado power and
caused a decline in the already-low living standards of the cultivators while pro­
viding little incentive for increased food production. The result was a predictable
increase in the demand for imported food, with the consequence that precious
foreign exchange was unavailable for industrial investment. By breaking up un­
productive estates and providing technical assistance and credit to smallholders,
the Frei land reforms were intended to improve the domestic food situation, to
increase justice as well as the capacity of the rural populace to consume, and,
not incidentally, to strengthen the Christian Democratic electoral base in the coun­
tryside. The land reform was accompanied by increased state aid to small-scale
urban producers, rises in social-service spending, and " generous wage policies"
(Foxley 1 983, 1 3- 1 4). The Frei reform package, however, failed to control in­
flation, while it split the center from the right and thus set the stage for Allende' s
electoral victory and for his regime' s populist and statist project of carrying out
a peaceful transition to socialism.
The accomplishments and failures of the Allende period continue to generate
such controversy that a recent account (Gomez and Echenique 1 988) of ,-,,,un;,,,,,', ,:,, "
agriculture sidesteps that era in order to retain credibility among a wide
trum of readers. In brief, the regime attempted to use the state as a
for reclaiming the national patrimony from multinational capital and
tive domestic capital, in part through encouraging and protecting the "nlltl("," I
vance of the popular sectors. Via expropriation and intervention, mines, l a,",LUl 1v�,i
and landed estates were transferred to government control. Although considerable
redistribution was achieved in both individual and collective consumption, the
regime fell. Allende' s U nidad Popular promised its supporters more than it could
deliver in its brief moment, and in so doing it threatened its enemies with extinction before it had developed the politico-military capacity to contain them. Never
in complete control of the state, internally divided among sharply differing political
parties and groupings, obstructed and eventually abandoned by the democratic
center, denied international financial backing and even ordinary commercial credit,
attacked by the defenders of private property within and without Chile, it was
overthrown by a military junta that proceeded to use assassination, imprisonment,
torture, and exile to insure a definitive victory.
72
Semiperipheral Success Stories?
If agrarian reform under Frei was remarkable for its incompleteness, and under
Allende for its incoherence, along with other factors it contributed to the moder­
nization of agriculture so notable in the last few years (Goldfrank 1 9 89). The
threat of reform induced some landlords to break up their holdings before the
state did and to bring more terrain under cultivation. The encouragement of
agricultural unions led to a new emphasis on technical change, to new levels of
social participation by the formerly excluded, and to income redistribution. The
developmentalist state fostered the fruit- and forestry-export industries that would
later rebound to the credit of the military regime. In 1 9 68 the CORFO (state
development corporation) published its plan for the fruit sector, resulting in vast­
ly increased plantings. The 1965-1973 period saw over 420, 000 hectares of timber
planted as well as significant state investment in industrial infrastructure for pulp
and paper (Gomez and Echenique 1 9 88, 43-45). This is by way of suggesting
that there are important continuities across the 1 9 73 rupture, that both the import­
substituting and the neoliberal states were attuned to certain world-market op­
portunities that any Chilean state must consider.
STATE AND MARKET UNDER PINOCHET
In his admittedly too''benign" account of economic changes in Chile between
1 9 73 and 1 9 80-a severe crisis rocked the economy in 1 9 81 - 1 9 83-the Chris­
tian Democratic economist Alejandro Foxley ( 1 9 83, chap. 3) discussed the in­
terplay of macroeconomic stabilization measures and structural transformations
introduced by the military government. In the first phase, to March 1 9 75, deregula­
tion occurred through currency devaluation, eliminating price controls, public­
sector deficit reduction, raising taxes, and shifting those taxes from capital to
workers and consumers. Expropriated properties were returned to former owners,
import and foreign-investment rules were liberalized, tariff reduction began, and
plans were formulated to privatize the public sector. Collective bargaining was
suppressed. Unemployment quadrupled, recession set in, and with copper prices
falling, the balance of payments was in crisis.
Rather than retreating from their ambitious goals, the so-called Chicago boys,
Pinochet's economic advisors, administered a fifteen-month " shock treatment."
They drastically cut public expenditures, raised taxes further, reduced real wages
by lowering the basis for cost-of-living adjustments, and put some of the poor
to work sweeping streets and cleaning up parks for a pittance. Structurally, they
accelerated privatization (especially in banking), freed interest rates, and step­
ped up the tariff-reduction program. The payments crisis eased thanks to copper
price rises and to increased inflows of foreign capital, but the recession deepened,
and official unemployment levels reached almost 20 percent. This led to a third
phase, from June 1 9 76 to June 1 9 79, marked by more currency devaluations and
tariff reductions, an increase in economic activity (unemployment fell to 1 3 per­
cent), and
an
increased influx of foreign capital. By mid- 1 9 79 Chile's economy
had been fully opened to world-market forces, and the miracle was being
State, Market, and Agriculture in Chile
73
- pro claimed. But little more than two years later, severe recession once again set
- in . Banks and businesses were failing, the Chicago boys were finished, and the
Chilean state was forced to resume its protective and developmentalist roles, albeit
a far lesser degree than before the coup.
Structural economic changes went beyond a privatization program that reduc­
ed the number of public enterprises from 507 to 15 and the amount of public
employment by 20 percent, eliminated profit remittance restrictions, and through
undervaluing sold-off assets and encouraging speculation transferred large amounts
of ass ets to the largest firms. Trade, the structure of production, and distribu­
tional patterns changed as well. Chile became an open economy as tariffs fell
from 94 percent to 1 0 percent, exports were exempted from the value-added tax
(VAT) and from customs duties, and nontraditional exports mushroomed while
in many branches of industry, import desubstitution occurred. As befits the ironic
description ' 'newly underdeveloping country, " Chile saw manufacturing decline
as agriculture and mining, commerce, and services grew. Distributionally, there
was a tremendous concentration of productive assets in a small number of con­
glomerates, which were restructured with even greater concentration after the
-198 1 - 1 983 crisis. Simultaneously, the rich got richer and the poor got poorer,
with the consumption share of the top 20 percent rising from 43 percent in 1 969
to 51 percent by 1 978 as that of the bottom 60 percent fell from 36 percent to
28 percent. " This marked dualism in consumption seems to be an essential
characteristic of the model" (Foxley 1 98 3 , 84) .
What began a s technocratic monetarism evolved into a full-blown adaptation
of U.S. neoconservatism as an ideological and institutional project for the military
regime. Whereas classical liberalism typically accompanies the market mentality, here authoritarianism was justified on the grounds that the Chilean people
had previously been educated to think in statist and socialist terms. They would
therefore need a long period of exposure to and experience with the
of the free market before they could be expected to make rational """"""'� .
language curiously mimicking Maoist phraseology, the government emlbaJrke!:i'
what it called "the seven modernizations" : labor, social security,
health, regional decentralization, agriculture, and justice. The new labor
gave birth to competitive union formation and to decentralized, atomized
'
tive bargaining; privatization of social security led to monopolistic control of retire- 'f\
ment funds; private markets were encouraged for schooling, medical care, housing; -- and nutrition (Foxley 1 983, chap. 4). The night-watchman state was reinvented,
but with a bigger stick than Bentham or Mill could ever have imagined.
The agricultural sector under Pinochet has undergone some ironic twists to the
modernization process that was set in motion when the Frei-era land reforms were
first promulgated. The military government's initial thrust was to reverse with
suddenness and finality the most visible tendencies of the previous decade: ex­
propriation and division or cooperativization of large holdings and formation of
peasant associations and agricultural unions (about 80 percent of rural wage
workers were unionized as of 1 973 [Garcia Elizalde 1 986, chap. 3]) . The land
-
_
74
Semi peripheral Success Stories?
situation was "regularized " as many properties were wholly or partially restored
to their former owners, state cooperatives were disbanded, and plots were assigned
to individual cultivators. Small farmers and the rural poor, principal beneficiaries
of the land reform, were denied access to credit and technical assistance, partly
from politics, partly from the free play of the market, and partly from the mistaken
view that large is more efficient than small. Legalization of corporate farming
1985).
1975 to 1983 found the agrarian sector hit particularly hard
gave a further boost to large growers (Jarvis
The period from
by the imposition of the neoliberal model. With the exception of a few enter­
prises that were highly capitalized and tightly linked to foreign markets or to
specialized domestic ones, the entire sector suffered. With both the dollar and
the tariff reduced, U.S. food poured into Chile, while large growers, small-scale
peasants, and especially wage workers saw their economic conditions deteriorate.
Owners contracted debts that high interest rates rendered unpayable, leading to
forced sales. Many ref orm beneficiaries-perhaps
as
many
as
40 percent-were
1988, 46, 96).
required or induced to sell their parcels (Gomez and Echenique
The pauperization of peasants and laborers led to growing rates of malnutrition,
58 per 1 ,000 in the most rural
1979 (Leyton 1 983, 137-38). When the rural troubles intensified under
the pressure of the general crisis of 198 1 - 1 9 8 3 , grower protests and the failure
illiteracy, and infant mortality, the latter reaching
zones in
of several prominent large firms led to a reorientation of state policy and a new
dynamism in the countryside.
If the new export sectors in fruit and forest products have advanced farthest
in the processes of land concentration, transnationalization, and technical change,
other subsectors of agriculture are already moving in those directions, including
dairy, livestock, and hops. Four of the seven largest fruit exporters are multina­
tionals, foreign capital is heavily involved in the timber industry, and there are
notable instances of joint ventures as well. Table grapes now follow only copper
and fish meal in export earnings; the value of fruit exports, of which grapes con­
stitute a little more than half and apples another quarter, has grown at around
20 percent annually since 1 9 8 1 .
But the big surprise has been the turnaround i n basic foodstuffs. Due i n large
measure to the introduction of price supports in response to the crisis-generated
protests of
1 983, a rapid increase in productivity has resulted in an astounding
process of import substitution. In effect, the land reform and counterreform had
prepared the terrain for commercially astute proprietors to apply advanced
technology, but not until the state aided the market to give the appropriate signals.
Whereas the first decade of military rule featured food imports equal to half the
1983 and 1 986,
34 percent to 9 1
percent in wheat, 3 percent to 6 0 percent i n vegetable oils, 5 1 percent to 9 7 per­
cent in sugar, 83 percent to 99 percent in dairy, 71 percent to 78 percent in rice,
and 78 percent to 94 percent in corn. Were income distribution less skewed, so
that demand f or food were to increase by the 20 percent necessary to restore the
foreign debt built up during those years, in the few years between
domestic production as a proportion of consumption rose from
State, Market, and Agriculture in Chile
75
levels of 1 970, there is every reason to believe that domestic produc­
could grow further. Such are the contradictions of the free market that the
and protein intakes of the population have been declining throughout the
Pinochet period (Gomez and Echenique 1 988, 160-65, 272). Oddly enough,
,.'-'U.u.�.�. agriculture in the 1 980s has recapitulated the story of import-substituting
induSlmUllzauon: between the limits of the internal market (highly unequal distribu­
of income), the high costs of imported inputs (machinery, fertilizers,
pesticides, and in some cases seeds) , and increased competition from ever­
cheapening advanced-country exports, stagnation tends to set in. Meanwhile, only
if there are successful efforts to diversify markets for fruit and vegetable exports,
and only if Chile can avoid boycotts on the basis of the regime 's international
unpopularity, will the recent dynamism of export production be sustainable.
Nor can it be denied that the state has played a critical role, unintentionally
as well as deliberately, in creating and perpetuating the current situation. We
already touched upon the CORFO diversification plans of the 1 960s, the
of the land reform and counterreform, the consequences of policies favoring
growers over small, and the replacement of the neoliberal import splurge
policies allowing the growth of domestic production. But the commercially
au,'ru"�,,u sectors of Chilean agriculture have benefited from other state actions
as well. Direct subsidies have gone to reforestation and to irrigation. Productive
lands have been handed over at below-market value in exchange for bonds retiring
portions of the external debt. Land taxes have been laughably low, and enter­
prises have taken advantage of the regime' s neglect of wage levels, working con­
ditions, and environmental effects. Via commission and omission, the Pinochet
government has enriched the powerful and pauperized the weak, while its
economy' s meager trickle-down has not begun to compensate'for what its institu­
tional restructuring dried up.
STATE AND MARKET: THE CHILEAN PROSPECT
The "double movement" is an axiom of Polanyi' s thought, that is,
advance of the market is necessarily accompanied by the advance of
protect society from the market' s effects. The state, typically, is expected to
vide that protection; social welfare and socialism are names for alternative ways
of organizing it. The Chilean case reminds us that the state can dedicate
to advancing the cause of the market while rejecting protective responsibilities
in principle. Just as in the early nineteenth century the British state made far­
reaching institutional and ideological changes to entrench the market system, so
the Chilean state in the 1 970s and 1 980s reversed the usual fascist patterns with
its embrace of both the world market and the market mentality. In the name of
anticommunism, on the one hand, and efficient insertion in the world market,
on the other, the Pinochet regime introduced an economic model that failed even
to protect many members of the social classes from which it drew its original
support. Yet the regime and its neoliberal model survived its disasters, its crises
76
Semiperipheral Success Stories?
of 1 975- 1 976, and 1 98 1 - 1 983, its unpopularity, and its international opprobrium.
This survival owed much to U.S. backing and to the international financial com­
munity, much to its partial successes in controlling inflation and in stimulating
export expansion, and much, needless to say, to its effectively brutal repression.
But as the military regime has embarked on an uncertain transition to democracy,
what are the prospects for the continued viability of the neoliberal model and
for the resurgence of protection? We can approach these questions in terms of
the present conjuncture, the structural changes of the past fifteen years, and the
likely effects of a more democratic polity on the relationship between state and
market. Three con junctural phenomena have buoyed the Chilean economy since
1 983, accounting for much of the growth that induced the regime's leadership
to think that it would win a fair and free plebiscite in October 1 988: cheap oil,
a low dollar, and rising copper prices. Imported inputs have thus been relatively
cheap, and exports relatively remunerative. A reversal of one or two of these
trends, or a generalized world recession, would generate severe problems for
an economy highly dependent
on
price fluctuations in the world market. There
is little a small country (population 1 2 million) can do to protect itself from such
fluctuations, although compared to the mid- 1 960's, Chile today has significantly
diversified both its exports and its customers for those exports. While timber and
pulp and paper appear poised to enjoy long-term security, opposite-season fruit
may be reaching the limits of its Northern Hemisphere markets, in part because
of the specter of European and U.S. protectionism. In case of recession or fall­
ing prices, contradictory demands for protection, on the one hand, versus renewed
austerity, on the other, could well lead to a reversal of the trajectory toward
democracy and quite possibly to abandonment of the neoliberal model, most pro­
bably in the direction of classical fascism, but perhaps toward socialism once again.
Some structural changes of the past fifteen years are likely to remain in place
while others are reversed. Export diversification will continue. Increased
bureaucratic efficiency may prove the most important legacy of the military to
the state apparatus. Continued wide scope for entrepreneurial initiative is prob­
able. Commercialization and even California-ization of agriculture will pick up
speed. But the government will return to social provisioning in a major way. In
fact, one of the notable features of Pinochet's preplebiscite maneuvering was his
pork-barrel housing and public works spending in 1 98 7 and 1 988. One sensed
a wide consensus, beyond even the remarkable grouping of the sixteen parties
in the "No" campaign (and beyond it both to the left and to some sectors of
the right who supported the "Yes"), that the distributional consequences of en­
forced neoliberalism are simply incompatible with the claim to be civilized. The
state will resume a protective role in part, then, because society demands it.
This brings us to the question of democracy, to which Chile is returning , albeit
more slowly and less completely than the majority of Chileans clearly desire.
To this point, the transition process has been propelled by pressure from below,
by support from Europe and more recently the United States, and by the exercise
of enlightened self-interest on the part of elite sectors that vastly prefer gradual,
State, Market, and Agriculture in Chile
77
controlled democratization to the possibility of convulsive and violent struggle,
whoever the victor (most probably the armed forces again). But democracy has
proved through the last century and a half to be the harbinger of social protection
and the enemy of liberalism, neo or otherwise. Democratic demands may well
engender fiscal crisis by raising wages so that exports are less competitive or
profitable, by channeling to social programs revenues that might otherwise be
invested, and by attacking or threatening the conditions that have lured foreign
investors. On the other hand, it is just possible-and certainly in keeping with
the vibrantly hopeful spirit one found in the streets of Santiago in October
1988-that democracy will stimulate responsible participation, reduce the social
and fiscal costs of repression, and allow the talents of the people to be expressed
in construction rather than in defensive struggle. There may be a Spanish or
perhaps even a Norwegian future for Chile, and however imperfect, that is sure­
ly preferable to the odd mixture of Franco and Quisling represented by Pinochet.
At the least, sociology will return to the university curriculum, and the second
half of the double movement will have its chance.
REFERENCES
Foxley , A. 198 3 . Latin American Experiments in Neo-Conservative Economics. Berkeley :
University of California Press.
Garcia Elizalde, P. 1986. "El desarrollo fruticola en Chile y sus derivaciones sociales . "
In El desarollo fruticola y forestal en Chile y sus derivaciones sociales: 9-120. San­
tiago: CEPAUFAO .
Goldfrank, W. 1 989. " Harvesting Counterrevolution: Agricultural Exports in Pinochet's
Chile." In Revolution in the World-System; edited by T. Boswell, 1 89-98. Westport,
Conn. : Greenwood Press.
Gomez, S . , and J. Echenique, 1 9 8 8 . La agricultura chilena. Santiago: FLACSO.
Jarvis, L. 1 985 . Chilean Agriculture under Military Rule. Berkeley: Institute of
tional Studies .
Leyton, 1. 1986 . " El fomento de la actividad forestal y su impacto sobre el desarollo
on Chile. "in El desarollo fruticola y forestal en Chile y sus derivaciones
121-227. Santiago: CEP AUF AO.
Loveman, B. 1 974. " Unidad Popular in the Countryside: Ni razon, ni fuerza. "
American Perspectives 1 , 2 (Summer) : 147-55.
Polanyi, K. 1944. 1he Great Transformation . Boston: Beacon Press .
Triantis, S . 1967. Changes i n Trade Balances of Countries Exporting Primary Products,
1927-1933. Toronto: University of Toronto Press.
ON A SEMIPERIPHERAL
UCCESS STORY? STATE DEPENDENT
EVELOPMENT AND THE PROSPECTS
R SOUTH KOREAN
OCRATIZATION
A. Smith and Su-Hoon Lee
developmentalist approach to social change dominant i n the 1 95 0s and 1 960s
expected increasing political pluralism to develop as part of an ensemble of
"modernization" (along with industrial growth, urbanization, and so on). But
by the 1 970s it had become clear that empirical patterns contradicted this expec­
tation in many parts of the less developed world. Many of these societies not
only had failed to develop Western-style democracy but had moved toward new
forms of particularly repressive military-controlled ' ' bureaucratic-authoritarian"
(O'Donnell 1 973) .
Against this backdrop, it seemed unlikely that the 1 980s would be heralded
as a decade of democratization, but that is the message of both academic
and the popular press. The wave began in the late 1 970s in Spain and
to Latin American countries like Brazil and Argentina. By 1 986 it was
at Asian shores, first in the "people power" revolution in the
a little later in the move to direct elections in the Republic of Korea
Analysis of this phenomenon varies from careful scholarly work (for
,_..
O'Donnell, Schmitter, and Whitehead 1 986) to superficial mass-media
tion about contagion and self-congratulatory tomes from the present U.S. ad­
ministration. The purpose of this chapter is to contribute to the former by
establishing a framework for examining the South Korean case in detail and at­
tempting to develop a clearly specified political economy of the world-system
explanation for the process and prospects for democratization in that nation. We
hope to move beyond the tentative, suggestive nature of this chapter to more
detailed empirically rich analyses in future work.
Our perspective is a structural one that focuses on the linkages between the
international and national political economy and adopts a historical stance. While
we reject the view that either political change or economic development proceeds
through a universal sequence of stages, we believe the two are inexorably linked.
�...
....
80
Semi peripheral Success Stories?
Our perspective should help illuminate the social forces and openings that can
be used by the proponents of democratization, as well as map some of the con­
straints and difficulties they face. However, we are well aware of the critiques
of approaches that overemphasize structure and ignore human agency (Giddens
1 979; Deyo 1 987c). Clearly, political organization, energy, and passion are crucial
components in moves toward more participatory politics (0'Donnell and Schmitter
1 986). We also note that in laying out some potential obstacles to democratiza­
tion, our intention is not to suggest the futility of efforts to attain it. Quite the
contrary, it is our contention that a better understanding of the structural con­
straints to political change could and should be useful to those who are struggling
to attain democracy.
At this late date, for readers of this volume, a general explication of the world­
systems perspective is hardly warranted. Two key advantages of the Wallerstein­
ian approach distinguish it from the " dependency"
tradition from which it
developed. First, there is the idea that the world-system is organized into distinct
strata. Second, there is the possibility of mobility in the global system through
"dependent development" (see Cardoso and Faletto 1 969, 1 979; Evans 1 979b).
Furthermore, the perspective suggests the working hypothesis that countries play­
ing similar roles in the international system (i.e., at structurally isomorphic
"levels") may exhibit similar patterns and mechanisms of development.
The semiperipheral stratum is of particular interest. This level differs
economically and politically from both the core and the periphery. The internal
production activities are a mixture of ' 'core-like" industrial production and labor­
intensive "periphery-like" production (Chase-Dunn 1 980, 1 988). As Arrighi and
Drangel ( 1 986) point out, the precise nature of activities and products that are
either "core-like" or "periphery-like" is historically bounded and related to cur­
rent technology and product cycles (Schumpeter 1 964; see Cumings 1 984, relating
this to contemporary Northeast Asia). Core activities are highly profitable and
embody the latest technological innovation (Arrighi and DrangeI 1 986). In the
eighteenth century, wooden shipbuilding might fit (Chase-Dunn 1 980) ; in the twen­
tieth century, automobiles or computers (Cumings 1 984). At any rate, semiperi­
pheral countries, with a developing mix of economic activities, are much more
likely to attract foreign and/or local capital to manufacturing industries than the
periphery. These societies are also usually starting to indigenously develop or
(more likely) import technology to promote industrial growth. Yet development
remains "dependent" in that it is severely constrained by the international
economy, dominated in the most advanced sectors by the vastly superior
technological, financial, and commercial resources of the core countries. This
semiperipheral dependence is all the more evident in the majority of these coun­
tries in which ( 1 ) development efforts have been financed by large foreign debt
and/or
(2) the engine of economic growth has been export-led industrialization.
Politically, the semiperiphery is also quite different from the periphery (or the
core). The more even mix of core-periphery economic activities in semiperipheral
nations changes the nature of the dominant class coalitions and means that state
Prospects for South Korean Democratization
81
policies can more directly influence local capital accumulation. Indeed, Waller­
stein argues that " semiperipherality is important because it points to a concen­
trati on of state-oriented political activity by major internal (and external) actors"
( 1 985, 35) . While acknowledging a wide variance in political ideology (from
"rightist" to "socialist") , Chase-Dunn and Rubinson claim that semiperipheral
countries " tend to employ more state-directed and state-mobilizing development
policies than do core countries" ( 1 977, 472).
Obviously, this emphasis on " dependent development" in the semiperiphery
moves the state into central focus in world-system analysis. This may seem ironic,
since the most well known critiques of the world-system perspective focused on
the economistic nature of exchange-based "neo-Smithian Marxism" and the lack
of attention to political and class forces (Brenner 1 977; Skocpol 1 977). In the
1980s a major effort was under way to " bring the state back in" to theory building
and to establish a more nuanced "new comparative political economy" dedicated
to historical-structural analysis of classes, elites, and politics (Evans,
Rueschemeyer, and Skocpol 1 98 5 ; Evans and Stephens 1988) .
While this shift toward greater attention to " internal" factors and the articula­
tion between national and local political economies and the international system
is one key theoretical shift, an equally important change has occurred in the con­
ceptualization of the world-system itself. Increasingly, international political
economists are aclmowledging that a thorough understanding of the global system
needs to account for both the world-economy and the international state system.
While these two aspects of the world-system are intertwined, neither is reducible
to the other (Chase-Dunn 1 98 1 ; Evans and Stephens 1 988). Here growing research
interest in Northeast Asia has directly contributed to theoretical clarification.
Studies of this world region, in particular, insist that geopolitics and military
strategems played a major role in development and social change (Cumings 1 984;
Lim 1 985 ; Nemeth and Smith 1985; Koo 1 987) .
KOREA AND THE EAST ASIAN NICs: STRONG STATE AND
DEPENDENT DEVELOPMENT
The recent experiences of South Korea and the other East Asian
.
dustrialized countries (NICs) provide a crucial case challenging the m�errlaUOltal
political economy perspective (and, indeed, other theoretical approaches that
port to explain societal development) (Deyo 1 987a, Introduction) . A number of
scholars argue that the experiences of these nations, and particularly Taiwan and
South Korea, provide the evidence needed to "disprove" dependency/world­
system theory (Barrett and Whyte 1 982 ; Gold 1 985 ; Hamilton 1 986; Barrett and
Chin 1 987) . At the risk of trivializing these arguments, their basic thrust is that
the East Asian "little tigers' " achievement of rapid economic growth and a
relatively modest level of income inequality, despite their reliance on external
economic and political links, qualifies these countries as "deviant cases" that
contradict basic assumptions of the international political economy approach.
Semiperipheral Success Stories?
82
Unfortunately, some of these critiques have framed their arguments in particular­
ly unconstructive ways. For instance, Barrett and Whyte's ( 1 982) widely read
article follows a rough qualitative''hypothesis-testing" strategy in which the work
of various and sundry dependency/world-system writers is abstracted (often wildly
out of context) into a series of propositions. The authors then, predictably, pro­
ceed to demolish the dependency/world-system "arguments" with data from
Taiwan. Not surprisingly, their favorite target is the early polemical writings of
A. G. Frank, which provide the lightest-weight materials with which to construct
a straw man. Despite a f oment of debates at the time about''dependent develop­
,
ment' and the status of semiperipheral nations, this article ignores this possibili­
ty,
suggesting that
dependency theory always
equates dependency with
underdevelopment, stagnation, and inequality. Further, it argues that the presence
of a strong interventionist state in Taiwan runs contrary to world-system expec­
tations, when, in fact, it is precisely the political form we would anticipate in
an upwardly mobile semiperiphery.1 Even a very recent evaluation of the East
Asian NICs in the world-system retains a similar flavor (Barrett and Chin, 1 987).
It steadfastly ignores the elaborations of the international political economy
perspective in the last decade.2
Proponents of the international political economy perspective respond to the
attacks by claiming that a sophisticated, flexible world-system perspective is useful,
even for the seemingly difficult cases of the East Asian NICs (Cumings 1 984,
1 989; Evans 1 98 7; Koo 1 987). These countries must be understood as semiperi­
pheral states undergoing the process of "dependent development."
To begin to explain trajectories of these countries, which are quite different
from those of either advanced core nations or underdeveloped peripheral ones,
we need first to look at historical patterns. Space precludes a full discussion of
this argument here (see Lim 1 985 for the most complete analysis of the Korean
case). But for both Korea and Taiwan, the timing and mode of their initial incor­
poration into the modern world-system through Japanese colonialism is crucial
(Cumings 1 984; Lim 1 98 5; Nemeth and Smith 1 985). The Japanese were hardly
benevolent imperialists, but because of their own relatively vulnerable global
status, the contiguity of Korea and Japan, and the peninsula's perceived strategic
value, the Japanese occupation had a number of "developmental " consequences
that colonialism in other world regions did not. The Japanese invested in modern
heavy industry, which prompts Cumings to claim that "by 1 945 Korea had an
industrial infrastructure that, although skewed sharply to metropolitan interests,
was among the most developed in the Third World" ( 1 984, 56). Partly with
military strategy in mind, the Japanese also established a transportation network
that quantitatively and qualitatively outstripped infrastructural development in other
less developed countries (Nemeth and Smith 1 985, 200). After World War II
the absence of a strong indigenous landed class and the infusion of massive U.S.
military and economic aid promoted forces favoring the rise of "import­
substitution industrialization" in the early 1 950s (Nemeth and Smith 1 985; Cum­
ings 1 984; Koo 1 987). This development phase, in turn, set the political and
Prospects far South Korean Democratization
83
context (particularly in the seeds of what Cumings calls the
'bureaucratic-authoritarian industrializing regimes" [BAIRs]) for the export-led
manufacturing that emerged in the 1 970s (Cumings 1 984; Lima 1 985; Nemeth
Smith 1 985) .
In the contemporary period the key component to the international political
economy arguments is their emphasis on the crucial role of the state as the in­
termediary between the nation and the world system. Deyo emphasizes this facet
and argues that "state med iation of dependency involves the institutional chan­
neling of most external linkages through bureaucratic agencies that are thereby
enabled to introduce strategic criteria into the construction of foreign market,
technology, and capital relationships" ( 1 987c, 237). South Korea, like other
semiperipheral nations, has a state with the capacity to "negotiate dependency"
(see Evans 1 979b, 274-329).
The South Korean state has done this in several ways. One is by limiting and
regulating the extent and nature of foreign capital penetration. As Peter Evans
(1987, 206-9) perceptively notes, the correlation between relatively low foreign
direct investment and rapid economic growth in the East Asian NICs is a resound­
ing confirmation of a basic tenet of the world-system argument. State policy has,
perhaps implicitly, followed what dependendistas would have prescribed. Despite
strict limitations on multinational capital, South Korea has relied heavily on ex­
ternal capital flows. During the immediate postwar period these were largely in
the form of direct development and military grants from the United States.3 Dur­
ing the early 1 960s the Park Chung Hee government increasingly turned toward
foreign loans as a source of capital for industrialization (Lim 1 985; Haggard and
Cheng 1 987; Evans, 1 987). While this created a degree of debt dependency
significantly higher than in the other East Asian NICs and high enough to prompt
some analysts to warn of potentially serious future economic difficulties (Cum­
ings 1 984; Lim 1 985), the most important aspect of the borrowing was the
ner in which the state positioned itself between foreign lenders and local val""'LU".'
The state, through central financial institutions, controlled and channeled
of capital to businessmen and companies. This mechanism became a
for state-directed economic planning (as well as a potential focus of Nn·nn"if,
and payoffs) (Evans 1 987). Kim ( 1 988) argues that the absolute
autonomy of the Korean state eroded in the 1 980s as the giant trading
(chaebols) became increasingly influential. But this does not indicate that
economy is more genuinely competitive. Instead, Kim ' s analysis documents the
continuing monopolization of economic planning by an alliance of leading chaebols
and the state .
The final way in which the South Korean state has intervened in the economy
to maintain or bolster its international market position and reduce the negative
effects of dependency has involved its relations with labor. Clearly, this aspect
of state policy has been as necessary a part of the ' 'economic miracle" as the
government' s strategies for dealing with local and international capital. As Deyo
rather bluntly states, the tremendous success of " export-oriented industrialization"
84
Semiperipheral Success Stories?
(EO!) throughout East Asia has been built on the foundation of "disciplined and
low cost labor" (1987b, 183). He argues that political demobilization and exclu­
sion are not accidental but an integral part of a wage policy for labor-intensive
manufacturing-which has worked. This argument is reminiscent of O'Donnell's
"bureaucratic-authoritarian (BA) state" model, which argued that the rise of
military-dominated dictatorships in Latin America in the 1960s and 1970s was
a necessary political precondition for the "deepening" of industrialization in
semiperipheral Brazil and Argentina (O'Donnell 1973; see also Collier 1979).
Some Korean scholars have argued that the constitutional crisis of the Yushin
period in 1972 and the imposition of martial law mark the beginning of a true
BA state and follow the O'Donnell model (Han 1985; 1m 1987). Others claim
that authoritarianism had taken root long before the beginning of industrial
"deepening" (Lim 1985; Deyo 1987a). Nevertheless, it does seem almost irrefut­
able that the existence of the BA state (or BAIR) provided political conditions
that facilitated the success of the export-led manufacturing strategy (Cumings
1984). Regardless of the causal sequence, the functional requirement for repressed
labor and deferred consumption was met by the Park regime. It is the consensus
of researchers that the South Korean labor laws and policies were the most
repressive among Asia's "little tigers" and, at least until recently, were "becoming
ever more oppressive" (Koo, Haggard, and Deyo 1986, 66). Antiunion activities
(often in the guise of "anticommunism'') and political demobilization have fulfilled
an economic function that contributes to the country's competitiveness in the world­
economy. Mouzelis's argument suggesting an "elective affinity" between "the
recent multinational phase of capitalist industrialization and the type of exclu­
sionist military dictatorships that have sprung up in several post-war semiperipheral
societies" (1986, 193) seems to fit. Such a link would appear to exist between
the BAIR and the South Korean model of development in the late 196 0s through
the early 1980s.
Today, to appropriate the title of a recent speech of the ROK's minister of plan­
ning to the foreign press, it may be accurate to see "the Korean economy at a
crossroads" (Cho 1989). Both the demands of international economic com­
petitiveness and the national political climate are forcing the South Korean peo­
ple and leading economic and political actors to make strategic choices that may
involve moving in new directions. A move to more capital-intensive, technological­
ly innovative production might m itigate the need to depress wage costs to maintain
international competitiveness. This shift would have clear political ramifications,
probably conducive to increasing democracy. But the costs of creating a research
and development capability comparable to that of metropolitan core countries
would be enormous. Lacking R&D competitiveness would mean that South Korea
would remain reliant on imported technologies or "reverse engineering" (i. e.,
copying products developed elsewhere) and remain stuck in the middle (less pro­
fitable and rather unstable) position in industrial product cycles (Cumings 1984).
This is the dreaded "sandwich effect" where semiperipheral NICs are unable
to compete in innovative core-type production but also can no longer offer the
Prospects for South Korean Democratization
85
advantages of very low wage labor comparable to that available in peripheral
countries (Gereffi 1988).
In a later section the emerging strategies to deal with this conundrum will be
addre ssed. For now, the crucial point is that state planning and intervention are
again likely to play a key role in negotiating Korea's ability to sustain economic
growth in the face of a changing internal political situation and despite continued
international commercial, financial, and technological constraints. Global eco­
nomic dependence involves much more than the relative presence or absence of
multinational corporations in a developing country. The structurally constrained
" maneuvering room" available, given the nation's niche in the international divi­
sion of labor, poses problems that are just as real for the indigenous bourgeoisie,
military officers, and sta te bureaucrats as they would be for managers of transna­
tional firms. In the past twenty-five years the Korean state has played a pivotal
role in solving these dilemmas.
POLITICS AND THE STATE: DOMINATION AND
DEMOCRACY
While Korea must be understood in the context of its role in the global system
and the economic constraints and opportunities present therein, political change
cannot be explained simply in terms of the nation's international status or in purely
economistic terms. Reductionist arguments, whether they seek the answer only
with reference to international dependency or focus exclusively on the state as
a facilitator of capital accumulation, will not provide very complete or useful
accounts of the process or prospects of South Korean democratization. Instead,
it is essential to emphasize more complex, contingent, and recursive relation­
ships between the world-economic context and the national political economy.
The historical nuances of class dynamics, states as actors and organizations, and
the relationships between classes, states, and the world-system all must be
sidered consistent with the synthetic "new comparative political economy"
proach (Evans and Stephens 1988).
It would be extremely unwise to attempt to untangle this intricate
theoretical connections here. Instead, we will develop two basic theoretical
tions that move beyond world-system analysis and are particularly relevant
an examination of the ROK state and the impetus toward democratization. One
recognizes the dual function of any capitalist state to maintain both economic ac­
cumulation and political legitimacy. The other stresses the state as a " relatively
autonomous" actor and organization in which the people who staff the state develop
distinct interests in perpetuating the political-economic status quo.
Recent research on transitions from authoritarianism to democracy emphasizes
the accumulation/legitimation tension (O'Donnell, Schmitter, and Whitehead
1986). Authoritarian regimes usually are much better at promoting profitability
and economic growth than in engendering political legitimation. Often military/
bureaucratic-authoritarian rulers came to power as the "solution" to perceived
86
Semiperipheral Success Stories?
economic mismanagement and sluggish growth. In the short run, attaining rapid
" economic development" in itself provides a measure of popular legitimacy (th is
seems to have been the explicit strategy of Park Chung Hee in South Korea) .
In the longer term, however, the success of the program for economic growth
may lead to a serious''legitimation problem"
as
" those sectors of the popula­
tion which are excluded and victimjzed" demand "the removal of the authoritarian
regime and its replacement by a democratic one" (O'Donnell and Schmitter 1986,
15). In the case of South Korea this type of pressure from below built up throughout
the Chun regime, leading ultimately to a full-fledged ' 'legitimation crisis" in early
1987 and a sudden "loosening up" in June of that year. This does not imply
an immediate political transformation : the transition to democracy is filled with
uncertainty and contingencies involving various " accumulation and legitimation
options" (Kaufman 1986, 100-107) and "negotiating (and renegotiating) pacts"
between key class and interest groups (O'Donnell and Schmitter 1986, chap. 4).
But empirically, it does appear that the South Korean state under Roh has lost
a substantial amount of both "state capacity" (the ability to get its policies im­
plemented) and legitimation (the degree to which it can mobilize national con­
sensus around its goals).
In the recent past Deyo has argued that the ability of East Asian authoritarian
regimes to deal with "the effectiveness-legitimacy dilemma" has been enhanced
by the weak and disorganized nature of "the popular sector" (i.e, peasants and
workers) (1987c, 231-33). This distinguishes the East Asian NICs from bureau­
cratic-authoritarian regimes elsewhere (for example, Latin America' s Southern
Cone) where the popular mobilization has been higher. But Deyo points out that
South Korea is a little different from Taiwan or Singapore. In the ROK he cites
" more repressive regimes . . . imposed in response to sometimes violent opposi­
tion from middle-class intellectuals, students, and workers" (1987c, 241), which
have made the tension between accumulation and legitimacy more palpable than
in other semiperipheral East Asian states.
To understand the dynamics of this process, it is necessary to move to the sec­
ond theoretical issue: the nature of the state as both an actor and an organization
made up of various interests. Students of the advanced core countries pioneered
the move away from "instrumentalist" images of the state to models stressing
"relative autonomy" (Poulantzas 1969; Block 1977). Block's observations that
the state must often grant concession to workers and rationalize production in
response to "class struggle" in order to maintain overall "business confidence"
may offer particularly useful insights into recent pressures on the South Korean
government (although the constraints of "dependent development" may limit the
degree of rationalization and wage concessions possible in this case). Skocpol
( 1979) further develops the idea that the state has its own distinct material in­
terests. She points to the multiplicity of state personnel (bureaucrats, police and
military officers, and politicians) who share the broad goal of maintaining social
order, political peace, and business confidence, but whose specific interests often
conflict. Critically, these competing interests are often most transparent in times of
Prospects for South Korean Democratization
87
crisis and may play a crucial role in the reshuffling, or even demise, of a regime.
In an attempt to directly wrestle with ' 'politics in the semiperiphery, " Mouzelis
986)
also formulates a nonreductionist approach to the state. He also uses the
(1
" relative autonomy " argument as a springboard to develop an alternative to
O'Donnell' s BA state approach. While not abandoning "the tradition of Marxist­
ori ented approaches , " Mouzelis urges ' 'new concepts which give serious attention
to the sp ecificity of political structures" ( 1 986, 203). He suggests an expanded
terminology including "the mode of political domination" (similar to the " mode
of production, '). The semiperipheral mode of domination is generally characterized
by "incorporative relations of production" (205) that exclude the masses from
meaningful political participation, and it often promotes the ' 'praetorian tenden­
cy" (toward military domination) in "late-late industrializing societies" (184).
Echoing arguments made earlier by Evans ( 1 979a) , Mouzelis highlights the power
of the state in the semiperiphery to guide economic development and to shape
class interests and configurations (rather than acting as an " instrument" of the
dominant classes). Like Block and Skocpol, Mouzelis is arguing for the key role
of "a non-economistic conceptualisation of political institutions and actors, " but
one that still operates under a general idea of a capitalist state.
The emphasis on the role of strategic " state-based" interests in opening
possibilities for political change may be crucial to understanding the Korean case.
The fissures between the interests within the ROK state have become most clear­
ly visible in the past two years of political crisis and uncertainty. This has led
to an increasing lack of coordination between different government agencies and
ministries across a gamut of issues and policies. In turn, this further weakens
state capacity vis-a-vis a civil society that is gaining political strength and losing
confidence in its rulers. The result is a degree of stalemate within the state that
makes popular demands difficult to resist. Nevertheless, still lurking in the
background is the general imperative to maintain " business confidence. " The
crucial issue in this period of flux is, at what point are interests in the South Korean .
state likely to coalesce and reimpose a more repressive solution?
TOWARD A NEW ECONOMIC MODEL? PROSPECTS AND
PROBLEMS
If the South Korean economy has reached a crossroads, there is a growing con­
sensus among planners and policymakers that the most promising highway to the
future involves the development and application of increasingly sophisticated
technology. Prominent government planner Lee Chong Ouk claims, " There are
several predictions, including one from the World Bank, that the Republic of Korea
will be ranked among the developed countries by the turn of this century. . . .
Korean society has been making full-fledged efforts to make this prediction a
reality through the development of science and technology capabilities" ( 1 988"
1 5). Realizing the key role that research and development may play in determin­
ing South Korea's role in the global division of labor in the future, he lists several
88
Semiperipheral Success Stories?
high-priority areas (including ' ' micro-electronics, information and telecommunica­
tions technology" and "specialty chemicals, new materials, genetic engineering " ) .
Other economic planning experts agree. "Developing independent technology "
and moving toward "capital-intensive production" are the keys to keeping the
South Korean economy ' ' truly internationally competitive"
(interview with Dr.
Kang Won Lee, Korean Institute for Economics and Technology [KIET] , July
14, 1 988). In a published review of industrial policy, another KIET research fellow
notes various steps that have been taken to encourage the development of innovative
technology (through direct government support and tax incentives). Between 1 980
and 1 986 the share of R&D investments to GNP rose from 0.9 percent to
2
percent ( "which is almost the OECD level") (Kang 1 988, 3 1 ), with plans to in­
crease it to 3 percent by the early 1 990s (37). This attitude is consistent with
past efforts by genuinely development-oriented ROK elites and technocrats to
develop national industrial strategies designed to enhance the country' s global
competitiveness. The success of this R&D push, however, is itself contingent
on international factors . As Lee ( 1 988) acknowledges, technological development
in South Korea will necessitate "cooperation" with advanced nations like the
United States . But this implies a degree of continued technological dependency
that could become problematic. As Haggard and Cheng ( 1 987) point out, South
Korea and the other East Asian NICs may be limited by the willingness of core
firms to engage in " 'real ' technology transf er." Current dif ficulties with ob­
taining the latest productive innovations are seen in the prevalence of " backward
engineering "
in which major Korean firms engage-where overseas products
(often from Japan, Europe, or the United States) are taken apart in order to deter­
mine how to copy the technology . Of necessity, this type of R&D relegates
the economy to a lower swing of the product cycle than nations that are innovators
(see Cumings 1 984 for a discussion). Haggard and Cheng claim that "the develop­
ment of an indigenous capacity for science and technology" will be critically i m­
portant. This suggests the urgent need for a major push toward science and
engineering, which may be difficult in a country that up until now has had a
relatively limited R&D infrastructure (using, for example, the physical plant
of universities as an indicator).
Of course, this is not the only strategy available for Korean capital. " Dein­
dustrialization" in the core countries (see Bluestone and Harrison 1 982 on the
United States) is a basic component of the emerging ' 'new international division
of labor" (Frobel, Heinrichs , and Kreye 1 980). One would expect that a similar
process might occur in Korea as well, particularly in the declining, less com­
petitive, labor-intensive industries (e.g., textiles, light industries, simple assembly) .
Such production might seek locales (like Southeast Asia) where labor is cheaper
and more compliant. This is the downward side of the ' ' sandwich" dilemma (see
Gereffi 1 988). Unless these types of industry are rapidly replaced by newer "high­
tech " forms, we would expect that aggregate industrial production will shrink.
The beginnings of this process may be becoming visible in contemporary Seoul,
where capital increasingly is attracted to nonproductive investments in urban
Prospects for South Korean Democratization
89
buildings and real estate. Growing land speculation of this type creates housing
shortages and rampant inflation and may present a long-term threat to the entire
South Korean economy.
Failure to move toward more sophisticated capital-intensive manufacturing will
not only fetter continued economic growth, it will also endanger the process of
democratization itself. This move is necessary because the " old" model of eco­
nomic growth was based on low wages and popular political exclusion. Once civil
society increases the demands for more democratic participation, the viability
of such a strategy becomes dubious. While the desire to maintain international
competitiveness does seem to be an integral part of the impetus toward ' 'rationaliz­
ing " the economy by moving to more technologically sophisticated production
tech niques, there is also a complementary "internal" motive.
There is near consensus among South Korean development planners, academic
researchers, and political ad visors that the "social costs" of the low-wage­
dependent export manufacturing had become intolerable. For example, a Korean
Development Institute researcher told one of the authors that the political situa­
tion and labor unrest had resulted in a situation in which increased social spend­
ing and rising wages are almost inevitable.4 Maintaining economic growth
becomes very problematic, and "one solution would be to move toward more
capital-intensive production" (interview with Dr. Soon Won Kwon, KDI, July
16, 1 988). Dr. Lee at KIET also argued that "economic policies now must ex­
plicitly deal with their ' social costs' . . . in particular, labor disputes, income
inequality, and regional disparity need to be addressed. " There is a growing
perception that the current political climate has ended working-class acquiescence
to "labor discipline" ; industrial workers seem no longer willing to accept low
wages and restricted consumption in exchange for national economic goals.
CONTENDING FORCES IN THE STRUGGLE FOR POWER
To fully capture the shifting dynamics of contemporary South Korean
would require an examination of a number of class and interest group
military has dominated the ROK government for much of the postwar ... ... __' �
continues to exert enormous clout; President Roh is a n ex-general.
in various state agencies also play an important role in policy-making and sup­
port for the current regime. Students and intellectuals have historically been in
the vanguard of the struggle for democracy. Their persistence in the face of
relentless government repression throughout the past decade was the catalyst that
sparked the national mobilization leading to the removal of President Chun (and
provided a heroic model for the 1 989 Chinese student movement for democracy).
The middle classes of professionals and small entrepreneurs are likely to be as
critical for successful moves toward democracy in Korea as they have been
historically in other nations. Emerging social groups may become more impor­
tant too. Although they are largely quiescent today, Seoul and other large Korean
cities have significant and growing populations of urban poor. In 1 988 the
_
90
Semiperipheral Success Stories?
opposition was beginning to make a political issues of the substandard living con­
ditions in urban shantytowns and "moon villages. "
While other social f orces may be important, our analysis suggests that the strug­
gle between the workers and the uneasy alliance between big business and the
state is particularly important. Historically, both the capitalist and working classes
are of recent origin. Only with the success of export-oriented manufacturing and
the institutionalization of giant chaebol trading companies as major economic forces
in the late 1970s and early 1980s did a politically important bourgeoisie emerge
(Koo 198 7; Kim 1988). As business becomes more powerful, some members
of the capitalist class are calling for decreased intervention in the economy by
technocrats and favor limiting the political prerogatives of the military. Thus in
some instances parts of this emerging capitalist class actually are advocating
economic liberalization and limited forms of political liberalization, although they
are also quite aware of the potential problems that unions, strikes, increased
demands for a social wage, and higher labor costs might bring if democracy pro­
ceeds too fast or too far.
This fear is a realistic assessment of the emerging clout of a n urban industrial
working class. This is occurring against a historical backdrop of forty years of
efforts to marginalize the political left and disorganize and exclude urban working­
class groups from political participation (Cumings 1981; Haggard and Cheng
1987). Deyo identifies "disciplined low-cost labor" as the basic element of export­
oriented industrialization and points to increasing levels of labor repression under
Park Chung Hee. He points out that after Park seized power in 1961, strikes
declined from an average of 79 per year (1955-1960) to 15 per year (1963-1971)
(1987b, 186). After Park's narrow presidential victory i n 1971 (and the "Yushin
Constitution" in 1972), even more controls were placed on workers and unions.
Labor repression actually intensified in the early 1980s (Deyo, 198 7b) as Presi­
dent Chun Doo Hwan "suspended all collective bargaining and banned organiz­
ed labor protests and the formation of independent labor unions" (Fineman 1987).
In spite of this repression, the latent power of the South Korean working class
was gradually growing as the success of export-oriented industrialization was
dramatically transf orming the occupational structure. The result of the economic
transformation is a proletarianized and urbanized South Korea. When "political
cracks " began to appear in the mid -1980s (created by a legitimation crisis in the
Chun dictatorship), the pent-up demands of the working class rapidly coalesced.
In July 198 7 a foreign missionary noted "a tremendous surge in labor activity"
and said that''the explosion is understandable when you consider the labor sec­
tor is the most suppressed of any in society today" (Fineman 1987). Workers
unleashed a wave of strikes demanding wage increases, better working condi­
tions (in 1986, 1, 718 ROK workers were killed and 141,809 disabled by on-the­
j ob injuries [Fineman 198 7] ), and collective bargaining rights and guarantees.
This appears to reflect a feeling among workers that they have deferred safety
and consumption long enough. But beyond acting for their own narrow self-interest
in work stoppages, workers have also joined in numerous demonstrations to
Prospects for South Korean Democratization
91
support students' calls for more democratic reforms and Korean reunification.
The developing class consciousness of Korean workers appears to transcend the
narro w economism that appears to characterize the core proletariat.
As interesting and important as growing working-class demands is the response
from the ruling elites. While some businessmen and government officials insist
that worker demands for wage increases, increased workplace safety, and institu­
tionaliza.on of collective bargaining are no threat to overall profitability (examples
in Fineman 1 987), others are not so sure. A Hyundai manager complained in
Iln August 1 988 story in the Ko rean Herald , that, " Our workers used to be highly
disciplined and do whatever the company wanted them to do but since the govern­
ment announced democratic reforms in June last year, the workers' attitude
changed completely" (Moon 1 988). In October 1988 the chairman of Daewoo,
Kim Woo Chong, told a Los Angeles Times reporter, " If it hadn't been for labor
trouble the GNP would have grown 20% last year instead of 12 % (Jameson 1988).
Recently President Roh "said strikes have cost $2.4 billion in lost production
and $600 million in reduced exports this year [ 1 989] " (Associated Press 1 989).
Clearly, business and government leaders are acutely aware of the economic costs
of democratic and labor reforms (although they may also feel that it is not feasi­
ble to "roll back" the reforms). As argued earlier, one of the imperatives that
the state must fulfill is maintaining ' 'business confidence" ; at some point further
reforms may come into sharp conflict with this function.
WHITHER DEMOCRACY?
South Korea in the 1 980s was undergoing a perilous time of change. It is, literal­
ly, at the economic and political crossroads. Many Koreans are buoyed by the
modest political opening affected by Roh Tae Woo in the past four years.
the structural analysis of this chapter suggests ample reasons for pessimism.
constraints of ' 'dependent development" make political democratization
ficult, even in a country that has been largely a " semiperipheral success
It is not likely that South Korea's state and business elites would allow
tional economic competitiveness to be sacrificed in exchange for greater I-'V>H"",'
and economic participation for ordinary Koreans, but this is a choice that
may face. Gereffi lays out the "three-dimensional challenge" to all East Asian
NICs
from below, by emerging NICs like the Philippines, Indonesia, Malaysia and Thailand
who were competing in many of the same low-wage manufacturing export industries that
East Asia's "Gang of Four" (Taiwan, South Korea, Hong Kong and Singapore) so suc­
cessfully exploited during the previous decade; from above, creeping protectionism in the
major markets for their industrial exports (the United States and the nations of Western
Europe); and from within, the shrinking labor pool, and hence rising wage levels . . .
coupled with growing political unrest in South Korea. (1988, 20)
92
Semi peripheral Success Stories?
Some aspects of the South Korean reality, particularly the emergence of large ,
strong, politically savvy urban industrial classes, along with the state' s enhanced
desire to attain national and intemational legitimacy, seem to bode well for gen­
uine lasting political change and democratization. On balance, however, there
appear to be many constraints on the speed and extent of political liberalization.
Perhaps Peter Evans 's speculation on the future trajectory of political change is
worth noting. He wonders whether South Korea might follow Japan 's lead here.
If so, rather than ending up in the ' 'tumultuous democracy" of the Latin American
semiperipheral societies, the ROK might end up with a Japanese-style "controlled
parliamentary system" characterized by "restricted" electoral competition "with
a minimum
or
repression"
( 1 987, 223) . Events in the spring of 1989 suggest
that the Roh government is beginning to become very worried about the burgeonin�
and increasingly militant labor movement and demands for more radical elec­
toral opposition politics. The state response has been sometimes-violent repres­
sion and the cancellation of a scheduled referendum on the president. None of
this bodes well for the prospect of further political liberalization. Perhaps even
Evans has been too optimistic.
On the other hand, predicting social change is a very perilous task. In the past
the people of South Korea have taken on major challenges against very long odds
and succeeded. It is quite possible that they may be able to steer their society
toward a distinctly Korean form of democracy and overcome some of the con­
straints suggested in this chapter. We would only argue that constraints are more
readily overcome if they are acknowledged, understood, and confronted head­
on, rather than denied, avoided or sidestepped. We end with a recent assessment
from the Economist:
South Korea has confounded pessimists before . . . . Korea's challenge will be to see
whether democrats can run an economy as successfully as despots . ( 1989, 78)
NOTES
A substantial portion of this research was carried out while David Smith was a 1988 sum­
mer fellow at the Institute for Far Eastern Studies. We thank the institute for its generous
support.
1 . Evans writes : "If classic dependence was associated with weak states, dependent
development is associated with the strengthening of strong states in the 'semi-periphery. '
The consolidation of state power may even be considered a prerequisite for dependent
development" (1979b, 1 1) .
2. The ideological nature of this critique i s clearly revealed in the author' s admission
of preference for ' 'neo-classical " economic theory as an explanation of East Asian NIC
development. The view that these economies' successes depend on unfettered free enter­
prise, markets , and a lack of government intervention is so patently false (for a discussion
of government intervention in the ROK, see Johnson 1987, 139) that it would almost be
Prospects far South Korean Democratization
93
. comical but that this misperception enjoys such great influence in the planning and policy­
literature (see, for example, World Development 1 6 , I ) .
3 . "Since 1945 South Korea has received nearly 6 % of the total nonmilitary grants
by the United States. This continued assistance from the United States reflects the
pcJ.'�O" HJ.O strategic or geopolitical importance of South Korea. The extent of its strategic
n{"\,rto,,{'p becomes clear when one considers that since 1970 South Korea also received
nearly 3 . 5 billion dollars in United States military aid, over three times that of any other
East Asian country except Vietnam (Ibid: 870)" (Nemeth and Smith 1985, 203). "It is
no exaggeration to say thatthe American aid sustained the Korean and Taiwanese economies
in the 1950s . " (Haggard and Cheng 1 987, 87).
4. Dr. K won's discussion of labor unrest took on a very concrete form. He related how
KDI itself had been touched by it only a few weeks before the interview when lower-level
researchers and assistants had gone on strike and succeeded in winning some concessions.
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___
HE LIMITS TO SEMIPERIPHERAL
EVELOPMENT: ARGENTINA IN THE
WENTIETH C ENTURY
P. Korzeniewicz
chapter argues that the concept of semiperiphery, as advanced by world­
theory, allows for a more accurate analysis of institutional arrangements
social constraints upon development among individual nation-states. This step
important because some authors continue to portray world-systems theory as
essentially similar to the dependency approach, maintaining that in both
theories "external factors determine the dynamics of domestic development"
and Stephens 1 988, 740). Such a criticism distorts the character 0 f world­
theory, manipulating a superficial dichotomy between " internal" and
vAlvl1J.al ' factors to portray the theory as a reductionist version of the dependency
approach. In this chapter I will focus on the concept of semi periphery to
the importance of world-systems theory in revealing social dynamics that
define as being of an " internal" or " domestic" nature.
This chapter centers on the institutional arrangements and economic tra j
of Argentina. The endemic crisis of development in the case of Argentina
often been held as a crucial paradox to be explained by theories of "p'llPlnnrn",nT�
Waisman's concept of reversal of development ( 1 988) is a recent example of
effort to explain Argentina' s apparent anomaly. The mediocre economic perfor- .
mance of Argentina since World War II is often contrasted with other nations
of recent European settlement such as Australia and Canada. There is also a con­
sensus that Argentina's steady deterioration in its standing within the world­
economy after World War II is in stark contrast to the trajectory of rapidly in­
dustrializing nations such as Brazil and South Korea. In short, on a comparative
basis, the pattern of economic growth in Argentina for much of the twentieth
century, and particularly during the postwar period, shows considerable stagna­
tion. This is illustrated by figure 6. 1 .
The adoption of a world-systems approach eliminates many of the apparent
paradoxes in Argentina ' s trajectory of development. Thus Arrighi has pointed
6.1
1929
.
.
. .
.
. . .
•••••I•
.
. .
.
•
• ,
.
'"
I.J
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••••
• •
•
1965
•I•
.•
I•••••••••
..
19 5 7
.
','I'.
...
•
Source: Elaborated o n the basis of data i n Waisman (1988) .
,
1937
=
,
.
.
.. .. ..
.
••.•
1978
1982
.. .. .. ..
, "
1 I" I , , ,.. . . . . . . . . . . . . . . ,
11
100)
1
II ,
1/
, "
"
.
,
I
'
•�'
(Argentina
..
...
1913-1982
-'-',
/////..r..r..r////-'-'/-'-'-' ..,..
///..r..r..r../..r..//..r//..r..r/..r/
///
I
I
f
1!! !!� �
J��:=;;
. .....n'
1913
o
1 50
200·
250
3 00
350
400
450
500
Per C apita Product, Selected Countries,
Figure
Australia
:///,
Brazil
':,:,:,:,:,:':' Italy
I...
C(]JUJ[]a
- A rgentina
The Limits to Development: Argentina
99
out that from a world-systems approach, " what appears as development at the
national level may be part and parcel of the reproduction of a core-periphery
dichotomy at the global level" ( 1 985, 250). The same argument also applies to
the opposite situation: namely, what appears as a case of world-economic stagna­
tion resulting from purely national characteristics in Argentina may in fact manifest
constraints and obstacles that are inherent in the world-economy as a system.
The premise of this chapter is that these constraints can be made analytically
transparent only by identifying them as embedded in structural positions within
the world-economy.
Core, semiperiphery, and periphery refer to the position occupied by states
in the world division of labor rather than to their position in the interstate system
or their internal political characteristics. Utilizing GNP per capita as an " opera­
tional measurement of the various mixes of core-peripheral activities, " Arrighi
and Drangel ( 1 986) have introduced greater precision in identifying both the
distribution of nation-states among the three structural positions in the world­
economy and the extent and frequency of individual mobility by nation-states from
one position to another. According to their research, core, semiperipheral, and
peripheral positions within the world-economy have maintained a high degree
of stability since the 1 930s, with relatively few transitions taking place from zone
to zone. The use of this same operational measurement shows that since the late
nineteenth century Australia and Canada have been firmly grounded in the core
and Argentina in the semiperiphery, with the trajectories of nation-states such
as Brazil and South Korea representing a transition from the periphery into the
semiperiphery after the interwar period.
The three sections of this chapter focus on these trajectories and their relation­
ship to institutional arrangements, state policies, and social constraints. The first
section deals with the differences between Argentina and other nations of recent
settlement and argues that the consolidation of Australia and Canada in the core
was accompanied by the adoption of state policies conducive to
mass consumption, and electoral democracy, while Argentina' s "".lill""UV'"
development involved mbre limited advances in each of these spheres. The
and section of the chapter deals with the interwar period and suggests that
were strong parallels between institutional arrangements in Argentina and
adopted among other semi peripheral nations during the 1 920s and 1 930s, and
that many of the specificities of Peronism resulted from the strong character of
semiperipheral development in Argentina prior to World War II. The third sec­
tion dra ws conceptual distinctions between the concept of semiperiphery and that
of " dependent development. " This section discusses the postwar period to argue
that social constraints upon state policies in Argentina are indicative of structural
limits to semi peripheral development, and that the " success models" of Brazil
and South Korea involve a different type of trajectory (from the periphery into
the semiperiphery) that is likely to encounter similar limits in the near future.
The major points made in each of the three sections are summarized in the
conclusion.
1 00
Semiperipheral Success Stories?
NATIONS OF RECENT SETTLEMENT (1890s-WORLD WAR I)
There has been much debate over the trajectories followed by the nations of
recent European settlement within the world-economy. In his early articles
Wallerstein was somewhat ambivalent about their precise structural position,
(1979, 85-86), other times placing them
(1 979, 1 00). Resnick (1 989) argues that Canada should be
sometimes placing these states in the core
in the semi periphery
considered as part of the semi periphery because of a weak national bourgeoisie
and little influence in the arena of international politics. Giving greater emphasis
to economic characteristics, Glenday has suggested that Canada belongs to the
semiperiphery because "economic development has been constrained by the in­
fluence of both the trade in 'staples' and the nature and direction of the flows
of capital from its metropolitan partner"
(1989 , 216).
Other authors have more accurately highlighted profound structural differences
between Australia and Canada, on the one hand, and Argentina, on the other.
Dyster, for example, indicated that differences between Australia and Argentina
in terms of relative wage levels were already entrenched by the last quarter of
the eighteenth century and the first half of the nineteenth century: "A decisive
shift had occurred in Argentina ' s terms of trade toward landholding and produc­
tion for export, whereas the balance in Australia between import and export, be­
tween consumption and production, held firm throughout"
(1 979 , 95). Similar­
ly, Diaz Alejandro argued that a great gap existed between Argentina and other
countries of recent settlement already by
1 860, although the gap was consistently
narrowed over the next seventy years, when national income grew faster in Argen­
tina than in Australia, Canada, and even the United States
(1970, 55) . 1 Alex­
ander has also argued that by the turn of the century Argentina was firmly in
the semiperiphery and Australia in the core of the world-economy, indicating
that these divergent positions explain the consolidation of democratic institutions
in Australia and the breakdown of democratic institutions and the adoption of
"a path of state repression and counterrevolution" that prevented the "incor­
(1989,
32 1 , 328).2 Finally, Arrighi and Drangel (1 986) and Arrighi, Korzeniewicz, and
Martin ( 1 985) confirm that Australia and Canada were already firmly grounded
poration of the working class into a consumerist capitalism" in Argentina
in the core and Argentina in the semiperiphery by the late nineteenth century,
and that these structural differences persisted throughout the twentieth century.
The fact that by the
1 920s Argentina remained in the semiperiphery, despite
experiencing a rate of growth among the world 's fastest, emphasizes that rapid
economic growth may be accompanied by no structural changes in the position
occupied by particular nation-states within the world-economy. The world­
economic trajectories of Canada, Australia, and Argentina also show that the ag­
gregate rewards accruing to different nodes of economic activity are not inherent
in the technical features of production or the type of commodities involved but
are an outcome of changing processes of competition and innovation among
economic actors in different areas of the world-economy (Wallerstein
1 979 , 71).
The Limits to Development: Argentina
101
Hence i n all three nations state policies and entrepreneurial initiative had achieved
formidable rates of economic growth by rapidly bringing together land, labor,
and capital into the production of high-priced agricultural commodities.3 Further­
more, aggregate rewards differed even within a single commodity according to
the forms of production that prevailed among different regions of the worldeconomy: after the 1 8 70s growing agricultural productivity in nations of recent
settlement led to declining market shares in grains for Eastern Europe, where
older methods of production prevailed (Alexander 1 989).
Finally, in all the nations of recent settlement (including Argentina) the state
played a very active role in providing conditions favorable to economic expan­
sion. In the case of Argentina, for example, state elites were a major force behind
territorial expansion and the military elimination of native Americans, as well
as in promoting labor migration from Europe and attracting foreign investments.
It is important to emphasize the active role of the state in Argentina during the
last half of the nineteenth century because some have interpreted the world-systems
approach to argue that nations in the semiperiphery are characterized by weak
states (Cumings 1 988, 269). This is not the argument put forth in world-systems
theory. In fact, Wallerstein has indicated that among semiperipheral nations "the
direct and immediate interest of the state as a political machinery in the control
of the market (internal and international) is greater than in either the core or the
peripheral states, since the semiperipheral states can never depend on the market
to maximize, in the sho rt run, their profit margins" ( 1 979, 72).
Contrasts in the trajectories of Australia, Argentina, and Canada after the 1 930s
have long been acknowledged in comparative studies, where the debate has re­
volved around whether the postwar stagnation of Argentina should be attributed
to Peronism or to the economic and political arrangements developed by land­
owners prior the the turn of the century. Most of these comparative studies have
focused on differences in the structure of economic growth. In Canada wheat
production was an important component of this growth, but ' ' exports of
and of livestock products also grew rapidly. And as export income eXj)aTIldel:ii
domestic market, manufacturing and the service trades also raced ahead"
1 978, 1 98). Manufacturing also played a more important role in Australia:
ing the 1 920s the total annual output of steel grew from 1 4 , 000 to over �vv. ,,'vv.
tons, and the motor vehicle industry became " one of the principal ways in which
foreign capital and techniques of production were introduced into Australian
manufacturing" (Forster 1 964, 57). In both Australia and Canada state economic
policies played an active role in promoting industrialization and in raising pro­
ductivity within mining and agriculture by making major investments in
technological innovations and scientific research.
In Argentina, on the other hand, the process of industrial growth was largely
saddled on the export structure that had been mounted in the 1 870s, and there
was a " high propensity to import manufactures" (Diaz Ale jandro 1 970, 16). 4
Manufacturing prior to World War I grew more slowly, so that in 1 9 1 3 the out­
put of manufactures per capita in Argentina was roughly one-fourth of what it
1 02
Semiperipheral Success Stories'
was in Australia (Lewis 1978, 163). As opposed to Canada and Australi a , manufac­
turing in Argentina grew ei ther in response to market opportunities or as
an
unintended consequence of state policies. However, "The Argentine growth rate
did not suffer noticeably from this relative weakness of backward linkages. It
may even have benefitted from greater specialization along the lines of comparative
advantage, in contrast with Australia during the same period , " so that "a sus­
tained lag in Argentina's growth rate behind most of Western Europe and coun­
tries of recent settlement is difficult to find before 1930" (Diaz Alejandro 1970,
17, 54).
Hence industrialization would only make a substantial difference in the interwar
period, when manufacturing (in a world-economy characterized by a breakdown
of hegemony and crisis of the world market) became a mechanism to overcome
peripheralizing pressures within the world-economy . In fact, over the short run,
the economic rewards of protectionist policies in Australia during the interwar
period were meager when compared to the consi stently high rates of economic
growth achi eved in Argentina between World War l and World WarIl . Unemploy­
ment and recession also hit Australia with much greater strength than Argentina
during the 1930s. But by World War II it became clear that state policies in
Australia had been instrumental in consolidating a core position within the
world-economy.s
State policies promoting i ndustrialization and increasing agricultural produc­
tivity in Australia and Canada were part of the creation of innovative institutional
arrangements designed to respond to the social pressures generated by labor and/or
family farmers . 6 This can be best illustrated by contrasting Australia and Argen­
tina. Mining in Australia served as the basis for a powerful labor movement that
by the early 1900s effectively constrained the choice of strategies that the state
could pursue. Having repeatedly lost major strikes throughout the 1890s , organized
labor turned to the politi cal arena to seek there the concessions it could not wrest
from employers through direct bargaining (see Turner 1965). The position of
organized labor was further strengthened after 1901 by the formation of a powerful
Labour Party. Thereafter,
it was the presence of labor in politics, and the growing strength of the industrial organiza­
tions, which precipitated the wave of social legislation that for a time made Australia a
model for the world. . . . the growth of government enterprise and the creation of institu­
tions, such as the Commonwealth Bank, to give effect to government economic policy;
such nationalist policies as immigration restrictions and defense-all these, the better and
the worse, owed their existence substantially to the labour parties (Turner 1 965 , 50).
Over the long run, however, these changing state policies (and particularly the
new restricti ons on immigration) could only be made compatible with further
economic growth by promoting a model of development based on industrializa­
tion rather than exports. This did become the new direction adopted by state
policies in Australia in the early twenti eth century. 7
The Limits to Development: Argentina
1 03
The political incorporation of labor also paved the road for industrialization
in Australia by providing an early institutional system through which to mediate
conflicts between workers and employers . The creation of these state institutions
included the early consolidation of a state bureaucracy that subsequently under­
took an active role in promoting industrialization as a " natural " extension of
its original functions (MacIntyre 1983, 1 08). Labor's strong political position
also had a crucial impact upon the domestic market: wages and income in Australia
rose through most of the 191 0s and 1920s, not only ensuring growing domestic
demand for consumer durables but also acting as an incentive for both technological
innovation and industrial protectionism.
In Argentina the forms of action and organization adopted by labor were precise­
ly the opposite to those of Australia. To begin with, " In spite of some cyclical
unemployment, for 1 860-1 930 as a whole Argentina can be characterized as a
full-employment economy " (Diaz Alejandro 1970, 27) . Furthermore, internal
labor reserves were lacking, and European immigrants had to be attracted through
high wages. As a result, workers had considerable bargaining power within the
labor market. This bargaining power was enforced through innovative forms of
action and organization adopted by labor when unformalized craft controls over
the workplace and the labor market were undermined after the 1880s.
Workers in Argentina were able to effectively press demands upon employers
with little need to strengthen the political power of their organizations. 8 This
does not mean that semi peripheral nations are characterized by weak labor
movements or poorly paid workers: it is precisely the strong market bargaining
power of labor in Argentina that explains the absence of a highly politicized labor
movement. This also does not mean that politics were absent from the develop­
ment of the labor movement: it underlines that politics did not constitute the cen­
tral arena in which workers pressed their demands upon employers. In short,
the export-led model of growth continued to shape state policies without any
jor political challenge from organized labor.
The very success of the prevailing model of development allowed for
and political challenges to be met by gradual institutional innovations and
rewards, and this provided an overall stability to the political system-at
while economic resources remained easily available. In the process, the
structure of Argentina evolved in a manner similar to that which prevailed among
core countries . This had social and political consequences that were to reveal
the inherent limits of semiperipheral development.
THE SEMIPERIPHERY IN THE INTERWAR PERIOD
By the end of the interwar period, the social and political constraints of Argen­
tina's semiperipheral position in the world-economy began to become apparent.
The interwar period as a whole was punctuated by increasingly pronounced
economic and political discontinuities. Economically, state elites found growing
difficulties in continuing to rely on exports as the main drive for the overall
104
Semi peripheral Success Stories?
economy : this was manifested in growing unemployment and balance-of-trade
deficits and declining rates of economic growth. Politically, there was a cris is
of prevailing institutional arrangements, beginning with the military overthrow
of the Yrigoyen administration in 1930, following with the widespread use of
fraud in elections through the rest of the decade, and culminating in the military
coup of 1943. These discontinuities resulted in two significant new trends : growing
intervention of the state in protecting the export sector and manufacturing from
competitive pressures and increasing mediation of the state in conflicts between
capital and labor. In turn, social actors began turning to the state to seek to ad­
vance their positions primarily through the political arena.
Both under the Radical administrations of the 1920s and the regimes of the
1930s, state policies in Argentina were intended to respond to the breakup of
the world market and the intensification of interimperialist rivalry. Facing a
deterioration of the terms of trade, growing protectionism in Europe, and a wither­
ing of capital flows from the United States, state policies were designed to avoid
the impact of competitive pressures by closing ranks with England through bilateral
trade agreements. Industrial growth did proceed forward in Argentina during the
1920s and 1930s, but it was bound by a model of growth that revolved around
the undisputed primacy of agricultural and livestock exports, as well as by the
rigidities of a political system in which ruling elites sought to keep institutional
innovations at a minimum.9
This institutional response to world competitive pressures stood in contrast to
the state policies pursued by the Vargas regime in Brazil during the same period.
The Vargas regime saw regional competition among factions of capital as a political
threat. In response, state policies in Brazil soon after the 1930 coup made in­
dustrial protectionism into the centerpiece of a broader effort to counter the im­
pact of the international crisis. For this purpose, domestic demand was stimulated
and financed by the central government through fiscal deficits and the revenues
generated by exports (Fishlow 1977, 26). Tariffs and exchange controls were
introduced to reduce imports and improve the balance of trade, and state agen­
cies were created to provide easier channels of credit for industrial development
(Villela and Suzigan 1975, 60). The state itself invested heavily in industry, par­
ticularly in large-scale and high-risk projects and enterprises that the military con­
sidered to be strategic to national security (Trebat 1981, 56).
State policies in Brazil during the 1930s were highly successful. Economic
recovery through the 1930s was led by manufacturing, which grew "at an [average
annual] rate of 8.6 % . . . while agriculture rose at half this rate" (Fish low 1977,
26). In contrast, manufacturing in Argentina grew at an average annual rate of
3 percent between 1929 and 1939 (Diaz Ale jandro 1984, 39). State policies pro­
moting industrialization in Brazil evolved in a manner similar to the case of Mex­
ico where these policies emerged as "a reflection of the government's unifica­
'
tion policy, designed to counteract the centrifugal forces at work in the country"
(Furtado 1970, 80). From this point of view, the main priority of the Vargas
regime was to capture and centralize political power under the central national
The Limits to Development: Argentina
1 05
go vernment; industrialization was pursued as a means to achieve this ulterior
:political objective.
, ( These policies shared important features with those of fascist regimes in Southern
�urope during the interwar period, particularly in terms of the strategy adopted
to deal with the new opportunities and constraints of the world-economy.
: ' Ideologically, these regimes pushed for ' ' social harmony" -as opposed to " market
{rule, liberal democracy and class conflict, [which] were seen as disruptive in­
fluences on the nation's internal cohesion and external power" (Arrighi 1 985,
251 ) . These regimes were also similar in their state policies, with protectionism
and mercantilism being ' ' meant to sustain domestic production and employment
in order to facilitate social harmony/control, and to strengthen the internal linkages
between economic processes at the expense of external linkages " (Arrighi 1 985,
25 1). In other words, state policies were designed to strengthen national com­
over wealth by insulating domestic producers from peripheralizing tenden­
: cies in the world-economy.
Argentina did come to share some similarities with these regimes after the
emergence of Peronism following the 1 943 coup. As part of the new develop­
ment strategy implemented after 1 943, state policies pursued industrial growth
by stimulating consumer demand through higher wages and public spending, pro­
tected industrial entrepreneurs from foreign competition through import tariffs,
and redistributed income from the export sector to the urban sectors. 10 Once im­
plemented, protectionist policies were supported by industrial entrepreneurs and
labor alike, for they allowed both wages and prices to rise. These policies coin­
cided with an effort by the Peronist administrations ( 1 946- 1 955) to consolidate
an internal coalition of the urban and rural working class, industrial entrepreneurs,
small farmers, and the middle class, while establishing Argentina' s hegemony
within Latin America.
But if one compares Peronism to other corporatist experiences in
semiperiphery, there are salient differences. First, Peronism made its <""r\po,r"" l'P
late in the interwar period rather than during the 1 920s (as in the case of
or the 1 930s (as in the case of Brazil). This difference in timing had ,'Tnn(�rt,,,·
consequences, for the same state policies that had effectively promoted .
dustrialization among many semiperipheral nations during the 1 920s and
would prove considerably less effective during the postwar period and the era
of U.S. hegemony. The second difference involves the role of labor under the ,:
Peronist regimes. In Italy labor-repressive legislation "was . . . a necessary com­
plement [of protectionism and mercantilism], since only direct state regulation
and repression could simultaneously maintain industrial peace, full employment,
and wages low enough to allow for accumulation in an inefficient economy" (Ar­
righi 1 985, 252) . In relation to the labor movement, fascism involved both en­
hanced competition within the labor force and a mobilization of other social groups
in support of antilabor policies (with the fragmentation and heterogeneity of social
groups providing a basis for the autonomy of state policies from particular
economic interests). In Brazil under the Vargas regime, state policies began to
�
t\
1 06
Semi peripheral Success Stories?
regulate the actions of organized labor; this ensured labor discipline, while at
II
the same time it opened a new potential basis of social support.
But in Argentina organized labor under Peronism considerably increased its
political bargaining power and institutional strength. Despite efforts to subordinate
trade unions to the state apparatus, they maintained a greater degree of autonomy
(particularly at the grass roots level), and state institutions found it difficult to
control the rising frequency of labor-capital conflicts. Furthermore , comisiones
intemas and factory delegates contested management's control over the organiza­
tion of the workplace. Finally, the emergence of Peronism was accompanied by
a massive growth in union membership, and trade unions played a key institu­
tional role within the new regime. In other words, organized labor under Peronism
achieved considerable institutional strength, and this would allow the labor move­
ment to effectively challenge state policies for decades to come.
How can these differences in timing and in the role played by labor under
Peronism best be explained? Waisman argues that these policies resulted from
an unrealistic fear of revolution among state elites. Structural changes in the world­
economy around the 1930s had challenged the economic and political status quo,
leading to a fragmentation of established elites and making possible a greater
autonomization of the state. But facing an unrealistic fear of revolution, new state
elites developed antirevolutionary policies- "radical protectionism to manufac­
turing and a corporatist strategy toward labor" (Waisman 1987, 137)-that led
to growing economic stagnation and political illegitimacy. According to Waisman,
' 'The new industrial and labor policies were initiated from above, and they were
not a concession to the demands and mobilization for these policies in civil socie­
ty" (1987, 138). In short, political instability and economic stagnation were the
outcome of misguided state policies: "The decline of Argentina was the result
of policies with which sectors of the elite believed they were protecting their in­
terests. More specifically, they sacrificed economic growth for what they thought
were their long-term political interests" (Waisman 1987, 11).12
But were Peronist policies merely ref orms ' 'from above " that did not respond
to actual social demands? In fact, during the 1930s labor was very effective in
adopting new forms of action and organization that enhanced its political bargaining
power. Before the 1930s the adoption of industry wide forms of action and
organization among workers had been rare, labor's bargaining power revolved
primarily around tight labor-market conditions, and state mediation in labor-capital
conflicts was irregular. But with the wave of strikes of the mid-1930s, semiskilled
and unskilled workers engaged in industrywide actions, adopted unions organized
on a nationwide basis, and pursued state mediation as a central mechanism for
pressing demands upon employers. Communist organizers were particularly suc­
cessful within these new industrial unions. Their success challenged the older
political leadership within the labor movement (such as Syndicalists, Socialists,
and Anarchists) and was viewed as a threat by conservative leaders, business,
and the armed forces. The state responded to labor unrest, particularly after a
wave of strikes in the mid-1930s, by intervening more directly in regulating labor
The Limits to Development: Argentina
1 07
cap ital. With these changes , labor' s political bargaining power began to
the new centerpiece of institutional arrangements among labor, capital,
the state.
�; P'ef(ml:, m developed as a response to the new pressures generated by the labor
;';""PTneI1t upon prevailing institutional arrangements. After the 1 943 military
the primary concern of Colonel Peron upon becoming secretary of labor
to contain the growth of Communist influence within organized labor. Here
broader context is important: as indicated in repeated memoirs and statements
the military during this period, there were pronounced fears among the armed
that organized labor-and with it, the Communist presence in Argentina­
grow substantially stronger upon the end of World War II. To counter
Communist unions and strengthen state regulation of labor-capital relations,
relied upon and further developed channels of institutional mediation that
been initiated in response to labor unrest during the 1 93 0s. Peron found will­
allies among trade un ion leaders from other political tendencies and encouraged
to adopt the same forms of action and organization that had previously been
under Communist leadership in the industrial unions. Finally, Peronism
the development of an alliance with other social sectors (such as
ggricultural workers, industrial entrepreneurs, the commercial middle class, and
farmers) through the use of a political discourse that actually shared many
in common with the Communist discourse of the late 1 930s and early
But the timing of Peronism and the role played by labor in support of these
should also be understood in light of the relative success of Argentina
the world-economy prior to World War n. Institutional arrangements among
capital, and the state had come to share strong similarities to those that
in core areas of the world-economy. In this sense the high revenues
,, ' g:ellierarea through the comparative advantages of agricultural and livestock pro-�
. ·
yielded a larger volume of revenues that could be distributed among
in Argentina to limit conflicts among them. As in core areas of the
this allowed for the early prevalence of a convergence of mtprc·ctc
tween labor and capital and for " a market economy sustained by the state,"
function of state policies "was . . . the reestablishment and "U.U�'JH'.la.'IU.JCl5";i" ",.f'r:;'
rather than the suppression of market competition" (Arrighi 1 980, 1 1 - 12).
some adjustments, these policies were maintained by state elites in Argentina in
the midst of the Great Depression. Overall, particularly in the short term, state
policies in Argentina during the interwar period were very successful in dealing
the disruptions of the world-economy. 13
As indicated in the previous section, the labor movement in Argentina derived
considerable bargaining power from the strong pattern of economic development
that characterized the period prior to World War n. In contrast to other semiperi­
pheral areas of the world-economy (such as Italy and other Southern European
nations), periods of economic expansion always confronted a relative shortage
of workers and/or labor reserves. As a consequence, the labor market in Argentina
1 08
Semi peripheral Success Stories?
was characterized by a tendency toward full employment, and this greatly
strengthened the bargaining power of labor at all levels.
This is where the issue of historical timing becomes important in relation to
the formation of Peronism. Through the 1930s institu.onal arrangements in Argen­
tina began to channel social demands through the political sphere, and there was
a rising mobilization not only of workers , but also of industrial entrepreneurs ,
farmers, exporters , and merchants. The coup of 1943 was designed to provide
new leadership to these disparate social forces . But as opposed to other
semiperipheral nations at the ti me, Argentina's privileged position in the world
market during World War II as a producer of foodstuffs generated considerable
wealth, providing a greater margin of resources for political negotiation and the
incorporation of labor. In a context marked by a high degree of politicization,
Peronist policies were designed to use this margin of negotiation to generate a
rapid and broad basis of political support.
Seeking to increase state control over economic resources to advance in­
dustrialization, Peronist state policies also used the distribution of wealth to en­
sure continued political support by labor . But as i ndicated in the next section of
the chapter, this new strategy of development also entailed future constraints.
The availability of revenues derived from a privileged position in the world market
was of central importance to the ability of state elites to maintain political con­
sensus . These revenues quickly dwindled in the early 1950s , generating a marked
recessi on. As agricultural and livestock producti on ceased to yield the same high
level of revenues as before, and as the state failed in its bid to transform Argen­
tina into a core area of the world-economy, the margin of surplus available for
internal distribution began to stagnate or even decline. At the same time, the in­
stitutional strength gained by labor under Peronism limited the ability of state
policies to reverse their strategy and try to more effectively subordinate labor
to accumulation. In a world context in which the unruli ness of labor acted as
a constraint upon development, these pressures would lead to the continued crisis
of the postwar peri od.
THE CONSTRAINTS OF SEMIPERIPHERAL DEVELOPMENT
IN THE POSTWAR PERIOD
Argentina's trajectory within the world-economy during the postwar period sug­
gests that institutional arrangements in the semi periphery are characterized by
social constraints that become an obstacle for subsequent transitions into the core.
During this period, as elsewhere in the semi periphery , " it was the outbreak of
social conflict and its unfolding that determined more than anything else the tim­
ing and direction of political-economic change" (Arrighi 1985, 2 64). Most im­
portantly, the labor movement in Argentina retained the strength that characterized
organized labor in core areas of the world-economy, but it became increasingly
dif ficult for the state to sustain the relative convergence of interests that had
characterized previous phases (or the immediate postwar period under Peronism).
The Limits to Development: Argentina
109
particular, state policies in Argentina during the postwar period found it in­
hard either to control social unrest or to extend mass consumption and
H
_�'nt.,," full employment. Hence labor unrest in Argentina in the postwar period
more profound and sustained than in most core areas of the world­
and entrepreneurs responded with capital flight abroad. The explosive
uu,' U "'�" of a strong labor movement with limited revenues illustrates some
the key structural constraints that are characteristic of semi peripheral areas
the world-economy.
As indicated in the previous section, these constraints were not immediately
;'ilPlp arent after the end of World War II. At the end of the war favorable trade
cond.ltlClDS and large reserves provided the Peronist regime elected in 1 946 with
necessary resources to promote industrial expansion and economic growth
improving wages . By the 1 95 0s, however, Peronist state policies ran against
' VUILU"U""-n.� that would constrain economic growth for decades to come. Thus,
the favorable external conditions of 1 945-48 and the reserves accumulated
1946 had disappeared, and in spite of the brief Korean commodity boom,
economy was not capable of sustaining a growth rate superior to that of the
"
.UJu'I'U"UU�'u (Diaz Alejandro 1 970, 1 1 0).
new economic difficulties resulted in part from a deterioration in the balance
trade. After the 1 95 0s, revenues from exports declined due to stagnant
productivity, falling terms of trade, and growing domestic consump­
of agricultural and livestock products. At the same time, the process of import­
industrialization generated greater demand for capital goods and raw
that
could only be secured abroad. These two trends resulted in " stop,
' and-go" cycles (see Braun 1 973 ) . State authorities periodically responded to the
'
, deterioration in the balance of trade by implementing devaluations designed to
agricultural exports and raise the cost of imports. Eventually, imc
' orov,emlentS in the balance of trade generated foreign revenues and increased the:
of the national currency, providing new opportunities for urban
and entrepreneurs to press for more favorable state policies (O'Donnell
These drastic fluctuations in economic growth and state policies prevented
consolidation
of a coherent institutional strategy for integrated economic U"V"J:uu'�,
.
ment. During the Peronist regimes, for example, there was growing competition
, '.- among manufacturing firms in Argentina over their relative share of a stagnant
I:; , : ' domestic market, but these firms found it difficult to gain a competitive edge
� " throUgh the adoption of technological innovations due to the lack of capital im.
, __ ports. From this perspective, protectionism and the closing of the economy to
foreign competition resulted in more pronounced inefficiencies in the production
i i and distribution of goods and service s . 14
�.�{ . ':
These institutional constraints were indicative of the limits to semi peripheral
� : development within the world-economy. During the interwar period and immediate
,. postwar era, state action in the semiperiphery played a fundamental role in counter­
ing peripheralizing pressures within the world-economy by protecting domestic
manufacturing from foreign competition. During this conjuncture state action was
"U�'''b'J
,
,'" " ,,
f
110
Semi peripheral Success Stories?
crucial in maintaining a semiperipheral position by reproducing an even mix of
core and peripheral activities within national boundaries . But over time the very
same strategy used to resist peripheralizing pressures within the world-economy
became crystallized in institutional arrangements and entrenched economic in­
terests that would later prevent the adoption of the further innovations required
for a successful transition into the core .
During the immediate postwar years, for example, protectionist state policies
had continued to promote the growth of manufacturing and to upgrade the mix
of economic activities contained within Argentina. But later in the postwar period
these same policies discouraged capital investments and/or the adoption of fur­
ther innovations in production. State efforts to dismantle these protectionist struc­
tures proved largely unsuccessful . This was because the restriction of foreign
competition through protectionist policies developed into a crucial mechanism
used by the state to reduce tensions between labor and capital, and both organized
labor and manufacturing firms resisted any efforts to substantially alter these in­
stitutional arrangements . 15 In time, these arrangements fed strong inflationary
tendencies, further undermining each of the different strategies of development
pursued by both civilian and military governments during the postwar period.
Thus, inherent in recurring balance-of-trade deficits, currency devaluations, pro­
tectionist structures, and inflationary pressures , there were escalating conflicts
between and within labor, capital, and the state (Diaz Alejandro 1970, 122) . These
conflicts were a major element explaining the institutional instability that followed
the military overthrow of the Peronist administration in 1 955, as well as the
economic stagnation and political violence that characterized Argentina for years
to come.
The postwar trajectory of Argentina has often been contrasted to that of Brazil
(see figure 6. 1 ) . State policies in Brazil achieved high rates of economic growth
through the rapid expansion of industrial activities : between 1 950 and 1 980 the
share of manufacturing in gross domestic product (GDP) grew from 1 6 . 5 per­
cent to 30.2 percent (Economic Commission for Latin America 1 980, 1 09) . As
an indication of the magnitude of industrial growth, " by 1976 the weight of steel
products, machinery and equipment within the industrial sector was superior to
30. 0 % , the highest ratio in all Latin America and close to the existing ratio in
Western Europe" (Serra 1983, 57) . Industrial growth was also accompanied by
changes in the structure of exports, with the share of manufactured products grow­
ing from 1 0 . 5 percent in 1968 to 45 percent by 1 980 (Serra 1983, 59) .
The success of the model of development pursued by federal state agencies
in Brazil and the recurrent crises that characterized the trajectory of Argentina
are indicative of significant differences in the type of social constraints encountered
by the state. In Brazil federal elites since the 1 930s had diluted the direct pressures
of economic interests by strengthening a centralized corporatist structure at the
expense of the strength and autonomy of state governments . A myriad of federal
state agencies were created to provide bureaucratic channels of participation, and
their effectiveness served to solidify the new model of growth implemented after
The Limits to Development: Argentina
111
mid-1 930s. These corporate channels of mediation were also effectively ex­
to the sphere 9f the organized labor movement. When these corporatist
were challenged by labor militancy after the 1 950s, the military moved
to replace them with more repressive forms of labor control.
opposed to Brazil, institutional arrangements in postwar Argentina have
constrained state efforts to consolidate any long-term development
. The institutional political system has itself reflected ' 'a compromise be­
powerfully structured groups" (Furtado 1 970, 102). 16 In particular, in;tium oHru arrangements after the overthrow of the Peronist administration in 1 955
until the mid- 1 970s were characterized by the capacity of labor and com­
sectors of capital to successfully resist most attempts by state policies to
,,,�.,.t"" " "- them and ensure their political subordination. 17 Thus postwar Argen­
was characterized by "a state [that was] recurrently razed by changing co­
of civil society. . . . This resulted in a state apparatus [that was both] ex­
colonized by civil society and [hence] extraordinarily broken-up"
LAJlIlI'v" 1 977, 552) .
. These constraints were particularly evident in regard to the labor movement.
political power developed by organized labor under Peronism made postwar
; 'lnlstil:utlon,U arrangements among labor, capital, and the state highly unstable and
as a constraint upon capital accumulation. After the overthrow of Peron
""(;; . __
1955, enterprises responded to the strength of trade unions by introducing
L"'-"II"'''V/,'V'U innovations designed to improve the productivity of labor. These
m",nV'UlCm s, however, had the unintended consequence of enhancing the ability
",r." Ir,�,.c to disrupt production through forms of action and organization centered
the workplace. This workplace bargaining power of labor undermined
ability of the official trade union leadership to discipline the rank and file,
iiltlrod:uc:ing further instability into prevailing institutional arrangements. Final­
a succession of co-optive and coercive policies implemented by both " '."'-" J
elected regimes proved unsuccessful in dampening labor unrest and/or
the power of organized labor.
This ' 'unruliness " of labor became the single most important constraint
the process of accumulation in the 1 960s, particularly in light of the fact
.' the military regimes in Argentina after 1 966 competed for the same flows of direct
: foreign investment that military regimes attracted to Brazil after 1 964. For pot:enltIai
.
lm'esltors, the virtual explosion of labor conflicts in Argentina in 1 969 became
" evidence that the Argentina Bureaucratic-Authoritarian [state] had failed as the
- guarantor of social peace and economic stability. Consequently, the flow of foreign
{ investment halted and numerous indicators registered without delay the loss of
�': ' confidence" (O 'Donnell 1 976, 1 9). In contrast, by 1 969 the military regime in
. Brazil had shown " the will and the ability to impose a socially regressive policy
over an extended period" (Skidmore 1 977, 28) , and this proved of great impor­
tance in effectively maintaining high rates of local and foreign investment.
This does not mean, of course, that internal social constraints were the sole
factor determining the relative success of state policies in generating high rates
___
.
1 12
Semi peripheral Success Stories?
of economic growth . The stability of institutional arrangements in the postwar
period hinged upon the ability of state policies to anticipate and effectively re­
spond to the new conditions of the world-economy. Foreign invesWnents, favorable
trade agreements , and international financial confidence were of great importance
in achieving high rates of economic growth, and they were pursued in Brazil
through a variety of incentives . At the same time, state policies in Brazil had
a long history of playing upon competitive pressures within the world-economy
to gain leverage from which to increase and direct flows of foreign capital toward
productive investments .
Such a strategy was not effectively pursued by political elites in the case of
Argentina. During the interwar period relations between Argentina and the United
States were viewed as competitive. Already in 1 929 "many influential Argen­
tine leaders regarded their country as the logical counterpoise to the United States
in the Americas, and dreamed of increasing Argentine influence in neighboring
countries" (Diaz Alejandro 1970, 59). After the end of World War II, the Peronist
administrations misjudged future developments in the world-economy and in­
terstate system (for example, by constructing trade policies based on expecta­
tions that an imminent World War III would increase demand for foodstuffs).
Finally, after 1 955 successive efforts to attract international investments and
finance were undermined by endemic institutional instability . From this perspec­
tive, Diaz Alejandro argues that ' 'nationalistic policies cost Argentina the direct
foreign investment that stimulated industrialization in Australia, Brazil, and Canada
during the postwar period" ( 1 970, 266) .
But what was the character of postwar developments in Argentina and Brazil?
The most significant attempt to conceptualize these trajectories of economic growth
has been through the concept of dependent development. For Cardoso and Falet­
to, in dependent nations "the accumulation and expansion of capital cannot find
its essential dynamic component inside the system" ( 1 979, xx). But postwar
dependency is to be distinguished from ' 'classical dependency" (production of
raw materials for the international economy prior to the Great Depression) (Evans
1 979, 58). After 1 929 populist regimes began to mobilize economic resources
away from traditional export sectors to promote investments and expand urban
consumption ; but the end of the export boom, combined with the growing strength
of industrial entrepreneurs and the mobilization of wage earners , resulted in a
political crisis of the populist regimes (Cardoso and Faletto 1 979, 1 50) . "When
a political crisis in the system prevents an economic policy of public and private
investment for development, the only alternatives are opening the market to foreign
capital or making a radical move toward Socialism" (Cardoso and Faletto 1979,
1 55) . In the postwar period this gave rise to "dependent development" , which
joined the public sector, the multinational corporation, and the modern capitalist
sector of the national economy, and producers. "Producers become the most im­
portant 'consumers' in the economic expansion . . . . To raise the accumulation
or savings capacity of those 'producer-consumers , ' the demands of the masses
must be contained, and as a consequence, a policy of redistribution to broaden
The Limits to Development: Argentina
1 13
consumption becomes ineffective and even contrary to this type of development
b ased on the dynamism of big enterprises" (Cardoso and Faletto 1 979, 1 63) .
From this perspective, the failure of state policies in Argentina to achieve high
rates of economic growth would be attributed to the impact of social unrest in
Argentina and the ability of organized labor and other social forces to resist the
implementation of the authoritarian strategy. This theme is further developed by
O'Donnell ( 1 978), who has focused on the political consequences of dependent
development through the concept of the bureaucratic-authoritarian state.
The dependent-development approach, particularly as used in Latin America
itself, represented a significant advance over more simplistic dependency ap­
proaches. The new approach sought to uncover the ways in which state elites
actively responded to the social constraints that had resulted from previous phases
of accumulation. As a result, the dependent-development approach emphasized
the processes of conflict and negotiation that confronted political actors and shaped
state policies, and social unrest was brought into analysis as a significant variable
shaping state policies.
However, the dependent-development approach, particularly as used in the
United States, had significant drawbacks. To begin with, the concept has involved
a number of generalizations derived from a limited number of " case studies"
(usually the most industrialized countries in Latin America) . Building on generali­
zations, the conclusions have often proved inadequate when dealing with other
nations outside this particular region. Cumings ( 1 988), for example, suggests that
the postwar trajectory of most Asian countries undermines the propositions that
the state plays a relatively subordinate role to foreign capital or that the logic
of the alliance between the state, foreign capital, and local elites will always re­
quire and reproduce greater social inequality and the political exclusion of the
broad majority of the population. The problem arises in part because it is unclear
whether the concept of dependent development applies to the relative standing
of states within the world-economy (in other words, to the relative command
wealth exercised by these states), or to the type of social and political
that has promoted industrial growth in a restricted number of cases. The
of semi periphery , on the other hand, allows for the two issues to be
analytically distinct, so as to make their relationship an object of theoretical inquiry:
This points to a further difference in the concepts of dependent development
and semiperiphery. The concept of dependent development focuses almost ex­
clusively on the postwar period and the expansion of multinationals engaging in
manufacturing in Third World countries . Patterns of development prior to the
1 930s are neglected as a phase of "classical dependency" that involved no signifi­
cant efforts by state elites to control interaction with the market. Within the world­
systems approach, on the other hand, the semi periphery is viewed as a constant
feature in the development of the world-economy. By adopting a long-term
historical perspective, it becomes easier to identify which are the features that
have been constantly present in the semiperiphery and which are truly new
phenomena of the postwar era.
1 14
Semiperipheral Success Stories?
One of the consequences of this difference is that it allows for different historical
questions to be raised . Although the notion of "active role of state" brings world­
systems theory close to the dependent-development approach in their emphasis
on the active role of states in seeking to enhance the mix of economic activities
contained within territorial boundaries, the world-systems approach maintains that
this pattern of state action has always been a maj or feature of the semiperiphery,
rather than being merely a postwar phenomenon. But the consequences go fur­
ther. Within the dependent-development approach, industrialization is generally
viewed as a mechanism of upward mobility . In the world-systems approach, on
the other hand, it is clear that the character of industrialization must be examined
within its historical framework . From this perspective, manufacturing is not in
itself a core activity . It may have been so at different times and places , and it
may continue to be so in certain forms, but the degree to which it represents a
core activity is a consequence not of the activity itself, but of the competitive
relations it embodies within specific time-space coordinates . This point is par­
ticularly relevant insofar as developments in the past few decades have under­
lined that ' 'the industrialization of the semiperiphery and periphery has ultimate­
ly been a channel, not of subversion, but of reproduction of the hierarchy of the
world-economy" (Arrighi and Drangel 1 986, 56) .
Finally , within the dependent-development approach, global processes are nar­
rowly understood as mechanisms of dependency-the avenues through which ex­
ternal agencies condition the development of Third World states. Rather than adop­
ting a narrow focus on the vulnerability of Third World nations to decisions made
in the core, the world-systems approach focuses on the dynamic process by which
classes and states are engaged in conflict over their relative position. This also
raises the issue of comparisons . Within the dependent-development approach,
successful models of development are compared to broaden the generalizations
that can be made about the dynamics and tensions of the social alliance that have
served as the basis for industrialization . From a world-systems approach, what
should be explored is the manner in which these developments were interrelated
(e. g . , the successful movement of Brazil and South Korea into the semiperiphery ,
through competition for scarce foreign resources , became a constraint upon the
development of Argentina) .
CONCLUSION
Argentina dramatizes the difficulties involved in breaking out from a semiperi­
pheral position to a core position. The institutional arrangements that accompanied
the emergence of Peronism were designed to mediate and/or defuse potential social
conflicts, and it was in these terms that the legitimacy of Peronism and postwar
regimes can to be measured. But in the process, postwar regimes were shackled
by the same social pressures they sought to defuse. This constraint became all
the more evident after the late 1960s, when foreign investments avoided conflict­
ridden Argentina. Thus the weight that social pressures had exerted upon the
The Limits to Development: Argentina
115
political system and the failure to overcome these pressures through political in­
novation have prevented the type of discontinuities and transformations that would
have been required for Argentina to bid for a move into the core. Even the military
coup of 1976, attempting to impose social discipline through corruption and repres­
sion, proved to be totally inept in creating legitimate and lasting changes in the
existing institutional arrangements.
The institutional responses adopted by labor, capital, and the state are likely
to differ among various semiperipheral nations. Some states, although they
constitute exceptional cases, may even succeed in generating innovative methods
of institutional response that allow for movement into the core of the world­
economy, thereby becoming a model of development for other nations to
follow. 18 Cumings argues that state policies in South Korea after the mid-1960s
resemble those of the "bureaucratic-authoritarian" regimes in Argentina and
Brazil, but that their " real model is . . . the 1930's Japanese state " (1988, 261).
According to Cumings, this model involved a considerable degree of autonomy
of the state from society; an active role of state elites as prime organizers of
economic growth (planning, investments, and infrastructure) ; and a sustained effort
to " suppress . . . all threats to the existing order" (1988, 261). In fact, this model
seems to involve what constitutes a common pattern in all successful transitions
from the periphery to the semiperiphery of the world-economy: state elites will
generally break with dominant economic interests in promoting a new strategy
of development designed to increase their legitimacy (internally and externally)
and counter centrifugal forces within national boundaries (either across or among
social forces).
Once nations move into the semiperiphery, however, state elites are likely to
encounter new social constraints that make it difficult to follow the path of suc­
cessful transition into the core without significant institutional innovations.19 To
begin with, state elites must contend with either the appearance of new
forces or shifts in the political balance among existing forces-the new
of the labor movement in Brazil after the mid-1 970s or current de1{e14:)plneI
involving students and the labor movement in South Korea are merely
amples of this point. At the same time, as suggested by the trajectory of
tina, institutional arrangements that prove functional to ensure a selnilpel:ip.llelral
position at one point in time (such as protectionism) may also hinder further
sit ion into the core. Finally, from this perspective, transition into the core
the late nineteenth century has apparently required the adoption of qualitatively
new institutional arrangements involving the effective economic and political in­
corporation of major social forces (as manifested during the postwar period, for
example, in policies conducive to mass consumption and full employment) . But
these changes are difficult to adopt in the semiperiphery, where the institutional
arrangements of previous transitions or permanence in the zone tend to become
crystallized in agencies and political channels of mediation that undermine the
ability of state elites to generate innovative responses to social constraints and
world -economic opportunities.
116
Semiperipheral Success Stories?
The consolidation of Australia and Canada in the core, the relative stagnation
of Argentina during the postwar period, and the character of successful transi­
tions from the periphery into the semiperiphery all serve to bring forth three im­
portant points. First, even when state elites do adopt innovative responses to social
constraints , they must face competitive pressures from other peripheral and
semiperipheral states within the world-economy . This is why the imitation of suc­
cessful models of development does not generally yield the expected results for
other nations. As indicated in this chapter, generating innovative responses is
difficult enough : in semiperipheral nations , as elsewhere in the world-economy,
entrenched economic interests will systematically resist institutional changes that
may expose them to greater competitive pressures . Furthermore, innovative
responses may actually succeed in overcoming these social constraints but still
fail to successfully exploit world-economic opportunities . Even states that are
successful in each of these areas must still deal with the fact that they do not
operate in a vacuum, but in a world-economy in which other states are also engaged
in efforts to improve their control over world economic resources. For this reason,
in order to understand the relative success or failure in the trajectory of individual
nation-states, it is necessary to analyze these trajectories in their relation to each
other . 20
Second, the trajectory of Argentina suggests that one of the most important
constraints faced in further transitions into the core involves the nature of the
labor movement in the semiperiphery. The unruliness of labor in the semiperiphery
has a more explosive character than in the core, due to the fewer resources
available to minimize conflicts between labor, capital, and the state. 21 Further­
more, the overall character of the labor movement is likely to undergo signifi­
cant changes on a periodical basis, generating further pressures that undermine
the stability of prevailing institutional arrangements. This is due to the very
character of the semiperiphery . Core production processes are characterized by
innovations that are clustered in time (related to this, see Schumpeter 1 962 , 68) .
These innovations result in cyclical transformations of the labor process and the
labor market that alter the forms of action and organization of labor. To the ex­
tent that nations in the world-economy participate in these innovations, one should
expect these changes to alter the nature and orientation of the labor movement
on a periodical basis, often undermining the stability of prevailing institutional
arrangements. However , in a semiperipheral context, labor movements
" tend . . . to be strong enough to disrupt accumulation but not strong enough
to resist retaliation in the workplace or in the political order" (Arrighi 1 985, 256).
The consequences of these tensions are revealed by the explosive character of
social and political conflict in the semiperiphery. For this reason, political strategies
toward organized labor in the semiperiphery can be expected to be of central im­
portance in determining the outcome of democracy and economic growth in the
immediate years to come.
The third and final issue involves current political changes in the semiperiphery,
and this final paragraph is designed to raise questions rather than provide answers.
The Limits to Development: Argentina
117
From Moscow to Buenos Aires , and from Seoul to Rio de Janeiro, the 1980s
have brought a clear trend toward greater democratization. In order to bring forth
the importance of the concept of semiperiphery, the nature of these changes should
be actively addressed within the world-systems approach. What will the
semiperiphery look like in the 1 990s? Is the trend toward greater democracy in
the semiperiphery likely to continue? Are political changes likely to be accom­
panied by structural economic transformations? From a world-systems ap­
proach,what are the limits that are likely to be encountered by these economic
and political transformations? Does democratization provide an avenue for
movement into the core? Alexander, for example, argues that ' ' democracy is not
a social lUXury available only after industrialization has advanced a country to
core status, it is an integral element in creating the flexibility that constitutes core
politicS" ( 1 989, 329). But by its very nature, the concept of semi periphery would
seem to preclude the possibility of a massive movement into the core by today' s
democratizing nations . Does democracy hence share essential similarities with
industrialization, in that both may have facilitated movement into the core prior
to the postwar period but now function to reproduce a semiperipheral position?
By addressing these problems, world-systems theory will begin to tackle the most
relevant question in the contemporary semiperiphery : what will it be?22
NOTES
1 . Agricultural and livestock exports, which were at the core of economic growth in
Argentina, grew at an average annual rate of 6 percent between 1 880 and 1 9 1 3, "making
Argentina compete with Japan for the title of the fastest growing country in the world"
(Lewis 1 978, 1 97) . But Diaz Alejandro points out that even by 1 929, GNP per capita
in Argentina ($700) remained considerably lower than in both Australia ($1 ,000) and Canada
($1 ,300) (in 1 964 prices) ( 1 970, 55).
2 . Institutional differences between Argentina and Australia are clear; what
be clarified is how these political differences were related to the different structural
tions occupied by these nations within the world-economy.
3 . Fogarty ( 1985) has referred to these agricultural commodities as " �111n"T-�t>tnIF'�'
and Di Tella ( 1 985) as a type of innovation yielding windfall profits .
4. This is not to say that industrial growth was insignificant in the early interwar
The expansion of agricultural and livestock activities resulted in growing domestic de­
mand, while periodic deficits in the balance of trade slowly redirected the supply of con­
sumer goods from imports to domestic production. Villanueva ( 1 975, 69) has pointed out
that industry grew rapidly in Argentina at the time: within the overa11 1900-1946 period,
the 1920s witnessed the highest rates of growth of both industrial investments and imports
of capital goods . Also, the deterioration of terms of trade for agricultural exports served
as an incentive for import-substitution industrialization already prior to the crisis of 1 929
(O' Connell 1984, 196) .
5. This conclusion is similar to that of Dieguez (1969) , who argues that the industrializa­
tion policies pursued by the Australian state in the 1 9 1 0s anticipated by two decades the
international developments that in the 1 930s forced the Argentine state to begin adopting
120
Semiperipheral Success Stories?
the difficulties in generating appropriate responses to the social pressures of the interwar
period. However, these constraints should not be seen as exclusively national in character,
but as broadly characteristic of the semiperiphery .
20. Wallerstein indicates that "it is not possible theoretically for all states to ' develop'
simultaneously . The so-called 'widening gap' is not an anomaly but a continuing basic
mechanism of the world-economy. Of course, some countries can 'develop. ' But the some
that rise are at the expense of others that decline" ( 1 979, 73) .
2 1 . Here I draw on the collective work of the World Labor Research Working Group
at the Fernand Braudel Center at the State University of New York at Binghamton.
22. The methodological implications of this question are raised by Mukherjee (1979) .
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___
___
___
SEMIPERIPHERY OR CORE?
7
THE REPUBLIC OF IRELAND IN THE
WORLD,ECONOMY : AN EXPLORATION
OF DYNAMICS IN THE SEMIPERIPHERY
Richard Grant and Donald Lyons
World-system theorists argue that semiperipheral states occupy a critical struc­
tural position in the functioning of the world-economy. Semi peripheral states ex­
hibit a set of characteristics that combine core processes and peripheral processes .
No semiperipheral processes have been identified. The semi periphery is a crucial
middle zone in the three-tier hierarchy of states, providing stability to the world­
system by preventing a bipolar division of the world-economy into core and
peripheral areas. This middle zone is one to which peripheral states can aspire,
and it can insulate former core states from descending into periphery status.
Classifications of the semi periphery include a diverse range of countries in terms
of geographic locations, economic strength, political background, size of
and levels of democracy.
Despite recent attempts by Arrighi and Drangel (1986) to classify the
imately 170 states of the world-economy into a trimodal structure
semiperiphery, or periphery) , the concept of the semiperiphery has remained
of the weakest and most ambiguous components of the Wallersteinian f'r,,","'Uli'lrl
(Milkman 1979, 264) . Surprisingly, there have been few attempts i n the
systems literature to trace in detail the development of semi peripheral states
time, with the exceptions of Mingst's (1988) study of the Ivory Coast, Millcnan's
(1979) work on South Africa, Martin's (1986) work on South Africa, and Ligthart
and Reitsma' s (1988) historical analysis of Portugal in the seventeenth and early
eighteenth centuries .
The first aim of this chapter is to assess the Republic of Ireland' s position in
the world-economy. We selected Ireland because it is an interesting case study
of a recently independent country (1922) with a long history of colonialization.
We decided to begin at 1959 since this was a key year in the development of
Irish foreign and domestic economic policy. Prior to 1959 successive Irish govern­
ments pursued an exclusionary policy of economic autarky severely restricting
126
Semiperiphery or Core?
foreign capital inputs and providing high tariff barriers for the protection of in­
digenous industry . This policy was deemed a failure in 1959 and was replaced
with a " developmental " or " modernization " -style policy that actively encouraged
foreign multinational investment. The second aim is to contribute further to a
clarification of the concept of the semiperiphery, which is one of Wallerstein's
most important and, at the same time, controversial concepts .
In order to investigate Ireland' s position in the world-system, we selected two
approaches from world-systems literature (Arrighi and Drangel 1 986; Mingst
1 988) and a method based on unequal exchange that we borrowed from
international-relations research (Firebaugh and Bullock 1986) . The Arrighi and
Drangel approach is based on the argument that the balance of core and peripheral
activities in a particular country determines its share of the world' s resources
or wealth and hence its structural position in the world-economy . They argue
that this balance is reflected in differences in GNP per capita between countries,
and this provides the basis for their classification. Mingst, drawing directly on
Wallerstein ' s arguments about the semiperiphery , identifies three important at­
tributes of semiperipheral countries: economic complexity, strong state machinery,
and a significant degree of cultural integrity. Firebaugh and Bullock attempt to
operationalize the notion of unequal exchange by assigning a numeric value be­
tween 1 and 6 to exports on the basis of the degree of processing prior to export­
ing. Level 1 exports contain the least processing, while level 6 exports contain
the highest degree of processing. This can then be used as an indicator to measure
a state' s structural position in the world-economy.
THE ARRIGHI AND D RANGEL METHOD
Using the same procedure as Arrighi and Drangel, we have superimposed
Ireland' s log of GNP per capita on the graph of core, semiperiphery, and periphery
modes (figure 7 . 1) . The result is consistent with the hypothesis that Ireland is
located in the semiperiphery. Unlike the semiperiphery as a whole, Ireland suc­
cessfully resisted peripheralization throughout the 1 960s and 1 970s . This was
achieved in a number of ways. First, in an effort to gain access to the core, the
previously unsuccessful economic autarkic policy was replaced by one that ac­
tively sought to attract foreign industry into the country to establish a viable in­
dustrial base. An aggressive industrial development policy was established that
offered generous capital grants and tax incentives for export-based industry.
Ireland ' s location on the rim of Western Europe, its inexpensive but relatively
well educated work force, and the government' s favorable attitude to business
made it an attractive location for branch-plant industry. Second, entry to the
European Economic Community (EEC) enhanced its locational advantage enor­
mously. Final-stage or assembly branch-plant industry could now gain tariff-free
access to the huge markets of Western Europe. Thus Ireland became an ideal
internal periphery to the EEC (Perrons 1 986). Third, entry to the EEC brought
about a large transfer of monies from core states through the Common Agricultural
t
-+------+--�-+1 950
1 965
Per i phera l Mode
Se m i pe r i phe r a l M o d e
Core Mode
Source: G. Arrighi and J .
1.5
G 2.5
N
P
P
C
2
L
0
G
3
3.5
'[
1 970
I r e l and
E175
--
-+-----1 980
1903
-- - - -- --- - - - - -- - - --- - - -- -�
Figure 7.1
Trends in Modal GNP Per Capita of the Three Zones and Irish GNP Per Capita
\
1 28
Semiperiphery or Core?
Policy (CAP) and to a lesser extent from the Regional Development Fund (Beck
and Nierop 1986) . The boom experienced during the 1970s was short-lived,
however, as rising inflation and indebtedness and increasing unemployment and
labor turmoil caused a rapid downturn in the early 1 980s as the fragility of an
industrial economy based on foreign multinational industry became evident. Real
GNP per capital declined in the first half of the 1980s, unemployment rose to
approximately 19 percent, and emigration reached 30,000 a year. Growth resumed
during 1 987, and the trade balance reached a surplus, reflecting a fundamental
improvement in Irish cost structures and the unexpected temporary strength of
the international economy . While domestic demand remains weak, emigration
continues , and unemployment remains high, GNP has begun to rise.
The Arrighi and Drangel model is of limited use in locating any given country
in the trimodal structure . Most importantly , Arrighi and Drangel do not present
GNP per capita as a surrogate measure for classifying individual countries . Rather,
it is used to identify the operation of broad structural processes within the world­
economy. As such, limited significance is attached to the exact GNP per capita
values of any given country . Furthermore, while the Arrighi and Drangel model
locates Ireland in the semiperiphery and suggests slow but steady growth
throughout the 1 970s and early 1 980s, it hides the considerable variation within
the Irish economy. While log of GNP per capita identifies the declining economic
situation of the early 1 980s , it fails to capture the complexity of the economic
situation in Ireland during the time period under study . Thus, while GNP per
capita as a measure of command over a proportion of the world' s resources iden­
tifies important aspects (necessary features) of the underlying structure of the
world-system, it does not isolate or identify how these patterns are worked out
in specific locations (contingent features) .
THE MINGST METHOD
Wallerstein argues that specific characteristics of semiperipheral states involve
their location between periphery and core on several dimensions: " the complex­
ity of economic activities, strength of state machinery, and cultural integrity "
(Wallerstein 1974 , 349, quoted in Mingst 1988, 260) . Mingst uses this argument
as the basis for her model .
The complexity of economic activity may include a diversification of agricultural
activity and movement from reliance on agriculture to growth in manufacturing
and service sectors. Mingst begins her analysis by examining the sectoral com­
position of GDP. Even in 1960 the composition of Irish GDP was relatively diver­
sified, but a clear trend toward increasing complexity was evident (table 7 . 1 ) .
Between 1 960 and 1 987 agriculture's share o f GDP declined from 22 . 2 percent
to 8 percent, while manufacturing increased from 26.2 percent to 35 percent in
the same period. This suggests considerable movement but again hides considerable
variation in the internal structure of the economy. Furthermore, if we compare
Irish GDP with that of the Ivory Coast (which Mingst has identified as a
The Republic of Ireland
129
Table 7 . 1
Sectoral Origin o f Irish GDP
Year
Agriculture
1 960
22.2
26.2
51.6
1 965
1 8 .4
28.4
53. 1
1970
1 4. 4
30.5
55. 1
1 975
15.0
31 0
5 4. 0
1982
1 0. 0
33.0
57.0
1 9 87
8.0
35.0
57.0
Netherlands
4 .0
26.0
70. 0
Ivory Coast
2 7.4
1 8 .5
54. 1
(1 985)
(1985)
Manufacturing
.
Services
Sources: World Bank, 1 976 ; Th e Economist, 1 982, 1 987.
semiperipheral country) and the Netherlands (which is a classic core country),
the composition of Irish GDP is closer to that of the Netherlands, suggesting that
Ireland resembles a core country rather than a semiperipheral country.
Aggregate output performance of Irish manufacturing industry between 1 973
and 1 983 outstripped that of all other OECD countries except Portugal (OECq
1985, 44). Total manufacturing output increased by 44. 9 percent, placing
in a similar position to the NICs (table 7.2) . This growth was COilcentrate�l
the capital-intensive, high-tech, and foreign-owned sectors such as
(160.6 percent) and metals and engineering (88 .4 percent). Output in the
tional Irish sectors fared badly in comparison. The largest indigenous
food/drink and tobacco, experienced lower rates of increase, while output in
other sectors declined.
Sectoral change in employment during 1973- 1983 also reflects these changes
(table 7.2). While total manufacturing employment decreased by 0.4 percent, this
hides considerable variation. The labor-intensive manufacturing industry, with
relatively low increases in labor productivity and a relatively high reliance on
the slow-growing domestic market, has suffered large employment losses (e. g . ,
textiles, 48 .6 percent). These losses have been concentrated in the domestic-owned
sectors. Employment in domestic textiles production, for example, decreased by
60. 8 percent, while employment in foreign-owned textile production decreased
by 8.5 percent. Foreign-owned capital-intensive industry with lower overall labor
130
Table
Semiperiphery or Core?
7.2
Structural Change in Irish Manufacturing Industry
Ind. prod.
% change
%
Total
change
Employment
foreign-owned domestic-owne d
% change
% change
1973/83
1973/83
1 973/83
1 973/83
Total Manufacturing
44.9
-0.4
36.6
- 1 0.8
Chemicals,
Metals, Engineering
1 60.6
88.4
20.9
52.8
50.2
90.4
- 1 1 .3
20.2
38.4
2 0.4
-2. 8
-5.2
9.8
·9.5
-4.6
-2.5
- 1 5. 6
-48 . 6
-8.5
- 60. 8
-28.4
-23.9
'24.0
-36.8
Timber
furniture
- 1 4. 2
9. 1
-7.5
10.3
Paper and
printing
-7. 6
-2.8
·7.7
-2. 1
Non-metallic
production
1 1. 8
Miscellaneous
53. 1
Food
Drink, Tobacco
Textile
Clothing
footwear
Source: OEDC,
47.7
1 .4
93.0
1 985.
costs and high productivity growth has been less affected and recorded modest
to large labor-force increases (chemicals, 20.9 percent; metals and engineering,
52. 8 percent) .
The structure of the Irish economy is difficult to interpret within Mingst's semi­
periphery framework. On the one hand, sectoral diversity of GDP suggests, at a
minimum, location in the semiperiphery and possibly the perimeter of the core.
Ireland, like the core countries, has experienced changes from labor-intensive
manufacturing to high-tech industry. On the other hand, the growth sectors of the
Irish economy are almost exclusively foreign owned and controlled. These sectors
have had little linkage into the domestic economy, and their significance to value
added has been limited to wages and salaries and some services (Telesis 1982; OEeD
1985; Delaney 1987). What seems clear is that Ireland experienced rapid industrial
development during the last twenty-five years, but this cannot be readily translated
into real development. Rather, as Arrighi and Drangel argue, like other semiperipheral
states, Ireland ran very fast in order to remain in the same place ( 1986, 60).
The Republic of Ireland
131
One explanation of this outcome is offered b y Rothgeb (1986). As he has argued,
multinational corporations (MNCs) during Kondratieff B phases may increase
their flow of investments to the semiperiphery to gain further control of the semi­
periphery or reduce investment and thereby transfer the pain of recession to the
semiperiphery. Both these processes are evident during the time period of the
study. During the 1970s MNCs increased their investments, but the continued
global recession and increased competitiveness of the 1980s warranted a different
strategy, occasioning massive " shakeouts " and an overall reduction of invest­
ment. Together these two strategies had enormous impacts on Ireland's economy
and thus suggest semiperipheral status.
The second of Mingst's categories is state strength. Analyzing state strength is
difficult since there is no consensus among researchers on how to measure it (Mingst
1988, 264). Mingst employs degree of political stability and state-nurtured capitalism,
and we follow her definition. However, Mingst's analysis of state strength implies
notions of a strong, corporatist, military-type government, which is probably more
suitable for analyzing state strength in Third World countries. Except for a two-year
civil war after the independence struggle, there have been no major political or
economic cleavages within Irish politics. Irish politics operates under a system of
representative democracy, a characteristic more evident in core states than in
semiperipheral or peripheral states. Indeed, Gonick and Rosh (1988, 187) argue that
Ireland has a high level of democracy and is more accurately classified as a core state.
Evidence of state-nurtured capitalism provides another tool for analyzing state
strength. Since the foundation of the state, Irish governments have been deeply
involved with the development of industry. First, the development of an autarkic
policy, embracing tariff protection to facilitate import substitution and restric­
tion of direct foreign investment, ensured state involvement in economic activi­
ty. Perhaps the strongest evidence of state support for capitalism comes from
two referenda and the development of industrial policy after 1960. The two TPt".TP.11C
da important in the development of state support for capitalism were on
into the EEC in 1 9 73 and its further consolidation through the Single LJUJl VP"'.f
Act in 1987. These two acts, which further strengthened Ireland's ties to
pean core, were supported by both major parties (Fianna Fail and Fine
and were passed by large majorities. The only opposition came from the
Party and the small farmers' interest groups.
Mingst's third criterion relates to cultural integrity. She argues that semiperi­
pheral states enjoy a semblance of cultural integrity more often found in the core
and generally absent in the periphery. Since independence successive Irish govern­
ments have actively sought to maintain a distinctive Irish culture. Through the
national education system and especially the national primary-school system, the
state has attempted to keep alive the Irish language, history, heritage, and na­
tionalism. Until very recently, for example, five years of Irish-language instruc­
tion was mandatory for graduation from high school.
Religion is usually regarded as a key cultural characteristic. Ninety-five per­
cent of those who live in the South are Roman Catholic, and while the influence
132
Semiperiphery or Core?
of the Catholic hierarchy is declining, it is still very significant. On two major
recent (1 983 and 1986) "religious/moral" referenda, concerning abortion and
divorce, the official Catholic position was supported by the majority of the popula­
tion (O 'Loughlin and Parker, forthcoming) . There is little debate regarding the
level of cultural integrity in Ireland. Ireland enjoys considerably more than a
" semblance" of cultural integrity and is more closely associated with core coun­
tries in this respect.
In summary, using the Mingst method for locating Ireland does not lead to any
conclusive answer. In terms of economic complexity, Ireland has experienced
rapid change since 1 960. Sectoral changes in GDP, output, and structure of
manufacturing suggest a position somewhere between the semiperiphery and the
rim of the core . On the other hand, the large foreign component in Irish economic
diversity suggests that Ireland belongs in the semiperiphery . In relation to state
strength and cultural integrity , Ireland appears more like a core country. These
characteristics, however, may be more suitable for analysis of African countries
than for semiperipheral countries in general. With the possible exception of the
state-nurtured capitalism category, Ireland approximates the core more closely
than the semiperiphery .
THE FIREBAUGH AND BULLOCK METHOD
The Firebaugh and Bullock method is based on an analysis of levels of pro­
cessing of exports (LPE) . The composition of semiperipheral countries would
be reflected by a mix in the levels of processing of exports, with a smaller pro­
portion of exports in level l and level 2 (mainly agricultural exports) than in
peripheral countries and less exports in levels 5 and 6 than in core countries.
Wallerstein (1979) has argued that semiperipheral countries trade in both direc­
tions, in one mode with the periphery and in the opposite with the core. For ex­
ample, semiperipheral states have been viewed as exporting peripheral products
to core states and core products to peripheral areas of the world-system (Waller­
stein 1 982 , 93) . Thus the semiperiphery exploits the periphery , while at the same
time the semiperiphery itself suffers exploitation from the core.
An examination of the direction of trade statistics indicates some diversifica­
tion of trade partners for Ireland over time, with less dependence on the United
Kingdom, although the United Kingdom still represents Ireland 's largest trading
partner (see tables 7 . 3 and 7 .4) . No dramatic changes have taken place in accor­
dance with changes in the world-economy. Ireland trades predominantly with the
industrial countries, suggesting that the European Community (EC) has substituted
for the United Kingdom and that the trading relation remains the same. Approx­
imately 93 percent of Ireland 's trade was with core countries for 1987. In the
same year Ireland had a balance-of-trade surplus with the core for the first time
in its history, but Ireland still has a trade deficit with the periphery. Ireland' s
trade with the Third World i s less than 5 percent o f total trade for any year. As
a result, we cannot describe Ireland as an exploiter of the periphery. There has
Table
7.3
Ireland's Direction of Trade Exports (Values as a Percentage of Total)
Area
1 960
1 965
1 970
1975
1 9 80
1987
Industrial
89.7
9 1 .0
84.5
9 1 .0
87.0
93.0
Britain
74.0
72.0
60. 8
54.1
42. 6
34.2
Africa
0.003
0.003
0.008
0.02
0.0 1
0.0 1
Asia
0.008
0. 009
0.006
0.005
0.01
om
Latin America
0.001
0. 008
0.007
0. 0 1 2
0. 0 1 2
0.003
USSR
0.00 1
0.008
0.007
0.0 1 2
0.0 1 2
0.003
Total a
$425.8
$615
$ 1 ,1 20
$3, 1 9 3
$8,499
$15,999
Source: IMF. Various years.
aMillions of US dollars.
Table 7 . 4
Ireland's Direction of Trade Imports (Values as a Percentage of
Total)
Area
1 960
1 965
1 970
1 975
1 980
1 987
Industrial
77.0
8 1 .0
8 1 .2
84.4
88.5
91.6
Britain
49.7
5 1 .0
5 1 .7
48.6
50.8
42.0
Africa
0.03
0.02
0.02
0.01
0.01
0.0 1
Asia
0.05
0.03
0.02
0.02
0.02
0. 02
Latin America
0.02
0.02
0.009
0.0 1
om
0.0 1
USSR
0.0 1
0.0 1
0.02
0.0 1
0.01
0.003
-$ 1,041
-$ 1 ,622
Totala
-$633.4
Source: IMF. Various years.
<lMillions of US dollars.
-$3,779
-$1 1 , 1 5 1
$ 1 3,628
134
Semiperiphery or Core?
been an increase in the dependence on the core industrial countries in terms of
imported goods, which lends some support to Wallerstein's assertion that
semiperipheral countries are outlets for core products .
Our estimates of LPE for Ireland are reported in table 7. 5 for the time period
1 960 to 1987. In 1 960 Ireland represented the classic peripheral distribution of
LPE, with 43 percent of exports in level l , which is relatively close to the Third
World average for 1 980. By 1975 the first signs of change are evident, with a
decrease in the proportion of exports in level 1 by 26 percent and an increase
of 1 3 percent for level 4. This coincided with a downturn of the global economy
in the early 1 970s with Kondratieff 4 B (the decline phase of the fourth Kon­
dratieff cycle), Ireland' s membership in the EEC, and rapid increases in foreign
investment. The pattern for 1980 represents a further decrease in the proportion
of exports in levels 1 , 2 and 3 and an increase in levels 5 and 6, which is in­
dicative of a core economy. This trend continued through 1 986, and there was
a dramatic increase of 23 percent in level 6. By 1 986 Ireland' s LPE resembled
that of a core country , which is suggestive of a movement from the semiperiphery
to the core. It is important to keep in mind, however, that most of this increase
was due to foreign-owned rather than domestic industry .
Ireland became integrated into the New International Division o f Labor (NIDL)
in the 1 970s (Perrons 1 986). Firebaugh and Bullock ( 1 986) argue that a com­
parison of the mean LPE for a country over time can be employed as an indicator
to assess the degree to which a NIDL is emerging. They demonstrate that LPE
for the Third World as a whole increased from 1 . 58 in 1 970 to 1 . 69 in 1980,
Table
7.5
Ireland: Levels of Processing o f Exports (LPE)
Lev 3
Lev 4
Lev 5
Lev 6
Mean LPE
Year
Lev 1
Lev 2
1 960
43
24
4
15
11
1 965
43
24
8
14
8
1970
40
31
4
10
7
6
2.0
1 975
17
30
6
28
10
7
3.0
1 980
14
20
3
26
26
10
3.0
1986
10
17
3
16
19
33
3.0
Pr/AWl
64
16
10
6
2
Various years.
aperipheral average for 1980 after Firebaugh and B ullock, 1986.
Source: U.N.
2
2.0
1.9
1 . 69
The Republic of Ireland
135
suggesting the emergence of a NIDL, which was particularly evident for the NICs
that moved from the periphery to the semiperiphery at this time . We should ex­
pect to find a similar pattern for Ireland (see table 7. 5). Ireland' s mean LPE in­
creased from 2 . 0 in 1 970 to 3 . 0 in 1 98 0, suggesting deeper incorporation into
the Fordist world-economy (Perrons 1 986) . Ireland's mean LPE, also in com­
mon with the semiperipheral countries of the Third World, is situated midway
on the continuum between level 1 and level 6 of the sophistication of exports.
In comparison, Brazil, a semiperipheral country, scored 2. 7 for 1 980.
By focusing on LPE for Ireland more closely and by examining where Ireland
exports core products (level 6) and peripheral products (level 1), we are able
to discern if this pattern correlates with the classic semiperipheral model where
a semiperipheral country exports peripheral products to core states and core pro­
ducts to peripheral states (Wallerstein 1982). For the year 1 987 we have calculated
that 80 percent of Ireland' s exports of peripheral products were exported to core
states and 30 percent of core products were exported to peripheral states. The
percentage of Ireland' s exports to core states declined with LPE, while exports
to peripheral states increased with LPE. It can be argued, in relative terms, that
Ireland exports peripheral products to core states and core products to peripheral
states. Yet in absolute terms the evidence does not seem strong enough to locate
Ireland as a semiperipheral state.
When we inspect Ireland' s LPE with specific trade partners, the pattern is not
any clearer (see table 7. 6). We selected the Netherlands as representative of a
classic core EC state, Sweden as representing a classic core state outside the EC,
and Mexico and Saudia Arabia as peripheral states. The configuration of Irish
LPE to countries such as the Netherlands and Sweden does not correlate well
with the semiperipheral model, as the largest concentration of exports is in the
upper levels. (The 79 percent value for level S exports with Sweden appears ex­
aggerated for Sweden due to the low level of agricultural exports [levels one
three] that Ireland trades with non-EC member states.) Ireland' s LPE to
does not correspond to the peripheral mode either. We can conclude
that Ireland's LPE does not resemble the semiperipheral norm.
dominance of foreign-owned industry is crucial.
CONCLUSIONS
Three measures are potentially available for use in measuring the concept of
the semiperiphery. The first focuses on attributes of states such as log of GNP
per capita or economic, political, and cultural attributes (Arrighi and Drangel
1986; Mingst 1 988). The second category examines the interactive mode of states
in the world-economy and the levels to which states are exploiters and exploited
through such processes as unequal exchange (Firebaugh and Bullock 1 986). The
third type focuses on the extent to which semiperipheral states function as
stabilizers or as legitimators within the world-system and to our knowledge can
not be empirically measured.
136
Table
Semiperiphery o r Core?
7.6
Ireland's Trading Partners: A Breakdown of LPE for
1987
Lev 1
Lev 2
Lev 3
Lev 4
Lev 5
Lev 6
14
30
2
11
33
10
S weden
2
4
2
12
79
Mexico
4
43
14
23
16
15
7
32
14
33
Country
Netherlands
Saudi Arabia
Source: Eurostat. 1 987.
The use oflog of GNP per capita highlights a crucial necessary factor for iden­
tifying semiperipheral processes and individual countries. The position of states
within the world-economy is generally determined by their position within the
hierarchy of wealth. The more wealthy a country is, the better its chances of reap­
ing greater benefits from the world-economy. To stop here, however, ignores
how the processes generating wealth are worked out)n specific places. GNP per
capita locates Ireland within the semiperiphery but is unable to incorporate the
complexity of the Irish economy. The Mingst method produces mixed results .
On the one hand, it suggests that Ireland, in terms of its economic structure and
diversity , is a strong member of the semiperiphery, but on the other two dimen­
sions, cultural integrity and state strength, Ireland resembles core states .
The impact of MNCs and the degree of control over MNC activities are crucial
here in understanding Ireland's role in the world-economy. What is clear here
is that we can no longer identify development within countries on the simple basis
of the degree of industrialization. More importantly, these results suggest that
it may not be possible to identifY specific characteristics within the semiperiphery
that operate similarly within all semiperipheral states . Taylor reaches a similar
conclusion, arguing that causality is not a matter of simply observing ' 'cause and
effect" but consists of identifying how key mechanisms inherent in the world­
economy are worked out in particular contexts ( 198 8 , 1 6) : The results from the
Firebaugh and Bullock technique imply that Ireland' s LPE in recent years
resembles a distribution generally found in core states. At the same time, we need
to be aware that the contribution of a positive trade balance for 1988 does not
seem to have led to real gains for its citizens . Again, what is important here is
how these benefits from trade are played out within the country .
These three measures can also be used to identify the timing of movement within
the semi periphery , in the direction of the core or the periphery. Each measure
may or may not produce different results on the nature of this timing, depending
on the mix of processes that are reflected in each measure. However, this finding
The Republic of Ireland
137
i s important as i t can highlight how processes are worked out i n different loca­
tions within the world-economy.
These different results using three measures suggest that Ireland can not be
termed simply a semiperipheral state; Ireland is superficially core-like in many
resp ects, but it is not a core state. If we have to categorize Ireland on the dimen­
sion of core/semiperiphery, we clearly have problems. Ireland appears to resem­
ble core states in many of the attributes used in this study, but the small size of
the Irish economy and its dependence on foreign MNCs suggest that it is dif­
ferent from the other core states. It also suggests that the characteristics of
serniperipheral states cannot simply be read off a score chart. We should expect
this result, however, since semiperipheral countries possess both core and
peripheral processes, and there is no reason to suggest that such a mix would
be easily identified by a simple set of characteristics evident in all or most
semiperipheral countries. Semiperipheral states as constituent parts of the world­
system directly reflect the overall balance between the processes that produce
them (Taylor 1 988, 3 6) . Rather, there is a need for further case studies to iden­
tify the complexity of the semi periphery and how the broader structural forces
of the world-economy interact with the realities of concrete places to produce
the complex mosiac that is the semiperiphery.
In conclusion, Ireland is core-like but not core. It cannot be defined as a
" classic" member of the semiperiphery because such classifications may not ex­
ist. Yet it is obvious that both core and peripheral processes operate within Ireland.
Ireland perceives itself as a core state by being a member of the EC, and it is
classified by the OECD as a core state. Ireland, " the poorest of the rich"
(Economist 1 987) must be viewed as in the perimeter of the core, knocking on
the door but not yet admitted.
NOTE
This paper was first presented to the Thirteenth Annual Conference on the
Economy of the World-System, April 28-30, 1 989, at the University of lllinois at
Champaign. Thanks are due to John Q'Loughlin (University of Colorado at Boulder),
Taylor (University of Newcastle upon Tyne) , Herman Van der Wusten (University '
Amsterdam) , Neil Smith (Rutgers University), Jan Nijman (University of Miami),
Denise Blanchard (University of Colorado at Boulder), who provided detailed COInrrlents
on our work. Thanks are also due to Senator Michael Lanigan (Fianna Fail), who
us in obtaining information on the Irish economy. Any remaining errors are our own.
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Production, Work, and Tern'tory, edited by A. Scott and M. Stopher, 246-64. Boston:
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The Republic of Ireland
139
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__
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__
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8
PERIPHERY IN THE CENTER: CANADA IN THE
NORTH AMERICAN ECONOMY
Jorge Niosi
The analysis of the late-industrialized countries in the world-economy, their
development, and the dynamics of their changing relationships with the large,
core industrialized countries has spawned an abundant theoretical and empirical
literature. This ranges from the most traditional and "mechanistic" models in
the Rostowian current to the neo-Marxist approaches of dependent development
in Cardoso and Faletto (1969) or Evans (1979). Canada (like Australia, Finland,
or Norway) is a good case for the testing of these models, because it resists easy
classifications, being sometimes labeled " dependent, " sometimes " industri­
,
alized, ' sometimes " semi-industrialized. " In this chapter some of the most basic
propositions of these theories are put to proof in the Canadian context. The
starts with a rapid review of these theories and sets forth some original h",,,,,th,,,
on the rise of Canada from the ranks of the semi-industrialized to those
specialized industrial countries. The argument is that Canada has l1lCLHQ'b'"''
own original way to industrial development, based on both its natural
(mainly in the case of energy-intensive industries) and state intervention in
industrial niches. Canada is in fact the largest of a group of industrialized
omies-together with Sweden, Norway, Finland, Denmark, the NetherlaJlds
Belgium, Switzerland, and Austria-that cling to the core advanced capitalist
tries (the United States in the Canadian case; Britain, France, Germany, and Italy
in Europe) . These smaller countries are as industrialized as the larger ones but
more specialized. Furthermore, they lack the political, military, and diplomatic
power that characterizes the core nations, and in this sense they are ' 'peripheral" .
The chapter argues that the core economies tend to create other, new industrialized
countries as technological diffusion and learning effects spread to smaller
neighbors. I call these countries "central-peripheral" to distinguish them from
Wallerstein's semiperipheral states. Central-peripheral states are characterized
by (1) high levels of industrialization, comparable to those of the most industrialized
1 42
Semiperiphery or Core?
states on a per capita basis ; (2) industrial specialization due to market-size con­
straints ; (3) trade relationships with the most developed countries (both in terms
of exports and imports) ; and (4) lack of any important military , political, or
diplomatic power in the world-system. This definition clearly makes them dif­
ferent from Wallerstein's semiperipheral states but is compatible with Arrighi
and Drangel's stratification categories (Arrighi and Drangel 1986) . Presently,
the most successful newly industrialized countries (NICs) (Korea, Taiwan, Hong
Kong, and Singapore in Asia; Spain in Europe) spread around the core advanced
countries . They are all "catchers-up" that may eventually join this " central
periphery " in the years to come.
In the second part of this chapter Canadian and international comparative data
for the postwar period are presented to support the argument and test the previous
hypothesis. A conclusion summarizes the evidence and compares it with some
of the most important theories presented in the first part.
THEORIES ON INDUSTRIAL DEVELOPMENT
Most of the received international trade theories are totally useless for understan­
ding both industrial development and the complex patterns of commerce, invest­
ment, and technological linkages between developed and developing countries .
Assuming perfect competition, identical production functions, identical tastes
across countries , and a passive and almost inexistent state, these theories do not
explain the rapid growth and changing configurations of the world-economy that
have taken place in the last forty-five years (see Soete and Dosi 1 990; Niosi and
Faucher 1 990) .
Among these major changes in the global industrial landscape, the postwar
period has witnessed the catching up to the United States by Western Europe and
Japan as well as the rise of a group of other smaller and more specialized in­
dustrial countries in Europe and North America. More recently, an array of newly
industrialized countries in the Pacific Rim and Southern Europe have also made
inroads in some industrial markets traditionally served by firms from advanced
capitalist countries . How do received theories of development cope with these
rapid changes?
For some authors , both Marxists and non-Marxists , industrial development is
a natural outcome of the diffusion of capital , technology, consumption patterns,
and organization from the most advanced to the less advanced countries . Rostow
( 1 960) and Kuznets ( 1 965) were among the first to argue in this direction. Other
authors emphasized the standardization of technology and labor-cost differentials
as the main push factor explaining the inevitable industrialization of the develop­
ing countries. One recognizes here the product life-cycle theory of Vernon ( 1 966,
1 97 1 ) and Wells ( 1 972 , 1 983) , but also the Marxist version of these arguments
in the works of Warren ( 1 980) , Frobel et al . ( 1 980) , or Michalet ( 1 976) . In these
approaches semi-industrial countries are only transitional states in the general­
ized process of development.
Canada in the North American Economy
1 43
At the other extremity of this first current, one finds Marxist theories of im­
and most neo-Marxist theories of dependency. Here industrial developremains locked in a few advanced nations. Industrial concentration and
corporations from developed countries tend to create early
or oligopolistic markets in developing countries; these market struc­
tur es are conducive to stagnation through the repatriation of monopoly profits
(Baran 1 95 7; Frank 1 967) or through the barriers they impose to technological
innovation (Merhav 1 969) . Technological dependence (Vaitsos 1 973) , combined
with commercial and financial dependence (Helleiner 1 98 1 ) , prevents backward
countries from following the same development path the now-advanced coun­
tries had taken in the eighteenth or nineteenth centuries. A variation of this thesis
appears in Wallerstein ( 1 984), where development is described as a " game of
chairs," with a few advanced countries at the top and some semiperipheral
countries attached to them as satellites. Semiperipheral states (including Canada)
are characterized by their intermediate situation in the world system, both in
economic and in political terms. In the long term the players change through time,
the number of winners and quasi-winners (semiperipheral) remains restricted.
Development is a sort of zero-sum game in which some countries' gains equal
other countries' losses.
A much more blended picture emerges from some neodependency theories.
Dependency is here a complex phenomenon with political as well as economic
dimensions. In backward countries development can be attained through indigenous
technological learning and adaptation, internal capital formation and inflows, and
a mix of organizational borrowing and local innovations. In the works of several
Latin American and American economists and sociologists like Cardoso and Falet­
to ( 1 969) , Evans ( 1 979) , Katz ( 1 976), or Perez and Soete ( 1 98 8) , the path to
industrial development, though narrow, is not at all closed. This path is one in
which dependency and development will coexist during the industrialization
with increasing local control and the spreading of technological learning
the developing country, and a mixture of home protection for infant
and the export of industrial products to foreign markets from the start.
authors not suspected of neodependency sympathies (Yoffie 1 983) have
that some developing countries were not helpless in building commercial
designed to penetrate the developed countries' markets with their industrial pro-.
ducts. In this approach the number of developed countries is always increasing,
but by small numbers.
This chapter is closer to this latter theoretical approach. In our view, each period
of long-term growth in the world-economy has created development opportunities
for several backward countries. Some of them, either by design or by a fortuitous
combination of circumstances, have seized those opportunities. Russia, Sweden,
Italy, Canada, and Japan were among the candidates for development in the sec­
ond half of the nineteenth century, as Argentina and Australia were in the first
half of the twentieth century, and a dozen NICs are in the postwar period. Some
of the candidates succeeded in attaining a sustained level of industrialization; others
144
Semiperiphery or Corel
failed. Similarly, some present-day NICs are knocking at the door of the
developed world, while others are already failing. In other words, in the musical
game the number of chairs is always increasing, but slowly so, and a few
semiperipheral states are now attaining the level of the industrialized countries.
The largest of them may pretend in the future to a position among the core coun­
tries (Spain today) , while the smaller (Korea or Taiwan) will remain central­
peripheral states .
Our assumption, thus, is that development is possible-and is in fact taking
place-in some countries of the peripheral capitalist world through a combina­
tion of indigenous learning and technological adaptation, organizational mimetism
and local innovation, and scientific borrowings and new political craftsmanship,
both in the domestic and in the international arenas. The last forty-five years have
witnessed an array of capitalist industrialization paths, from the most "liberal"
(Hong Kong) to the most planned and state-oriented (Brazil, Korea, Taiwan) .
Similarly, Canada was the least interventionist among the late niIieteenth-century
industrializing countries, if compared to Japan, Germany, Sweden, or Italy.
Canada' s economic limitations and structural weaknesses may be traced back to
the uneven state intervention implemented to promote catching-up industrialization.
Capital, technology, and managerial know-how from developed countries on­
ly flow to those followers that have the best political, economic, and cultural con­
ditions to absorb them. Human migration from more advanced countries and
geographic and cultural proximity are among the best preconditions for the suc­
cessful industrial growth of latecomers. Development is a cluster-like process
that occurs among neighbors, inasmuch as the latecomer is able to understand
and eventually copy and adapt at least part of the organization and technical know­
how of the most advanced country.
CANADA AS AN INDUSTRIALIZED PERIPHERAL COUNTRY
Canadian development has been interpreted in very different ways by social
scientists. The most common approach has been in terms of dependency and trun­
cated industrialization. Starting with Innis 's theory of staple development ( 1 962a,
1 962b), many social scientists concluded that the export of basic commodities
such as furs, wheat, timber, and minerals had not been conducive to industrial
development. Foreign control of most of the basic resources created a primary
economy with a few basic industrial transformation spin-offs. The neo-Marxist
approach in Levitt ( 1 970) , Watkins ( 1 970, 1 973, 1 982) , Hutcheson ( 1 977) ,
Williams (1983), or Clement (Clement and Williams 1 989) contends that Canada's
industrialization was arrested by the early foreign direct investment in the upstream
activities of manufacturing. Foreign (mainly American) multinational corpora­
tions created branch plants in Canada for a captive protected market and not for
export. These subsidiaries used foreign machinery and technology, thus block­
ing any further industrial development in Canada. This approach is c1eaxly coherent
with Wallerstein's view, in which Canada appears as a semiperipheral state
Canada in the North American Economy
1 45
together with Nigeria and Zaire in Africa, Brazil, Mexico, or Argentina in Latin
America, and Saudi Arabia in Asia (Wallerstein 1 979) .
A more optimistic approach was built on the basis of work by Mackintosh (1 939)
and Dales ( 1 957). Staple production and export were accepted as the first stage
in Canadian development, but their transformation was seen as a base for the
development of Canadian industry, either foreign- or Canadian-controlled. Dales
insisted on the particular importance of hydroelectricity as a basic resource in
Canadian industrial development, attracting many energy-intensive manufactur­
ing activities such as pulp and paper, metal refining, and petrochemicals. This
dynamic staple approach is much closer to Rostow' s or Kuznets' s theories, where
development follows naturally from the economic linkage with more developed
countries. More recently, Lower ( 1 964) and Spelt ( 1 972) argued in the same direc­
tion as Mackintosh had done half a century ago.
Finally, some authors built a more nuanced perspective. While accepting
dependency as a starting point in Canadian industrialization, they emphasized the
gradual decline of foreign control in the Canadian economy since 1 970, the rise
of local capital in the 1 960s and 1 970s with the help of both the provincial (Pratt
and Richards 1 979) and federal Canadian state (Niosi 1 981), the rapid deploy­
ment of Canadian multinational corporations in the postwar period (Niosi 1 985),
and the steady development of Canadian industry since World War II (Resnick
1 982 ; Carroll 1 986) . While Canada is not a "core" country or principal industrial
power, its manufacturing base has certainly attained some level of maturity and
is able to compete with foreign manufacturing enterprises of core developed coun­
tries in several niches.
In this perspective Canada is one of those latecomer countries that for more
than a century has managed its original way of industrialization. With a popula­
tion of only 26 million today it could hardly attain a very diversified industrial
structure. But it i s, and can remain in the foreseeable future, very {Y\lnnf>htnlP
in several manufacturing areas. In the past, the inflow of scientific, U'�U"'S"'.'�
and technical knowledge was favored by its proximity both to England
the United States and by massive migration from both countries, the " .."_""",,.
hegemons in the world-economy since 1 8 1 5. Starting with a high level
control in the late nineteenth century, some Canadian firms were already
in the nineteenth century in traditional manufacturing industries, such as
and beverages, wood products, shipbuilding, textiles, apparel, and shoes.
World War II some of them entered pulp and paper, metal refining, or heavy
equipment, and later (during or after the war) some entered high-technology in­
dustries such as the production of telecommunications and mass-transportation
equipment, synthetic rubber, aircraft, and nuclear engineering. In services Canada
conserved its traditional international stronghold in banking and insurance and
added engineering and co�struction in the postwar period.
Canada's industrial development was favored by macroeconomic state interven­
tion, such as the protectionist National Policy in 1 87 9, and by the unification
of the domestic market through the construction of a national network of railways.
1 46
Semi periphery or Core?
These policies were similar to those implemented in the nineteenth century by
presently industrialized countries .
State intervention was also crucial in the development of today ' s important in­
dustries. Pulp and paper migrated to the north in the late nineteenth and early
twentieth centuries because of the imposition of provincial taxes or embargoes
on the export of timber cut in the Crown lands (Guthrie 1 94 1 ) . Petrochemicals
and synthetic rubber developed first during World War II under a giant Crown
corporation, Polymer , using American technology and technical personnel for
defense production (N iosi 1 985) . Nuclear energy developed also during and after
World War II under the aegis of the federal government through another Crown
corporation, Atomic Energy of Canada (Doern and Morrison 1980) . Telecom­
munications equipment was a favorite of the federal government' s industrial sub­
sidies policy in the postwar period (Conklin 1 988) . Engineering was developed
in the 1960s and 1970s through the nationalistic procurement policies of the Quebec
government, particularly those of Hydro-Quebec, the giant provincial Crown cor­
poration (Niosi and Faucher 1987a) . Tax incentives were key in the postwar
development of the now-prosperous steel industry (Barnett and Schorsch 1983) .
As these examples show, Canadian interventionism was not a tight package of
measures closely implemented in a short span of time (as in Germany, Japan,
or Italy) , but a much more chronologically scattered set of punctual policies de­
signed to develop one particular industry at a given moment. Besides, it was depen­
dent on the fluctuations of the political process: it was heightened between 1 966
and 1984 under the Liberal federal administration and has declined since with
the Conservatives.
Canadian interventionism was much less embracing than the French , the Ger­
man, or the Swedish, with their early emphasis on scientific, technical, and in­
dustrial education; in these countries the state created a large education system
in order to insure a fast and adequate training of workers , technicians, and
engineers for manufacturing (Landes 1972). Canada seldom relied on the straight
creation of industrial enterprises by the state or on massive direct subsidies to
infant private firms as Japan, Italy, or Germany did in the late nineteenth and
early twentieth centuries (Blackford 1988; Landes 1 972) . In this sense Canada's
path to industrialization was a " late liberal model, " more interventionist than
the British, but less than the Japanese, the German , or the Italian. If late in­
dustrialization is often achieved under the auspices of the state, as Gerschenkron
( 1 965) has successfully argued, the degree and types of public intervention varied
from one country to another, depending on many particular historical cir­
cumstances . Canada, for example, strongly counted on migration of a qualified
labor force, mainly from Britain and the United States; many of thes� immigrants
founded some of the largest and best-known Canadian industrial giants, such as
Dofasco (steel) , Hiram Walker (distilleries), or Alcan (aluminum) (see Niosi
1 978).
The result of these market and policy developments was a particular Canadian
industrial structure showing two kinds of strongholds. Some of them were based
Canada in the North American Economy
\
147
on static comparative advantages. This was the case in energy-intensive
such as aluminum, copper, nickel, zinc, and lead refining, pulp and
and steel minimills; it was also the case in modern natural-gas
Vl"J.l"lun.·u." and agricultural machinery. The second group was based on state
:,nt,orv,entlon, technology transfer from abroad, and indigenous R & D, including
r.ell!l:U'UUUUILU\.-QUOJU<> equipment, integrated steel production, mass-transportation
eOllllpme:nI, and synthetic rubber.
nr11 1 �lTle.,
ADA'S INTERNATIONAL POSITION TODAY
On
some dimensions Canada can be compared with the largest core industrial
(with which it sits, since 1 976, in the Group of Seven) , while on others
compares with the smaller industrialized nations of Western Europe. Canada' s
international position will be analyzed o n the basis of three related indicators:
. direct investment, trade, and technological flows. But let us first start with some
• basic indicators of industrial development
Canada' s proportion of manufacturing in the gross domestic product is cer­
tainly much lower than the German or the Japanese proportion but is similar to
' that of the United States and the Netherlands, between 1 9 and 2 0 percent (table
8 . 1) . While Canada' s productivity in manufacturing is second only to that of the
United States, all these core and central peripheral countries have very close pro­
, ductivity levels, considerably higher than those of even the most successful NICs
(table 8 .2).
The analysis of the international position shows, -first, that in terms of foreign
direct investment, Canada is now the fifth-largest foreign direct investor in the
world, after the United States, the United Kingdom, Japan, and West Germany,
and preceding the Netherlands (see table 8. 3) . Like all the largest industrialized
countries, its foreign investment takes place mostly in the developed countries
(85 percent) , mainly the United States, and only marginally in the
world (15 percent). The industrial distribution of its foreign direct " ,n " ""ot"..,,,,
shows traditional sectors such as shoes and distilleries, capital-intensive areas
as pulp and paper, metal refining, and agricultural machinery, and hlg;h-tectmologM
industries such as telecommunications equipment, plastics, and synthetic rubber.
In any event, this industrial distribution is much more like that of the United States
than that of any other country. In per capita terms, of course, Canadian foreign
direct investment (CFDI) is much higher than U. S . foreign direct investment
abroad. One could show that the other central-peripheral countries are also in­
vesting in core countries and not in less developed countries (LDCs) , bringing
another rebuttal to Wallerstein's inclusion of them in the semiperiphery .
The Canadian economy is highly concentrated, and CFDI is the consequence
of this high level of concentration. The theory of multinational corporations, as
Hymer (1 970) has shown, is but a chapter of industrial organization theory. Also,
Canadian firms are making intensive use of some static and dynamic advantages
they have acquired in the management of specific Canadian resources (such as
Semiperiphery or Core?
1 48
Table
8.1
GDP i n Manufacturing Industries a t Market Prices,
Country
1986
GDP in manufacturing as % of GDP
Germany, Federal Republic
33.1%
Japan
29 . 3 %
Austria
27 . 1 %
France
25.0%*
Italy
2 3 . 6%
Belgium
22. 6 % *
United Kingdom
22.6% *
S weden
2 1 .5 %
Finland
2 1 .0%
Netherlands
19.8%
United States
19.3 %
CANADA
19.2%
Norway
1 5. 3 %
United Nations. December 1987. Monthly Bulletin of Statistics;
United Nations. 1988a; OECD. 1988a; U.S. President. 1988; Bank of
Canada. 1988.
Sources:
* Figures are for 1 985. Data are not available for other industrial countries
in these sources.
pulp and paper and nonferrous metals) or through industrial activities connected
with them (such as agricultural machinery) . However, not all CFDI can be ex­
plained by experience gained through the intensive use of local natural resources,
as the cases of telecommunications equipment, rubber, and plastics show.
Foreign direct investment in Canada has been falling in relative terms. Foreign
control of the Canadian economy peaked in 1 970, with nearly 36 �ercent of the
assets of nonfinancial industries, then declined steadily , reaching a level of ap­
proximately 24 percent in 1986 (see table 8 .4) . In manufacturing foreign control
declined from 58 percent in 1 970 to 44 percent in 1986, but the decline has been
general and across the board. Under the favorable economic and political en­
vironment of federal and provincial nationalism, Canadian firms have been able
Canada in the North American Economy
1 49
Table 8.2
Manufacturing Productivity (1984) in Current U.S. Dollars
Country
Producri vitya
United States
55 1 3 6
CANADA
41 373
Germany, Federal Republic
39073
Japan
35542
Sweden
284 1 5
Australia
27938
Netherlands
25 1 1 9 (1 983)
France
24725
Italy
24689 (1982)
Finland
24286
Belgium
2 1 7 5 1 ( 1 983)
Norway
2 1 704
United Kingdom
20340
Austria
1 8308
Spain
1 6 1 48 ( 19 83)
South Korea
12939
Source: United Nations 1988c.
aDefined a s manufacturing value added 0 n average number 0 f employees i n
manufacturing for the year.
to acquire ongoing foreign subsidiaries in Canada or to successfully compete with
them in many of the same industries in which foreign subsidiaries were active.
However, nearly 17 percent of Canadian assets still are under American control,
and 30 percent of its manufacturing assets, a proportion not found in any other
central-peripheral industrial country (United Nations 1 983) .
In terms of trade, and thus of the international competitiveness of its industry,
Canada is now the seventh-largest exporter of manufacturing products, ranking
after West Germany, Japan, the United States, France, Italy, and Great Britain,
Table
8.3
Foreign Direct Investment Stock, Main Countries,
1984
FDr
Share (%)
Amount
(Bi llions of U. S . Dollars)
Counrry
233.4
42.5
United Kingdom
85.3
15.5
Japan
37.9
6.9
Germany, Federal Republic
36.6
6.7
CANADA
31.3
5.7
Netherlands
3 1 .2
5. 7
Other
93.3
17.0
549.0
1 00 . 0
United S tates
Total
Source: Keizai Koho Center. 1 986.
Table
8.4
Foreign Control o f Canadian Industry,
Industry
1979
and
1986
A ssets under foreign control as a percentage of total assets
Difference
1986
1 970
Agriculture, forests
13%
3'0'"
· 1 0%
Mining
69%
31%
·38'70
Manufacturing
58%
44%
· ] 4%
Construction
1 6%
70b
·9 %
8%
3�1c,
·5 %
Wholesale trade
27%
24%
·3 %
Retail trade
22%
13%
·9 %
Services
22%
16%
·6%
Total, non financial
industries
36%
240/"
· 1 2%
Utilities
Source: S tatistics Canada.
1 980, 1987. Cat. 6 1 ·2 1 0.
Cil
r;
Canada in the North American Economy
151
but before Belgium-Luxembourg, the Netherlands, and Sweden (table 8 . 5) . Its
share of the world market of manufactured goods has increased since 1975 . On
this measure Japan and Italy have improved their performance, contrary to the
United States, the United Kingdom, and even Germany and France. Again, in
per capital manufactured exports Canada ranks eighth after Switzerland, Belgium­
Luxembourg, Sweden, West Germany, the Netherlands, Finland, and Austria,
but before Norway, Japan, France, the United Kingdom, and the United States
(table 8 . 6) .
Table 8.5
Exports of Manufactured Good s, Selected Countries in Market Economies 1975 and 1986
(in billion US$ )
1986
1986
Germany, Federal Republic
7 9 . 62
2 1 7.32
1 6. 9 %
16. 1 %
Japan
53. 1 7
203.36
1 1 .3 %
15.1 %
United S tates
70.97
1 48.87
15.1 %
1 1 .0 %
France
3 9 .72
92. 1 9
8.4%
6.8%
Italy
29. 1 4
86.09
6.2%
6.4%
United Kingdom
36.44
80.09
7.8%
5.9%
CANADA
1 6. 6 8
56. 1 9
3.5%
4.2%
Belgi um-Luxembourg
22.84
52.29
4. 9 %
3.9%
Netherlands
1 9. 3 2
46. 82
4. 1 %
3.5%
Switzerland
1 2. 1 2
35.79
2.6%
2.7%
Sweden
1 3 . 84
3 1 .49
2.9%
2.3 %
Austria
6.52
20. 1 7
1 .4 %
1.5%
Finland
4.40
1 3.57
0.9%
1.0%
Norway
5 . 07
8.30
1.1%
0.6%
S u btotal
409 . 85
1 092.54
87.2%
81 .0%
Total (market economies)
470.06
1 349.30
1 00.0%
1 00.0%
Source: United Nations. April 1 976. April 1 987.
1 975
(in %)
1975
Country/Year
Monthly B ulletin a/Statistics.
Semiperiphery or Core?
1 52
Table
8.6
Manufactured Exports Per Capita,
1975
and
1986
(in current U . S . dollars)
Country
1975
1986
S witzerland
1 8 94
5506
Belgium-Luxembourg
2239
5077
S weden
1678
3749
Germany
1228
3557
Netherlands
1410
3207
Finland
936
2769
Ausoia
869
2654
CANADA
7 32
2 1 94
1268
1 976
Japan
476
1673
France
752
1 664
Italy
522
1505
United Kingdom
65 1
1410
United S tates
332
616
Norway
Source: Calculated from United Nations. April 1 976. April 1987.
Monthly Bulletin of Statistics.
The arguments of the dependency school were also based on another dimen­
sion of Canada's international trade: its geographical concentration. As Hirschman
and others have suggested, dependency emerges where country A represents a
large percentage of trade of country B, but the latter takes a small part of country
A's total trade (Hirschman 1945) . Canada conducts 72 percent of its foreign trade
with only one country , the United States , while it represents only 20 percent of
U . S . trade . We found several small European industrialized countries with high
proportions of trade in only one area: Belgium, the Netherlands , and Switzerland
are also "dependent" upon a single market, both for exports and for imports
(table 8 . 7) . There are two important differences , however, between Canada and
these countries. Some of these small industrial nations are inside the EEC and
are thus exempted from eventual threats or retaliation from their larger trading
partners ; second, no single country takes as high a part of the total trade of any
small industrial nation, including the Southeast Asian NICs (Barrett and Chin
Canada in the North American Economy
1 53
Table 8.7
Developed Countries, 1987: Main Foreign Market and Supplier
Co untry
Main foreign market
(% of exports)
Main supplier
(% of imports)
Belgium
EEC
(74.2%)
EEC
(72.4%)
CANADA
United S tates
(75 .6%)
United S tates
(68. 1 % )
Netherlands
EEC
(74 .9%)
EEC
(64. 1 % )
S witzerland
EEC
(55 . 7 % )
EEC
(72.2%)
France
EEC
(5 8 . 3 % )
EEC
(60.7 % )
Norway
EEC
(64.4%)
EEC
(49. 6 % )
Italy
EEC
(56. 1 %)
EEC
(56.6%)
Sweden
EEC
(5 1 . 0%)
EEC
(57.3%)
Germany, Federal Republic
EEC
(52. 7 % )
EEC
(52. 7 % )
United Kingdom
EEC
(49.5%)
EEC
(52.8%)
Finland
EEC
(42 . 1 % )
EEC
(44.4%)
Japan
United S tates
(36. 8 % )
United States
(21.2%)
Australia
Japan
(25 .6%)
Japan
( 1 9. 7 % )
United S tates
EEC
(24.2%)
Japan
(20 . 2 % )
Source: United Nations. 1 9 8 8 b .
1987). A t another level, our tables show that small industrial countries,
Canada, Finland, or Norway, trade with other developed countries, not with
industrial and peripheral economies, as was suggested by Wallerstein' s aPlJroaCh
This kind of trade dependency is not without consequences. In the case
Canada, it was the main official reason given by the Canadian government for
a free-trade agreement with the United States. Increasing U.S. protectionism and
the vulnerability of Canadian exports to this threat were repeatedly cited as the
crucial explanation of the urgent need for a Canada-U.S. treaty, both during the
trade negotiations and the recent federal campaign.
When it comes to technology, Canada has a lower ratio of gross expenditure
on research and development (GERD) to GDP than the United States, Japan, West
Germany, France, and the United Kingdom (among the largest economies) and
Sweden, Switzerland, and the Netherlands (among the mid-sized economies). But
Semi periphery or Core?
1 54
it has a larger GERD/GDP ratio than Austria, Australia, and Spain (among the
mid-sized economies) and also almost all the small industrialized economies ex­
cept Norway and Finland. Furthermore, Canada has very low military expen­
ditures in R & D , while these account for a large proportion of total publicly
financed GERD in the United States, the United Kingdom, France, and Sweden
(table 8.8). When these military expenditures are subtracted, as Palda (1984) has
already remarked, Canadian R & D expenditures become much closer to those
of other developed countries. Also, the Canadian balance of technological
payments , while negative, is close to that of the French and the Japanese, and
it is far less negative than that of the Netherlands, Italy, or Spain.
In sum, Canada exhibits many structural similarities with mid-sized and small
industrialized economies: strong industrial specialization , high per capita manu­
factured exports, high per capita foreign direct investment, high geographical
trade concentration, smaller R & D expenditures, and a negative technology­
transfer balance. These characteristics are those of industrialized countries
, 'clustering " around larger core industrial nations . It would be easy to show the
technological , cultural, and economic links of each of these " central-peripheral"
states with one or two neighboring mother countries : Austria and Scandinavia
with Germany; Belgium with France; Korea and Taiwan first with the United
States and then with Japan; and Canada with Great Britain and then with the United
States.
Table
8.8
Government R & D Expenditures by Objective in
1987
Country
Defence
All other
Total
United S tates
68.6%
3 1 . 4%
100%
United Kingdom
50.3%
49.7%
1 00%
France
34. 1 %
65.9%
1 00%
S weden
26.9%
73. 1 %
1 00 %
Germany. Federal Republic
12.5%
87.5%
1 00%
Australia
9.2%
90. 8 %
1 00%
Italy
7.8%
92.2%
1 00%
Norway
7.5%
92.5%
100%
CANADA
7.4%
92.6%
1 00%
Source: OECD. 1 9 8 8 b : 4.
Canada in the North American Economy
1 55
CONCLUSION
Our figures tend to refute the more radical versions of the dependentist analysis
of Canadian economic development by Levitt, Watkins, Hutcheson, or Williams.
Canada is neither underindustrialized nor deindustrializing. On the contrary, its
industrial performance has been better than that of the United States and several
other OECD countries since 1967. Foreign control has been declining for fifteen
years. Canadian industrial and service multinational firms are increasingly play­
ing important roles in world markets, successfully competing in the United States
and Western Europe. The figures also deny Canada' s inclusion in the semi peri­
pheral category, as in Wallerstein's analysis. On the basis of our data, Canada
could even be included in the core, as Arrighi and Drangel suggested.
However, if dependency is a continuous variable with many different values,
Canada looks in some respects more dependent than any comparable country of
similar size. Its commerce is more concentrated with a single industrialized na­
tion. Its industry has a higher degree of foreign control. Its manufacturing is also
more reliant on the transformation of resources than on knowledge-intensive ac­
tivities. Manufacturing is a smaller part of its GDP than in any other large or
medium-sized industrial nation. Canada shows an important and increasing deficit
in high-technology products. Its scientific and technical base is lagging behind
those not only of large developed countries but also of some small and medium­
sized industrial nations. Canadian industry and domestic multinationals are mostly
on the low-intensive area of the technological spectrum. These weaknesses can
be traced back to the less embracing and continuous state efforts to promote
industrialization.
In the future, too large a reliance on static comparative advantages may con­
tribute to a one-sided industrial structure and mortgage industrial development
based on knowledge-intensive industries. Free markets and hands-off goveITIIl1erits
may underproduce the scientific and technological resources necessary for
development of the next generation of industrial goods. The more optimistic
perspective was thus wrong in neglecting the role of the state in past
development. More importantly, it could also prove wrong in the future, due
the increasing competition in world markets and to the steady rise of new in­
dustrial countries using more sophisticated industrial and commercial policies than
Canada.
From a more theoretical perspective, a group of "central-peripheral" coun­
tries has to be neatly differentiated from the countries of the semiperiphery. These
central nations trade with larger, core countries, both in terms of imports and
exports. Their foreign direct investment also takes place in core countries. Their
technology overwhelmingly comes from these larger partners. Their industry is
as advanced as that of the core countries but more specialized, due to market­
size restrictions. They are not ' 'intermediary countries" in any meaningful sense
but are most often close followers to early developed economies.
1 56
Semiperiphery or Core?
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.
PART IV
ETHNICITY: PROPELLING OR
CHECKING ADVANCE ?
9
THE CONTRADICTIONS OF SEMIPERIPHERAL
"SUCCESS " : THE CASE OF ISRAEL
Beverly Silver
In a recently published volume Yoram Ben Porath notes the wildly shifting for­
tunes of the Israeli economy: "For twenty-five years after the establishment of
the state in 1948, Israel was considered an economic miracle, with one of the
highest rates of growth in the world . . . . During the 1970s, however . . . the
economy almost stagnated and Israel has become synonymous with running in­
flation and balance of . payments crises" (1986, 1). Israel's transition from
" economic miracle" to " economic disaster" can be fruitfully analyzed as part
of the world-systemic processes that have continuously reproduced an intermediate
(semiperipheral) zone of the world-economy. Israel's high growth rates in the
1950s and 1960s found parallels among many semiperipheral states of the
era. The combined result was a narrowing of the wealth gap between
semiperiphery during the postwar phase of world economic expansion.
as the 1970s and 1980s progressed, one semiperipheral " economic
another collapsed into economic disaster, leading to a widening of the
tween core and semiperiphery during the current phase of world-economic
traction (Arrighi and Drangel 1986; World Bank 1989).
The first section of this chapter will analyze the social processes
J .�.e
Israel's rapid economic growth from the establishment of the state in 1948
the abrupt shift to stagflation in 1973. Many of the processes that will be em­
phasized will be familiar to students of other " successful" semiperipheral NICs.
These are (1) the important role played by an activist state leadership with a strong
developmentalist and nation-building ideology; (2) the fact that in comparison
with the state, both dominant and subordinate classes and groups were weak, thus
giving the state leadership a large degree of autonomy in channeling human and
material resources in accordance with nation-building priorities; (3) the success
of the state leadership in manipulating and/or bypassing world-market forces rather
than becoming their passive victims, including the ability to stimulate or block
�"'��••
162
Ethnicity: Propelling or Checking Advance?
resource inflows and outflows through nonmarket mechanisms ; and (4) the abili­
ty to find a niche in the expanding world-market by exploiting their cost advan­
tage (lower wages) vis-a-vis core producers and their resource advantages (capital,
skilled labor, and infrastructure) vis-a-vis peripheral producers .
While some were trying to distill the secret of successful development out of
an analysis of the NICs, the very success of the latter was changing the world­
economic and national class conditions on which their own rapid growth had been
based. The second part of this chapter analyzes the processes through which Israel's
success (and success throughout much of the semiperiphery) undermined the con­
ditions for continued rapid growth . Again, some of the processes that will be
emphasized in the Israeli case are familiar to students of other semiperipheral
states.
First, on the national front, rapid growth itself tended to strengthen civil socie­
ty and weaken the relative autonomy of the state . The emergence of militant and
effective movements of workers and other subordinate groups throughout the
semiperiphery-from Spain and Brazil to South Africa and South Korea-signalled
the end of "cheap labor. " In Israel the end of cheap labor has been loudly an­
nounced in numerous forms from "the Oriental (Jewish) Revolt" of the 1970s
to the Palestinian intifadah in the late 1980s .
Second, at the world-economic level, as more and more countries attempted
to follow the NIC strategy of developing low-wage manufactured exports , com­
petitive pressures intensified, squeezing and/or eliminating profits. As more and
more low-wage exporters targeted core markets, protectionist pressures inten­
sified, thus bringing the limits of the low-wage manufacture export strategy into
clear vision. These trends support one of the key predictions of world-systems
analysis: strategies that can make some states (or individuals) wealthy cannot
simultaneously make all states (or individuals) wealthy (Arrighi and Drangel 1986;
Wallerstein 1979 , 60-6 1 ) .
Israel could not resolve the squeeze on profits in its old lines o f production
by lowering wages . With the new balance of class forces , real wages have escalated
beyond productivity increases virtually every year since the late 1 970s . The only
alternative was to shift to new lines of production that would be subject to less
competitive pressure (i . e . , core activities) . In fact , this has been the main em­
phasis of the Israeli state 's development strategy since the late 1 960s-that is,
the promotion of skill-intensive, high-tech industries .
While Israel has had some success in this area (most notably in the buildup
of a military-industrial complex) , the difficulties Israel has faced in promoting
an overall shift to core activities illustrates the general processes that keep
semi peripheral states from catching up with the wealth levels of the core. Core
countries (because of their wealth) are able to sustain the processes of innovation
that allow them to continuously shift into new economic activities that are not
subject to strong competitive pressures. To be sure, semiperipheral states have
a resource advantage over peripheral states , and an activist state leadership can
exploit this advantage to promote innovations and production in core activities
The Case of Israel
1 63
(e. g . , Uzi submachine guns and Gabriel missiles) . However, they simply do not
have the necessary resources (capital, labor, infrastructure, and markets) to move
up overall into predominantly core activities. This inability was starkly
demonstrated by Israel's recent forced abandonment of its multibillion-dollar pro­
ject to design, build, and market its own world-class fighter airplane (the Lavi) .
Israel has thus very much followed the semiperipheral pattern of "running fast
to stay in the same place. " However, the post-1973 Israeli experience also ex­
hib its a curious deviation. Since 1973 the Israeli domestic economy has been in
virtually perpetual crisis. However, according to Arrighi and Drangel (1986) ,
during this same period Israel moved up into the "perimeter o f the core . "
Moreover, the latest World Development Report (World Bank 1989) has
reclassified Israel, promoting it into the group of "high income economies . " If
from 1948 to 1973 Israel "ran fast to stay in the same place, " since 1973 Israel
appears to have moved up by standing still.
The key to this paradox lies in massive U.S. economic aid. This aid first became
significant in 1973 and then escalated sharply in the 1980s. Thus, while the
semiperiphery as a group sank, Israel was kept afloat. While it has not moved
up much relative to the average GNP of the core in the 1970s and 1980s, it has
been spared the fate of moving down with the bulk of the semiperiphery.
While it is not clear whether this aid can be converted into a form that will
allow Israel to firmly move up into the core, or if it will all be dissipated through
warfare and financial speculation, the post-1973 Israeli experience provides a strik­
ing illustration of the most effective means by which positions in the world
hierarchy of wealth can be affected. If we can judge from the Israeli case, massive
redistribution from the core is the most effective route . However, redistribution
as a strategy of upward mobility is the biggest fallacy of them all. Israel, with
a population of only about 4 million, receives nearly 30 percent of total U.S.
foreign aid (Abed 1986) . Thus such a strategy to upward mobility, like all sW'ategies
of upward mobility, is by definition limited to exceptional cases.
TIIE SOCIAL FOUNDATION OF RAPID ECONOMIC GROWTH,
1948-1973
Israel presents yet another clear case refuting the neoclassical myth
high growth rates of the successful postwar NICs were the result of free
prise in action, made possible by a state that passively accepted the verdict
unencumbered market forces . 1 Instead, the key role was played by an activist
state leadership with a deep-seated nation-building ideology and a strong distrust
for private capital and market forces. Furthermore, the ability of this state leader­
ship to successfully implement its develop mentalist goals was predicated on a
large inflow of both capital and labor-neither of which was responding to the
pull of market forces. Indeed, if it had been left to the free play of the market
and purely economic motivations, Israel would have been marginalized from the
international flows of labor and capital .
1 64
Ethnicity: Propelling or Checking Advance?
Given the logic of postwar international capital and labor flows, Israel was not
likely to attract large-scale resource inflows as a result of purely market
mechanisms. In the first place, Israel has no natural resources of significance
to attract capital interested in primary production for export. Second, during the
first two postwar decades manufacturing capital was attracted either to countries
with large protected domestic markets or to countries with access to even larger
regional markets (e. g . , the EEC, Spain, Brazil, Mexico) . Israel had neither a
large domestic market nor access to the regional market. By the 1 970s , with the
intensification of world-market competition, low labor costs became an impor­
tant factor in attracting foreign investment in labor-intensive segments of the labor
process. However, while Israel' s wage levels were low relative to those of the
core, it could not compete with most of the rest of the semiperipheral zone (par­
ticularly East Asia) , not to mention the periphery .
A final determination of large-scale international capital flows has been cold­
war politics . While this type of resource inflow has by now become the main
source of outside funds for Israel, before 1 973 intergovernmental transfers
represented an insignificant factor in Israel 's balance-of-payments situation. It
was not until the outcome of the Six-Day War that the United States began to
seriously consider Israel as a strategic asset, and it was not until after the Oc­
tober 1 973 war that the United States became a key source of financial assistance
(Israel Central Bureau of Statistics, annual; Silver 1987; Safran 198 1 , 578) .
Thus, if it had been left to market forces, Israel would have been subject to
strong peripheralizing pressures . Instead, Israel was able to resist marginaliza­
tion through the development of strong (nonmarket) links with extraterritorial
individuals and communities-diaspora Jewish communities around the world.
The Israeli state was able to effectively mobilize the latter' s resources (capital,
labor, expertise, and trade networks) and direct them toward the development
of the nation-state. These ties gave the Israeli state the resources to effectively
pursue an aggressive nation-building strategy-for example, sufficient capital to
make large-scale investments in agriculture, industry, and infrastructure; sup­
plies of both skilled and unskilled labor through immigration and association;
and the development of trade networks through integration into those of diaspora
businessmen.
The most striking success has been in the promotion of capital flows from the
diaspora community. Annual appeals for donations were institutionalized in Jewish
communities throughout the world, raising $ 1 . 7 billion from 1 950 to 1 967 . Dur­
ing the same period another $ 1 . 3 billion were raised through the sale of Israel
State Bonds (at below-market interest rates) . Finally, a major component of the
$ 1 billion in foreign private investment that reached Israel in this period was
" philanthropic" in nature-private investments by diaspora Jews that would not
have been made had the main criterion been profit (Lucas 1 975, 337-40) .
The largest single source of capital inflow in the 1 950-1967 period was also
premised on the existence of close ties between the Israeli state and world Jewry .
The war reparations agreement concluded with West Germany in 1952 provided
The Case of Israel
1 65
for the payment of some $820 million to the state of Israel over a twelve-year
period (the first payments arriving in 1 953) and was followed by an agreement
on personal restitution payments to individual victims of Nazism that by 1 967
brought another $ 1 . 2 billion into the hands ofIsraeli citizens (Lucas 1 975, 338-39).
These large capital inflows played a key role in financing Israel' s rapid economic
growth. From 1 95 0 to 1 973 Israel was able to maintain an average yearly invest­
ment rate of 3 0 percent of GNP while maintaining an import surplus equal to
8 1 percent of gross domestic capital formation, with accounts being balanced by
the capital inflows (Israel Central Bureau of Statistics, annual).
Israel' s rapid economic growth from 1 948 to 1 973 was also facilitated by the
large-scale immigration of skilled and unskilled labor. Between May 1 5 , 1 948,
and the end of 1 95 1 , 686,739 new Jewish imm igrants settled in the country; and
by 1973 total imm igration equaled over 1 . 5 million. These massive labor inflows
were not responding to market mechanisms. Many first-generation immigrants
experienced a sharp downward mobility relative to their economic status in their
country of origin. Moreover, unemployment rates were exceptionally high
throughout the period of mass immigration in the 1 95 0s. Instead, immigrants were
either ideologically or religiously motivated or pushed there by threats to their
personal safety in the sites of emigration.
These massive labor and capital inflows gave Israel important cost and resource
advantages in the competitive struggle. Israel was able to acquire them at below­
market prices-that is, interest and wages paid were lower than those that would
have been required to induce the same supply through market mechanisms.
The Israeli state leadership had a strong nation-building/developmentalist
ideology. Moreover, by the time of the establishment of the state, it had a degree
of control over resources that allowed it to act on this ideology. By the end of
the 1 948 war, ownership or control of capital, labor, and (especially) land was
heavily concentrated in the hands of the state. In addition to this physical control
over resources, the relative weakness of both the capitalist and working
enhanced the state' s power to channel human and material resources.
The 1 948 war and subsequent Israeli policy toward Palestinian r"t'n",p""
their property led to a dramatic concentration of land into the hands of the
Briefly, the 650,000 Arabs who had left their ' 'usual place of residence" at
time since the outbreak of the war (defined as November 29, 1 947, in the L"">.U'''''"LL''''
Property Law of 1 95 0) were classified as "absentees, " and their property
subject to confiscation by the state. In addition, laws were put into effect (or car"
ried over from the British Mandate) that allowed lands to be seized by the military
"in the interests of public safety" and by the minister of agriculture in the in­
terests of ensuring that all lands were cultivated.
The total amount of land involved was vast: the United Nations CCP Refugee
Office "estimated that although only a little more than a quarter was considered
cultivatable, more than 80 percent of Israel' s total land area of 2 0,850 square
kilometers represented land abandoned by Arab refugees" (Peretz 1 958, 1 43).
By the time all the nationalization processes had been completed at the beginning
166
t:thnicity: f-'ropelling o r Checking Ad�
'nC�)
of the 1960s, over 90 percent of all land 'W
1958; Segev 1986; Kirnrnerling 1983a, 19 \lll.ct
This sudden and nearly total control Ov b� t.. �t
per t:z;
e
Sti(: etrunent control (S� 976) .
a crucial asset for the political leadershi �
1
p
.
1 9 80a , 1980 ; Jif)'l S
and economic viability of the state . In til til It�
b
r was
t '
the rapid development of a capital -inteh � fit� ql.t " y s agricul tural sect01iti al
t
� �t
.
c
" Stv
1'
redistributed (for use) m large tracts to e <t P IaI: t0 C onsolidate the 0
fo r
i
s
b
a
.
· � ' It
· e a (coop �t 11:"
S
an overall government plan to achIev
provided the
g
d w as
�t · "1
. .
. .
tu ral
all
l
Jewish polItical control withm the 1 949 ICll\t\J. atly
e
Th
secto
r.
t
<t
.
.
a rt o f
at
tensive aid to these cooperatives m the fOr ilt·1St' l s � s and collectiveS aS I' dat
e
II: �l
li
and marketing . The mandatory channeliIlt 0f I: � i�f" SuffiIciency and COn so d e)(n
d
t
Histadrut Trade Union Federation's lltat l. g af �().it � S .2 The state e)(teCl . �c e ,
.
a
e
t
"' ill� s} , g r
�c 1
public control over the agnculturaI S\ltN
an ts , technic al <"-' S S
h the
and reinvested according to the 1eade sh'lJ.s , \'�()lll.hl.l.ltural produce throOg ured
r
.
a '
) ll s
The refugee properties were also mstrul 1):\' S 'V
ClyIt'I I: �t' tlle
s (e . g . , TnuVa e ol a ted
ltel
C
Jll
o
tion of the state. O �e of the first �cts Of
th lta) i �tQll Uld then be acco
.
to pass a law allowmg for unrestncted Je e. l) \ylJ. I:
al}
().e
velopment pi ' . 1'O S1\lv l � y a S
new state's extremely precarious econolh: sh I' I \; olidating the strateg1 C was
.
' ••().e
ta et
tion were promoted for a mIxture of "idII\: s·It\J.<tlhh
e
sh S '
nt
e
te th e
t> ....tl.i g r P nde Jew i
one hand, the ingathering of the exiles ft
1()tl. atio n to Israel . V�S 1'� ; raf ' -1",, ''''g
.
Ot>. t (:al ' I.l.",
<lI ' t
d' etre of the state. The speed at WhICh
al
trni ed flows 0 v'on the
g"Cl1 1fl
l
of fears for the safety of some diaspot <t
s e Cu rity reasOll S ,
r a i soll
Holocaust survivors stuck in displaced � <t J \y . <ts p I sh diaspora waS th e
t
�
r e sul
large part the policy of rapid immigration. r S(jll.s , IS� l.lrsUed was in part th�
e
th
g
.
.
I:
.
. I U di ll
. .
shortage m a new state faced WIth a Iong �h\y �'<s � I:<tl" OIh�
III
p " .'-lIl UllltJes (JOc
er '
l "t
..
"'IQ
eV
w
tight security situation.
fJo
\)l'I.) � S� S In Europe) .
pOwer
The extensive property of Arab refuge
tat \V llse to the severe rP�Jl ous1y
.
at fOIl
.-.uJlU
J' on. " Of the 3 hi
t' <t
"
of mass Imnllgrat
absorptIOn
o wed by a co,·
y
�
between 1 948 and the beginning of 1 953 3 f() tl.
\y a
,
for the
more than one-third of Israel 's Jewish P S() \y � J �y role in allowillg
d
aP
e
blishe
nearly a third of the new immigrants (250 ��ti�t� Cl \Vl sh settlements esta 954,
1
l)
doned by Arabs . In addition to homes n.��\J\j p ll.
ab sentee propertY . 111 and
y
a
and stores were taken over by the custoQ fa��Pl � on absentee propert a ­
i
e
a b ll
s
to new immigrants (Peretz 1958, 143)· lvt ll l:lf \\, t ll Settled in urban ar�
�
s ses ,
o r disputed border areas, thus giving l: h. Cl qbs�h thOU sand shops , bUS 1�e u d
Q
.
b te
rl . f . ·'tee
.
establIshment of new JeWIsh seUIemen.t ,, (). ItiCl 11.
d 1' s tr1
"
�
p
ty
pe
r
d
o
r
an
l
.
s
te
tellSe
tl.<tl fu gee property w as II)
Land was not the only critical econolllil: '
e
a
st
t th
lized by the state. E�ually i��rt�nt was t�SSet
tegic sign ificall C e
ta
t
t
ty of investment capItal arnvmg III the ca � l<t hat I:
tt
110po­
in long-term capital inflows (62 percellt I.ttl.tty �t ' s '%.e to be virtuallY IJlo
ori­
the state. Furthermore, during the sau e h()f tl' t;-tCl�antrol over the va st IJl�Ij
. "'l � t <'
.
.
b liOll
" s t'� tlrw
were III the form of umlateral transler
1 19 5 5 to 1 973 $3 6 1 o f
CI
",
t
.
.
' a
.
'
halld s
were controlled by the state or publIc ag� ttq <t" the '<l)
ll. �rnv ed into the . fl W
O S
tances by the Jewish National Fund, Ge
l<lJ ority of resou rce 11) h se
r
f e
.
0 t
trJ.atl. · tCIt Il Iatger
proportlOI)
,.,.,it. a1 re'"
�l(Q
.
\)Qt r lt1p l e , institutlO!)
lI
Ql
I srae
e
a n Pay
ments to th
�
� ()
t�� {� �
t'til()
"til:
this
O\a�i
�S
"
:
� l�\V�
�Q
liv
l
tll:i�s� �v�
t�
The Case of Israel
167
state, and intergovernmental transfers (see Israeli Central Bureau of Statistics,
annual, balance-of-payments tables).
The concentration of investment funds in the hands of the state leadership was
of great significance. Since the goal of the state leadership was to consolidate
a nation-state rather than to turn a profit, it was willing and able to channel in­
vestment funds into areas and activities that were deemed a priority from the point
of view of political and economic development rather than from the point of view
of pure profit criteria. Consolidation of the new state required large-scale in­
vestments in areas and activities that were either not profitable or were too risky
from the individual private entrepreneur's point of view. The state leadership,
hOw ever, was able to encourage investments in all the priority areas through its
decisions on how to dispense the capital it commanded: to whom, for what
economic activity, and at what interest rate.
The state's development budget became the major source of investment finan­
cing for both public and private enterprises (Pack 1 97 1 , 1 44). The Israeli capitalist
class was relatively weak, composed of small entrepreneurs with little indepen­
dent access to capital. As a result, the state was able to control investments, not
only through state-owned and Histadrut-affiliated enterprises, but also through
disbursements to private entrepreneurs that were earmarked for use on a specific
investment considered essential by the government.
The weakness of the Israeli working class (Jewish and Palestinian) during the
first decade or two after independence also gave the state leadership a great deal
of power to channel human resources in accordance with the developmentalist
and nation-building ideology of its leaders. During the first three and one-half
y ear s of statehood the population of Israel more than doubled, increasing from
64 9 , 600 in May 1 948 to 1 , 404,400 at the end of 1 95 1 . This massive wave of
immigration was composed almost entirely of destitute individuals: Jews fro.m
Arab countries who were either impoverished in their countries of origin (e
the M oroccan Jews) or whose possessions were expropriated by their
ments (e. g. , the Iraqi Jews), and concentration-camp survivors and
displaced persons ' camps in Europe. Unlike earlier waves of immigration,
h a d no useful personal contacts (family who had arrived and settled
o r political connections (with the Zionist parties, each of which controlled a
of patronage in the form of access to jobs and other resources). Having
dependent financial resources, they were totally dependent on the various
ment agencies for their immediate subsistence and their " absorption" into
economy and society (see Smooha 1 978, chap. 5 ; Segev 1 986, chap. 6) .
While the absorption of destitute immigrants meant a commitment of vast sums
of m oney in order to support the immigrants until they could be integrated into
th e lab or force and become self-supporting, the immigrants ' dependence made
it much easier for the state to direct new manpower resources into the economic
branches and geographical areas required by the development goals. For exam­
pIe , the twin goals of population dispersal and import-substitution industrializa­
t ion were facilitated by the government's ability to send groups of immigrants
168
Ethnicity: Propelling or Checking Advance?
from the transit camps to newly built Development Towns in outlying areas . Here
a newly built factory , designed for, say, textiles or food processing, would await
their arrival and integration as the unskilled labor force. Certainly , if a large
percentage of the new immigrants had had independent financial resources , it
would have been far more difficult for the state to persuade the population (through
ideological exhortations) to settle in the priority development zones: the border
and desert areas and areas of the country where a Jewish majority had yet to
materialize. It would also have been far more difficult for the state to persuade
the large percentage of immigrants who had been involved in petty-bourgeois
urban occupations in their country of origin to suddenly become farmers trying
to squeeze a living out of marginally fertile land.
The existence of an established trade union federation affiliated with the ruling
party furthered the new immigrants' dependence on the state. Responsibility for
negotiating wages and working conditions on a national and industrywide scale
lay with the Histadrut's central Trade Union Department. The latter's leadership
was drawn from the same strata and party from which the state leadership was
drawn . (The first prime minister of the state of Israel, for example, was also the
first secretary-general of the Histadrut in 1920-David Ben-Gurian. ) Moreover,
the ruling party also dominated the majority of Workers' Committees at the fac­
tory level-shop-floor committees that would have been a natural vehicle for spon­
taneous trade union activity (Shalev 1984, 37 1 ) .
The Histadrut leadership, in turn, trod a fine line between defending th e rights
of its members and promoting economic development. The following quote from
Pinchas Lavon, a secretary-general of the Histadrut in the 1950s , highlights the
Histadrut's policy of cooperating with the government leadership and subordinating
the pecuniary interests of its members (e.g . , rising real wages) to the broader
goals of full employment, economic growth, immigration absorption, price stabili­
ty, and national defense:
We are a movement which recognizes no fundamental differences between itself and the
State, but seeks to shape its policy and its actions on a basis of faithful service to the labour
community and the State alike. Such a movement cannot be guided by rule of thumb, nor
isolate itself from the outside world, but must consider itself always in the service of the
community and from time to time, true to its character, consider how to circumscribe
its organizational efforts in its field of activity. (quoted in Preuss 1965 , 1 48)
Whether as a result of state-Histadrut cooperation and hegemony over the labor
force or due to the high unemployment rates registered throughout most of the
1 950s , a degree of labor tranquility was achieved during the first decade of
statehood. Between 1 948 and 1 957 only 7 percent of all strike days were due
to strikes and lockouts not authorized by the Histadrut Trade Union Department
(Preuss 1 965, 1 68). During the same period strike activity declined almost year­
ly . Real wages rose yearly, but they did so at both a decelerating rate and at levels
consistently below increases in productivity (Silver 1 987).
The Case of Israel
169
Finally, there was n o serious challenge from the Arab national minority dur­
ing the first decades of statehood. The political and economic weakness of the
Palestinians allowed the Israeli state to extract important resources from the " Arab
sector" and direct these toward the consolidation of the nation-state. Furthermore, it meant that the effective maintenance of control over a discontented and
hostile national minority could be achieved at a very low cost to the state (see
Lustick 1980a, 1 980b).
While the force of Arab nationalism was an unsuccessful but costly and palpable
threat to the Zionist movement before 1 948 (Porath 1 977; Silver 1 987), after
1 948 the remnant of the Palestinian Arab community left within the borders of
the new Jewish state was far too small, weak, and disorganized to present a serious
security threat to the state. For the Arabs remaining within the boundaries of
the new state of Israel, the outcome of the 1 948 war meant a sudden and dramatic
reversal of status from majority to minority: only 150,000 Arabs remained within
the armistice lines, where there had been 800,000 before the conflict (Touma
1985, 74); at the same time their percentage of the total population dropped from
68 percent in 1 947 to 1 4 percent in 1 949 (Smooha 1 978, 68). Among those who
left the country were the vast majority of the urban population (Lustick 1 980b,
66), including the economic, political, intellectual, and religious leadership. There
were no longer any Arab newspapers, publishing houses, political parties, or
labor unions. "The ' center' had fled; the Arabs who stayed were, in effect, the
remnants of what had been the 'periphery' of the Arab community " (Lustick
1 980a, 48).
The structural weakness of the Arab national minority combined with the state
policies of repression, segmentation, and co-optation (see Lustick 1 980a, 1980b)
succeeded in keeping discontent under control. During at least the first two decades
of statehood the Israeli state did not have to confront mobilized mass-based na­
tionalist groups or political parties. The Arab national minority hardly '
into the consciousness of most Israelis or constrained the overall actions
state, even as their resources were channeled to the development of the
Finally, the autonomy of the state vis-a-vis all social forces was "u .�u�,un.
by the chronic state of war. The establishment of military rule over Arab
was justified by the tense security situation. However, the perceived
national security was also an important factor in increasing the state's
over the Jewish population. The nature of Israeli borders prior to 1 967
that in a war Israel could not afford to make any mistakes: along the coastal plain
where most of Israel's population, economic life, and industry were concentrated,
the country was only nine to fifteen miles wide, and thus a slight enemy advance
from the West Bank could splitthe country in half, cutting off the Haifa and Galilee
regions from the Tel Aviv region and the Negev. In this situation those who pur­
sued group- or class-based interests risked being accused of endangering national
security. This sentiment was made explicit by Moshe Dayan when he commented
that ' ' it is impossible to carry two flags at the same time" (quoted in Kimmerling
1 983a, 89-90).
1 70
Ethnicity; Propelling or Checking Advance?
In sum, a strong and motivated state leadership, faced with a weak civil socie­
ty and control over substantial resources , including non-market-induced capital
and labor inflows , was able to promote over two decades of rapid economic
growth .3 Yet, as will be argued below, "success" slowly eroded the social basis
of further " success. "
THE LIMITS OF "SUCCESS, " 1973-1989
In the previous section the integration of the immigrant labor force into an
already-existing trade union structure with close links to the ruling party was iden­
tified as an important factor underlying the relative insulation of the state from
class forces . The national trade union bureaucracy 's willingness to cooperate with
government economic policy by restraining real wage increases to levels below
productivity increases was a key factor allowing for the rapid economic growth
of the first two decades of statehood. However, rapid economic growth culminated
in long periods of full employment during which continued efforts by the na­
tional trade union bureaucracy to restrain real wage increases led to explosions
in unauthorized strikes and open rank-and-file defiance of the national trade union
leadership . The two periods in which the trade union bureaucracy successfully
restrained real wage increases to levels significantly below productivity increases
( 1 957- 1962 and 1 97 1 - 1 976) both culminated in a period of rank-and-file revolt.
The first rank-and-file revolt led the government to induce an economic reces­
sion in 1 966- 1 967 . The second and larger revolt, mounted after the October 1973
war, culminated in the ouster of the Labor Party from government and the vic­
tory of the Likud in 1977 (Shalev 1 984 ; also Friedman 1 976; Wolkinson and
Cohen 1 982; Fischer and Jacobson 1 982) .
The inability of Mapai/Labor Alignment, while still in power, to induce the
working class to join in a social contract with the state through socialist or na­
tional appeals to sacrifice for the common good was not only, or even mainly,
the result of cyclical processes (i . e . , a tight labor market) . Rather, important struc­
tural changes had taken place in the labor force that made it less likely to accept
the subordinate conditions under which it was initially incorporated and that
simultaneously gave it increased power to challenge those conditions.
As we saw earlier, one of the reasons for the relative freedom to maneuver
of the state in the early postindependence years was the total dependence of most
of the immigrants on the state for everything from jobs to housing to Hebrew
lessons . An elaborate system of patronage was developed through party machines
in which resources were exchanged for votes and cooperation with state policies
(Aronoff 1 982, 77; Meyer 1982) . The patronage system functioned as long as
the immigrants were dependent on the state and felt powerless on their own.
However, machine politics entered a crisis as the second-generation immigrants
came to numerical dominance in the labor force; educated in the Israeli school
system, speaking Hebrew fluently , they were far less dependent and vulnerable
than their parents ' generation. 4
The Case of Israel
1 71
The revolt of the working class was sharpened by the strong overlap between
class and ethnicity. Mass immigration in the 1 950s "created the preconditions
for the mobility of an entire stratum of the [predominantly European/Ashkenazi]
veteran population. Ever increasing numbers of the veteran members of society
abandoned any positions which required physical labor (in agriculture, industry
and construction) and instead moved into 'white collar' occupations which were
created as a result of the growth of the government bureaucracy, the building
of a professional army, and the growing demand by both the government and
the private market for professionals. . . . The places of the veterans who had
abandoned physical labor were taken by the new immigrants, primarily those who
had immigrated from Asia and North Africa" (Kimmerling 1 983a, 1 1 1 ; also see
Bernstein and Swirsky 1 982).
Oriental resentment burst into organized protest in the late 1 960s. One ofthe
first strong manifestations of discontent was the emergence of the Israeli Black
Panther movement in 1 968, a militant organization of Oriental youth formed to
protest the inferior social and economic conditions and discriminatory treatment
faced by Oriental Jews (Peretz and Smooha 1 98 1 , 5 12 ) . " The Oriental revolt"
mushroomed in the 1 970s, its most striking manifestation being in the clear shift­
ing of votes to the Likud, the right-wing but antiestablishment party. Of those
voters born in Asia or Africa, 5 1 percent voted for Labor in 1 969, while only
39 percent did so in 1 973 , 32 percent in 1 977, and 25 percent in 1 98 1 . At the
same time, the support for Likud from this group increased from 32 percent in
1 969 to 43 percent in 1 973 , 46 percent in 1 977, and 60 percent in 1 98 1 .
Significantly, the percentage of votes going to the Likud was even greater among
the second generation. Of voters whose fathers were born in Asia or Africa, the
Likud increased its share from 37 percent in 1 969 to 47 percent in 1 973 and over
65 percent in 1977 and 198 1 (Peretz and Smooha 1 98 1 , 5 12 ; also see Cohen
The Oriental revolt became a dominant political issue in the 1 970s,
Ashkenazi political elite on the defensive. Manifestations of this
shifting votes and organized protest movements to urban riots and rising
levels-together with the growing strike movement of Ashkenazi and
labor, were forceful signals that the state autonomy that had underlain the
of rapid economic development had come to an end, and that a new social
would have to be forged for sustained growth to reemerge.
The Likud's response to this new balance of class forces was decidedly populist.
Government spending increased in practically all spheres from export and in­
vestment subsidies to low-income housing (Project Renewal), basic commodity
subsidies, public-sector wages, and increased defense spending and support for
settlement activity in the occupied territories. The shekel was allowed to become
and remain overvalued, thus stimulating a sharp surge in imports, expecially con­
sumer durables such as cars and color televisions, and an even sharper deteriora­
tion of the balance-of-payments situation. These economic policies got the Likud
reelected in 1 98 1 , but they also exacerbated the domestic economic crisis, pushing
the economy from stagflation to hyperinflation and collapse by 1 98 3 .
1 72
Ethnicity: Propelling or Checking Advance?
The crisis of state autonomy was further fueled by the changing relationship of
forces between state and capital as the dependence of private entrepreneurs on the
state also declined. The government's policy of providing investment funds and
other incentives to all three sectors (private, public, and Histadrut) , while not in­
creasing the relative weight of the private sector (60 percent of GNP) , has increased
its absolute size and strength. Much of the government development budget was
permanently transferred to the private sector through grants, subsidies, and tax
credits and through unindexed loans and mortgages that effectively turned into grants
with inflation (Rosenfeld and Carmi 1976, 138-42; Kimmerling 1983a, 101). This
privatization of public wealth gradually increased the sources of capital available
to the private sector outside disbursements from the state development budget. As
a result, the private sector became increasingly powerful in its ability to determine
the overall pattern of economic evolution and to influence state policies to be more
in line with its immediate interests (Rosenfeld and Carmi 1976, 142) .
Thus, while the undisputed Israeli elite in the first decade of statehood con­
sisted of those individuals in the commanding heights of the public sector, by
the late 1960s and 1970s a new elite was emerging . According to Jon Kimche,
the post- 1967 economic boom and the accompanying surge in foreign direct in­
vestment led to the creation of "a new Israeli elite, a new establishment that to
a considerable extent displaced the old, or embraced part of it into its amply
financed New Deal . This resulted in a new parallel power-structure to that which
had dominated Israel for the previous 30 years . . . . Thus, alongside the old
establishment -the political parties, the Jewish Agency , the Histadrut, the Kib­
butz organizations and the armed forces-there grew up the new elite, which was
no longer dependent on the restrictive patronage of the old establishment but was
strong enough and had the fmancial resources to exercise its own form of patronage
and influence" (quoted in Peretz 1 983, 72-73) .
When the Likud came to power, it responded to the increased strength of
capitalists by making expensive concessions . Among the economic measures im­
plemented by the Likud 's first finance minister, Simha Erlich , were ones that
had long been desired by Israeli and foreign entrepreneurs-most notably the com­
plete liberalization of foreign exchange. Israeli nationals were allowed to hold
foreign-denominated currency accounts forthe first time. Those with savings were
able to (legally) protect themselves against the devaluation of the shekel by holding
other currencies. This option was so popular that it created a vicious circle of
devaluation and further flight from the shekel. In the context of a stagnating
economy (characterized by rising real wages and declining productivity) , quicker
and easier profits were to be made by investing capital in speculation against the
national currency rather than in productive activities . The house of cards came
crashing down along with the Tel Aviv stock exchange in October 1983 .
The period of rapid economic development also culminated in the strengthen­
ing of the weakest social force in Israel, the Arab national minority . Israel 's rapid
economic development led to the emergence of (1) a modem industrial proletariat;
(2) a class of self-employed artisans and small businessmen; and (3) a large number
The Case of Israel
1 73
of young educated professionals. With the growth of these groups, the base of
the traditional leadership declined and the basis of a less vulnerable and less depen­
dent modern nationalist leadership was born. By the mid-1 970s vocal nationalist
was widespread both within Israel's pre-1967 borders among Arab citizens
.
of Israel and among the West Bank and Gaza Palestinians .
A stable Arab industrial proletariat emerged in Israel in the second half of the
1960s. With the post-1967-war boom and the incorporation of Palestinian labor
from the occupied territories into the lowest rungs of the Israeli work force (e. g. ,
agriculture, construction, and services), the Palestinian citizens of Israel began
to shift rapidly from employment in agriculture and construction to jobs in manu­
facturing-including the advanced military-related industries. By 1980 manufac­
turing was their leading category of employment. At the same time, the ratio
of Palestinian Arab citizens in skilled proletarian occupations increased steadily,
from 2 to 1 in 1974 to 3 . 2 to 1 in 1977 (Makhoul 1982, 78-79, 95). The growing
presence of Palestinian Arab citizens in strategic positions in the national divi­
sion of labor increases their bargaining power. Likewise, the strong demand for
. their labor power and the consequently larger numbers with stable employment
and income indicate a move away from the unilateral economic dependence that
was a key process underlying their social and political weakness.5
The expansion of the self-employed is also indicative of a decline in economic
dependence and the emergence of a pool of independent resources in the Arab
community that could help sustain political protest. For example, in a mixed
Moslem-Christian village studied by Rosenfeld (1964, 1978) , more than one-third
of the gainfully employed were self-employed in 1976, compared to less than
15 percent in 1963. For Rosenfeld, "The rise of the number of self-employed,
the increased numbers of those with fixed and full-time employment points to
inroads into the middle class" and a generally strengthened class position. The
result, he concludes, is " that the Arabs have arrived at the point where they
to conform, and are capable of resisting (along lines of legitimate political
gle according to the democratic procedures of Israel itself) the role allotted
by those who administer them" (Rosenfeld 1978, 396-97, 404; see also
1980b, 76-78).
Simultaneously with the impact of economic development, political
have contributed to the revival of Palestinian national consciousness. The
whelming defeat of the armies of the Arab states in the 1967 war provoked a
crisis of pan-Arabism and the rise and radicalization of Palestinian particularism
(Ajami 1981) . The futility of the Palestinian movement 's strategy of relying on
the Arab states to eliminate Israel was dramatically laid bare. A more dynamic
Palestine Liberation Organization (PLO) under new and more militant leader­
ship emerged from the crisis (see Cobban 1984). At the same time, the occupa­
tion of the West Bank and Gaza by Israel unified the majority of the Palestinian
people under one state' s rule, where they had previously been isolated from each
other under the rule of three distinct states (Israel, Jordan, and Egypt) , each with
vastly different policies toward them (Peretz 1977). Israel's bad performance in
1 74
Ethnicity; Propelling or Checking Advance?
the 1 973 war and the rise of the PLO and the Palestinian issue to prominence
in the international arena further encouraged the militancy of Palestinians living
under Israeli rule.
The combined result of these socioeconomic and political changes has been
the growing salience of protest: a shifting of votes from the Labor Party to the
Communist Party (Rakkah) , the rise of an independent Arab student organiza­
tion on university campuses, and mass protest actions such as the "Land Day"
general strike called on March 30, 1976 , to protest land expropriations. The Israeli
Arab vote for Rakkah increased steadily from 2 3 . 6 percent in the 1965 Knesset
election to 37 percent in 1 973 and about half the Arab votes in the 1 977 election .
In the 1973 municipal elections the voters in Nazareth, Israel's largest Arab town,
chose a Rakkah mayor and a leftist municipal council for the first time. But the
greatest challenge to the Israeli state came from the West Bank. In the April 1 976
West Bank mayoral elections , PLO supporters were elected to govern in ten
municipalities, including the three principal West Bank towns of Nablus, Hebron,
and Ramallah (Peretz 1983, 67 , 72) .
The shock of growing Palestinian militancy was among the factors leading to
.
the defeat of the Labor Party and the right-wing Likud's victory in 1977. High
government officials (especially Ariel Sharon as the new minister of defense in
1 9 8 1 and Menachem Milson, the military governor of the territories) set out to
destroy the PLO's influence in the occupied territories . They believed that this re­
quired not only the banning of the pro-PLO nationalist organizations that had
developed in the territories (such as the National Guidance Committee) , but also
the elimination of the PLO protostate in Lebanon (Sandler and Frisch 1 984, chap. 7).
The war against the PLO began after the Likud's reelection victory in 1981
and was carried out in two phases . The first began i n March 1982 with a crackdown
on the nationalist institutions and activities in the occupied territories . The sec­
ond began in June 1 982 when Lebanon was invaded and the war was carried for­
ward to Beirut with the goal of expelling the PLO entirely from Lebanon.
The long-term results, however, were not those anticipated by the architects
of the war against the PLO. Israeli forces became bogged down in a quagmire
that eventually led to the unilateral withdrawal of Israeli ground forces. Support
for the war on the home front wore thin, and conscientious objection among Israeli
soldiers became a significant factor for the first time. Israel 's " solution" began
to look like the U . S . " solution" in Vietnam-a capital-intensive role for its own
troops (i .e . , bombing) , and the organization and support of a surrogate army (the
Southern Lebanese Army) for the labor-intensive fighting .
Meanwhile, in the occupied territories the outbreak of the largest and most sus­
tained Palestinian rebellion in December 1988 (the intifadah) made it abundantly
clear that a military solution to the Israeli-Palestinian conflict was not being and
could not be achieved. Thus the Israelis had poured an estimated $5 billion (Barkai
19 86) down the drain in a war all of whose aims were defeated.
The expense of the Lebanese war was yet another phase in the growing economic
dependence of Israel on the United States . By the time the Likud relinquished
The Case of Israel
1 75
the premiership, approximately 65 percent of total net long-term capital flows
and 50 percent of net unilateral transfers were in the form of U. S. aid; another
big subsidy arrived as the National Unity government formed in 1984 asked for
help in stepping back from the brink of bankruptcy. These funds helped finance
a chronic import surplus amounting to more than 100 percent of total gross
domestic capital formation (or around 30 percent of GNP) from 1973 on.
Finally, the rise of Palestinian militancy, together with the combined outcomes
of the 1967, 1973 , and Lebanon wars, led to a precipitous decline in the freedom
to maneuver that the state had enjoyed due to the tense security situation and the
public's faith that the governing elite could best handle security affairs without
interference. Israel's quick and unambiguous victory in the 1967 war and the
apparently far more defendable borders created by the absorption of the West
Bank, Sinai, Gaza, and the Golan Heights reduced the barriers to the emergence
of social movements based on fears of endangering national security. Pent-up
demands, especially for increased consumption, burst out in the post -1 967 years.
More significantly, " Unification of the ancient Land of Israel led to the shat­
tering of the political consensus that had precluded exhausting controversy over
security issues. Disposition of the territories occupied in 1967 became a major­
and divisive-issue in Israel" (Meyer 1982, 32). The issue divided and immobi­
lized the LaborAlignment, which attempted to dodge the issue through vague policy
formulations designed to maintain party unity-or at least contain disunity (Yaniv
and Yishai 1981, 1117-18).
The failure of the governing elite to anticipate the attack by Egypt and Syria
in October 1973 (despite repeated warnings in intelligence reports) , and the heavy
casualties suffered by Israel as a result, marked a major turning point. Confidence
in the government was shattered. The shock of growing Palestinian militancy
within Israeli-controlled territory and the international arena further contributed
to the crisis of confidence in the government. After the 1973 war groups
had previously abstained from interference in security affairs formed vocal
forceful pressure groups and social movements. For example, the N
Religious Party (NRP) began to express strong interest in security affairs,
ly the disposition of the West Bank (the biblical Judea and Samaria). I n
leaders of the National Religious Party youth faction became founding 'U','1UJ"'�
of the extraparliamentary settlement movement Gush Emunim.
The rise of extraparliamentary social movements on the settlement
divided and paralyzed the Labor Party government. The Likud government came
to power with a strong commitment to these movements' goal of the ' ' unification
of the Biblical Land of Israel. " This goal drove the Likud into the Lebanon debacle
in an effort to destroy PLO influence in the territories. It also led them into a
policy of intensive Israeli settlement in the occupied territories in an effort to
achieve de facto annexation (Benvenisti 1984). The National Unity governments
since 1984 have again been divided and immobilized. With the governments
pressed between effective Palestinian resistance, on the one hand, and heavily
armed and committed settlement movements (with which key members of the
176
Ethnicity: Propelling or Checking Advance?
government have strong sympathy), on the other hand, the courage to provide
the political leadership necessary to resolve the Israeli-Palestinian conflict has
been tragically absent.
CONCLUSIONS: THE CONTRADICTIONS OF NATIONAL
DEVELOPMENT IN THE MODERN WORLD-SYSTEM
The"development of underdevelopment" is the norm for noncore states within
the world-economy. In part this is because "real development" (i.e., the attain­
ment and retainment of core status) requires the capacity to concentrate on the
most lucrative economic activities within the world division of labor at any given
point in time; and this in tum requires a capacity for constant innovation. However,
the catch is that core states (and only core states) have the institutional arrangements
and accumulated resources (capital, labor, expertise, and infrastructure) necessary
to sustain the required stream of innovation in products and production processes.
Thus the operation of market mechanisms on a world-scale serves to reproduce
the unequal distribution of wealth produced in the world-economy (Arrighi and
Drangel 1986).
Israel, however, was able in large measure to overcome the limitations im­
posed by the paucity of market-determined resource inflows because Israel was
able to mobilize sizable inflows of capital, labor, and expertise via noneconomic
means-most notably via appeals to the religious and nationalist sentiment of
diaspora Jewish communities. As was argued earlier, these resources gave Israel
the means with which to sustain a period of rapid growth and a process of in­
novation that made Israel strikingly competitive in certain skill-intensive products.
Ironically, the same processes that have allowed Israel to mobilize the resources
necessary to achieve two decades of rapid economic growth have unleashed pro­
cesses that vitiate further attempts at progress. Here I am referring to the mobiliza­
tion of human and material resources through appeals to nationalist and religious
sentiment. The drive to establish a nation-state in a hostile environment called
forth the sacrificial energies necessary to establish and consolidate the state and
to achieve two decades of rapid economic development. Thus, for example, far
from suffering a "brain drain"
during the first decades of statehood, Israel was
able to attract skilled workers from the diaspora communities. However, na­
tionalism does not operate as a positive force in a vacuum, but instead comes
into conflict with (and indeed provokes) the nationalist responses of others. As
Israel became more and more successful in mobilizing human and material
resources through nationalist appeals, more and more of those resources had to
be directed toward military expenditures to counteract the reaction from com­
peting nationalist forces.
Thus, while the nationalist and religious appeal pulled hundreds of thousands
of Jewish immigrants to Israel in the 1950s who contributed to the rapid economic
development of the state with their labor and other resources, it necessarily in­
flamed the conflict with Palestinian and Arab nationalism by creating a large
The Case of Israel
1 77
refugee population along Israel's borders.6 Likewise, the combination of na­
tionalist and religious pride inspired by the successes in the 1967 war, including
the occupation of the biblical lands of Judea and Samaria, initially called forth
a tremendous surge in immigration and financial support from the diaspora com­
munities. However, the nationalist and religious upsurge in Israel (and the oc­
cupation of new territories) intensified the nationalist and religious opposition
of the Arab states and the Palestinians. The route to Israel's successful mobiliza­
tion of human and material resources was also the route to an intensification and
growing militarization of the conflict with Arab nationalism. While the available
human and material resources grew, they were increasingly channeled into military
expenditures.
This contradiction brought Israel's economic miracle to an abrupt end. The
Likud experience showed that Israel does not have the level of wealth necessary
for the simultaneous maintenance of a warfare state and the establishment of a
populist social contract that takes into account the strengthened bargaining power
of the Jewish capitalist and working classes. The National Unity governments'
experience has shown that the working class has become too strong for a strategy
of prolonged recession to effectively restore labor discipline and productivity.
Like many countries in the semiperipheral zone in the 1970s and 1980s, the work­
ing class in Israel is as least as strong as its counterparts in core countries, but
the state and capital do not have the resources that exist in the core for forging
a social contract that simultaneously takes into account this strength and allows
for continued economic growth. Meanwhile, the economic crisis, combined with
the growing militarization of Israeli society and its continued illegitimacy in the
region, was contributing by the mid-1970s to the breakdown of the processes
through which Israel had been able to mobilize large-scale, non-profit-oriented
inflows of resources from the Jewish diaspora communities. With the combined
impact of the intifadah and domestic economic collapse, Israel has begun
fer from large-scale emigration and the classic "brain-drain" syndrome.
while, diaspora communities are showing signs of growing alienation from
(see, e.g., Sheffer 1984).
An alternative source of funding has been available, and indeed since 1973
has been a shift to this new and mushrooming source-the U.S. government.
Israel strengthened its warfare capabilities in response to the regional conflict;
the United States became increasingly willing to [mance Israel-but as a surrogate,
warfare state enmeshed in theU. S. global political strategy of East-West conflict
and containment. While militarization in response to the regional conflict
simultaneously has led Israel to seek additional (''non-J ewish'') sources of funds
and has led the United States to see Israel as an attractive ally deserving lavish
funding, the growing Israeli dependence on U.S. funds makes it increasingly dif­
ficult for Israel to resolve the regional conflict or exl£icate itself from the militariza­
tion that created the need for U.S. funding in the first place. On the one hand,
military capacity is precisely the specialty that Israel has to sell to the United
States in exchange for economic aid. On the other hand, the expansion of military
178
Ethnicity; Propelling or Checking Advance?
industries in response to the regional conflict has created an Israeli military­
industrial complex under pressure to export as a result of "economies of scale,"
which in turn requires a close collaboration with U.S. global strategic interests
(see, e.g., Klieman 1985; Mintz 1985).
This analysis suggests that the current crisis can only be resolved if Israel can
disengage itself from the military conflict. It also suggests that such a disengage­
ment would not be easy: the two main transnational links on which the Israeli
economy has depended are both links that (in very different ways) have promoted
the process of militarization. However, without demilitarization, Pa'il's ( 1983,
30-31) grim prediction of an Israel that combines the worst aspects of Northern
Ireland and South Africa-" a cruel non-democratic state structure with constant
fighting and bloodshed" -becomes more true daily.
Most of the "solutions" to the Israeli-Palestinian conflict currently on the
political agenda would require massive inflows of resources from core countries.
Unfortunately, however, it still remains to be seen whether "peace" can be as
strong as a motivation as "war" (hot and cold) for eliciting massive international
redistributions of wealth.
NOTES
This is a substantially revised and shortened version of a paper prepared for the Research
Working Group on Semiperipheral States at the Fernand Braudel Center. Many of the
assertions made in this paper are more fully documented in the longer version (Silver 1987),
available on request from the author. For their comments and criticisms on this and/or
earlier drafts, I thank Giovanni Arrighi,Baruch Kimmerling,Art Liebman,William Martin,
Don Peretz,Allen Silver,and the members of the Research Working Group on Semiperi­
pheral States.
1. See,for example,Amsden (1985) on Taiwan,Evans (1979) on Brazil,and Deyo
(1987) on the Southeast Asian NICs.
2. The degree of state control over the process should not be exaggerated. Much of
the refugee property was seized by homeless new immigrants and returning war veterans
who squatted in the empty properties (see,e. g. ,Segev 1986,75-76). In fact,the spon­
taneous "expropriations" created a situation that encouraged the government to move toward
official expropriation.
3. It should be noted that the state's control over resources did not mean that it was
free to pursue economic policy without regard for world-market conditions. Rather,the
state's success in promoting rapid growth was largely linked to its ability to find niches­
that is, to channel resources into economic activities that were not subject to sharp com­
petitive pressures in the world-economy at any given point in time. Israel switched from
a primary emphasis on import-substitution industrialization to export-oriented industrial
expansion in the late 1950s and early 1960s,while world-market demand was still expand­
ing rapidly and before competition in industrial exports from low-wage countries became
intense. After 1967 the state began to promote advanced technology exports,again a shift
in step with world-market conditions as the terms of trade declined for low-technology
industrial exports,much as they had for primary products in the previous period.
The Case of Israel
179
Israel's unviable textile industry provides an example of the "wrong policy at the wrong
time. "
Although the Israeli textile industry has been targeted as a development budget
priority and has undergone extensive state-subsidized modernization, it has never become
a profitable export branch. The main reason for failure appears to be in the nature of the
international competition. While Israeli wages for textile workers are significantly lower
than those in core countries, the low-wage international competition has been fierce, with
a large and growing number of competitors. By contrast, most of Israel's successful ex­
ports are in products with few or no other low-wage competitors in the international sphere
(Silver 1987).
4. Beginning in 1975, for the first time in the life of the collectivity, the majority of
Jewish residents in Israel were born in the country (Kimmerling 1983a, 143).
5. Kimmerling (1983a, 72-73) notes what amounts to the "workplace bargaining power"
of the Arab strikers, that is, their concentration in the transport industry and their ability
thus to paralyze movement in the country. Interestingly enough, it was this kind of power
that came from being concentrated in the key sectors of the economy that the theorists
and practitioners of Labor Zionism sought to achieve by the creation of a Jewish working
class and the "normalization" of the Jewish class structure through the establishment of
a self-sufficient Jewish nation-state in Palestine. See especially Ber Borochov ([1906] 1984).
On the concept of workplace bargaining power, see Arrighi and Silver (1984).
6. Refugees with their fields near the border became the primary infrltrators during
the early years of statehood, often attempting to return to their land permanently or to
harvest crops or to get possessions left behind (Peretz 1958, 59). As the refugee problem
remained unsettled, both the scale and violence of refugee infrltration and Israeli retalia­
tion across the border escalated until these tensions spilled over into the 1956 Israel-Egypt
war (see Schiff 1985 on escalation of infiltration and retaliation).
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10
ETHNIC DIVISIONS AND STATE�CENTERED
DEVELOPMENT: MALAYSIA AND NIGERIA
COMPARED
Paul M. Lubeck and Donna Rae Palmer
WHAT IS THE COST OF ETHNIC DIVERSITY?
In world-systems theory it is a truism that all successful semiperipheral states
must mobilize nationalism as a social force to construct cultural integration and
to discipline bureaucratic and social organizations. Indeed, history suggests that
state-directed nationalism is necessary and determinant because it is critical for
local capital accumulation, for the forging of alliances between capitalists and
state technocrats, and, ultimately, for achieving upward mobility within the global
division of labor-the capitalist world-economy (Evans 1979; Wallerstein 1979).
In an ideal world ethnonational cultural identities overlap perfectly with the ter­
ritorial boundaries of the nation-state. Commonly, however, this ideal is
lized. Oftentimes a state elite must "socially construct" a national'
redefining existing ethnic boundaries through manipulation of religious,
and cultural symbols or reconstruct one from diverse ethnic sources or
The Mexican postrevolutionary political elite, for example, mobilized
.
port for state-centered industrialization by creating a new ethnonational
that glorified Mexico's pre-Columbian past (Hamilton 1982, 138). Today this
symbolic construction of''pastness" is personified by the appellation of opposi­
tion leader "Cuauhtemoc" Cardenas, son of the great populist president. 1
Since nationalism is an invaluable resource for mobilizing cultural and material
resources for state-centered industrialization, multiethnic states are handicapped
before bolting from the starting gate. To be sure, Malaysia and Nigeria are not
alone, for ethnic diversity is widespread among aspiring semiperipheries. 2 If one
examines today's most celebrated semiperiphery, South Korea, the contribution
and power of ethnonational homogeneity are readily apparent. Let us examine
this ideal case from a comparative perspective so as to highlight the cost of ethnic
diversity borne by multiethnic states.
184
Ethnicity: Propelling or Checking Advance?
SOUTH KOREA: THE ORIGIN AND ADVANTAGE OF ETHNIC
HOMOGENEITY
Though lacking rich natural resources, South Korea owes no small part of its
unrivaled success to a common language and national culture that were institu­
tionalized early by a Confucian-bureaucratic state that resisted waves of foreign
invaders. The premodern Korean identity, in turn, was reinforced by the process
of' 'reactive ethnonationlism" under the Japanese colonial occupation (1910-1945)
(Hechter 1975). Unlike the British colonial states in Malaya and Nigeria, the im­
perialism of the Japanese was not indirect; rather, the Japanese colonial state in­
nded profoundly into the social and economic relations of both Korea and Taiwan.
Interestingly, modern Korean nationalism was strengthened by the dialectical in­
terplay between the myth of premodern cultural unity and postwar reactive na­
tionalist resentment directed against Japanese imperialism. After the 1961 coup
military-led strategists articulated a reconstructed interpretation of Korean na­
tionalism that was cohesive, disciplining, and "developmentalist," thus enabling
them to harmonize the strategic objectives of indigenous capitalists and state
technocratic elites. No relationship has more explanatory power for Korea's suc­
cess than the tightly articulated relationship between local capital and state
technocrats.3 A widely shared nationalist consciousness, directed and institu­
tionalized by state planners, supplied the cultural mortar for this alliance in Korea
as well as in other success stories such as Brazil and Taiwan.
This contrasts sharply with the colonial experience of Nigeria and Malaysia,
where, for reasons we shall explore, the colonial encounter with the world­
economy redefined ethnic groups and intensified communal antagonisms. Not
only did colonial rule stimulate mutually antagonistic, reactive ethnonationalisms
within Malaya and Nigeria, but the combined interaction of the colonial export
economy and the administrative policy of the colonial state created an invidious
ethnic division of labor in both colonies. Moreover, in Nigeria, more than in
Malaya, semiautonomous regions were constructed, each possessing a distinct
export-commodity relationship to the world economy and virtually no transethnic
integrative institutions. Most significantly for our study, ethnic divisions in
Malaysia and Nigeria overlapped with the social division of labor. In both cases
the most economically backward but most politically cohesive groups controlled
the postindependence state apparatus, while the more economically advanced
groups dominated the higher niches of the indigenous economy. Instead of har­
mony in an alliance of accumulation, ethnic competition between state elites and
economic elites undermined the thrust of nationalist cohesion, producing a stag­
nant state sector, a rentier bourgeoisie, and a disarticulated economy (Jesudason
1989; Lubeck 1986; Horowitz 1985).
Malaysia and Nigeria Compared
185
ETHNONATIONALISM: CULTURAL AND STRUCTURAL
EXPLANATlONS
Accordingly, the central thesis of this chapter is that in order to evaluate the
cost of ethnic diversity for semiperipheral development in our two case studies,
one must first grasp the social reconstruction of ethnicity during the colonial en­
counter, a period when the ideologies and practices of "indirect rule" dictated
a particular ethnic division of labor and relative regional autonomy. Only after
understanding how colonial rule reconstructed ethnic identities in Nigeria and
Malaysia can one suggest a structural explanation for ethnic antagonisms that have
frustrated their achievement of a semi-industrial and semiperipheral role in the
global division of labor. Throughout, we argue that ethnic groups or "peoples"
are not primordial, natural, unchanging, or essential identities. Instead, any identity
expressed as a "people" is the product of the dialectical interplay among several
structural forces and an inherited or invented cultural system that must be repro­
duced socially in households at a particular moment in the evolution of the capitalist
world-economy (Wallerstein 1987; Brass 1985).4
Obviously, we intend to avoid the essentialist reasoning employed by our
historical-political subjects, that is, their understandable tendency to reifY the
essence of their''Imagined Communities," to quote Benedict Anderson's felicitous
phrase (Anderson 1983). Thus we must define the structural forces that, we
theorize, best explain the affirmation of politically significant ethnic identities
from a vast array of overlapping, contradictory cultural possibilities and social
boundaries. Following Marx, we agree that identities are socially created but''not
as they please." Such identities are formed under structural constraints''transmit­
ted from the past" (Marx 1963, 15). Accordingly, we argue that three structural
forces interact with cultural legacies derived from kinship, religion, language,
and custom to form the dominant ethnic groups in contemporary Malaysia
Nigeria. These are (1) the historical relationship of groups to the cycles,
cesses, and institutions of the capitalist world-economy, including exchange·
tions, export-commodity production, and the diffusion of global cultural·
tions such as language, religion, and print literacy; (2) the positive and
impact of the colonial state on the boundaries, political organization, income op­
portunities, and cultural practices of subjected groups; and (3) the relationship
between the ethnic and the social division of labor (i. e., class relations) within
the colony, especially how each group's access to market opportunities was ad­
vanced or retarded by the state and the world division of labor.
STRUCTURES, CULTURES, AND ETHNIC OUTCOMES:
MALAYSIA AND NIGERIA COMPARED
Given the space limits constraining this study, only the most salient ethnic
groups, structural processes, and historical phases can be analyzed in the detail
186
Ethnicity: Propelling or Checking Advance?
they deserve. For Nigeria, where hU:1dreds of possible ethnic affiliations exist
among more than 100 million citizens, the pivotal actors are the Muslims, Hausa
speakers, who tend to control the military and the state, and the Yoruba , who
are the most economically and educationally advanced group, but who are nearly
evenly divided between Christian and Muslim affiliations. The latter dominate
the southwestern states and the former the northern states. In Malaysia, where
a population of about 16 million enjoys a higher per capita income, the Muslim
Malays control the state apparatus, while the Chinese control indigenous capital. 5
The peoples from both countries participated in transnational trading empires
during several distinct phases since the sixteenth century before incorporation
into the capitalist world-economy. Coastal enclaves gave way to formal British
imperial control during the late nineteenth and early twentieth centuries. Interac­
tion with the world-economy and the colonial policy of "indirect rule" advanced
the economic and technical advantages of the Chinese and the coastal Yoruba,
while protecting the aristocratic (prebendal) privileges of the Malay and Hausa
rulers over their respective peasantries. Islam was promoted as a cultural mode
of social control and a buttress for noncapitalist ruling groups in both cases.
Despite the greater size of Nigeria and the greater wealth and presence of com­
mercial rubber plantations in Malaya, both exported tropical commodities as well
as tin. Later both became dependent upon petroleum and natural-gas exports.
Post-World War II politics generated a similar portrait: Nigerian southerners (e.g.,
Yoruba and Igbo) and Malay Chinese and Indians who were radical nationalists
demanded independence in a unitary state, only to be confronted by unified but
reluctant Hausa and Malay elites who feared being overwhelmed by the former
rivals in the economy, in the civil service, and in the proposed unitary state con­
stitution. Predictably, the British opted for a federation as the "compromise of
independence," an arrangement that soon degenerated into extensive communal
rioting in 1966 in Nigeria and in 1969 in Malaysia. In each case resentment by
the more economically backward, preponderantly Muslim groups ignited attacks
on the more advanced Chinese and southern Nigerians, especially Igbos.
The Nigerian civil war soon erupted, and civilian rule was suspended temporarily
in Malaysia. State centralization, greater power for security forces, and greater
state involvement in the economy characterized the policies of the 1970s. In­
terestingly, the political cohesion of the more backward groups, not unlike the
. Afrikaners of South Africa, enabled them to exert greater authoritarian control
over the state apparatus. High commodity prices, especially for petroleum, buoyed
the economy through the inefficiencies wrought by redistribution and indigeniza­
tion of industry, policies implemented by both governments during the high tide
of economic nationalism.
Hence there are obvious and consistent similarities in these cases. Key dif­
ferences are important also. The Yoruba are indigenous and not "defined" as
immigrants like the Chinese and Indians. The level of social development is more
balanced and the economy more advanced in Malaysia than in Nigeria. Fiscal
responsibility and economic nationalism are more restrained in Malaysia. The
Malaysia and Nigeria Compared
187
number of ethnic groups in Nigeria requires greater pluralism; there are some
cross-cutting social linkages in Nigeria such as the Islamic affiliation of at least
half the Yoruba and the affirmation of a common racial (i.e., physical) identity.
Most importantly, there is a long-standing and significant merchant-industrial
bourgeoisie among the Hausa, centered in the Kano-Kaduna region. In Malaysia
race, religion, language, and ethnicity overlap almost totally and thus reinforce
the social division of labor to a degree not found in Nigeria.
With this overview in mind, let us explore how these three structural factors
interacted within distinct culturally defined groups during the colonial conjunc­
ture. We emphasize that these structural factors produced a remarkably similar
ethnic separation of indigenous political and economic power.
BEFORE COLONIALISM: THE CONSTRUCTION OF
ETHNICITY
Nigeria
Contact with the Muslim world via long-distance trade and the Atlantic trade
helped define ethnic identities. In the Hausa-speaking cities of northern Nigeria,
the Muslims formed distinct communities with specialized occupational groups
much valued by indigenous rulers for their trade, wealth, literacy, and lclowledge.
Unified by a reform movement, the Fulanijihad, a vast number of communities
and walled city-states were unified in the early nineteenth century into a largely
Rausa-speaking empire that remained external to the capitalist world-economy
(Ajayi and Crowder 1976). It was this ethnic identity that the British confronted
when the caliphate was conquered in 1903-1904. Nonetheless, the divisions
between Muslim and non-Muslim and aristocrats and commoners, as well as
peting elite lineage affiliations, were more important sources of political
tion and social cleavage than the subsequent''tribal" ethnic identities that
"constructed" by a new colonial discourse when Nigeria became a feder
ony (Lubeck 1986).
If the northern Muslim groups remained external to the capitalist
economy, thus allowing the Muslim state and belief systems to incorporate
integrate diverse ethnic groups into the Muslim Hausa, southern Nigerians
ed a different path. The two major ethnic groups of southern Nigeria, the Y
and the Igbo, existed as language groups but not as ethnonational or unified political
groups under a single authority. Town and clan rather than emirate and Muslim
empire were the widest political affiliations in the south.
Caught between the pressure from the Muslim expansion in the north and the
changes in economic power arising from the slave trade, the confederation of
Yoruba towns known as the Oyo Empire collapsed early in the nineteenth cen­
tury. Hence civilwar, fed by the slave and firearms trade with the world-economy,
shattered the previous confederation and created new lineage-organized towns
but did not create a common ethnonational (political) identity among the Yoruba
188
Ethnicity: Propelling or Checking Advance?
speakers. The effective political identity was, and still remains to a significant
degree, the Yoruba city-state and not the language group as a nation. Customs,
land-tenure practices, and dialect differences distinguished the separate towns.
That the British conquerers played a role as peacemakers from 1886 until the
declaration of a protectorate underscores the destructive impact of nineteenth­
century intra-Yoruba warfare (Lloyd 1968, 1971).
Formal colonialism began when the coastal Yoruba town of Lagos was annexed
as a crown colony in 1861, functioning as a commercial center for the palm-oil
trade and a base for missionaries among the Yoruba. The origins of the educa­
tional advantage enjoyed by the Yoruba began when the missionaries translated
the Bible into Yoruba and thereby provided an intra-Yoruba medium upon which
"print nationalism" made its contribution to the colonial construction of the
Yoruba (Wallerstein 1984). Christianity spread via Yoruba written in roman script.
Emancipated slaves (i.e., the Saro) formed a protobourgeoisie, integrating rival
Yoruba towns through evangelization and communicating their "peopleness" in
the new script. Thus biblical Christianity provided a written medium of com­
munication and a symbolic form to express an emerging trans-Yoruba identity.
The word "Yoruba" is not a Yoruba word; it is originally of Hausa extraction.
The myth of descent from Oduduwa never enjoyed priority as a political identity
above the Yoruba town. Finally, proximity to the Atlantic trade, together with
missionary-sponsored educational investments, laid the foundation for Yoruba
preeminence in state technocratic roles, commercial and industrial leadership,
and dominance over the modern economy in general.
Prior to colonial rule, therefore, the modem ethnic identities-Hausa, Yoruba,
and Igbo-were not operative political identities. Intraethnic conflict was more
significant, especially among the southern groups, than conflict between these
groups. Only with the colonial export economy, migration to new urban centers,
and the definitions asserted by the colonial state did "modern" ethnic identities
emerge, taking on the new political meanings and new assertions of''peoplehood."
Malaysia
As in the case of Nigeria prior to incorporation and formal colonial rule, in­
stitutional borrowing from the great traditions (Hinduism and Islam) enabled cen­
tralized states to form in Malaysia from autochthonous groups. Yet neither large­
scale migration nor transformation of production systems arose from their in­
volvement in administered long-distance trade. Without a strict ethnic division
of labor so characteristic of the colonial economy, both Malaysia and Nigeria
witnessed the gradual assimilation of now-hostile groups into tribute-paying but
legitimate local communities distinguished by possessing a unique origin. Observe
how similar ethnic relations were in both cases prior to incorporation into the
world-economy as a commodity exporter.
Prior to formal incorporation as a British colony, the Malayan Peninsula was
not divided into Malay and Chinese communities. Because it was situated midway
Malaysia and Nigeria Compared
189
on the India-China trade route, the proliferation of trading ports and the conse­
quent influence of traders originating from the great empires of India and the
Muslim world generated diverse cultural communities. Only later, under different
structural conditions, do we discover the Malays, Chinese, and Indians who were
to be consolidated into more or less strict ethnic identities during the colonial era.
Believers in primordial ethnicity should examine the origins of the groups who
became the contemporary "Malays": that is, those groups who inhabited the
riverine villages (kampongs) that proliferated during the period of Asian trade.
The inhabitants of these villages were by no means homogeneous. They were,
in the early periods of settlement, immigrants from various regions within the
Indonesian archipelago who displaced the aboriginal groups, the Orang Asli, forc­
ing them inward. They included among their ranks Minangkabau (Sumatrans),
Bugis (Celebesians), Korincha, Rawa, Mandiling, Batak, Javanese, and Achehnese
(Hua Wu Yin 1983). Generally, each of these groups settled in different areas,
maintaining separate Hindu-style political kingdoms, local dialects, and
sociopolitical identities.
Although originally descended from the southern provinces of China, the various
Malay groups of the archipelago and the Malayan Peninsula were more influenced
culturally by the missionary-minded Indians than the Chinese, who were content
to collect tribute from the Malays rather than to convert them. The commonality
of Hinduism and a shared Malay language of trade is indicative of the social con­
struction of ethnic identity among the Malay peoples via contact with the world­
system of the Asian trade. Later, quite consistently, the Malay ethnic identity
became inextricably linked with Islam rather than East Asian ethical systems
(Gullick 1958).
Attempts by Persian, Arabian, and Egyptians traders and missionaries to con­
vert the rulers of Sumatran kingdoms to Islam were generally unsuccessful, but
the Muslim Indians from Gujerat, perhaps because of closer cultural affinity, were
successful. Intermarriage between ruling families and proselytizing by a
of Islamic religious scholars-originally Sayyids from Mecca, Persia, and
and later indigenous Malay or Jawi pupils-spread the Muslim faith
Sumatra and Malaya (Nagata 1984).
The conversion of the sultan of Malacca to Islam in the sixteenth century coin".
cided closely with the beginnings of contact with the European trading
This coincidence had a universalizing effect, on the one hand, but promoted ethnic
particularism, on the other. Ensuing political and economic antagonism between
the Muslim rulers and the Europeans helped create an oppositional identity
(believer/infidel) that stimulated a tightening of bonds between the sultans of the
various states of the peninSUla as they vied for control of trade and tribute against
the Portuguese and Dutch invaders. The intersection of the two processes­
Islamization and European mercantilism-helped to solidify a Malay state system
and a political identity among the ruling classes throughout the peninSUla. In a
process of reactive ethnonationalism these forces gradually socialized subordinated
groups into the Muslim Malay identity.
190
Ethnicity: Propelling or Checking Advance?
Besides contributing to the social construction of the Malay identity, British
incorporation of Malaya promoted a distinct economic role for Chinese traders
as intermediaries between the hinterland and the Straits Settlements of the em­
pire. Even before formal colonialism, the global economy was structuring the
ethnic division of labor (Lim Mah Hui 1980). Yet the Chinese traders in no way
constituted a single ethnic group. They were spatially segregated and socially
organized in communities distinguished according to affiliations derived from clan,
dialect, and region of origin in China. Trade specialization followed dialect groups:
Hokkiens with rubber, Teochews with rice importing, Cantonese with restaurants,
import-export trade, and tin mining, and the Hakkas with tin mining and medicine
(Jesudason 1989, 24). For European capitalists, the initial economic advantages
arising from their fostering a competitive system for obtaining local products
proved to be quite costly during the mid-nineteenth century. The demand for tin
in the European capitalist world-economy stimulated intraethnic conflict among
the rapidly increasing population of Chinese mining communities, conflict that
necessitated the imposition of formal colonialism by the British in 1874.
THE COLONIAL CONSTRUCTION OF ETHNICITY
The Division of Labor in Nigeria
If the conquest of Yorubaland was gradual and accompanied by missionaries,
the incorporation of the northern Muslim and non-Muslim areas was swift and
met with Islamic resistance (Mahdism) that reduced the influence of missionary
education for Hausa speakers. From the very beginning, the northern, prebendal
feudal states and their ruling classes were supported by colonial administrators
who identified quite romantically with the noble life-styles of the Muslim
aristocracy. Indirect rule blocked the progressive aspects of the market economy,
constrained access to capital, reduced incentives for indigenous capital accumula­
tion, and increased the tax burden of the commoner classes, the talakawa. Guided
by the doctrine of indirect rule, the colonial state institutionalized a distorted but
functionally necessary vision of aristocratic privilege that was wedded to an
authoritarian "Native Authority" system. Abuses by the latter bureaucracy were
sanctioned by the colonial interpretation of Islam. Further, the Anglo- Muslim
aristocratic alliance extended the printing and use of the Hausa language, especially
in the colonial army. Hausa was the language of administration even among non­
Muslim, eventually Christian, groups in the so-called Middle Belt of the Nor­
thern Region. Quite unintentionally, modern rail and motor roads aided Muslim
mercantile capital and facilitated urban forms of Islamic affiliation. "Ruling along
native lines," as Lord Lugard instructed his residents, meant, in practice, sup­
porting the authoritarian and corrupt rule of a rentier ruling class, accepting its
definitions of Islamic prerogative, and encouraging ethnic tensions by segregating
southern ethnic groups in cities and discriminating against them in myriad ways
in the interest of stability (Lubeck 1986; Paden 1974).
Malaysia and Nigeria Compared
191
At least one-third of the northern provinces were non-Muslim, and even though
the majority of colonial army recruits came from the Middle Belt, the ad­
ministrative language was Hausa. Most importantly, indirect rule created a con­
servative, romantic alliance between colonial administrators and Muslim aristocrats
that institutionalized backwardness by undermining innovation in education, health,
and industry. By increasing ethnic segregation of southern groups in cities, by
exacerbating regional imbalances, by discriminating against the talakawa in op­
portunities for modern education, and by failing to prepare the region for postwar
self-government, indirect rule was an immediate cause of the Nigerian civil war.
At the same time, the colonial state unified the Muslim groups from Borno
and the emirates of the Sokoto caliphate, thus creating a northern Muslim ethnic
identity together with other Muslim groups such as the Nupe and the Yoruba of
Ilorin. Virtually all spoke Hausa as well as indigenous languages. Given the hun­
dreds of ethnic groups in the less developed areas of the northern provinces and
the limited utility of these identities in new urban situations, new communal iden­
tities were defined by conversion to Islam or Christianity, while individuals
acknowledged an original or even a subtribal lineage identity in other contexts.
United by a common governor of Nigeria, but in practice administered separately
as the northern and southern provinces, each with different legal systems and
"native" representative councils, the colonial state literally constructed regionally
based ethnic identities. By 1939 export-oriented marketing boards mediating pro­
ducers with the world-economy also corresponded to what would become distinct
regions-Northern, Western, and Eastern-dominated by the Hausa, Yoruba, and
Igbo, respectively. Export commodities corresponded to the respective regions:
peanuts and cotton in the north, cocoa in the west, and palm products in the east.
Even prior to the time nationalist sentiments were activated as social movements,
therefore, new ethnic identities had emerged that did not exist in the precolonial
period. Such identities were the constructs of colonial state policy, ditfer'en1tial
access to Western education and hence to civil-service employment, and,
ly, distinct export-commodity relationships to the world-economy . .uLlHU',", "
sions were quite literally overdetermined. The postwar nationalist
emerged in the Southern Region, led by the Western-educated professional
dIe classes who were now identified as Yoruba or Igbo (Coleman 1958).
trary to the south, the members of the Muslim aristocracy were latecomers
nationalism, preferring instead to maintain their alliance with the British
The Division of Labor in Malaysia
By developing an export-oriented plantation economy and by allowing the
Chinese to organize tin mining, colonial Malaya departed from the experience
of Nigeria. On the other hand, the colonial state institutionalized indirect rule,
reinterpreted Islamic prerogatives for the benefit of the ruling aristocracy, and
encouraged ethnic segregation by increasingly ossified definitions of community.
For the majority of peasants, indirect rule institutionalized economic backwardness
192
Ethnicity; Propelling or Checking Advance?
in the interest of short-term stability. Hence the differences did not prevent an
invidious ethnic division of labor from forming since it was perceived as natural,
not to mention advantageous, for political control in the mind of the colonial
administrator.
The imposition of colonial rule proceeded swiftly in the heavily Chinese­
populated tin-mining states that were combined to form the Federated Malay States
(FMS) under a centralized administration by the end of the nineteenth century.
The twin objectives of formal British colonial policy, to "preserve" Malay society
via indirect rule and to expand the colonial export economy, dictated the develop­
ment of an ethnic division of labor between the Chinese and Malay populations.
The wealthy Chinese congregated in the FMS. Here they were entrenched in
plantation agriculture and tin mining, largely because of their virtual control of
immigrant labor and culturally organized institutional forms of capital accumula­
tion. Hence they were positioned to benefit immediately from the colonial state's
financing of infrastructural development and subsequent economic expansion.
Though the majority of Chinese immigrants had been recruited under strong com­
munal arrangements for the tin mines, in many cases they gained some oppor­
tunity for mobility to higher occupations. Indeed, the centralizing tendency of
the colonial state gradually reduced the power of communal control over workers.
Such economic benefits were not forthcoming for the Malays, however. Hav­
ing lost their major source of revenue from the enterprising Chinese, Malay
aristocrats (and later some commoners) were placated through co-optation into
the newly created Malay civil service or were given pensions for holding tradi­
tional offices within the state (Gullick and Gale 1986, 84). The Malay peasantry
was placed in the precarious position of having lost traditional forms of support
for land development through feudal arrangements while, at the same time, hav­
ing their physical mobility constrained by the introduction of backward land
policies that discouraged investment or capitalist relations of production (Hing
Ai Yun 1986). Take, for example, the rubber boom beginning in 1910: the oc­
cupational segregation of the Malays within the subsistence agricultural sphere
was sealed by the passage of the Malay Land Reservation Act (1913). Designed
ostensibly to protect the Malay peasant from alienating subsistence farmland for
quick profits, especially to potential non-Malay landlords, this state colonial policy
prohibited the planting of rubber on Malay lands and thus left the majority of
Malays with no choice but to remain subsistence rice producers (Lim Teck Ghee
1977, 1984). Hence the ethnic specialization of Malay rice producers resulted
not from natural choice but from state policy.
The political compromise between the British and the Malay aristocracy in­
cluded a promise by the former not to interfere in matters of Malay custom (adat)
and religion; thus the elite Malays maintained some traditional forms of social
control. No such political appeasement was deemed necessary for the Chinese
population, as they were perceived by the British to be temporary residents who
would eventually return to China. By the time it became clear to the British that
local-born Chinese had no intention of emigrating to the political and economic
Malaysia and Nigeria Compared
193
uncertainty of China during the depression decade, the colonial state response
of restricted immigration was useless. Attempts by the British to grant citizen­
ship rights to the disenfranchised Chinese were thwarted by the politically en­
trenched Malay elite. This was especially true of upper-class Malays involved
in the administration of states outside of the FMS, where the political elite was
more closely associated with the Islamic tradition and had been less directly bound
by British administrative control. Isolated as a backward, subsistence region in
a colonial situation marked by a strict division of labor even in the more
economically advanced FMS, this area provided the political leadership for the
early phases of the Malay nationalist movement (Gullick and Gale 1986). As in
Nigeria, where the regions possessed even wider powers, the combination of
uneven socioeconomic development across regions, the institutionalization of
backwardness as a prop for aristocratic clients, and ethnic segregation policies
generated an ethnic division of labor. 6
NATIONALISM AND THE COMPROMISE OF INDEPENDENCE
Thus far we have argued that involvement in the world division of labor is
associated with regional and hence ethnic specialization. In the cases of Nigeria
and Malaysia, the colonial state allied itself with prebendal feudal classes via in­
direct rule and retarded the development of market forces in productive relations.
Colonialism, therefore, was the historical moment when, through the interaction
of agency, structure, and culture, ethnic boundaries expanded to include former­
ly remote, even hostile or rival communities. Moreover, colonial state and
economic processes introduced new concepts that, once melded and applied locally,
created new ethnonational loyalties. In turn, elites and their propagandists sought
to assert the primordial nature of the new bonds. Often constructing boundaries
around religion, language, and region, they went beyond the clan, town, and local
linguistic group and defined a new ethnonational identity. Once colonial"
ministrators began discussing the terms of political independence, elites
ized these new loyalties into political parties, thus sealing the fate of ethnic
daries indefinitely. Mobilizing their new nationalist identities, political
then demanded that the transition serve their respective political and material in;'
terests. Those who played an inferior role in the colonial division of labor or
who became relatively more backward due to indirect rule sought exclusions from
normal liberal democratic practice in order to guard authoritarian prerogatives.
Of course, those who dominated the market and superior roles. in the colonial
division of labor draped their demands in competitive values. To transfer power,
therefore, required asserting constitutional compromises to protect key interests
of the Anglo-Muslim aristocratic alliances. In retrospect, these compromises not
only set the stage for communal violence but weakened the central state and any
chance for a modern nationalist movement so necessary for a transition to
semiperiphery.
194
Ethnicity: Propelling or Checking Advance?
Nigeria
Both Igbo and Yoruba politicians spearheaded the demand for independence
after World War II. Interestingly, the Yoruba movement originated from the
founding of a pan-Yoruba cultural society, Egbe Omo Oduduwa (the descendants
of Oduduwa, the mythical progenitor of the Yoruba peoples). The Igbos under
Azikiwe attempted a genuine nationalist political party, the National Council of
Nigerian Citizens (NCNC) , but they failed to overcome British hostility, their
rival's distrust, regional power brokers, and the lack of integration from the col­
onial period. Pressure for independence produced a bevy of constitutions with
varying degrees of decentralized power for the three regions. Not surprisingly,
northern Muslim elites rejected rapid independence, fearing the domination from
more advanced southern groups and the effect of radical democracy on their hold
over the talakawa and minority groups in the northern provinces. The compromise
of independence created a weak federation with three semiautonomous regions;
each, in turn, was dominated by a major ethnic group that discriminated against
its respective regional minorities. The relationship to the world-economy also
figured importantly because with self-government each region's marketing-board
surplus, now fat from the Korean War boom, fell under the control and patronage
of each region's dominant ethnic elite. By the time of independence in 1960, the
Northern Region was recognized as the most populous only because of the inclu­
sion of non-Muslim, non-Hausa peoples who resented aristocratic Muslim domina­
tion. This solution reflected the support of the British for their conservative allies
and enabled the Muslim elites from the north to form an alliance with the Igbo
against the Yoruba at the federal level while strengthening their autocratic con­
trol over the Northern Region (Coleman 1958; Diamond 1988).
A weak federal government, strong regions that discriminated against outsiders,
electoral fraud, and a disputed census set the stage for a military coup in January
1966 in which the northern Muslim leadership and its southern allies were
assassinated. Since the coup leaders were perceived as Igbo, two pogroms were
launched against Igbo living in northern towns. The Nigerian civil war followed
when the Eastern Region declared independence as the nation of Biafra. With
the demise of Biafra, the Igbos retreated after their loss, and the Yoruba became
the unrivaled economic and technocratic elite during the postwar period.
Hindsight confirms that British colonial administrative policy, the educational
imbalance, the invidious ethnic division of labor, and the regional enclave linkages
to the world-economy created the structural basis for new and antagonistic ethnona­
tionalist identities. Worse still, the constitutional arrangements for independence
literally overdetermined ethnic conflict by supporting the antidemocratic domina­
tion of the northern, Hausa-speaking ruling class over the federation. The col­
onial compromise created a state apparatus that only exacerbated ethnic division
and dissipated the potential creative energy of Nigerian nationalism. Rather than
integrating diverse ethnic groups, the colonial state and export economy actually
isolated them by creating separate dependent relationships to the world market.
Malaysia and Nigeria Compared
195
In retrospect, while indirect rule redefmed the boundaries of ethnonations within
regions, it also increased the antagonism between groups in the modern urban
sector as well as fostering a technically backward peasantry. To some degree,
the centralization of the federal state after the civil war reduced ethnic tension
and brought class tensions to the fore. But the traditional ethnic blocs reasserted
themselves in the elections for the Second Republic (1979) and again in 1983.
Malaysia
In Malaya the boundaries of the ethnic division of labor constructed by col­
onialism were strained during the global economic depression of the 1930s. The
bust in the tin-export economy produced significant squatting on Malay agricultural
land by displaced Chinese, who subsequently demanded political rights (Lim Teck
Ghee 1984). The squatting also created a structural base for Chinese guerilla ac­
tivity. In response to heightened Malay fears, the colonial government enacted
the Aliens Ordinance, which discontinued immigration by 1938, but by this time,
a permanent non-Malay settlement existed that demanded economic and political
rights. Political parties of various ideologies burgeoned among the local-born
Chinese, and labor militancy increased. Among the Malays a small professional
and commercial trading class appealed to Islamic notions of anti-imperialism and
protested the economic domination of the Chinese and foreign capital. Still another
group, a radical nationalist Malay faction, allied itself with the Indonesian in­
dependence movement, opting for a pan-Islamic identity. But the members of
the elite chose to renegotiate their alliance with the British. English�educated
Malays and the aristocracy, frustrated by their slow incorporation into the civil
service, which was compounded by retrenchment in public expenditure, decried
"special rights for the Malays" rather than anticolonialism ( Roff 1967). As was
the case with their Muslim aristocratic counterparts in Nigeria, bureaucratic o f< .
.
fice and state revenue were the niches from which they were to reproduce
ethnonationalist movement.
During the Japanese occupation of World War II, the Japanese army
ethnic cleavages and adopted separate policies for each ethnic community.
the Chinese community the legitimacy of traditional leadership by Chinese
was eroded by the latter's compromise with the Japanese. Their leadership
replaced by that of the militant Malayan Communist Party. The Malay aristocracy
was de legitimized due to its accommodation to the Japanese. However, cleavages
between the radical Malay nationalists and the Malay aristocracy and administrators
were arrested as ethnonationalist sentiments overshadowed class contradictions.
When one reflects upon the critical differences between our case studies, the
emergence of the Cold War in the post war period explains to a significant degree
the pattern of ethnic conflict in Malaysia. After the defeat of the Japanese the
resistance forces under the leadership of the Chinese dominated, but nonetheless
multi-ethnic Malayan People's Anti-Japanese Army, unleashed a revenge cam­
paign against collaborators. Since the leadership was Marxist, the conjuncture
196
Ethnicity: Propelling or Checking Advance?
of the Cold War allowed British security forces, supported by their clients among
the Malay aristocracy, to construe the insurgency as a purely Chinese phenomenon
during the counter-insurgent "Emergency" of 1948-60. Significantly, the Anglo­
aristocratic alliance thwarted the Labour government's reform efforts toward a
multi-ethnic democratic union as the vehicle for the transfer of political power
to the indigenes. The Malayan Union would have abolished the position of the
Malay rulers and granted citizenship and equal rights to all communities domiciled
in Malaya. However, Malay aristocrats would not agree to the democratic pro­
posal which reverted the colonial "pro-Malay" stance, and the Malayan Union
was dissolved (Gullick and Gale, 1986, pp. 86).
This contrasts sharply with the post-war situation in Nigeria. While the British
tended to support the Muslim aristocracy in the Northern Region, in the absence
of an emergency, the security apparatus was unable to suppress radical nationalism
in the south and transfer a national security state apparatus to their conservative
clients upon independence.
The nature of the compromise of independence embodied the British pro-Malay
stance as well as the Malay aristocratic call for "special privileges" for the Malays.
When the radical factions of each ethnic group had been crushed and the cleavages
between the aristocratic and working classes of Malays had been repaired, a coali­
tion government was formed that incorporated the three elite-interested ethnic
political parties into an alliance government. This tense''ethnic-accommodating"
alliance firmly established the Malay ruling party (UMNO) as the dominant arm.
Leaders were drawn from the ranks of the aristocracy, and most early leaders
had gained experience within the colonial administration. The compromise in­
herent in the alliance allocated to the Chinese relatively free opportunity to develop
and control the economy.
Hence political events leading to the expression of ethnonationalism, which
were themselves precipitated by the interaction of world-systemic factors and the
colonially constructed ethnic division of labor, resulted in a postcolonial an­
tagonistic system in which the Malay elites were firmly in control of the state,
while the Chinese bourgeoisie dominated the economic sphere. Imperial policy,
Anglo-aristocratic alliances around security issues, and the division of labor in
the colonial economy provided the structures of ethnic diversity, a division that
continues today but was constructed during the colonial era.
ETHNICALL Y DIVIDED SEMIPERIPHERIES
Lessons from Malaysia and Nigeria
The evidence supports the argument that colonial state policies-indirect rule,
blocking capitalist land tenure, bolstering Muslim aristocratic privileges, and
protecting British trading interests by limiting indigenous capital-constructed
a division of labor that corresponded to, and thus reinforced, ethnic stratification
in both states. The events of the postindependence period have not altered
Malaysia and Nigeria Compared
197
significantly the correlation of ethnicity and state officeholding or membership
in the most advanced sectors of indigenous capital. In Nigeria's civilian election
of 1979, even when communal political parties were banned, the ethnic voting
patterns were nearly identical to those registered at the time of independence.
Economic nationalist intervention by the Nigerian state disproportionately benefited
Yoruba businessmen who, by their education and concentration at Lagos, were
ideally situated to take advantage of the decrees on indigenization of industry of
1972 and 1977 (Biersteker 1987). This windfall merely reinforced the Yoruba's
domination of the more advanced technical and economic positions both in the
public and private sectors. Yet the revival of Igbo entrepreneurship and the close
relationship between state and capitalist elites among the Hausa-speaking nor­
therners allow for greater cross-cutting alliances than in the Malaysian case.
In Malaysia the Malay domination of the state remains unchallenged. Indeed,
it is illegal even to suggest altering their privileged preeminence. Efforts to create
a Malay entrepreneurial class and an efficient industrial state sector have
foundered, according to recent reports (Jomo 1988; Malaysian Business 1989).
The Chinese, though hesitant to invest in fixed capital assets, remain dominant
in the indigenous capitalist sector. Despite enormous expenditure of Malaysia's
national wealth, the distribution of equity ownership may have changed, accord­
ing to the formulae established by the New Economic Policy, but a dynamic,
innovative Malay bourgeoisie has not been produced. As in Nigeria, the separa­
tion of economic and political power hinders state-centered industrial policy; na­
tionalism remains a potential rather than an actual force, because in order to
forestall Chinese domination of the economy, the state elites have relied on transna­
tional capital. Hence state-foreign joint ventures in heavy industry are costs rather
than assets; electronic investments possess negligible forward or backward
linkages; and the potential for linkages by medium-scale Chinese industry re­
mains unrealized, largely because of distrust between industrial policymakers and
Chinese industrial entrepreneurs. Hence, though no condition is permanent
a dynamic world-economy, the fusion of structural and cultural forces
the colonial era has blocked, for now at least, the business-state alliances
have been so effective elsewhere in the Pacific Rim .
What has changed ethnonational affiliations with respect to the
dynamic processes? Since independence the Islamic revival has figured into
relationship between ethnic groups and state policy in both case studies. Of course,
the rivival is inseparable from OPEC oil surpluses, and Islamization has always
has been a transnational social movement. For the Hausa and Malay elites, "fun­
damentalism" represents a populist challenge to their leadership from within their
respective groups. Although Islam is already enshrined as the state religion in
Malaysia, Nigerian Muslim demands for the extension of Islamic law and con­
tinued membership in the Organization of Islamic Conference have raised new
communal tensions, even riots in 1987, defined by religions rather than the col­
onial era's''tribal" definition of ethnicity. Islam is the route of assimilation into
the Malay nation for Indonesians, Arabs, and South Asians and thus plays some
198
Ethnicity; Propelling or Checking Advance?
integrative role among the non-Chinese population. In the Nigerian case Islam
is much more complex because it represents a cross-cutting cleavage between
the Muslim Yoruba and the Hausa. Hence the construction of new, religiously
defined, ethnonational identities is possible for Muslim Nigerians, especially
among Hausa and Yoruba. Potentially, class factors could play a role in realign­
ment, for there tends to be a positive correlation between Christianity and high
socioeconomic status among Yoruba. At the same time, Muslim fundamentalist
demands for Islamic law and Islamic politics put additional pressure on the Hausa
and Malay elites, who must construct compromises, arrange alliances, and main­
tain national unity in order to dominate their polity.
Population growth, fed by higher natural increase and the capacity to assimilate
Muslims, favors the continued growth of the Muslim Malays over the Chinese
and Indians. Unlike the situation in Nigeria, there are no cross-cutting cleavages
between the Chinese and the Malays. Race, religion, language, and culture separate
them. The existing ethnic division of labor has been assaulted by state "affir­
mative action" interventions on behalf of the Malays but without encouraging
results. Only a new model of accumulation that would allow the Chinese to exer­
cise their entrepreneurial talent more freely could stimulate the dynamic growth
that the state planners aspire to achieve. Here the need to employ, and to
redistribute income to, a rapidly urbanizing Malay population could serve as the
basis of a new compromise, that is, a model that would require economic in­
tegration between the two groups and more freedom from state intervention for
Chinese family businesses. One awaits the details of the Sixth Economic Plan
(1991-1995).
Prospects for Ethnically Divided Semiperipherai States
In the face of ethnically supported social movements stretching from Sri Lanka
to South Africa and even to Peru, the contradictions faced by Malaysia and Nigeria
are unlikely to remain unique. It is important to investigate the origins of the
groups in question with special attention to the ethnic division of labor and the
policies, if relevant, of the colonial state. Clearly, when ethnic divisions separate
indigenous political and economic elites, the arena for state intervention and state
mobilization of nationalism is severely constrained, and the accumulating alliance
is attenuated.
If the internationalization of society, economy, and polity continue at the rapid
rate registered over the past three decades, then very nationalist sentiments granted
to the modern nation-state may come under increasing pressure from regional,
ethnic, and local allegiances. Of course, such an outcome assumes a highly in­
tegrated world-economy that is probably beyond the regulative capacity of the
nation-state as we now define it. Transformations of the world-economy have
always altered the definition of ethnic groups, so the current trend toward in­
tense competition between blocs, reduced regulatory power of nation-states, and
high technology integration and communication will surely impact on and generate
Malaysia and Nigeria Compared
199
reactions from ethnic groups in the semiperiphery. Just as Nigeria's and Malaysia's
ethnic identities and roles in the division of labor were shaped by the era of formal
colonialism, so too one can expect the next wave of global expansion to construct
new ethnic identities and problems for elites who direct semiperipheral policy.
NOTES
The authors would like to thank the Academic Senate Committee on Research, the Pacific
Rim Program, the Social Sciences Division, the Graduate Student Patent Funds, and the
Center for Cultural Studies, all of the University of California, Santa Cruz, for financial
assistance in the preparation of this chapter.
1. Wallerstein observes that social categories-races, peoples, ethnic groups, and na­
tions-"are used with incredible inconsistency" (1987, 380). He sees the changing use
of social identities as an attempt to construct a "pastness," which "is a tool persons use
against each other . . . the content of pastness constantly changes" (381). Hence "it makes
little difference whether we define pastness in terms of genetically continuous groups (races),
historical socio-political groups (nations), or cultural groups (ethnic groups). They all are
peoplehood constructs, all inventions of past ness, all contemporary political phenomena"
(381).
2. Examples include India, Indonesia, Pakistan, Sri Lanka, South Africa, Iran, Kenya,
Zaire, Peru, Yugoslavia, and Zimbabwe.
3. See C. Johnson (1987).
4. As Wallerstein explains:
The "peoples" that exist today have come into existence as a result of the development of the capitalist
world-economy, through which some groups (names) that were
in existence before have become molded
into peoples, other groups (names) have disappeared from our vocabulary, and some entirely new
groups (names) have been invented.Furthermore, this
creation
of "peoples" is not a once-and-for­
all happening.It is a matter of constant, if slow-moving, flux ....The assertion of people-hood
is a major political act.... Creating a people, or remolding its definition of boundaries, is
portant mechanism in shaping the world market, and in the "assignment" of different'
as specific work forces in the production processes that are integrated through that market. To
and recreate peoples is to mold and remold class boundaries, and to strengthen or weaken
processes of accumulation of capital (appropriation of surplus value).People formation is an
part
of class-formation. (1981,
50)
5. For purposes of brevity, we are eliminating from our discussion the Igbos of
and the Indians of Malaysia.
6. Interestingly, in the unfederated Malay States such as the Malay padi-cultivating
regions of the southern peninsula or the Siamese-controlled states of the north, such ethnic
segmentation was much less pronounced. In fact, in the northern states of Kelantan and
Trengganu there was assimilation and acculturation among Chinese artisans and merchants
with local Malay and Thai cultural influences. They form a subethnic category (Peranakan
Chinese) similar to the Malay-speaking Baba Chinese whose identity was congealed dur­
ing the period of the Malacca sultanate (see Tan Chee Beng 1986). It is noteworthy that
in this instance ethnic segregation is correlated with the ethnic division of labor deter­
mined by exports to the world-economy, while the more isolated and least urbanized areas
experienced greater interethnic assimilation during the colonial period.
Ethnicity; Propelling or Checking Advance?
200
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Anderson, Benedict. 1983.Imagined Communities: Reflections on the Origins and Spread
of Nationalism. London: Verso.
Biersteker, T. 1987. "Indigenization and the Nigerian Bourgeoisie." In 1he African
Bourgeoisie: Capitalist Development in Nigeria, Kenya, and the Ivory Coast, edited
by P. Lubeck, pp. 249-79. Boulder, Colo.: Lynn Rienner Publishers.
Brass, Paul. 1985. Ethnic Groups and the State. Totowa, N.J.: Barnes and Noble.
Coleman, James S. 1958. Nigeria: Background to Nationalism. Berkeley: University of
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Diamond, Larry. 1988. Class, Ethnicity, and Democracy in Nigeria: The Failure of the
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Evans, Peter. 1979. Dependent Development: The Alliance of Multinational, State, and
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Gullick, John. 1958. Indigenous Political Systems of Western Malaya. London: Athlone
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Gullick, John, and Bruce Gale. 1986.Malaysia: Its Political and Economic Development.
Selangor, Malaysia: Pelanduk Publications.
Hamilton, Nora. 1982. 1he Limits of State Autonomy: Post-Revolutionary Mexico.
Princeton, N.J.: Princeton University Press.
Hechter, M. 1975. Internal Colonialism. Berkeley: University of California Press.
Hing Ai Yun. 1984. "Capitalist Development, Class, and Race." In Ethnicity, Class,
and Development, edited by S. Husin Ali, pp. 297-328. Kuala Lumpur: Persatuan
Sains Social Malaysia, Universiti Malaysia.
Horowitz, Donald. 1985. Ethnic Groups in Conflict. Berkeley: University of California
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Hua Wu Yin. 1983.Class and Communalism in Malaysia: Politics in a Dependent Capitalist
State. London: Zed Press.
Jesudason, James V. 1989.Ethnicity and the Economy: 1he State, Chinese Business, and
Multinationals in Malaysia. Singapore: Oxford University Press.
Johnson, C. 1987. "Political Institutions and Economic Performance: The Govemment­
Business Relationship in Japan, South Korea, and Taiwan." In 1he Political Economy
of the New Asian Industrialism, edited by Frederic C. Deyo, pp. 136-64. Ithaca,
N.Y.: Cornell University Press.
Lim Mah Hui. 1980. "Ethnic and Class Relations in Malaysia." Journal of Contemporary
Asia 19, 112:130-54.
Lim Teck Ghee. 1984. "British Colonial Administration and the 'Ethnic Division of Labor'
in Malaya." Kajian Malaysia: Journal ofMalaysian Studies 3, No.2 (December).
___
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Lloyd, Peter. 1968. Africa in Social Change: West African Societies in Transition. New
York: Praeger.
___
.1971. The Political Development of Yoruba Kingdoms in the Eighteenth and Nine­
teenth Centuries. London: Royal Anthropological Institute.
Lubeck, Paul M. 1986. Islam and Urban Labor in Northern Nigeria: TIle Making of a
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1989. "The New Economic Policy: Where Now? (On Equity and
Equitability)." August 1-15, 17.
Marx, Karl. 1963. 1he Eighteenth Brumaire ofLouis Bonaparte. New York: International
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Nagata, Judith. 1984. 1he Flowering ofMalaysian Islam. Vancouver: University of British
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Roff, William. 1967. 1he Origins of Malay Nationalism. New Raven: Yale University
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Sundaram, Jomo Kwame. 1988. A Question of Class: Capital, the State, and Uneven
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---. 1988. Mahathir's Economic Policies. Kuala Lumpur: Insan.
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Wallerstein, Immanuel. 1979. 1he Capitalist World-Economy, Cambridge: Cambridge
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---. 1981. "Race Is Class? Some Reflections on South Africa Inspired by Mugubane."
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Sociological Forum 2, 2:373-87.
Malaysian Business.
11
FROM
NrC
TO
NUC :
SOUTH AFRICA'S
SEMIPERIPHERAL REGIMES
William G. Martin
IS SOUTH AFRICA OUTSIDE THE WORLD-SYSTEM?
Few would contest South Africa' s semiperipheral status in the capitalist world­
economy. The country contains a well-established industrial complex yet falls
far short of the advanced levels of core areas. GNP per capita squarely places
South Africa in the middle of the global hierarchy of wealth. The South African
state commands an extensive military, ideological, and economic infrastructure,
yet despite its dominating regional position and nuclear capabilities, no one would
rank it as a core power. Neither core nor peripheral, South Africa has never­
theless attained worldwide notoriety , captured best in one word: apartheid.
Indeed, if there is one semiperipheral area where ethnicity would appear
have made a decisive difference, it would surely be South Africa. Yet with
divisions and oppression so obvious and pertinent, it has become almost ll
' Uf'\J''''.lU�'
to approach any aspect of South Africa except through race. The result is
the institutions and ideology of apartheid have provided the focus and point
departure for almost all studies of South Africa. This is a most dangerous
cedure. It has confounded our understanding not only of the historical trajectory
of this region of the world, but even of the character and contradictions of racial
oppression.
Race and Deveiopmentalism
It is impossible, of course, to ignore the salience of race. From its origins over
three hundreds years ago as a shipping outpost en route to the Far East, to the
present realities of apartheid, modern South Africa has been forged on the bedrock
of white supremacy. For most of this period, however, the characteristics of set­
tler and colonial domination were shared with many other areas of the world.
204
Ethnicity; Propelling or Checking Advance?
South Africa's divergence from such patterns, and indeed its worldwide notorie­
ty, arose only after World War II . Here two related developments were central.
First, the South African election of 1948 ushered in the terminology and prac­
tices of apartheid. Second, at the very moment when apartheid was being con­
structed, the world as a whole moved in the opposite direction-decolonization
proceeded apace, and legalized racial domination was formally rejected elsewhere.
Set against the self-congratulatory liberalism of U . S . hegemony, South Africa
steadily became the exception, a pariah among the world of nations .
Lending even further distinctiveness to South Africa' s path was the apparent
success of modernization under white domination. Once resistance to the im­
plementation of apartheid was contained, the economy boomed; during the golden
years of apartheid from the early 1960s to the mid- 1970s , few countries experi­
enced faster growth rates . Far from an atavistic phenomenon, racial domination
in its most heightened form proved fully compatible with accelerated industrial
accumulation. For the West and East, North and South, South Africa had become
an isolated subject, all too much an affront to postwar sensibilities.
This widely proclaimed uniqueness had immediate, long-lasting, and quite
deleterious effects on our understanding of modern South Africa. As a racially
structured and driven society , South Africa became a world apart: none of the
comparative, much less world-historical , conceptual and theoretical advances com­
mon to the study of noncore areas of the world-economy were utilized to ex­
amine South Africa. Few of the debates or lessons drawn from African studies ,
for example, ever appear in the vast literature on the development of modern
South Africa: for all intents and purposes South Africa has floated off the conti­
nent. There is not a single book written in the last two decades , moreover, that
seriously treats the country from a dependency, dependent-development, or world­
systems perspective.
How, then, do we explain the emergence and flourishing of a racially structured,
industrializing area? Here the procedures have been quite straightforward: racial
uniqueness underpinned the study of South Africa in isolation from world networks,
and industrialization provided the perception of national development. The end result
was the deployment of concepts and theories appropriate to the ongoing evolution
of a national, industrial economy. For liberals and conservatives alike, modernization
theory reigned supreme, while Marxists and neo-Marxists cast South Africa's
historical development within the mold of the advance of national monopoly capital.
For both parties , the history of South Africa became largely the history of the crea­
tion of a racially structured national society , nation-state, and national economy.
While fierce debate continues to circulate around who instigated and benefited from
apartheid (Lipton 1985 , 2- 1 3 ; Freund 1987) , agreement confirms a steady march
forward from an agrarian to an industrial economy, from segregation to apartheid.
In short, the racial distinctiveness of South Africa reinforces the exclusive character
of the country's developmental trajectory.
To step beyond the boundaries of these developmentalist premises places such
a seemingly natural progression on its head. If we examine other noncore areas
South Africa's Semi peripheral Regimes
2 05
of the world, ethnic and racial divisions are commonplace in the twentieth cen­
tury, and the achievement of an industrializing economy is the exception. But
this is not all. To place South Africa within a world-historical perspective is to
upset widely accepted conclusions regarding apartheid and indeed the whole course
of the country's place in the twentieth-century world. As we argue later, far from
advancing South Africa's place in the industrial world, apartheid has diminished
it. Far from drawing upon tribalism and tradition, apartheid has created and
remolded such social divisions. Above all, the apartheid state in the post-World
War II period has, by openly allying itself with local and multinational enter­
prises, opened the door to an ever-lower position in the global division of labor.
To grasp these insights is of importance not only to students of South and southern
Africa, but to those seeking an understanding of the semiperipheral zone itself.
Far from being unique, South Africa demonstrates the very contradictory posi­
tion of all semiperipheral states within the changing course of the twentieth-century
world-system.
Semiperipheral South Africa: Apartheid South Africa?
To chart the course toward these conclusions, let us begin with the most cen­
tral issue framed by the debate over apartheid: what has been the relationship
between phases of segregation and apartheid and accumulation?
From the existing literature the answer is clear: it has been during the apar­
theid epoch that Soudi Africa has moved decisively toward a modern industrial
status. If South Africa is investigated from a world-economic perspective, the
conclusions could not be more different. Here we take the simplest measure utilized
to indicate position within the polarizing core-periphery division of labor, GNP
per capita. Unfortunately, reliable GNP data for South Africa and the world
preclude any full analysis of South Africa within the global hierarchy of wealth
during this century. Figure 1 1. 1 illustrates a less desirable procedure:
Africa's relative distance from core status as measured by South
GNP/capita as a percentage of that of four "organic" members (Britain,
Germany, United States) of the core zone (data prior to 1 95 0 are approxima
tions). One could readily extend such data with figures on wage rates and the
mix of core-like and peripheral production processes over time. What even
data here suggest, however, is startling in key aspects.
Sharply evident is the current "organic crisis" of apartheid (Saul and Gelb
1 986, 63-98), only momentarily broken by rises in the price of gold. More strik­
ing are longer-term trends. Where recent analyses depict South Africa's develop­
ment as the outcome of apartheid, the data suggest otherwise: far from accelerating
South Africa' s position in the global division of labor, apartheid has at best merely
served to maintain the country in a steady middle position in the world-economy
through most of the post-World War II period. If one compares South Africa
with other semiperipheral areas, this observation is further confirmed. Figure
1 1. 2 illustrates other well-known semiperipheral states ' GNP per capita
206
Ethnicity; Propelling or Checking Advance?
Figure
11.1
South African GNP Per Capita a s a Percentage o f Organic Core GNP Per Capita
�
. <IS
s..
U
40
....
"
Q..
Z
0
�
0
U
Q..
30
d)
00
'"
...
"
>
-<
....
0
d)
00
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20
;:
"
�
"
Q..
10 4---�-.--�--r-�--�-.--�-4
1930
1 940
1 950
1 9 60
1 970
1 9 80
1 920
1 990
Sources:
1 929- 1948: United Nations. Various Years.
1 950-1987: World Bank. Various Years.
and World Tables.
Statistical Yearbook.
World Development Repor t
as a percentage of South Africa' s GNP per capita. The data sharply reveal South
Africa's strong semiperipheral position in the early postwar period and the clos­
ing of the gap between South Africa and other semiperipheral areas in the 1960s
and 1 970s . Even during the best years of the apartheid economy, other semiperi­
pheral states were overtaking South Africa. Indeed, one could be much harsher:
if in 1 948 South Africa was a newly industrializing country (NIC) , in the last
three decades it is more appropriately captured under the rubric of a newly under­
developing country (NUC) . While debates rage over the meaning of industrializa­
tion for Latin American and East Asian NICs, South Africa's postwar history
indicates that steady industrialization hardly equals "development" or a move­
ment toward core status in the world-economy. Simply stated, the much-heralded
and generalized boom of the apartheid era is a myth . Semiperipheral South Africa
is not a product of apartheid, but rather apartheid' s starting point. Indeed, one
might rather ask: is apartheid the result of semiperipheral development?
South Africa's Semi peripheral Regimes
2 07
Figure 1 1 .2
GNP Per Capita of Selected Semiperipheral States as a Percentage of South African
GNP Per Capita
�
'5..
'"
1 50
p...
1 25
u
...
..,
.
I.
I
)
1/
�
v
g()
1 00
J3
�
"§
0
t/J
'-
0
d}
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'"
i::
OJ
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...
.,
75
Brazil
50
- . ... . ...
_
p...
25
0
1 950
Sources:
. ... . ..... . ,
;.
"
.
'
1 960
World Bank.
World Tables.
0
°
'
"
-
./ '.
I
'
\.. . .".
,.
"
r S o uth Korea
_0'"
1 970
1 980
1 990
Various years. World Development R eport and
FROM A PRIMARY-PRODUCING TO AN INDUSTRIALIZING
SEMIPERIPHERAL REGIME
Such conclusions , like the data, only tell us of raw, empirical outcomes:
approximate location over time of South Africa in the global hierarchy of wealth.
Here the data indicate that South Africa has been a steady member of the semi­
peripheral zone since at least the 1 930s. In light of the most common information
regarding South African economic history, this generates two central periods of
semiperipherality : (1) the country's movement from a simple, if rich, primary­
producing area of the world-economy in the opening decades of this century to
a newly industrializing member of the semiperipheral zone during the interwar
period, and (2) the failure to advance toward core status in the world-economy
in the post-World War II period.
It remains to be seen how such a position straddling core-peripheral relation­
ships was first captured, and subsequently, how South Africa' s semiperipheral
position was maintained in the face of the transformations and cyclical rhythms
208
Ethnicity: Propelling or Checking Advance?
of the world-economy over the course of the last half century . The pursuit of
answers to these questions, given South Africa's relatively long membership in
the semiperiphery, has considerable advantages for the study of the semiperipheral
zone. The study of South Africa illustrates , for example, that neither the transi­
tion to semiperipheral status nor the maintenance of it flowed naturally out of
preceding phases of accumulation and conflict within South Africa. Each phase
arose from violent confrontations with the contradictions of success of previous
patterns of participation in the world-economy, and each of these key periods
entailed the abandonment of past patterns of participation in core-peripheral net­
works, the local social and ethnonational alliances and practices that sustained
such participation, and the political structures and policies that were essential to
the continual reproduction of these relationships. It is to these quite clearly demar­
cated regimes of accumulation and political rule, and to their lessons for
semiperipheral development generally, that we now turn .
The Creation and Contradictions of Primary Production
Nineteenth-century South Africa was the product of the extension of the world­
economy under British hegemony. Having seized the coastal shipping outpost
of Cape Town from the Dutch in 1 806 , Britain steadily developed a set of col­
onial territories in southern Africa. To these areas flowed labor, capital, and the
manufactured goods of Britain and other core areas ; from them flowed primary
products such as wool and sugar. The exploitation of fabulous mineral deposits
in the interior of southern Africa radically advanced this pattern as great mineral
complexes developed around the mining first of diamonds in the 1 860s and then
of gold in the 1 880s . By the end of the century the battle for control over these
resources resulted in Great Britain's greatest colonial war, the Anglo-Boer con­
flict of 1 899-1902.
Out of the war came the Union of South Africa ( 1 91 0) , designed to ensure
what squabbling between colonial territories and Afrikaner republics had
obstructed: the free flow of labor, commodities, and capital to , from, and across
southern Africa. By this time both mining and agricultural production has emerged
as classic instances of primary production, selling their products in markets deter­
mined by world prices and export opportunities and drawing their capital and
most wage goods from overseas producers . As mining capital prospered, settler
farmers struggled to commercialize their marginal lands in a world market well
served by the extraordinarily fertile lands of Argentina, Australia, and even the
Punjab . Two factors favored commercializing settler farmers , however: favorable
world prices in the opening decades of the twentieth century and the South African
state's intervention through direct financial assistance and the suppression of
African competition.
Part and parcel of this deepening peripheralization of accumulation processes
was the constant exertion of political force in order to ensure the conditions for
the reproduction of mining and agricultural capital. Overtly dominated by mining
South Africa's Semiperipheral Regimes
2 09
interests, state policy followed the dictates of a free-trade policy designed to
guarantee continued access to overseas financial and commodity markets and the
lowest-priced commodity imports for the mines and settler agriculture. An open
alliance with Britain sustained these relationships and even provided the levers
to dominate Portuguese colonial territories from which the mines drew a signifi­
cant proportion of their labor force and through which critical railways passed.
While at the turn of the century the stability and prosperity of South Africa
seemed uncertain, the following decades witnessed the creation of a stable and
prosperous peripheral regime of accumulation and political rule. Sheltered by
British hegemony, feeding Europe's financial and commodity markets in return,
and buoyed by an expanding world-economy, white South Africa appeared to
have found its place in the modern world. By the end of World War II all such
illusions would be rudely shattered.
The Crisis of the Free-Trade, Low-Grade Regime
The first signs of deep structural problems were transmitted directly through
the commodity networks upon which South African prosperity had been based.
This was most evident in the mining sector, where the long-term price inflation
of the early twentieth-century A (expansionary) phase raised input costs for the
mines while the price of gold remained fixed to sustain the British-led interna­
tional monetary system. By the end of World War I this " scissors crisis" was
so severe that many mines were running at a loss and in danger of shutting down
operations. Near panic ensued as the state and capital struggled to deal with the
crisis of " low-grade" mines. At the same time, producer prices for South Africa's
agricultural products suffered a sharp fall on the world market, while the cost
of overseas imports remained at high levels.
South African primary producers were hardly alone in facing these chill
blowing across the world market. Across Africa, and indeed across most of
periphery, the whole interwar period would be one of falling terms of
increasing hardship. The very depth and scale of primary production in
Africa had, however, created forces capable of a vigorous response. The
was not simply a crisis of profitability, but the eruption of conflict as the
social and political props that had underpinned fifty years of primary production
collapsed. Central here was an outbreak of class struggle so extensive that it under­
mined not only the cohesion of minority rule and the social basis of the state,
but the very stability of the relationship between the state and capital.
At the heart of this process were developments in the mining sector. The rapid
expansion of mining capital in the late nineteenth century had rested upon an equal­
ly rapid growth in the immigration of skilled white miners and an army of black
labor drawn from surrounding colonial territories. World-record wages for white
miners and the generalized benefits of mining had served to secure a common
commitment amongst the white electorate to minority rule and mining produc­
tion. Mining capital's response to its profit squeeze was to squeeze in turn the
210
E thnicity:
Propelling or Checking Advance?
only cost fully under its control , the price of labor. This first entailed extending
the reach of black labor recruiting throughout southern Africa and undercutting
the viability of African agriculture wherever possible. With the full support of
the South African state and Great Britain, such designs were largely successful:
black wage rates were' considerably reduced between the late nineteenth century
and World War I.
Reducing the larger wage bill for white miners (despite a ratio of ten black
miners to every white miner) was tackled on a broad front: through the partial
dilution of artisanal skills, the replacement of foreign artisans with locally trained
and largely Afrikaner miners , and, contingent upon labor recruiting, raising the
black/white labor ratio on the mines (Johnstone 1 976). Such moves against both
black and white labor depended upon undercutting the marketplace bargaining
power of labor: for black workers by withdrawing agricultural alternatives to
part-lifetime wage employment, and for white workers by reducing skills
monopolies, the scarcity of white labor, and the high (overseas) cost of its recruit­
ment and reproduction.
Such tactics of class restructuring were made considerably more volatile by
ongoing developments in settler agriculture. As commercial production expanded
in the interior, ever-larger numbers of black and even white tenants and sharecrop­
pers were thrown off the veld. While displaced blacks could be forced into
reserves, the growing urban army of "poor whites" posed mounting problems
for the state. Together these factors led to a growing struggle between capital
and labor, with a long strike wave in the mines by both black and white miners
coming to a head just as the crisis of profitability peaked in the early post-World
War I years . Both mining capital and the government remained stubbornly com­
mitted to a shared defense of primary production and a British-centered free-trade
system. By 1922 pitched battles were being fought in the streets of Johannesburg.
To those who had championed and benefited from the primary-producing role,
the world seemed turned upside down. Not only had the world-economy turned
against its golden outpost, but the very development of peripheral accumulation
had fostered forces now contesting the political program that had sustained the
social and economic relationships of primary production and the coherence of
white domination. Such a conjuncture opened opportunities for opposition political
parties, particularly the Afrikaner National Party, which sought to tap long­
standing anti-imperialist, anticapitalist sentiments. In 1924 global cycles and local
political upheavals intersected: the ruling alliance of mining capital and the free­
trade, pro-British government was overthrown in national elections by a coali­
tion of the parties of Afrikaner nationalism and white labor.
The South African state under this "Pact" government proved to be neither
less capitalist nor less interventionist than preceding governments . What it per­
ceived more sharply and acted upon, however, was the evident failure of the coun­
try 's model of accumulation, class structure, and state policy. Central here was
the implementation of two interwoven and interdependent aims : ( 1 ) the promo­
tion of industrialization as a solution to the poor white problem, white worker
South Africa's Semi peripheral Regimes
211
militancy , and the decline of the mines , and (2) the reorientation of the state policy
such that it was possible to counter the underdeveloping processes emanating from
core areas. In quick order the government transformed the direction of state policy,
turning away from a slavish fealty to mining capital and toward the creation of
an industrial sector: South Africa's first protectionist tariff was passed, preferential
duties for British manufactures were eliminated, state enterprises such as transport
and energy production were revamped in the service of industrial production,
and new state enterprises were established. Most notable among the latter was
the establishment of a state iron and steel works (ISCOR), one of only two in­
tegrated steel plants outside core areas during this period.
Such initiatives signaled far greater transformations than simply changes in state
policy or, as is more commonly argued, the simple recomposition of white racism
in the service of capital and the building of a national economy. What was at
stake was nothing less than reorganizing and reintegrating the country ' s position
in the global division of labor and the interstate system. At the interstate level
this was most visible in the creation of a Department of Foreign Affairs and in
the South African government's leading role in the successful struggle to achieve
independent status in the interstate system for the dominions. Protectionist
measures further disrupted the long-entrenched dependence of South Africa upon
industrial sourcing from core areas. Essential to this effort was an attack upon
British control over the country' s trading networks (Martin 1 990b). New
multilateral relationships were established with Britain's competitors, particular­
ly those able to supply, on the most favorable terms, new technologies and capital
goods for state and private industry . Britain's share of merchandise exports and
imports accordingly fell throughout the interwar period. Less successful, it must
be noted, was the attempt to sever the City of London's hold on the local capital
market; it proved extraordinarily hard to undermine well-established personal
and institutional ties between the semi-independent South African Reserve Bank
and the Bank of England.
The contribution of these measures to the localization of industrial
was critical . Equally essential, however, was resolving the seemingly
unruliness of labor and the threatened defection of segments of the white com­
munity. This was tackled on two fronts. First, the repression and control of black
labor were greatly extended. Second, the militancy of employed and unemployed
whites was undercut by the ideology of a " civilized labor" policy and the cor­
responding institutionalization of white labor-capital relations through Industrial
Conciliation Councils. The success of these measures was indicated by the
emergence of a period of labor peace and the rapid expansion of South Africa's
nascent industrial sector.
If the pursuit of the localization of industrial production demanded immediate
action vis-a-vis core areas and new institutions of labor control, it soon became
evident that it also required a division of labor between South Africa and sur­
rounding peripheral areas (Martin 1 990a). Under British hegemony the whole
of southern Africa had become a common peripheral zone, open to transterritorial
212
Ethnicity; Propelling o r Checking Advance?
flows of capital , labor, and commodities. If South Africa's program of manufac­
turing expansion were successful, local primary producers would supply inputs
to an expanding urban-industrial complex, replacing a dependence on shrinking
overseas markets . Manufacturing would in turn replace goods previously pur­
chased from overseas areas. Yet existing regional trade arrangements confounded
such a development because they allowed regional producers to compete in ser­
vicing the South African market, yet privileged in many instances manufactured
imports from Britain and Portugal .
Here the actions of the South African government were quite clear. Any gains
from increased local industrial consumption of primary products were to be
awarded to South African producers alone. Toward this end, protectionist bar­
riers were erected not only against manufactured imports from core areas but
against imports of raw materials and foodstuffs from surrounding territories. Gone
were the days of the free importation of Rhodesian tobacco, Mozambican sugar
and cement, and cattle from the High Commission territories of Bechuanaland
(Botswana) , Swaziland, and Basutoland (Lesotho). At the same time, effective
bargaining in the midst of the collapse of the world demand ensured South African
access to surrounding markets for South African manufacturers. Southern Africa
as a coherent region of center-hinterland relationships was being forged for the
first time .
In a similar vein the government moved to reorganize the pattern and fruits
of labor migration. Local training of whites had already eliminated any appreciable
skilled labor inflows from core areas. The supply of unskilled black labor,
however, had long been based upon the recruitment of migrant labor from across
southern Africa. While moving carefully in light of the mines' extreme suscep­
tibility to cost pressures, the Pact government slowIy redirected the reach of labor
flows. This had the desired effect of ensuring not only that South Africa' s
homelands became tied to the mining industry, but that migrants ' wages were
spent on the products of South African manufacturers and not on British or Por­
tuguese goods in neighboring colonial territories . The impact of such measures
became apparent when the international price of gold leapt upward after 1933
and employment increased: for the first time the majority o f black miners were
recruited from within South Africa itself (Martin 1984) , while gold production
boomed, stimulating ever-further industrial advance.
During the 1 930s many countries-given the great crash , the breakup of the
world market, and increased interimperialist rivalry-would attempt to reconstruct
their position in core-periphery networks. By moving forward in the 1920s, the
South African state was ideally situated to take advantage of the chaotic world
conditions of the mid- 1930s. Yet precocity and the pursuit of farsighted state
policies alone cannot explain South Africa's remarkable transition to a newly in­
dustrializing member of the semiperiphery. Nothing less than a radical rupture
of prevailing social, economic, and political relationships was required. Major
class and ethnic struggles in a hostile world climate set the stage. The resultiL6
Pact government, despite the screams of protest by mining capital, was, however,
South Africa's Semi peripheral Regimes
213
hardly a " white workers' state, " much less an anticapitalist political movement.
Yet a major transition had indeed taken place. Having broken the power of min­
ing capital and free trade, the state laid the foundations for industrialization, a
corporative institutionalization of white labor movement, and a more assertive­
and momentarily autonomous-state. Interwar advancement would have been im­
possible without each of these ruptures. None of these features are encompassed,
much less explained, within the restricted ambit of either black-white conflict
or even national boundaries. Indeed, the resolution of the crisis of the primary­
producing, free-trade regime was only possible by shifting the country' s position
in core-peripheral networks and the interstate system.
This endeavor was, nevertheless, a movement down an uncharted path. It de­
pended to a very great degree upon world conditions of hegemonic crisis and
great depression. Few paused to contemplate what would occur when these con­
ditions changed, and even fewer considered what new class and ethnonational
forces this semiperipheral transformation would itself unleash. The end of World
War IT would reveal just how volatile both these dimensions were.
THE POST-WORLD WAR II SEMIPERIPHERAL REGIME
As World War IT came to an end, South African officials faced the future full
of the accomplishments of the past. As one government report noted, " The Union
is not just entering the industrial stage. On the contrary the industrial develop­
ment of the country is well-advanced" (South Africa. Board of Trade and In­
dustries 1 945, 1 9) . In 1 91 8 industry' s contribution to GDP was but 29 percent
of that of agriculture and 39 percent of that of mining; by 1 945 industry had sur­
passed both, with the industrial group of metal products, machinery, and transport
bypassing food and beverages as the largest single group in the industrial sector
(South Africa 1 982, 2 1. 5 , 2 1. 6) . Ever cognizant of South Africa' s position in
the world-economy, government reports noted with approval that industry and
national income had grown more rapidly than in many countries, including
Australia, Canada, and New Zealand (South Africa. Board of Trade and Industries
1945, 1 9) . South Africa, it appeared, had entered the select ranks of the industrial
world and was seemingly en route toward an advanced equality with overseas
powers. What such assessments failed to anticipate, however, were the contradic­
tions due to the very success of the state ' s promotion of a semiperipheral posi­
tion and the emerging new world order of U.S. hegemony. Together these fac­
tors would make a continuation of the interwar trajectory impossible.
Crisis and Transition
As we have seen, one of the cornerstones of interwar semiperipheral develop­
ment was the application of corporative policies toward white labor in industry
'lAnd the deepening of black proletarianization within the country. As industrial
production proceeded apace in the 1920s and 1 930s, these developments unleashed
214
Ethnicity: Propelling
ar
Checking Advance?
serious challenges to further industrial accumulation . First of all , rapid industrial
advance carried forward the replacement of a labor process based upon the ar­
tisan/unskilled division of labor with a division of labor utilizing semiskilled
operatives. Unforeseen in the 1920s, and considerably accelerated during the 1930s
and war years, this development stripped many white workers of their skill
monopolies and thus bargaining power vis-a-vis capital . This in turn challenged
the white worker' s very place in industrial production, as capital found newly
urbanized black workers increasingly suitable for expanding operative positions. 1
Although industrialization had opened avenues for white employment, the future
of the white worker at the hands of capital looked bleak.
Second, this undermining of white workers ' marketplace bargaining power
rested upon increasing the supply of suitable black labor drawn from the more
intensive exploitation of rural areas within South Africa. Success in this effort
during the 1 930s and 1 940s, however, created an impoverished countryside and
an urban black proletariat. For the increasing number of Africans without substan­
tial income from deteriorating rural agriculture, the attraction of urban employ­
ment was clear: average manufacturing wages were two and one-half times those
of mining by 1945 , a significant increase over the one and one-half ratio at the
beginning of the interwar period (South Africa 1 960, G4, G6 , G20) .
Such increasing disparities within the labor market reflected the growing
contradictions-for this world-historical period-between core-like industrial pro­
duction processes and peripheral mining and agricultural production processes.
These contradictions involved not merely the formal wage disparities of a split
labor market, but the very social structures that underpinned such inequalities.
Mining and settler agriculture were well aware that urban-industrial labor-force
formation was undercutting cheap migrant labor and the rural household struc­
tures that mixed income from part-lifetime waged work and rural subsistence pro­
duction. As these processes proceeded apace, tensions slowly emerged within
the camp of capital over the direction of state policy .
These contradictions arising from the very success of interwar industrializa­
tion came to a head in the early post-World War II years as tension among dif­
ferent sectors of capital was overlaid with growing struggles between capital and
labor. White workers again resisted capital's move to employ ever-larger numbers
of black workers at lower wage rates, while divisions among white workers erupted
as trade unions representing artisans battled those representing semiskilled white
workers (Lewis 1 984, chap. 9). Meanwhile, black workers became increasingly
militant as urban living costs soared, conditions in unplanned and increasingly
overcrowded urban locations worsened, and returns from deteriorating rural areas
fell. Throughout the 1 940s workers ' struggles in response to these differing yet
related processes rose in intensity; the period from 1 946 to 1 948 saw an un­
precedented number of strikes in comparison to the preceding two decades .
The state's response to the challenges of escalating labor unrest and disunity
among capital was one of uncertainty and vacillation. Only in the repression of
black labor was the state capable of decisive intervention. When corporative labor
South Africa's Semi peripheral Regimes
215
institutions became unworkable, for example, the state refused to offer legisla­
tion to secure the position of white workers in the new industrial order. The state
similarly offered no solution to capital' s concerns over the competitive costs of
black labor. With a disintegrating social base and an increasingly incoherent
response to capital' s difficult and divergent situation, the government fell in the
1948 election . The era of apartheid had arrived.
Changing Semiperipheral Regimes: The Apartheid-Industrial
Complex
The Nationalist Party (NP) victory in 1948 was based upon an explicit social
alliance. Driven by bourgeois and petty-bourgeois Afrikaner elites based in fman­
cial and commercial organizations-but largely excluded from the expansion of
industrial capital-the NP combined Afrikaner strata from within agriculture,
labor, and nascent financial groups (O'Meara 1 983). Common explanations chart
this development as either the economically irrational shoring up of white domina­
tion or the refurbishing, through repression, of a split labor market and cheap
labor. Yet as we have indicated, underneath such surface manifestations of racial
domination stood intractable contradictions arising from the very success of in­
terwar semiperipheral advance.
While apartheid did indeed reconsolidate white solidarity, the inner secret of
its success was not simply the reconstruction of white domination, but its ability
to address the contradictory requirements of both peripheral and core production
processes within the boundaries of a single state. Apartheid operated equally upon
accumulation processes and upon the imposition of tribal and racial divisions.
No better example of this exists than in the labor market. Here apartheid not merely
ensured " cheap" black labor and an aristocracy of white workers-as is most
commonly and crudely described-but most critically split black workers on
sectoral and regional scale. In essence the policies and institutions of ap�lrtblel
channeled the black labor force into three distinguishable segments: (1)
creasingly foreign, semiproletarian labor force for the mines, (2) an tn{>rp"�li
proletarian, yet coerced labor force for white commercial farmers, and (3)
trolled, supposedly temporary, yet recognizably permanent urban South
black working class. These new divisions corresponded to the conflicting aelmanal, «
of, and particularly wage and labor-process differentials between, mining,
agricultural, and industrial production. No longer, for example, could foreign
black workers migrate to higher-paying industrial jobs. Low-wage labor for farms
and mines was thus assured, as were the conditions for the continued expansion
of urban industry.
..
By moving in this direction, apartheid also served to recast South Mrica' s rela­
tionship with surrounding peripheral areas, particularly as foreign labor once again
came to be the predominant source of labor for the mining sector (Stahl 1 98 1 ,
1 4). Such changes reflected the density and connectedness of the regional rela­
tionships forged across southern Africa during the 1930s and the war years. It
216
Ethnicity: Propelling
ar
Checking Advance?
also represented, however, a response to postwar alterations in the global divi­
sion of labor and the transition to a period of global expansion . The passing of
classical imperialism-in the sense of the formal expansion of core powers , the
dominance of finance capital, and intercapitalist rivalry leading to war-funda­
mentally altered the prospects of any continuation of interwar semiperipheral
strategies. Under U . S . hegemony the world market was recomposed, decoloniza­
tion proceeded apace, and direct investment by multinationals displaced the in­
direct investment that allowed the development of locally controlled industries
in the semiperiphery during the interwar years .
South Africa's acceptance of this new world order was immediate: South Africa
was a founding member of the United Nations, a signatory of the Bretton Woods
agreements, and a full partner to the General Agreement on Tariffs and Trade (GAIT)
treaties . This was a dramatic reversal of the pattern of interstate relations during
the interwar period. In part this expressed the South African state's bid for a leading
role in African-if not world-affairs; South African poJicymakers expected to secure
their domination over central and southern Africa (Barber 1973 , 8 1 - 1 18).
Considerable benefits were bestowed by such willing integration into the boom­
ing world order organized under U. S . hegemony, leading to what Wallerstein
(1 979) has called economic advance by "seizing the chance. " After lagging
economic growth in the late 1 940s and 1950s , the economy flourished as invest­
ment funds flowed in, the world market boomed, and local industrial production
expanded to consumer durables . Such conditions facilitated the merger of South
African firms into a handful of mining , financial, and industrial conglomerates.
For foreign investors , South Africa offered not only high profit rates , but also
a seemingly secure and stable base for penetration of southern and central Africa
as a whole. In many ways this was a zero-sum game for countries in the region:
multinational industrial investments would be located in only one country, and
that was to be South Africa. Meanwhile, South African firms expanded into the
region as well, although their investments were largely concentrated in the subor­
dinate spheres of finance and mineral exploitation.
From the mid- 1960s to the mid-1970s there thus appeared a felicitous correspon­
dence of apartheid, economic boom, and support by the political and economic
power of the West. Yet acceptance of U . S . hegemony significantly constrained
any further movement toward core status in the world-economy. Unlike the in­
terwar policy of protection, participation in bodies such as GATT foreclosed any
further protectionist policies . As befit an industrial power, concessions in respect
of South Africa's own manufacturing exports were neither sought nor granted.
In relation to the International Monetary Fund (IMF), as well as to the GATT,
South Africa sought to be treated as an industrial power, thereby sacrificing ac­
cess to funds on terms offered to developing countries. By the early 1970s govern­
ment commissions and private-sector economists began to note that such agree­
ments constituted a major obstacle to further accumulation, particularly in the
development of an export trade (South Africa 1972, 2 19 ; Nedbank Economic
Unit 1983 , 20-2 1 ).
South Africa's Semiperipheral Regimes
217
Much the same could be said \lbout the open embrace of foreign capital. This
runs directly counter to the common thesis that overseas direct investment made
possible the unbridled expansion of the apartheid-industrial regime. Indeed, it
is quite curious that proponents of this view have failed to address studies elsewhere
that stress the negative effects of unregulated multinational investment. Certainly
these were in evidence: foreign capital came to control the commanding heights
of the local economy, technological innovation was stifled at the national level,
manufactured exports were blocked by overseas headquarters' directives to local
branch plants, transfer pricing undoubtedly occurred, and so on. As the economy
faltered, private and public analyses linked the failure to the advance beyond im­
port substitution to the multinational penetration of the economy (South Africa
1 972 , 21 9; Nedbank Economic Unit 1983 : 20-2 1 ) . Continued industrial expan­
sion by sectors with a high propensity to import, at the same time as gold pro­
duction was waning due to adverse input/output price ratios (as at the end of the
previous A phase in the 1920s), threatened a structural balance-of-payments
problem.
Amidst such constraints South Africa' s domination of surrounding peripheral
areas became increasingly strategic. As already noted, apartheid was truly a
regional construct, solidifying a regional hierarchy of labor and production pro­
cesses linked by flows of labor, capital, and commodities. In this process a new
pattern of center-hinterland linkages was constructed between South Africa and
her surrounding neighbors. As argued earlier, influx controls prevented foreign
labor from flowing toward higher-paying industrial jobs, an expansion of the ex­
change of South African industrial goods for regional primary products took place,
and South African capital was invested in mineral and primary production in the
surrounding periphery. To a degree rare among members of the semiperipheral
zone, South Africa's position in core-peripheral networks was founded upon the
emergence of a distinctive region of the world-economy.
THE LIMITS OF THE APARTHEID REGIME
By the early 1970s southern Africa was poised at a crossroads. Flushed
the national and regional successes of the apartheid-industrial complex,
African capital and the South African state moved to consolidate and
center-hinterland links and thus their domination of the region. Even the
effects of the outbreak of global crisis seemed to support such efforts: the shat­
tering of the international monetary system resulted in an unprecedented rise in
the price of gold, which in tum alleviated balance-of-payments problems and spur­
red a speculative expansion of the local economy . Yet at the same time, the
ligaments of the apartheid model came under severe attack. This assault struck
from two quite different directions, although both derived, as we shall see, from
common roots .
The first challenge to apartheid came from the final completion of the interstate
system in southern Africa. Portugal's defeats in its African colonial wars brought
218
Ethnicity: Propelling
ar
Checking Advance?
to power in 1975 the MPLA and FRELIMO governments in Mozambique and
Angola. FRELIMO's support for the armed struggle in Zimbabwe culminated in
Zimbabwean independence (1980). The basis of South Africa's regional expansion,
a common alliance with Portuguese colonialism and Rhodesian settlers, was in ruins.
Over the same time period a second challenge emerged to South African
hegemony from within the heartland of apartheid itself. Like revolts against the
extension of South African power in the region, these arose out of the very develop­
ment of apartheid power. In this area, however, the critical effects resulted from
the working out of the economic changes that had followed upon the successful
suppression of labor and political unrest in the late 1950s and early 1960s . In­
dustrial expansion in subsequent years drastically revised the class and ethnic basis
of South African society . As white workers were displaced upward into super­
visory and managerial positions, the factory floor became the province of an almost
wholly black labor force. More importantly , postwar industrial advance under
the aegis of multinationals widely introduced continuous-flow production pro­
cesses , which considerably strengthened the workplace bargaining power of a
growing urban (black) working class . Despite apartheid' s best attempts to divide
black South Africans into tribes , accumulation processes had created the basis
for more united urban resistance. From 1976 onward, urban South Africa emerged
as the central battlefront of a rising tide of resistance that claimed a common black
identity. To make matters worse, the global depression, after the first flush of
the speculative rise in the gold price passed, hit South Africa very hard.
The triple hammer blows of regional challenge, internal resistance, and con­
traction in the world-economy shattered all pretenses of the peaceful evolution
of apartheid. Although repressive measures escalated by the late 1 970s , the state
and capital also recognized the need for a formative political response. The death
of apartheid and the age of reform were thus proclaimed: the mixed-marriages
act was repealed, signs of petty apartheid were removed, black trade unions were
recognized, and attempts to co-opt Indian and " coloured" representatives into
a new tricameral Parliament were advanced. None of this met the demand for
majority rule. Apartheid had as well even dissolved its central supports within
the white community : white workers had almost completely disappeared, while
" Afrikaner" capital had become as monopolized as "English" capital. Those
who had originally formed the central social supports for the apartheid project
were nowhere to be found.
CONCLUSION: SEMIPERIPHERAL REGIMES
AND PROSPECTS
We began this chapter by noting that far from underwriting South African pros­
perity , apartheid has barely maintained South Africa's semiperipheral position
in the world-economy. Since the outbreak of the global crisis in the mid- 1970s,
moreover, the crumbling of the national and regional pillars of apartheid has driven ·
South Africa even lower in the hierarchy of wealth and power on a world scale.
South Africa's Semiperipheral Regimes
219
It is tempting to contain South Africa's current crisis within its dramatic political
dimensions. Certainly any resolution of the crisis now requires meeting the de­
mand for majority rule. Yet majority rule alone will directly supply neither the
means nor the measures to overcome the country' s seriously declining position
in the modem world-economy. Indeed, the current crisis contains a far more substan­
tive problem shared with many other long-term members of the semi peripheral
zone: the inability of postwar political and economic relationships to address the
challenges of a changing global division of labor in the current B phase.
To place twentieth-century South Africa within a world-economic perspective
indicates this quite sharply . As argued earlier, the transformation of South Africa
during the interwar period was induced and made possible by the conjunctural
features of a great depression and rivalry in the interstate system. Under new
political leadership the state was able to institutionalize white labor-capital rela­
tionships, reorganize linkages with core and peripheral areas, and thereby establish
South Africa as a center for expanded industrial production.
The distinctiveness of this path can be starkly revealed through comparisons
to other states similarly situated in the international division of labor, but miss­
ing one or another of the elements of the South African configuration. In many
instances outbreaks of labor and civil unrest similar in origin and timing to South
Africa ' s occurred. Yet few resulted in a transition to new patterns of industrializa­
tion and state power. In many instances the very lure of continued wealth by staple
production and the strength of dominant classes in agrarian or mineral produc­
tion foreclosed such a radical rupture as occurred in South Africa. Such, for ex­
ample, was the case in neighboring Zimbabwe, where settler farmers and export­
oriented mineral producers curtailed industrial initiatives; elsewhere, such as in
Portugal, new political regimes emerged, yet proved antidevelopmentalist in their
orientation. For much of Latin America, the search for new forms of accumula­
tion and state power emerged only in the mid- 1 930s, or even later, when
and national conditions were far less favorable.
As argued earlier, the very success of the interwar semiperipheral
undermined its continuation in the early post-World War II period. In the
instance this was a political challenge, as unfettered industrial
simultaneously created a new, militant labor force and widened
between the core-like industrial production and peripheral production
in mining and agriculture. Apartheid resolved these difficulties by forging com­
plex new relationships between divergent production processes and their labor
forces, the social and ideological basis of white rule, and the segregation and
repression of black urban resistance. In key aspects such a configuration paralleled
similar developments elsewhere in the world-economy that melded bureaucratic
repression, industrialization, the expansion of a middle-class market, and the
solicitation of foreign capital.
Equally important to apartheid's stability, however, was the remolding of South
Africa' s relationship with core powers and the now-stable and expanding world­
economy. In the world order established by Great Britain, accelerated industrialization
220
Ethnicity: Propelling or Checking Advance?
expanded national productive and technological capabilities. In this climate in­
novative and precocious state policies such as those pursued by South Africa made
upward movement within the global division of labor possible. Such successes
would later provide the evidence for dependency analysts' promotion of withdrawal
from the world market. These semi peripheral strategies became increasingly in­
applicable, however, under postwar conditions of global expansion and the asser­
tion of U. S . hegemony . No longer could tariff barriers circumscribe polarizing
forces emanating from core areas : multinationals, for example, simply leapt over
tariff barriers . The relationship between industrialization and national power and
wealth thus changed dramatically: in South Africa, as in many other semiperipheral
areas , the commanding heights of the industrial sector came to depend upon and
be limited by decisions , technology, capital goods, and trade coursing through
the channels of multinational enterprises. In a similar fashion independent action
by noncore states became less and less possible as U. S . hegemony was asserted
throughout the nooks and crannies of the interstate system.
For states such as South Africa, prosperity thus came to rest upon economic
expansion in core areas that could sustain continued investment inflows and
favorable terms of exchange with core areas . The 1 960s and early 1970s reaf­
firmed the apparent wisdom of a semiperipheral model based upon acceptance
of the new world order. By the mid- 1 970s , however, the full effects of the world
depression struck South Africa, and the inability to sustain and reproduce even
the economic assumptions of the apartheid regime became fully apparent. Similar
effects soon became evident all across the semiperiphery where "development
by invitation" or "dependent development" had been relatively successful dur­
ing the postwar boom.
Many have postulated that full-blown " peripheral Fordism, " seizing upon ongoing
changes and opportunities in the global division of labor, now offers such states
the best opportunity of advance toward core status in the world-economy. Indeed,
apartheid has itself been termed a limited form of " racial Fordism, " sustaining
industrial advance by expanding the high income of white consumers (Gelb 1 987).
The implication for South Africa and other similarly situated states is that a redistri­
bution of wealth could push this process by stimulating greater mass production.
Neither the expansion of demand nor higher levels of industrial output, however,
are likely to be as possible or successful as is often suggested. A " Fordist" solu­
tion would require-as occurred during South Africa's interwar and postwar
transitions-a radical reorganization of relationships between capital, labor, and
the state. Here the limits imposed by changes in core-periphery networks im­
pinge severely . In core areas Fordism resolved labor-capital-state relationships
by melding high wages , high productivity , and mass consumption. These were
not simply elements of advanced industrial production but were based upon at­
tributes of accumulation in core areas: oligopolistic profits derived from highly
innovative products and (continuous-flow) labor processes .
As core areas have deindustrialized and semiperipheral areas industrialized,
semiperipheral areas have inherited continuous-flow labor processes but not the
South Africa's Semiperipheral Regimes
221
oligopolistic profits and high wages sustained by innovation. The result i s Ford­
ism in its labor-process aspect, but the blockage of the high-wage/mass-consump­
tion relationship as automobiles, steel, simple electronic goods, and so on have
become standardized products subject to increasingly competitive production.
Simply stated, the production of such commodities no longer generates oligopolistic
profits, high wages, and thus mass consumption.
For areas such as South Africa that have captured part of this ongoing process,
the contradictory effects of these global developments are all too apparent. On
the one hand, the workplace bargaining power of labor has been considerably
enhanced, as is evident in the increasing unruliness of labor on the factory floor
and in the political arena. On the other hand, capital and the state remain unable
to strike the bargains reached in the United States during the 1930s and in Europe
during the 1960s because the global rewards associated with such production pro­
cesses and a world-expansionary climate are absent. It should hardly surprise
us, therefore, that labor and social unrest, and a desperate search for a means
of politically containing them, have accelerated all across the industrializing
semiperiphery.
Such conclusions seem as equally applicable to South Africa as they are to the
South Koreas, Brazils, Mexicos, and Polands of the semiperiphery. To be sure,
in each state the handling of the contradictory aspects of semiperipherality in this
late twentieth-century depression will surely be distinctive. In the instance of South
Africa, majority rule will reforge, on the principles of a democratic and unitary
state, a more stable political consensus. A postapartheid state would inherit,
moreover, several critical features that may advantage the task of accelerated
accumulation: a strong and in several areas a technologically advanced state sec­
tor; a defensive and yet highly concentrated and centralized ("monopoly" ) sec­
tor of national capital; and the weakened presence of foreign capital due to capital
flight, disinvestment, and the forced repayment of debt.
Whether and to what extent such elements could coalesce and form the
for expanded accumulation and movement upwards in the international
of labor remains to be seen. To be sure, some level of redistribution would
pand the domestic market, and the political alliances across southern Africa
cruing from over two decades of anticolonial and anti settler struggles could
translated into a broader regional market and more sustained efforts to contain
polarizing forces emanating from core zones of the world-economy. More prob­
lematical will be meeting the demands for equality and social justice. As is evi­
dent throughout much of the semiperiphery, these demands now speak with the
powerful voice of a burgeoning labor movement. The forging of a new institu­
tional relationship between capital, labor, and the state-as was done in both the
1920s and the early apartheid period-will be an exceedingly difficult task. Pros­
pects here are especially clouded given world conditions, the legacy of decades
of foreign investment, and the historical aversion of South Africa' s largest enter­
prises to the pursuit of innovative production processes. The legacy of the apar­
theid epoch will weigh heavily indeed upon any majority-rule government.
222
Ethnicity: Propelling or Checking Advance?
How these elements might be combined and fashioned even in a period of global
expansion remains open for further analysis .2 What is evident, however, is that
no national solution to South Africa's, and even the semiperiphery 's, current crisis
can arise simply from a rise in export revenues , new inflows of foreign capital,
or even increased demand for basic consumer goods. Advance within the world­
economy cannot be fashioned simply by correct policies toward the external market
but will depend upon a new social and political order corresponding to radical
changes in the regional and global arena. If the semiperipheral regime denoted
by apartheid has failed, it remains most uncertain what will replace it. South
Africa, like the rest of the semiperiphery , faces a turbulent future.
NOTES
1 . For a detailed example of this process in the metals industry, see Webster 1985,
45- 122. In sectors less dominated by artisans, such as beverage and food processing and
textiles, the challenge was greater still.
2. This question is currently being addressed by the Fernand Braudel Center's Research
Working Group on Southern Africa and the World-Economy; see Martin 1986.
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__
INDEX
Agriculture: capital intensive, in Israel,
166; European Economic Commun­
ity, 126-28; import substitution of
foodstuffs , 74-75 , in Israel, 1 66-68;
land policies in colonial Malaysia,
192; large landowners , 71 ;
machinery, 147; modernization of, in
Chile, 70-75; South African settler,
208 , 2 1 0 ; state assistance to, 72-73 .
See also Primary products
Allende, Salvador, 7 1
Alliance for Progress, 7 1
Anderson, Benedict, 1 85
Angola, 2 1 8
Apartheid: and industrialization, 205,
2 15- 17; limits of, 2 1 7- 1 8 ; "organic
crisis " of, 205; reform of, 2 1 8 . See
also South Africa
A-phase. See Kondratieff waves
Argentina: exports, 101 ; labor in,
103-9; as model, 33-34; versus NICs
after World War II, 97-98. See also
Peronism
Arrighi, Giovanni, 5 , 97
Arrighi, Giovanni, and Jessica Drangel,
1 9 , 22, 48-49, 80, 99 , 1 00 , 125 ,
142, 163; critique of, 128.
Australia, 100
Authoritarian regimes: Chile, 73; crises
of, 28-29, 3 1-32; economic growth,
85 ; "popular democracies" in Eastern
Europe, 26; in Latin America, South­
ern Europe, and USSR, 26. See also
Bureaucratic-authoritarian regimes;
Military regimes
Balance of payments : Israel, 159, 1 64,
171
Balance o f trade: crises i n Argentina
104, 109; Chile, 72
Banking and finance: Canada, 145;
Chile, 7 1 ; City of London, 2 1 1 ;
change rate in Israel, 1 7 1 ;
tional community, 76; South
Reserve Bank, 2 1 l . See also
tional monetary system
Biafra, 1 94
Bourgeoisie: and antisystemic regimes,
29; merchant-industrial in Nigeria,
187; South Korea, 85, 90. See also
Capital; Class
B-phases . See Great Depression; Kon­
dratieff waves
Brazil: labor movement, 1 15 ; state
policies, I I O- l l ; Vargas regime,
104-5
Bureaucratic-authoritarian regimes, 26,
79, 83; Argentina, I l l ; Latin
228
Index
America and South Korea compared,
84; models, 3 ; South America, 69;
state, 1 1 3 . See also Authoritarian
regimes; Military regimes
Canada: position in world division of
labor, 147-55; hydroelectricity, 145;
industrial late-comer, 145; a s member
of semiperiphery, 100; theories of
development of, 142-44
Capital: Afrikaner and English, 2 1 8 ;
Muslim mercantile, 1 90
Capital concentration, 147. See also
Monopoly capital
Capital flight, 1 3
Capital flows: t o Chile, 72; forcible and
voluntary 1 3 ; to Israel, 1 63-64;
within world-economy, 12. See also
Debt; Foreign direct investment
Cardoso and Faletto, 1 12, 143
Center-periphery : polarization, 12; rela­
tional structure, 47. See also World
division of labor
Central-peripheral states , 141-42, 154
Chaebol, 83, 90
Chase-Dunn, Christopher, 3 1-32, 37
Cheap labor: in footwear industry, 5 8 ;
South Africa, 215; South Korea, 84.
See also Wages
Chicago Boys, 72-73
Chile: CORFO (state development cor­
poration) , 72; economic changes
under Pinochet, 73-75; import
substitution, 70-7 1 , 75; populist
developmentalism in, 70; repression,
70; state and market, 70-77; struc­
tural economic reforms under
Eduardo Frei government, 7 1
Chinese: i n Malaysia, 1 86-87, 190, 1 92;
traders, 1 90
Chun Doo Hwan, President, 89
Classes: Arab, 172-73; dominant and
state, 7, 1 15 ; feudal , 193 ; Muslim
aristocracy, 190-9 1 ; overlap with
ethnicity, 1 7 1 ; popular in South
Korea versus Latin America, 86;
rentier, 190; ruling, 29; South
Africa, 2 1 8 ; South Korea, 88-89 . See
also Proletarianization; Working
class
.
Cold War, 1 95-96
Colonialism: British policy in Malaysia,
192; and ethnic stratification, 196; in­
direct rule, 1 86, 190-9 1 ; Japanese,
82, 1 84; political parties under, 193;
Portuguese, 209, 217- 1 8
Commodity chain: concept, 47-48, 50;
footwear, 5 1 -55
Communist Party : coercive rule, 30;
"democratization" of national wealth,
30; Malaysia, 195
Comparative advantage: Argentina, 107;
Canada, 1 47 ; and industrial develop­
ment, 1 5 5 ; and semiperipheral state,
17
Core: Canada as member, 147; countries'
ascent to, 14; definition by wealth,
15; expansion of, to areas of new
settlement, 1 3 ; Ireland along perimeter
of, 130; measured by · GNP per capita,
19-22; oligarchic wealth of, 17- 1 8 ,
22; organic members of, 22, 205;
perimeter of, 19-2 1 ; production
processes and innovation, 84, 1 16;
states, 12, 30. See also Central­
peripheral states; World division of
labor
Core enterprises: competition between,
3 3 ; concessions to labor, 27; move­
ment to semiperiphery, 27-28. See
also Multinational corporations
Corporatism, 26; Peronism compared to
other, 105-6; South Africa, 2 1 3
Costa Rica, 2 6 , 32
C6te d'lvoire, 128
Crisis of dictatorships, 26 . See also
Authoritarian regimes; Bureaucratic­
authoritarian regimes; Legitimacy ;
Semipheriphery, contradictions of
Cumings, Bruce, 83, 1 1 3 , 1 15
Currency devaluation, 72
Debt: dependency of South Korea, 8 3 ;
financing development, 8 0 ; world
crisis, 24
Index
Deindustrialization: of core, 6, 1 1- 1 2 ,
8 8 , 220; as defense of core status, 7 .
See also New international division of
labor; World division of labor
Democracy: new forms in semipheri­
phery, 35; Japanese mode, 92 ;
parliamentary , 26, 32; prosystemic ,
32-33 ; semiperipheral , linked to
North America and Western Europe,
3 3 ; South Africa, 2 1 9
Democratization, 7 9 , 1 17 ; Chile, 76-77;
and crisis of semiperipheral regimes ,
9; South Korea, 9 1
Dependence: commercial and financial,
1 43 ; technological, 88, 1 43 , 154
Dependency theory : and Canada,
1 52-55; classical form, 1 12 ; and in­
dustrialization, I I , 143; interwar ap­
plication, 220; neo-dependency
theories, 1 43
Dependent development, 80-82, 1 12- 14,
141 , 220
Deregulation: Chile, 72
Deutscher, Isaac, 30
Development. See Dependent develop­
ment; Industrialization;
Semiperiphery; World division of
labor
Developmentalism, 79; illusion of, 22;
and industrialization, 24; populist, in
Chile, 70; and progress, 9; and race,
203-5; stages of growth, 6
Development of underdevelopment, 176.
See also Dependency theory
Deyo, Frederic, 83-84, 86, 90
Dominions: South African growth com­
pared to, 2 1 3
Eastern Europe: political regimes, 26;
proletarianization in, 29 ; redistribu­
tion of wealth, 27; ruling elites, 29
"Economic miracles " : Israel, 159;
South Korea, 3 3 , 8 3 ; Taiwan, 3 3
Education: Canada, 1 4 6 ; imbalances in
Nigeria, 1 94; Ireland, 1 3 1 ; Israel,
1 70; missionary in Nigeria, 1 8 8
Emmanuel, Arghiri, 5 , 1 2
229
Empires: Indian, 1 89; Muslim, 1 87,
189; Oyo, 1 87
Ethnic groups: Ashkenazi (Israel) , 1 7 1 ;
concept, 1 8 5 ; origins of Malay, 1 89
Ethnicity: colonial construction of, 1 84,
190-93 ; cost of diversity, 1 83 ; and
division of labor, 8 , 1 84, 1 93-94;
and formation of political parties,
193 ; Nigeria and Malaysia compared,
1 85-90; repression of Arab minority
in Israel , 1 69; South Korean
homogeneity , 1 84; state intervention
blocked by , 198; state and nation­
building in Israel, 1 64
Ethnonationalism, cultural and structural
theories of, 1 85
European Economic Community (EEC):
Common Agricultural Policy,
126-28; and Ireland, 126, 1 3 1
Evans, Peter, 92. See also Dependent
development
Exclusion, processes of, 1 6- 1 8
Exploitation, processes of, 1 6 - 1 8
Exports : agricultural, from Chile, 72,
74; Canada, 1 5 1 ; competition in
footwear, 58-59; distribution and
marketing networks, 60-61 ; diver­
sification, Chile, 75; level of pro­
cessing, 1 34-35; low-waged, 162;
networks, 59-60; niches , footwear,
61-65 (figure 62) ; primary product,
1 9 1 ; South Korea, 64; structure in
Argentina, 1 0 1 ; Taiwan, 64-65.
also Export-oriented
Tariff protection; Trade
Export-oriented industrialization (EOI) ,
80; Ireland, 126; models, 3 ; South
Korea, 7, 83-84
Fascism: Chile, 76; Europe, 69; regimes,
26; southern Europe, interwar, 105
Federated Malay States, 192-93
Firebaugh and Bullock method, 126,
1 32-36
Fordism, 1 3 5 ; peripheral, 220; racial,
220; relations between labor, capital,
state, 10; semiperipheral, 221
230
Index
Foreign direct investment: attraction of
semiperiphery for, 80; Canada, 144;
of Canadian firms, 149-50; com­
parisons with Canada, 147; Ireland,
130; in South Africa, 2 1 6- 1 7 ; of
South African firms, 2 1 6 ; United
States, in Canada, 149. See also
Multinational corporation
Foreign exchange: deficits, 2 8 ;
liberalization, 1 7 2 ; surpluses, 28
Foreign investment codes: Chile, 72
Footwear production: commodity chain
of, 5 1 -5 5 ; distribution and marketing
networks , 60-61 ; domestic capital,
54; exports to United States, 5 1 -5 3 ;
firm size, 57-59; geographical shift
in production, 54; peripheral produc­
tion, 6 5 ; product specialization,
59-60; profits from, 54, 66; raw
materials in production, 56-57;
upgrading of industry, 63-64
Foxley, Alejandro, 72
Free trade: policy, 209; system, British,
2 1 0 ; United States-Canada, 1 5 3
Fulani jihad, 1 8 7
General Agreement of Tariffs and Trade
(GATT) , 2 1 6
Gerschenkron, Alexander, 1 46
Ghana, 2 1 -22, 49
Gold prices , 209, 2 1 7
Great Depression, 102; Argentina,
103-4; creative destruction during, 6;
interwar, and semipheriphery, 103-8;
state policies during, 212
Greece, prosystemic democracy, 32
Group o f Seven, 147
Gush, Emunim, 175
Harrod, Roy, 1 5 - 1 6
Hausa, 1 8 6-8 8 , 190
Hegemony : British in southern Africa,
209, 2 1 1 ; crisis of, 3 3 , 102; Canada
in relation to United States and
British, 145; rivalry, 27; United
States, 9, 3 3 , 2 1 6
Hirsch, Fred, 1 5 - 1 6
Hirschman, Albert, 152
Histadrut, 1 66-68
Hobsbawm, Eric, 26
Holland, 1 4
Igbo, 1 86- 8 8 , 1 9 1
Imperialism: passing of, 2 1 6 ; theories
of, and industrialization, 143
Import Substitution Industrialization
(lSI) : Arg�ntina, 109; Chile, 70-7 1 ,
75; Israel, 1 67 ; South America,
69-70; South Korea, 82
Income inequality : Chile, 27, 7 3 ;
egalitarian, in East Asia, 45 ; in
semiperiphery, 27. See also Inequal­
ity, world
Income redistribution: necessity in
Malaysia, 1 9 8 ; prospects of, in South
Africa, 221
Incorporation into capitalist world­
economy: Korea, 82; Malaysia,
1 86-90; Nigeria, 1 86-87; South
Africa, 208 ; Taiwan, 82
Independence movements : and Anglo­
Muslim aristocratic alliances, 1 93 ;
Malaysia, 1 85 ; Nigeria, 1 8 6 , 194-95
Indians, in Malaysia, 1 86-87
Industrialization: contradictions of, in
South Africa, 2 1 4 ; as measure of
development, 46, 130, 204; paths of,
1 44; state promotion of, 144-45. See
also Bureaucratic-authoritarian
regimes ; Export -oriented industrial­
ization; World division of labor
Industry: capital intensive, 89; domestic,
in Ireland, 129; energy intensive, in
Canada, 147; foreign-owned, capital
intensive, 129; global system of, 45;
international competitiveness of,
South Korea, 8 9 ; late-comers to, 142;
labor intensive, 88, 129;
peripheralization of, 24; skill­
intensive in Israel, 176; by zone, 25 .
See also Deindustrialization; World
division of labor
Inequality . See Income inequality ; In­
come redistribution; Inequality, world
Index
Inequality , world: gap between core­
semipheriphery-periphery , 1 2 , 1 9-20;
long-term stability of, 22-24; and in­
dustrialization, 24
Institutional innovation, 1 14- 15
International division of labor: See
World division of labor
International Monetary Fund, 2 1 6
International monetary system, 209; and
gold, 2 1 7 . See also Banking and
finance
Interstate system, 6 , 9
Intifadah, 162, 174, 177
Ireland: democracy , 26; and European
Economic Community , 126, 1 3 1 ;
migration from, 128; prosystemic
democracy, 32; trade of, 126-34; and
world division of labor, 130, 1 36-37
Islam: law, 1 97-98; and non-capitalist
ruling groups, 1 86 ; religion, 1 89;
revival, 1 97; scholars, 1 89
Israel : analogy with Eastern Europe and
Soviet Union, 34; geo-strategic posi­
tion, 164; Histadrut, 1 66-68; invest­
ment rate in, 165; limits of success
of, 170-76; as model for semiperi­
phery, 34-35; occupied territories,
1 75 ; strengthening of Arab minority
in, 172
Ivory Coast. See C6te d'lvoire
Japan: ascent to core, 1 8 , 2 1 -22; as
model for semipheriphery, 1 15 ;
sogoshosha, 60
Japanese occupation of Malaysia, 195
Jamaica, prosystemic democracy, 32
Kondratieff waves : expansion (A­
phrase), 1 59, 209, 2 1 6 ; contraction
(B-phase) , 1 3 1 , 2 1 9 . See also Great
Depression
231
Australia, 103 ; split markets under
apartheid, 2 1 5 ; non-waged reserves
of, 28
Labor militancy : Argentina, 1 1 1 ;
Malaysia, 195; across semiperiphery ,
22 1 , South Africa, 209- 10; South
Korea, 89. See also Labor
movements ; Strikes; Trade unions
Labor movements: Argentina, 106, 109 ;
Australia, 102 ; i n core, 27; in
semiperiphery , 1 16 ; South Korean,
92. See also Labor militancy; Strikes ;
Trade unions
Labor parties: Israel, 1 7 1 , 175; South
Africa, 2 1 0
Labor process : continuous flow, 2 1 8 ;
semi-skilled operative, 2 1 4
Labor repression, 84, 90
Land: Arab, in Israel, 1 66 ; concentration
of, in Chile, 74, nationalization and
concentration of, in Israel, 165-66
Land reform: Chile, 7 1 , 72
Landowners, Argentina, 101
Late industrialization, 142 , 146; develop­
ment opportunities of, 143
Latin America. See under specific
countries
Legitimacy : and state, 85; crisis, in
South Korea, 85-86, 90. See also
Crisis of dictatorships ;
Semiperiphery, crisis of legitimacy
Liberalism, in Chile, 73
Libya, 2 1 , 26-27
Likud party , 170-75
Mahdism, 190
Malay : elites and state, 196
Malaysia: Chinese guerrillas, 1 95 ;
" Emergency" o f 1 948-1960, 196;
ethnic division of labor under
colonialism, 1 95 ; ethnic groups, 186;
nationalism, 195; UMNO party, 196
Labor, bargaining power: Argentina,
103 , 107 ; of South African miners ,
210; workplace, 1 1 1 , 2 1 4 , 2 1 8 , 221
Labor, cheap. See Cheap labor; Wages
Mapai/Labor Alignment, 1 70
Marketing boards , Nigeria, 1 9 1
Marx, Karl: o n identities, 1 85 ; and
world-system perspective, 15
Labor : institutionalization of, in
Mercantilism, European, 1 89
232
Index
Middle class: South Korea, 8 9 ; market
in South Africa, 2 1 9
Migration: to Canada, 146; China to
Malaysia, 1 92 ; from Ireland, 128; to
Israel, 163-66; from semiperiphery to
core, 27-28 ; skilled labor from Israel,
177; South Africa and cheap labor,
212, 2 1 4 ; southern African, 2 1 5 ; and
state manpower policies in Israel, 1 67
Militarization, of Israeli society, 177-78
Military coup : Argentina, 1 1 5 ; Chile,
7 1 ; Nigeria, 194
Military expenditures, 3 1 ; Canada, 154;
Israel, 176
Military-industrial-complex, 29; in core,
30; Israeli, 34, 162-63, 1 7 8 ; South
Africa, 3 4
Military regimes : 2 6 , 8 5 - 8 6 ; Argentina,
I l l ; Chile, 73 ; promotion of
economic development, 87 ; South
America, 69; South Korea, 8 9 . See
also Authoritarian regimes;
Bureaucratic-authoritarian regimes
Mining: Australia, 10 I; Canada, 10 I ;
South Africa, 208 -10; tin, in
Malaysia, 1 9 1
Modernization theory, 79, 142; applied
to South Africa, 204; and in­
dustrialization, I I
Monetarism, in Chile, 72-73
Monopoly capital , in South Africa, 204
Moslem. See Muslim; Islam
Mouzelis, Nicos, 87
Mozambique, 2 1 8
Multinational corporation (MNC): in
Canada, 1 44 ; in Chile, 74; in distri­
bution and marketing networks, 54;
and industrialization, 136, 220; in
Ireland, 1 2 8 ; nationalization, of, in
Chile, 7 1 ; in semiperiphery and de­
pressions, 1 3 1 ; in South Africa, 2 1 6
Muslim: aristocracy, 190-9 1 ; faith, 1 89 ;
rulers , 1 89 ; Nigeria, 1 86 . See also
Islam
Nationalism: Afrikaner, 2 1 0 , 2 1 5 ; Arab,
169, 1 7 3 , 176; Korean, 1 8 4 ; Malay,
1 9 3 ; Malaysian, 1 95-96; Nigerian
193-95; Palestinian, 1 69 , 173-76
National liberation movements, 27
Nationalist Party (South Africa) , 2 1 5
Neo-liberalism, 72 , 7 4
Netherlands, 129
New comparative political economy , 85
New International Division of Labor, 88,
134. See also World division of labor
New International Economic Order, 1 0
Newly Industrializing Countries (NICs):
and commodity chains, 50; competi­
tion between, 49; East Asia, 46, 8 1 ;
export-oriented, 49; models and
literature, 3-4; Pacific Rim and
Southern Europe, 1 42 ; position in
world hierarchy , 46. See also
Bureaucratic-authoritarian regimes;
Industrialization; World division of
labor; under specific countries
Newly Underdeveloping Country (NUC):
Chile, 73 ; South Africa, 206
Nigeria: civil war, 1 94; coup, 194;
Rausa, 1 87-8 8 , 190-9 1 ; regions,
1 86 , 1 9 1 , 1 94; Yoruba, 1 86-87, 1 9 1
O 'Donnell, Guillermo, 1 1 3
Oil prices, 1 8 6
Oligopoly profits, 220
Organization of Petroleum Exporting
Countries (OPEC), 1 97
Organization of Islamic Conference, 1 97
Oriental (Jewish) Revolt, 1 62, 1 7 1
Pact govenment (South Africa), 2 1 0- 1 1 ,
2 1 3- 1 4
Palestinian Liberation Organization
(PLO), 173-75
Park Chung-hee, President, 90
Patronage, 170
Peasants, Malaysia, 1 9 1 -92
Periphery : competition within, 7; decline
due to semiperipheral success, 1 8 ;
defined by wealth, 1 5 ; measured by
GNP per capita, 19-22; organic
members of, 22; perimeter of, 1 9-2 1 ;
poverty of, 1 8 , 22; southern African
Index
zone, 2 1 1 - 1 2 . See also World divi­
sion of labor
Peronism, 10 1 , 105-8
Pinochet, Augusto, 69, 70, 77
Plantations, rubber, in Malaysia, 1 86
Polanyi, Karl, 69-70
Population: distribution by zones of
world-economy, 19-20
Populism: Israel, 1 7 1 , 177
Portugal, 32
Primary products: Malaysian exports of,
1 86; Nigerian exports of, 1 86; prices,
209; South African, 208-1 1 ; state
promotion of, 101
Proletarianization : Arab, 172-7 3 ; East­
ern Europe, 29; and power of lower
classes, 28; in semiperiphery , 26; of
world, 26. See also Working class
Protectionism: Argentina, 104, 1 09-10;
Chile, 76; interwar, 1 0 2 ; Ireland,
125-26; Southern Europe, 105 ;
United States, 1 5 3 . See also State
economic policies; Tariff protection
Privatization, in Chile, 72
Product life cycle theory, 142
Productivity in manufacturing, comparisons of, 147 , 1 49
Race: South Africa, 203-5; Nigeria, 187
Refugees : Arab , 165-66
Religion: Catholic Church, in Chile, 70;
Christian, in Nigeria, 1 8 8 ; and
ethnonational identities, 1 9 8 ; Hin­
duism, 1 89 ; Ireland, 1 3 1 -32; Malay,
192; movement in Israel, 175
Research and development: in Canada,
1 5 3 ; and international competitiveness
84; in South Korean economic
growth, 87-88. See also
Technological dependency
Roh Tae Woo, 89, 91
Rostow, W. W., 1 4 1 -42
Rothgeb, John M. , 1 3 1
Schumpeter, Joseph, 1 5
Semiperipheral states : competition: com­
petition between , 2 8 , 1 62 ; democratic
233
wealth of, 17, 22; encouraging
relocation of industry, 27-28;
redistribution 0 f wealth by , 27; See
also Semiperiphery
Semiperiphery : antisystemic character of,
10, 29 , 3 1 -3 2 ; and cultural integrity ,
1 3 1 ; contradictions of, 8-10, 9 1 ,
176, 2 1 8-22; crises 0 f prosystemic,
28; crisis of legitimacy in, 35; defini­
tion of, 5, 1 1 , 1 1 3 , 125; ethnic
diversity of, 196-9 8; and global pro­
cesses, 1 14; institutionalization and
development of, 108-14; as measured
by Firebaugh and Bullock method,
132-35; as measured by GNP per
capita, debate over, 5 , 19-22,
126-28 , 1 3 6 ; as measured by Mingst
method, 1 28-32; membership of,
4-5 , 47 ; mobility of, Ireland,
1 36-37; organic members of, 22;
prospects of, 1 98-99; prosystemic
role of, 10, 3 1 ; South Africa com­
pared to other semiperipheries, 207;
stability of, 4; as stabilizer of world­
economy, 10, 3 1 , 1 3 5 ; and world
division of labor, 27-28 . See also
World division of labor
Skocpol, Theda, 86
Slave trade, 13, 1 87
Social movements, 9-10; ethnic support
for, 198; in Israel, 1 75-76. See also
Labor; Nationalism
Socialism, in Chile, 7 1 , 76
Sogo-shosha , as model for South
60
South Africa: analogy with Eastern
Europe and Soviet Union, 34; com­
pared to other semiperipheries, 2 1 9 ;
as model for semiperiphery, 34-3 5 ;
position i n world division o f labor,
205. See also Apartheid
Southern Africa: as region of world­
economy, 2 1 7
South Korea: ascent t o semiperiphery ,
3 3 ; bureaucracy in, 85, chaebol, 8 3 ,
90; democracy in, 9 1 -92; ethnic
homogeneity of, 1 84; politics in,
234
Index
85-87 ; prospects of, 87-89; social
forces and classes in, 89-9 1; state
and development, 8 1 -85; student
movement in, 89; upward mobility in
world-economy, 21-22; urban poor
of, 89
Spain: post-Franco model, 33, prosystemic democracy in, 32
Stabilization policies in Chile, 72
Staple theory, 144-45
State: aid to small urban producers, in
Chile, 7 1 ; alliance with indigenous
capital , 90, 1 97 (see also Dependent
development) ; bureaucracy and
ethnicity , 197; warfare, in Israel,
177. See also Authoritarian regimes ;
Bureaucratic-authoritarian regimes;
Military regimes
State and foreign investment, 83, 1 13 ,
126; Brazil compared to Argentina,
I I I - 1 2 ; Israel, 166-67;
State and market: Argentina, 107 ; Chile,
70-77; Israel , 163. See also Protec­
tionism; State economic policies
State autonomy , 85; as organization of
interests, 86; Israel, 160, 169,
17 1-72; South Korea, 83, 86-87; and
successful development, 8
"State-centered development, " 7, 8, 8 1
State economic policies : Argentina,
103-4, 109- 10; Australia, 1 0 1 -2;
autarchic, i n Ireland, 1 2 5 , 1 3 1 ;
Canada, 101-2; Chile, 72; footwear
production, 5 5 ; Israel, 162-65 , 167;
Malaysia, 186, 198; on manpower,
Israel, 167; and mobility between
zones of world-economy, 7, 48;
Nigeria, 188, 193-94, 197; Pinochet
model, 72, 75 . See also Bureau­
cratic-authoritarian regimes ; Export­
oriented industrialization;
Protectionism
State enterprises: Canada, 146; Chile,
73; South Africa, 2 1 1
State labor policy: in Argentina, 106-9
(see also Peronism); "civilized
labor" in South Africa; in Israel (see
also Histadrut) , 168; in South Korea,
83, 90
Stock exchange crisis, in Israel, 172
Strikes: Argentina, 106; Australia, 1 02;
Israel, 1 7 1 ; South Africa, 214; South
Korea, 90-91 . See also Labor
militancy; Trade unions
Taiwan: ascent within world division of
labor, 2 1 , 33
Tariff protection, 1 3 1 ; Chile, 70-7 1 ,
73; South Africa, 2 1 1 -12
Tariff reductions, in Chile, 72
Technological dependency, 143 ; Canada,
154; South Korea, 88
Terms of trade: Argentina, 100
Textile production: Ireland, 129
Trade: Asian world-system, 189; Atlan­
tic, 1 87 ; collapse in 1 930s, 70;
India-China route, 189; Ireland' s
partners , 1 32-34; level of pro­
cessing, 132-35; of primary pro­
ducts in Argentina, 101 ;
semiperipheral pattern of, 1 3 2 ;
theories of, and industrial develop­
ment, 1 42 . See also Protectionism;
Tariff protection
Traders: Chinese, 190, 192; large
trading companies, 59, 60; small ex­
port, 60
Trade unions: Argentina, 106, I l l ;
Chile, 69, 73; Histadrut (Israel) ,
1 66-68; rise of, in semiperiphery, 9 ;
South Africa, 2 1 8 ; South Korea,
90-9 1 . See also Labor militancy;
Labor movement
Trading empires, 1 86
Trinidad and Tobago, 26
Unequal exchange: active engagement
in, 17; and defining zones of world­
economy , l l-14; and high wages,
13; and labor flows, 12; method of
measurement of, 126; and
semiperiphery-core relations, 1 7 ; and
world inequality, l l -14. See also
Emmanuel, Arghiri
Index
Union of Soviet Socialist Republics: pro­
letarianization in, 29; and redistribu­
tion of wealth, 27; ruling elites,
29-30
United Nations , and South Africa, 2 1 6
United States, 1 3 ; aid to Israel, 1 63 ,
1 75 , 1 77 ; aid to South Korea, 83;
global strategy of, 1 77 . See also
Hegemony
Wages: female, 5 8 ; low, and competi­
tion, 85, 1 64; and productivity in
Israel, 162 ; South Korea, 89; world
levels, 1 2 . See also Cheap labor
Waisman, Carlos H. , 97, 106
Wallerstein, Immanuel, 3 1 , 8 1 ,
100- 1 0 1 , 143; o n semiperipheral
trade, 1 32 , 134
War: Anglo-Boer, 208; intra-Yoruba,
1 8 8 ; Israel, 165, 169, 173-75 , 178;
Nigerian civil, 185; reparations to
Israel, 1 64-65
Warren, Bill, 1 4
Wealth: oligarchic and democratic,
15-17
Working class: Israel, 1 67 , 1 77 ; power
of, 69; South Africa, 2 1 8 ; South
235
Korea, 90; Soviet, 30. See also
Labor militancy; Labor movement;
Proletarianization
World division of labor: classic pattern,
45 ; competition within, 1 7 - 1 8 , 84,
1 00; and ethnicity, 1 8 3 , 1 97-99;
footwear production, 66; in­
dustrialization of semiperiphery, 220;
membership of zones, 19-2 1 ; move­
ment across zones, 6, 7, 48 ; redivi­
sion, 4, 7, 9; short-term mobility,
22; specialized niches within, 1 5 , 85;
stability of zones of, 1 9 ; upward
mobility, 2 1 ; zones, definition of, 99.
See also Inequality , world; New In­
ternational Division of Labor
World-system perspective: critiques of,
8 1 ; compared to dependency theory,
80, 97, 1 1 3-14; definition of core­
periphery, 14, 1 8 ; and ethnicity , 1 83 ,
197-99; extending, 85; and na­
tionalism, 1 8 3 ; and semiperiphery, 4;
and state, 101, 1 1 4; and South
Africa, 205; unit of analysis , 6
Yoruba, 1 86-87, 1 9 1
Yugoslavia, 27
ABOUT THE CONTRIBUTORS
GIOVANNI ARRIGHI is professor of sociology at the State University of New
York at Binghamton and a board member of the Fernand Braudel Center. He
is author of the Geometry of Imperialism and coauthor of Dynamics of Global
Crisis, Antisytemic Mo vements, and Transforming the Revolutio n: Social Move­
ments and the World-System.
GARY GEREFFI is associate professor of sociology at Duke University. He is
the author of The Pharmaceutical Ind ustry and Depend ency in the Third Wo rld
and coeditor of Manufactured Miracles: Paths ofIndustrialization in Latin America
and East Asia. H e has served as a consultant to the United Nations Centre
Transnational Corporations and organizations concerned with essential drugs
grams in developing nations. His current research focuses on organizations
port networks, and global competitiveness and on their implications for
ment theory.
WALTER GOLDFRANK is professor of sociology at the University of California,
Santa Cruz . He edited Ihe Wo rld-System of Capitalism: Past and Present and
has published on semiperipheral processes in Mexico, the USSR, Japan, and Italy.
RICHARD GRANT is a Ph.D. candidate in political geography at the Universi­
ty of Colorado at Boulder.
MIGUEL KORZENIEWICZ is an assistant professor in the Department of
Sociology at the University of New Mexico.
ROBERTO P. KORZENIEWICZ teaches sociology at Skidmore College and is
a research associate at the Fernand Braudel Center at the State University of New
238
About the Contributors
York at Binghamton. He has published several articles on the labor movement
in Argentina. His current work centers on labor unrest, democracy, and develop­
ment in the semiperiphery.
SU-HOON LEE is assistant professor of sociology and director of planning at the
Institute for Far Eastern Studies at Kyungnam University in South Korea. He is
the author of State Building in the Contemporary Third World (1988) . His current
research interests include global militarization, world inequality, and the linkage
between local modes of production and the dynamics of the world-economy.
PAUL M. LUBECK is professor of sociology and history at the University of
California, Santa Cruz, where he teaches political economy and development studies.
He has published extensively on Nigeria, Islamic social movements , and capitalist
development in Africa. His book, Islam and Urban Labor in Northern Nigeria,
received the Herskovits Prize in 1987. His current research explores accumula­
tion, social movements , and state industrial policy in the Pacific Rim .
DONALD LYONS is a Ph . D . candidate in political geography at the University
of Colorado at Boulder.
WILLIAM G. MARTIN teaches sociology and Africap studies at the University
of Illinois at Urbana-Champaign. His research and publications have focused on
southern Africa as a "region" of the world-economy and on antisystemic
movements ; several large-scale studies, the result of individual and collaborative
work, are presently being completed. Current research extends this work to similar
semiperipheral areas , regions , and movements .
JORGE NIOSI is professor at the Universiie du Quebec in Montreal (UQAM) ,
Canada, and director of its Centre for Research on the Development of Industry
and Technology. He studied sociology in Argentina and economics in Paris, where
he received his Ph .D. ( 1 973) . He is the author of six books and nearly thirty ar­
ticles , most on Canadian economy and society .
DONNA RAE PALMER is a doctoral candidate in the Board of Studies in Sociol­
ogy at the University of California at Santa Cruz. She is currently writing a disser­
tation on the social consequences of industrial development policy in Malaysia.
BEVERLY SILVER is a research associate of the Fernand Braudel Center and
author of several articles on labor unrest in the world-economy. She is currently
completing a long-term, large-scale analysis of the world labor movement.
DAVID A. SMITH is assistant professor of sociology at the University of Califor­
nia, Irvine. His recent research focuses on comparative urbanization and
socioeconomic development, Third World political change, and network analysis
of the structure and dynamics of the world-economy.
Studies in the Political Economy of the World-System
(Formerly published as Political Economy of the World-System Annuals)
- 1 . Social Change in the Capitalist World-Economy
edited by Barbara Hockey Kaplan
2 . The World-System of Capitalism: Past and Present
edited by Walter L. Goldfrank
3 . Processes of the World-System
�
I O! r;; V
edited by Terence K. Hopkins and Immanuel Wallerstein
4. Dynamics of World Development
edited by Richard Rubinson
5. Ascent and Decline in the World-System
edited by Edward Friedman
6. Crises in the World-System
edited by Albert Bergesen
7. Labor in the Capitalist World-Economy
edited by Charles Bergquist
8 . States versus Markets in the World-System
edited by Peter Evans, Dietrich Rueschemeyer, and Evelyne Huber Stephens
9. Crises in the Caribbean Basin: Past and Present
edited by Richard Tardanico
1 0 . Rethinking the Nineteenth Century: Contradictions and Movements
edited by Francisco O. Ramirez
1 1 . Racism, Sexism, and the World-System
edited by Joan Smith, Jane Collins, Terence K. Hopkins, and Akbar Mu:hal'l1m'ad
12. Revolution in the World-System
edited by Terry Boswell
1 3 . War in the World-System
edited by Robert K. Schaeffer
Numbers 1-9 published by Sage Publications