Causes of Underdevelopment according to Baran

Before we come to dependency theories that during the 1970s and after came to dominate large parts of the development debate, it is deemed relevant to look a little close at the role Paul Baran played in establishing the theoretical linkages backwards to classical Marxism.

Baran who emigrated to the USA from the USSR before the Second World War, wrote his most influential work in 1957. It included both an historical account of the origins of underdevelopment and an analysis on the ‘morphology’ of contemporaryunderdevelopment. Baran conceptualized the causes of underdevelopment in much the same way as his contemporary non-Marxist economists.

He emphasized that the backward countries were characterized by dual economies: on the one hand they comprised large agricultural sectors, where productivity was extremely low and the marginal productivity of labour close to zero; on the other hand, they had small industrial sectors with high level of productivity.

Baran further stressed that the growth and’ employment potential lay in the industrial sector, but that its expansion was constrained by the small size of the domestic markets as well as by competition from the highly industrialised countries. All these were generally accepted views in the 1950s. The important new feature in Baran’s approach and analysis was his attempt to explain this state of affairs, and, in particular, why the backward societies remained underdeveloped. In pursuit of this explanation, Baran introduced a special version of Karl Marx’s economic theories with emphasis on class relations and their impact upon the utilization of the economic surplus.

Where Marx, in his analyses of conventional capitalism, had underlined how the capital owners could expropriate an economic surplus from the working class in the form of surplus value produced by the workers (who were not paid the full value of their labour), Baran, emphasized the extraction of economic surplus in all its forms. In the backward economies, the surplus potentially available for capital formation did not only take the form of surplus value produced by wage labour, but also included the appropriation of surplus from peasants and other direct producers in the form of land rent, interest on credit, and profits from trade. Four main classes each appropriate surplus in one of these forms.

Land rent was extracted by the feudal aristocracy or other big landowners. Interest on credit accrued to the moneylenders, who were sometimes the same people as the landowners. The profit from trade was appropriate by merchants who made a living from buying cheaply and selling dearly. Finally, the surplus value from capitalist production was appropriate by the largely foreign capitalists, but also to a certain extent by the emerging groups of national industrialists.

Baran’s crucial point was that none of these four propertied and economically dominant classes had any vital interest in promoting industrialization and the accompanying transformation of the peripheral economies. The feudal landowners, moneylenders and traders, in fact, opposed this because it would threaten their access to the traditional sources of economic surplus.

The foreign and national capital owners were also against it, because a more comprehensive industrialization process would undermine their monopoly position and force them into competition with new entrepreneurs a which in turn, could threaten their extraordinarily high profits. In such circumstances capitalism was devitalized and deprived of its growth and development dynamism, the dynamism that, under other circumstances, had created impressive economic progress in the centre formations during an earlier period.

Baran, contrary to the classical structuralists and many later dependency theorists, focused mainly on the internal conditions in the backward societies. It was in these internal conditions, and more specifically in the distribution of power among the classes and control over the economic surplus, that Baran found the primary barriers which had prevented the poor countries from copying the industrialised countries and reaching a similar stage of development.

However, Baran also emphasized the international circumstances by underlining that economic development in the backward societies was profoundly inimical to the dominant interests in the advanced capitalist countries. As these countries governed the international economic system, the underdeveloped countries remained trapped in poverty (cf. Palma, 1989).

The only way Baran could see out of the misery was through extensive state interventions to promote nationally controlled industrialization. The recommended strategy markedly distinguished itself from those of the structuralists by emphasizing the establishment of state-owned heavy industries as a precondition for evolution on the other industrial sectors.

The strategy proposed by Baran, directly or indirectly, achieved some influence on economic planning in countries such as India and China, but did not otherwise play any central role in the theory formation within the Neo-Marxiit school of thought. On the other hand, Baran’s analyses of the causes of underdevelopment became an important source of inspiration for scholars like the American economist, Andre Gunder Frank, the following section will briefly review the contributions to theory formation from the Egyptian economist, Samir Amin, and the Graeco-French economist, Ashiri Emmanuel.

Frank based his original dependency theory mainly on evidence from Latin America, while Amin drew his conclusions chiefly from empirical analysis of West Africa. Emmanuel drew more widely on the developing countries, trade with the industrialised countries. In terms of analytical perspective he worked only with a few rather limited subject areas, as opposed to Frank and Amin.

After a brief examination of the earlier works on dependency, from the 1960.. and the beginning of the 1970s, we shall try to trace the main lines of thought in the debate among the Neo-Marxists during the subsequent decades. This will include, on the one hand, a discussion of what can be conceived of as attempts to further elaborate and refine the original propositions, and, on the other hand, a summary of opposing positions in the debate.

In the next article, we shall follow yet another school of thought with roots going back to Mar and Baran, i.e., theories on modes of production and social classes which focus primarily on the internal conditions in peripheral societies.