Open Veins of Latin America

by Eduardo Galeano

  When the United States declared its independence, it had the same population as Brazil. The Portuguese metropolis--as underdeveloped as the Spanish--exported its underdevelopment to the colony. Throughout the eighteenth century, Brazil's economy had been orchestrated into the British symphony as imperial supplier of gold. This function was reflected in the colony's class structure, Unlike the United States, Brazil's ruling class was not made up of farmers, manufacturing entrepreneurs, and domestic businessmen.

  The chief interpreters of ruling-class ideals in the two countries, Alexander Hamilton and the Viscount de Cairu (one of the main figures influencing the opening of the ports in 1808), expressed the difference clearly. Both had been disciples, in England, of Adam Smith. But while Hamilton had become a champion of industrialization and a promoter of state protection for national industry, Cairil believed in the invisible hand that worked the magic of liberalism: laissez faire, laissez passer, laissez vendre. 33

  By the end of the eighteenth century, the United States had the world's second merchant fleet, consisting entirely of ships built in its own yards, and its textile and steel mills were in surging growth, Soon afterward its machine industry got under way, eliminating the need for its factories to buy capital goods abroad. The zealous Mayflower pilgrims had laid the foundations of a nation in the New England countryside; along its coast of deep bays and great estuaries an industrial bourgeoisie had continuously grown and prospered. In this, as we have seen, the Antilles trade--including the sale of African slaves--

  had

  202

  played a major role, but the U.S. achievement would not have happened if it had not been kindled from the outset by a fierce nationalist flame. George Washington had advised in his farewell address that the United States should pursue a lone course. Emerson proclaimed in 1837: "We have listened too long to the courtly muses of Europe.... We will walk on our own feet; we will work with our own hands; we will speak our own minds."34

  Public funds broadened the internal market. The states built roads and railroads, bridges and canals. In midcentury, the state of Pennsylvania participated in launching more than 150 mixed-economy enterprises, in addition to administering the $100 million invested in public works. The military operations which grabbed more than half of Mexico's territory also contributed substantially to the country's progress. But the state participated in the development process with more than capital investment and the military costs of expansion; in the North a tough protectionist policy had been inaugurated. The landlords of the South, on the contrary, were free traders.

  Cotton production doubled every ten years, and while it brought a large commercial income to the whole country and fed Massachusetts's modern textile mills, it depended above all on European markets. The Southern aristocracy, like that of Latin America, was primarily linked to the world market; 80 percent of the cotton spun in European mills came from the toil of Southern slaves. When abolition of slavery was added to Northern industrial protectionism, the contradiction set off the war. North and South confronted each other as two opposed worlds, two historical eras, two antagonistic philosophies of the national destiny. The twentieth century won this nineteenth-century war.

  Let every free man sing ...

  Old King Cotton is dead and buried,

  sang a poet of the victoriotis army. After General Lee's defeat customs duties--

  which had been raised during the conflict to provide revenue and had remained in force to protect the industry of the victors--became sacred. Congress voted the ultra-protectionist "McKinley" tariff in 1890, and the Dingley Act further hiked customs duties in 1897. Soon afterward the developed countries of Europe felt obliged to erect customs barriers against the invasion of dangerously competitive U.S.

  203

  manufactures. The word "trust" had been coined in 1882: petroleum, steel, foodstuffs, railroads, and tobacco were dominated by monopolies that advanced with giant strides.( The South became an internal colony ofnorthern capitalists.

  After the war, propaganda for spinning-mill construction in the rwo Carolinas, Georgia, and Alabama assumed the dimension of a crusade. But this was no victory for a moral cause, and no pure humanitarianism fathered the new industries; the South offered cheaper labor and power and soaring profies, sometimes amounting to 75 percent. Capital flowed from the North to tie the South to the system's center of gravity. The tobacco industry, concentrated in North Carolina, was directly under the Duke trust, headquartered in New Jersey to take advantage of more favorable laws; in 1907 Tennessee Coal & Iron, which exploited Alabama's iron and coal, came under the control of U.S. Steel, which from then on arranged prices and thus eliminated irksome competition. At the beginning of our century the South's per capita income had fallen to half of what it was before the Civil War.35)

  Before the Civil War Grant had participated in the plunder of Mexico; after it he was a protectionist president: all part of the same process of national affirmation. Northern industry was conducting the orchestra of history and, as political master of the state, seeing to its interests from the seat of power. The agricultural frontier moved westward and southward at the expense of Indians and Mexicans, but it was with small holdings, not latifundios, that it Filled the new open spaces. The promised land not only attracted European peasants; masters of the most varied crafts and workers skilled in mechanics, metallurgy, and steel production also came from Europe to enrich the country's industrialization. By the end of the century the United States was the leading industrial power; in thirty years after the Civil War its factories had multiplied its production capacity by seven. It produced as much coal as Britain and twice as much steel, and had nine times as many miles of railroad. The center of the capitalist world was beginning to move.

  After World War II the United States began to emulate Britain in exporting the doctrine of free trade and free competition, so that other people could consume. The International Monetary Fund and World Bank emerged together to deny to underdeveloped countries the right of protecting their national industries, and to discourage state action in those countries. Infallible curative properties were attributed to private enterprise. But the United States did not abandon an economic policy which still remains rigidly protectionist, and which listens carefully to the voice of history: in the North the disease was never confused with the remedy.

  204

  5. The Contemporary Structure of Plunder

  AN IMPOTENT TALISMAN

  Of all the direct private investment in Latin America coming from abroad, less than one-fifth was from the United States when Lenin wrote Imperialism in the spring of 1916. Today, nearly three-quarters is from the United States. What was the imperialism Lenin knew? The rapacity of industrial centers seeking world markets for their merchandise; the fever to capture all possible sources of raw materials; the plunder of iron, coal, and petroleum; the railroads which linked the control of dominated areas; the voracious loans of the financial monopolies; the military expeditions; the wars of conquest. It was an imperialism that poisoned any place where a colony or semi-colony might dare to build a factory of its own. Industrialization was the privilege of the metropolis; in the poor countries it was incompatible with the rich countries, system of domination. The end of World War II found European interests in full retreat from Latin America, and U.S. investments triumphantly advancing.

  Since then there has been an important change in the focus of investment. Step by step, year by year, capital put into public services and mining has lost importance, while investments in petroleum and, above all, in manufacturing have grown in proportion. At the present time $1 of every $3 invested in Latin America is invested in industry. ( Forty years ago U.S. investment in transformation industries was only 6 percent of the total U.S. capital invested in Latin America. In 1960 it grazed the 20 percent mark, and has continued rising to become nearly one-third of the total.) 205

  In return for insignificant investments, the affiliates of giant corporations jump over cus
toms barriers erected-- paradoxically-- against foreign competition, and take over the internal industrializing process. They export factories or, not infrequently, corner and devour those already existing. For this they can rely on the enthusiastic aid of most local governments and on the power of extortion with which international credit organizations endow them.

  Imperialist capital captures markets f rom within, appropriating the key sectors of local industry: it conquers or constructs the decisive strongholds from which to control the rest. The OAS describes the process thus: "Latin American enterprises continue in control of already established and less sophisticated industries and techniques, while private investment from the United States--

  and probably from other industrialized countries also-- rapidly increases its participation in certain dynamic industries, which require a relatively high technical level and are more important in determining the course of economic development."1 Thus the dynamism of U.S. factories south of.the Rio Grande is much more intense than that of Latin American industry in general. The figures for the three biggest countries are eloquent: with an index of 100 in 1961, Argentina's industrial product amounted to 112.5 in 1965, while in the same period sales by U.S.-affiliated concerns rose to 166.3. For Brazil the equivalent figures are 109.2 and 120; for Mexico, 142.2 and 186.8.

  The interest of the imperialist corporations in appropriating Latin American industrial growth and capitalizing it for their own benefit does not, of course, imply a disinterest in traditional forms of exploitation. It is true that United Fruit's railroad in Guatemala stopped being profitable, and that nationalization by Brazil was splendid business for Electric Bond and Share and International Telephone and Telegraph, which received indemnities in pure gold for rusty installations and museum-piece machinery. But if public services are abandoned for more profitable activities, raw materials are a different matter. How would the Imperium make out without Latin America's oil and minerals? Despite the relative decline in mining investment, the U.S. economy 206

  cannot, as we have seen, do without the vital supplies from the south and the juicy profits they bring. Furthermore, the investments that turn Latin American factories into mere cogs in the giant corporations' machinery do not in any way alter the international division of labour. There is no change in the system of intercommunicating arteries through which capital and merchandise circulate between poor countries and rich countries. Latin America continues exporting its unemployment and poverty: the raw materials that the world market needs, and on whose sale the regional economy depends. Unequal exchange functions as before: hunger wages in Latin America help finance high salaries in the United States and Europe. Brazil, despite its industrialization, continues substantially dependent on coffee exports, Argentina on sales of meat; Mexico exports very few manufactures.

  There are always politicians and technocrats ready to show that the invasion of "industrializing" foreign capital benefits the area invaded. In this version, the new-model imperialism comes on a genuinely civilizing mission, is a blessing to the dominated countries, and the true-love declarations by the dominant power of the moment are its real intentions. Guilty consciences are thus relieved of the need for alibis, for no one is guilty: today's imperialism radiates technology and progress, and even the use of this old, unpleasant word to define it is in bad taste. But when imperialism begins exalting its own virtues we should take a look in our pockets. We find that the new model does not make its colonies more prosperous, although it enriches their poles of development; it does not ease social and regional tensions, but aggravates them; it spreads poverty even more widely and concentrates wealth even more narrowly; it pays wages twenty times lower than in Detroit and charges prices three times higher than in New York; it takes over the internal market and the mainsprings of the productive apparatus; it assumes proprietary rights to chart the course and fix the frontiers of, progress; it controls national credit and orients external trade at its whim; it denationalizes not only industry but the profits earned by industry; it fosters the waste of resources by diverting a large part of the economic surplus abroad; it does not bring in capital for development but takes it out. As various ECLA reports have shown, the hemorrhage of profits from direct U.S. investments in Latin America has been five times greater in recent vears than the infusion of new investments. To 207

  enable the corporations to take out their profits, Latin American countries mortgage themselves to foreign banks and international credit organizations, thus multiplying the flow of the next bloodlettings. The result is the same for industrial investment as it is for the "traditional" kind.

  In the rigid framework of a global capitalism integrated around the big U.S.

  corporations, the industrialization of Latin America has increasingly less to do with progress and national liberation. The talisman was robbed of its power in the decisive defeats of the past century, when ports triumphed over interiors and free trade crushed newborn national industries. Arid the twentieth century produced no bourgeoisie strong and creative enough to reshoulder the task and follow it through to its end. Every effort petered out haffivay to the goal. What happened to Latin America's industrial bourgeoisie was what happens to dwarfs: it became decrepit without having grown. Our bourgeois of today are agents and functionaries of prepotent foreign corporations. Truth compels us to admit that they never did anything to deserve a better fate.

  THE GUARDS THEMSELVES OPEN THE GATES:

  THE GUILTY STERILITY OF THE NATIONAL BOURGEOISIE

  The present structure of industry in Argentina, Brazil, and Mexico--the three touted poles of Latin American development--shows deformations characteristic of a reflected development. With rare exceptions, the satellization of industry in other, weaker countries has been easily achieved.

  There is certainly nothing competitive about a capitalism that today exports factories as well as merchandise and capital, that penetrates and hogs everything: this is a global industrial conglomeration by capitalism in the age of the multinational corporation, of the giant monopoly embracing every kind of activity in every corner of the earth. U.S. capital is more tightly concentrated in Latin America than in the United States itself; a handful of concerns control the overwhelming majority of investments. For them the nation is not a task to undertake, a flag to defend, or a destiny to fulfill: it is no more than a hurdle to leap--for sovereignty can be inconvenient--or a succulent fruit to devour. But is the nation a destiny to fulfill to the ruling classes in each 208

  country? The grand march of imperialist capital has found local industry defenseless and unaware of its historic role. The bourgeoisie has enlisted in the foreign invasion force without shedding tears or blood; and with the Latin American economy getting steadily weaker over the past two decades, the state's influence upon it has been reduced to an all-time low by the good offices of the International Monetary Fund. U.S. corporations went into Europe like conquistadors and grasped the reins of the old continent's development so firmly that before long, we are told, U.S. industry in Europe will be the world's third industrial power after the United States and the USSR.2 If the European bourgeoisie, with its tradition and power, has not been able to dam the flood, what hope is there that, at this stage of history, Latin America's bourgeoisie will lead the impossible venture of independent capitalist development? In fact, the denationalization process in Latin America has been much speedier and cheaper and has had far worse consequences.

  The growth of Latin American manufacturing was sparked, in our century, from outside, rather than by planned national development policies. It has not been a maturing of productive forces; nor was it the result of an explosion of internal conflicts--conflicts allegedly "overcome"--between landlords and an ascendant artisan class, for that class was short-lived. Latin American industry was delivered from the very womb of the agro-export system, in response to an acute disequilibrium provoked by the fall of external trade. Two world wars, and especially the capitalist depression that followed "Black Fr
iday" in October 1929, abruptly and violently curtailed the region's exports and consequently its capacity to import. Prices of suddenly scarce foreign industrial products soared.

  No industrial class free from traditional dependency emerged: the manufacturing impetus came from capital accumulated by landlords and importers. It was the big cattlemen who imposed exchange controls in Argentina. The chairman of the Sociedad Rural, who had become minister of agriculture, said in 1933: "The isolation in which we have been placed by a dislocated world obliges us to manufacture here what we can no longer buy in countries that buy from us."3 Coffee hacendados hurried to put much of their capital accumulated from external trade into the industrialization of Sao Paulo: "In contrast with the industrialization of already developed countries," a government document said, "Brazil's industrialization was not a slow 209

  process, a part of a general process of economic transformation. It was rather a rapid and intense phenomenon, superimposed on the previously existing socioeconomic structure without entirely modifying it, giving rise to the profound sectoral and regional differences which characterize Brazilian society."4

  From the start, the new industry dug itself in behind protective customs barriers erected by the governments, and it grew thanks to measures taken by the state to restrict and control imports, fix special exchange rates, avoid taxation, buy or finance production surpluses, build roads for the transport of raw materials and merchandise, and create or extend sources of energy. The nationalist and broadly popular governments of Getulio Vargas (1930-1945

  and 1951-1954), Lazaro Cardenas (1934-1940), and Juan Domingo Peron (1946-1955) expressed the need of Brazilian, Mexican, and Argentine industry to "take off," to develop or consolidate according to place and period. In Latin America, the "spirit of enterprise" that defines certain basic characteristics of the industrial bourgeoisie in developed capitalist countries was a characteristic of the state, especially in these decisive periods. Instead of the social class for which history clamored with small success, it was the government of the populist caudillos that embodied the nation and gave the masses political and economic access to the benefits of industrialization. The industrial bourgeoisie hatched in this incubator did not differ essentially from previous ruling classes.