Agro-Industrialization,Petrodollar Illusions and the Transformation of the Capitalist World Economy in the 1970s: The Latin American Experience

Abstract

A transformation of world capitalism took place during the 1970s. Profitability decline in core countries was compounded by an increase in world oil prices connected to the rise of OPEC’s oil rent. In this context, a fraction of the Latin American semiperiphery rose in industrial prominence but ultimately collapsed. A combination of recycled petrodollars and an agrarian transformation underwrote this semiperipheral agro-industrial rise. By 1982, however, illusions of advance resting on industrialization were undermined by the debt crisis. While part of the semiperiphery embraced debt-led industrialization, capitalism switched gears into a regime where financial power, not industrialization, became the main sign of coreness. This process is examined through a perspective of capitalism as (simultaneously) world economy and world ecology, where the production of nature and the production of capital are organized in order to secure endless profitability. Nature, in the form of oil, labor-power and agricultural exports takes center stage.

Keywords

agro-industrialization petrodollars Latin American development world-systems political economy

Introduction

During the world-historical transition of the 1970s (ca 1966–82), amid the overall decline of advanced capitalist countries, it seemed that a reversal of fortunes was taking place. It was the decade when the semiperiphery of world capitalism caught up with the core in terms of degree of industrialization (see Figure 1).¹ There was a rise of ‘new industrializing countries’. Also, rentier states like Venezuela became influential in world affairs through their command of oil. Supposedly, imperialism, dependency and related structures of subordination were becoming obsolete (cf. Lipietz, 1987; Ominami, 1989; Warren, 1973). After 1982 the Mexican default called into question these developmentalist illusions (Arrighi, 1990). The collapse of industrialization and developmentalism, particularly in Brazil and Mexico, was of world-historical significance. In the 1980s, these countries were used as models of a ‘failure’ that, in the eyes of world elites, legitimized the imposition of a liberalized regime on the Third World.²

Figure 1.

The 1970s conjuncture: core de-industrialization, semi-peripheral industrial rise.

This essay examines this world conjuncture of the 1970s. I put forward two related arguments; one is theoretical and the other is historical. First, I argue that the crisis of the 1970s is not only a question of the history of advanced capitalist countries (Aglietta, 2000; Brenner, 2006). What took place was a world-historical transformation of capitalism (Arrighi, 2010). Second, I argue that this transformation was a transitional phase from the postwar configuration of sustained growth, or golden age (1945–1966/73), to the rise of neoliberalism (1982–?). This cycle from the core decline that began around 1966 to the semiperipheral collapse of 1982 is what I mean by the world-historical transformation of the 1970s.

My historical interpretation is as follows. First, I lay out my theoretical starting point. I conceptualize the world transition of the 1970s in the context of a hierarchical capitalist world-economy which is also a ‘world-ecology’ (Moore, 2009, 2011; Wallerstein, 1974). Capitalism is an ecosystem for accumulation where production of nature and production of capital are combined in search of profitability (Moore, 2011; Smith, 1990). Moreover, I also describe capitalism as creating a world hierarchy of wealth. Following this, the historical argument highlights three related themes: a declining capitalist core, a newly powerful rentier bloc, and a rising industrial semiperiphery.³ Each, however, will not be discussed in equal depth. The crisis of core capitalism will be discussed only to the extent that it relates to the semiperipheral rentier and agro-industrial rise that marked the decade. The core crisis is described in the second section as a generalized fall in profit rates caused by a decline in the productivity of capital. I focus on the contemporaneity between this decline and the end of US oil hegemony.

Afterwards, I present the general outline of the 1970s. I explain how the rise of the Organization of Petroleum Exporting Countries (OPEC) and its oil rent in the 1970s provided a structural link between semiperipheral nature (in the form of OPEC oil) and semiperipheral industrialization. Oil was a partial underwriter of the rise of semiperipheral industrialization in Latin America. The link was materialized by the recycling of oil rents into loans for a number of countries, what I call the petrodollar illusion. Prominent among the selected debtors were Brazil and Mexico. These two ‘newly industrializing countries’ combined repressive states, growing domestic markets, industrial regimes developing at least since the 1940s, and significant natural resources (of continental scope in the case of Brazil). For Mexico, the discovery of new oil fields furthered bankers’ enthusiasm (Barkin, 1990: 95). I discuss how these two countries were related to the world conjuncture. I also discuss Venezuela’s role in the conjuncture as an OPEC member and underwriter of the semiperipheral agro-industrial rise.

My overall picture of the 1970s is drawn from the perspective of three Latin American semiperipheral states. Although I will refer to some quantitative indicators, I will not compare the three trajectories in terms of such indicators. Using a world-historical framework (Tomich, 2004), I will describe each state’s particular position in, and relation to, the global transformations of the 1970s. Therefore, different processes will be emphasized in each case. I examine the main processes through which each country was linked to world capitalist development: oil rents for Venezuela; recycled oil rents and debt-led agro-industrialization for Brazil and Mexico. Also, I show how their trajectories in part shaped the character of capitalist development in the 1966–82 period. These three trajectories marked this period as one of semiperipheral industrialization and rising oil rents.

For Brazil and Mexico, this transitional moment entailed the uneven development of import substitution industrialization (ISI) into an export-led and highly indebted agro-industrial regime.⁴ Since the semiperipheral industrial impetus of the 1970s was built upon this early state-led ISI, it is clear that I am not describing the origins of semiperipheral industrialization. The world-historical meaning of the 1970s conjuncture resides in that it was during this decade when the semiperiphery basically caught up with the core in terms of industrialization degree, in theory accomplishing the developmental goal advocated by liberal ideologies of growth.

Because of rising debts made possible by petrodollar recycling, however, these successful semiperipheral industrializers became vulnerable to changes in interest rates. This vulnerability would become central when the USA raised interest rates after 1979. Latin American development collapsed soon after this monetarist attack. The main consequences were the conversion of Third World debt into an unbearable burden and a new subordination through debt-servicing. What seemed to be a victory for the semiperiphery, thus, turned out to be a fortunate outcome for core capital since it was able to defer its own accumulation crisis.

The deferral was achieved by the unintended transferring of core capitalism’s problems to those states located directly below it in the world-economy. First World banking and dollar hegemony did the trick. Capitalism was undergoing a transformation whereby control of finance capital, not industrialization, became the road to coreness (see below). Moreover, I argue that the growing financialization provided a framework where the USA could defer its 1970s crisis by reversing world trends drastically, first by buying OPEC oil with devalued dollars and then collecting the benefits of Third World indebtedness through higher interest rates. The rise in US interest rates, of course, was not implemented with the goal of cashing in on Third World debt. While unintended, this reversal in financial flows from semiperiphery to core was a fortunate outcome for First World finance capital. First came loan pushing. Recycled petrodollars that were ‘lent, multiplied and re-lent’ (Lipietz, 1987: 159) financed semiperipheral industrialization. Then came the rise in interest rates that switched the weight of adjusting the debt economy to those indebted countries that were touted as success stories a decade earlier.

In the conclusion, I discuss the emergence of neoliberalism out of the collapse of the 1970s configuration. I argue that the 1970s did have an effect on the structure of world capitalism. That decade showed that, notwithstanding the neoliberal setback, industrialization and autonomous development are possible for Third World countries. While industrialization is not a sufficient condition for development, it can become its basis if real autonomy from core capital is conquered. Dependent development could be turned into auto-centered development, as dependency theory would say (Amin, 1979; Cardoso and Faletto, 1972).⁵ Ultimately, this possibility of future Third World development will create new struggles over the hierarchy of accumulated socio-natural wealth that underpins world capitalism.

A Global Ecosystem for Accumulation

I conceptualize capitalism, first, as a global ecosystem rooted in the endless commodification, appropriation and transformation of natures, human and extra-human (Moore, 2010). Simultaneously, it is a three-tiered world economy (Braudel, 1984). In the first instance, since its origins in the long 16th century (1450–1640), capitalism formed a new ‘world-ecology’ where ‘the accumulation of capital and the production of nature [are joined] in dialectical unity’ (Moore, 2009: 396). It is through this process of production that the capitalist class achieves the goal of endless accumulation. The wealth capital accumulates, i.e. profits, is nothing more than the productive combination of human labor and nature’s wealth (Marx, 1976: 133–134, 1979).

Therefore, capitalism organizes socio-ecological relations under the requirements of accumulation (Moore, 2011: 18). It accumulates via the production of a mass of commodities in their dual existence as embodiments of abstract labor-power and of a natural substratum. Along these lines, I explain how the 1970s world conjuncture ascended through its production of agro-industrial transformations and appropriation of specific forms of nature, namely, the natural force of labor-power (Marx, 1972: 282) and the socio-ecological products of agriculture and oil.

The capital-nature dialectic derives from capitalism’s requirement to organize, transform and produce nature in order to accumulate at least average profits. Therefore, the contradictions between capital and its environmental conditions of production (Foster et al., 2010) have to be conceptualized as internal contradictions of the capitalist ecosystem. There is a dialectic between capitalism’s requirement of un- or under-capitalized nature to be appropriated cheaply (for example cheap un-commodified labor and natural resources) and capital’s own tendency towards erasing this un-capitalized nature from the planet through its commodification. In other words, there is a rise in the share of capitalized world nature (Moore, 2010) that raises costs and, potentially, pulls down profit rates. This process of rising capitalization of nature works hand in hand with the tendency of the profit rate to fall caused by the declining productivity of capital caused by mechanization. In order to avoid the overall outcome, falling profitability, capitalism develops unevenly. Capital moves out of some sectors and into others; for example, from productive investments into financial instruments, as occurred in the 1970s (Gunnoe and Gellert, 2010: 271). Simultaneously, it moves in and out of regions in the search for lower costs and higher returns. In the 1970s, it moved massively into the Latin American semiperiphery, mainly in the form of finance capital.⁶ The outcome of this uneven development, however, seldom changes the hierarchy of wealth that, together with accumulation, characterizes the capitalist world economy.

This brings another central aspect of world capitalism: its organization in a tri-modal hierarchy of wealth. Alongside its existence as ecosystem for accumulation, capitalism is defined by a world hierarchy of wealth. As Braudel argued (1984), since its beginnings capitalism has always been a ‘world-economy’, determined by the economic links and exchanges that form its global structure and enable accumulation. Capitalism developed by subsuming external regions, incorporating them as semiperipheries and peripheries. The capitalist world economy, then, ‘is a sort of a jigsaw puzzle, a juxtaposition of zones interconnected, but at different levels’ (Braudel, 1984: 39, emphasis in original).

At least three main zones can be described: a core which accumulates/appropriates the big share of world wealth, a peripheral zone that stands as its opposite concentrating poverty and the most violent forms of exploitation, and an intermediate semiperipheral zone. The semiperiphery, then, functions as a middle-tier of the world economy, able to accumulate/appropriate more than the periphery but less than the core in the struggle over the hierarchy of wealth. Late industrializers (Argentina, Brazil, Mexico, South Korea and Taiwan) and rentier regimes (OPEC) belong to this zone. The existence of industrial and rentier semiperipheries means that it is not a particular accumulation regime but instead the differential degree in the command of world wealth vis-a-vis other zones that defines a region or state as semiperipheral.

As for ‘coreness’, it is indicated by a higher than semiperipheral accumulation/appropriation of world wealth, by any means necessary (Arrighi, 1990). Empirically, this can be assessed through long-term statistics of national income per capita.⁷ In the long-run it is not necessarily an accumulation strategy that ultimately indicates coreness, but the successful use of such a strategy in climbing to, and staying at, the top of the hierarchy. In sum, a particular strategy of accumulation can be described as a sign of coreness during the historical periods when it provides the elements for a successful attainment and long-run stability of core-level incomes.

During the golden age of capitalism influential liberal theorists argued that industrialization was a path that all states could follow in attaining levels of income per capita that, in time, would parallel those of core capitalist societies (Rostow, 1959). Up to that point the leading economies of the world had undergone a process of broad based industrialization, or better agro-industrialization since the process included the industrialization of agriculture. In a way, then, agro-industrialization was a sign of coreness. Agro-industrialization was a sign of capitalist development in theory but also, in part, in reality. Therefore, the developmentalist illusion was not the perception of a link between industrialization and development. The illusion resided in seeing this link a-historically, as if the strategy that worked for some states would simply work for all others and in all instances.⁸ In other words, while Western European and American industrialization (of course, with the support of imperialism) did correlate with a path towards coreness, most Third World industrialization experiences led to semiperipherality. Also, semiperipheral industrialization has brought important agrarian transformations that underpin it and that I will examine here. On the other hand, oil provided a parallel road to this middle-tier position. OPEC states have benefited from the command of a primary fuel for industrialization. As of today some OPEC members have core-level incomes. The long-run stability of this oil income, however, remains an open question.

Nonetheless, in arguing that all could reproduce the path of advanced capitalist societies, liberal theories of development disregarded the fact that in capitalism there is a recurrent ‘adding-up’ problem. As more rising states adopt a particular strategy, the less effective it becomes in time (Arrighi et al., 2003). My argument builds upon Arrighi et al.’s (2003) claim that this sort of process took place during the 1970s. The growing significance of finance as a way out of declining profitability in industry constituted a new accumulation strategy. The link between industry and coreness was undermined and developmentalist illusions became disillusions with developmentalism. Here I provide a broad picture of this transition by examining the world-historical conjuncture of the 1970s.

The 1970s World-Historical Conjuncture

The transition from core decline to semiperipheral collapse took place in the years between 1966 and 1982. The turning point was around 1966, with the simultaneous peak and consequent crisis of the USA-led world regime of accumulation, the onset of the so-called Brazilian miracle and its agro-industrial transformation, the emergence of a second Green Revolution in Mexico and OPEC’s new claim to higher rents (Barkin, 1990; Coronil, 1997; DeWalt, 1985; Furtado, 1981; Singer, 1980). The signaling crisis came in 1982 when Mexico, the biggest Third World debtor, defaulted on its debt. Before events undermined semiperipheral development, the 1970s exemplified of one of historical capitalism’s main traits: in times of cyclical crisis those in the middle-tier of the world-economy gain in competitiveness (semiperipheral agro-industrial rise) and bargaining power (OPEC’s rent) (Wallerstein, 1976). A world conjuncture materialized: recycled oil rents linked OPEC’s rise with the semiperipheral industrialization of Brazil and Mexico. By 1982, this conjuncture ended with the debt crisis. I provide a broad outline of this conjuncture, beginning with an examination of the onset of the crisis in the core, where it all began.

The Onset of Crisis

The accumulation crisis that became a global phenomenon in the 1970s began as an exhaustion of core Fordism in the late 1960s, when the golden age of postwar capitalism (1945–66/73) gave way to a downturn of advanced capitalist economies (1973–82). The crisis emerged around 1966, when profit rates in advanced capitalist economies started declining. Manufacturing profit rates in the G-7 economies declined 25% between 1965 and 1973, ending the impressive rise in profitability that took place between 1950 and 1965 (Brenner, 2006: 117, 141). An analysis of the reasons for the sustained accumulation characteristic of the golden age that preceded this decline falls outside the scope of this article (Aglietta, 2000; Harvey, 1989). Also, I will not examine thoroughly the break from upturn to downturn. The crisis of USA-led world capitalism is relevant here only to the extent that it unleashed petrodollar circulation. Therefore, I will focus the discussion on how rising oil prices corresponded to the unfolding accumulation crisis.

As I will explain shortly, for the USA the crisis of postwar capitalism was in part the crisis of petroleum-dependent Fordism, even if oil was not the main driver of decline. In fact, the problem of an overall declining productivity of capital in light of increased expenditure in fixed capital was the trigger of core capitalism’s problems (Duménil and Lévy, 2004; Lipietz, 1986). I take this explanation, based on the Marxist notion of the rising organic composition of capital (OCC), as highlighting the main reasons for the profitability decline of the 1970s. The crisis was rooted in a declining productivity of capital, measured as the ratio of the market price of commodities produced to the costs of constant capital (machinery and physical infrastructure, but also raw materials as we will see). This productivity of capital, in turn, was inversely correlated to a rising OCC. A rise in the latter indicated a fall in the former (Lipietz, 1986). Both can be seen as describing the movement of the same ratio but in different directions.

Accordingly, Duménil and Lévy (2004) explain that productivity of capital began declining in the USA and Europe during the second half of the 1960s. Labor-saving investments continued, holding down the increase in wages, but they were not beneficial in terms of productivity of capital and, thus, profitability. A rising OCC trend was taking place as the cost of fixed capital overtook the price to be realized from the commodities produced. As they explain,

This increased weight of capital reached such proportions that its total price, in relation to that of the goods and services produced, didn’t stop growing until the early 1980s, as the decline in capital productivity indicates. Although mechanization made labor productivity growth possible, its cost limited its potential in terms of profitability. Mechanization may have turned out to be effective in making it possible to save labor, but it was expensive. (Duménil and Lévy, 2004: 33)

The authors conclude, then, that unprofitable mechanization lay behind the 1970s crisis (Duménil and Lévy, 2004: 37). Of course, the horizontal pressure of inter-capitalist competition (Brenner, 2006) and the vertical pressure of workers struggles for higher wages (Arrighi, 2010: 314–315) can be seen as simultaneously causing and exacerbating the tendency of capital towards unprofitable mechanization. I will take these insights as a point of departure. But I will highlight the possible relation of oil production to the accumulation crisis explained by rising OCC. While declining oil production may not have been a main cause of the productivity/profitability decline described by Marxists, it did contribute in transforming the crisis of core capitalism into a global phenomenon. The decline in US oil production corresponded in time with the profitability crisis. It brought rising oil prices and increased oil imports. The USA paid for imports of oil with devalued dollars. By the time these petrodollars were recycled as loans a world conjuncture had materialized.

Productivity Decline and American Petro-Fordism

In the postwar era up to 1973, American hegemony led world oil production by managing oil supply and regulating prices (Mommer, 2002: 64). The mechanisms of US oil hegemony were various forms of national and international cartelization (Bina, 2013; Mommer, 2002). Price movements based on American high-cost producers or oil states seeking higher rents based on differential productivities were minimized.

By managing the oil supply and regulating prices the USA secured ‘cheap enough’ oil.⁹ This cheap-enough oil lowered the cost of a myriad of products that affected the price of labor-power. The costs of food, plastic, asphalt and transportation, among others, were lowered by cheap enough oil. It was ‘the fluid lubricating the flow of capital and labor alike … a contingent factor facilitating the remarkable accumulation of capital in post-World War II USA’ (Huber, 2009: 475). Until the late 1960s, petro-Fordism created a virtuous cycle of high profitability, high productivity and rising wages. By 1972 this accumulation regime was unraveling. There was the overall productivity decline/rising composition of capital in core capitalist economies. Also, in US oil production, nature was increasingly capitalized. The problem was not natural scarcity, but the inability of crude oil production to keep up with the norm of cheap enough oil.

A socio-ecological productivity decline, rather than a strictly technical one, was developing: crude oil output could not grow fast enough and be produced cheaply enough so as to fuel Fordism (Huber, 2009; Moore, 2009). US oil production ‘peaked’ in 1972 at 9.6 million barrels per day (b/d). The problem resided not only in declining national production in terms of b/d, but in the global implications of this decline. The norm of cheap enough oil led to a point where oil production/consumption became problematic for US accumulation. Thus, in the 1970s we witnessed a passage from cheap enough oil regulated by the USA to oil prices determined outside the USA. The overall profitability decline corresponded with the decline of US oil hegemony.

In terms of political ecology, we can explain the problem of oil using Moore’s notion of ‘capitalized composition of world nature’, the ratio of capitalized nature to un- or under-capitalized nature at the world scale (Moore, 2010). Un- or under-capitalized nature is a relative notion that denotes nature that is appropriated cheaply enough, because of higher productivity of extraction. The point is that un-capitalized nature can lower the composition of capital on the circulating side. On the contrary, capitalized nature is nature that has been completely integrated into the circuit of capital. It depends on costly investments for its expanded production. Think of the difference between less capitalized (relatively lower cost/high productivity) newly opened oil frontiers versus highly-capitalized oil production (relatively high cost/lower productivity) in old fields. In the end, capitalization of nature induces a general rising of the organic composition of capital because of an increase in the costs of circulating capital. A ‘world-ecological’ reading broadens the perspective on capitalist contradictions (Moore, 2010). In most analyses there is an emphasis on the fixed character of constant capital, where it means mechanization. This emphasis might be empirically justified, as in Duménil and Lévy (2004). Nonetheless, constant capital is investment in both fixed (machinery and built environment) and circulating (raw materials and natural inputs) capital (Marx, 1959). Higher circulating capital costs because of greater capitalization of world nature means higher constant capital costs. Greater capitalization of world nature can contribute to the (tendential) fall in profitability.

In the USA, from the postwar era up the 1970s, the trend was one of rising capitalization of oil as a natural resource. Oil production was becoming a problem as demand increased and costly activities such as extension of old fields and maximization of recovery became a main avenue to satisfy this demand (Bina, 2013: 28–36). This greater significance of investment in older fields increased the capitalization of oil in the USA and, by association, in the global oil sector. Production of oil depended on expensive investments to extract amounts of crude which, in terms of US national production, never achieved the 1970 peak. The capitalized composition of nature was rising. While US oil was the regulator of world prices up to 1973, its own capitalization was pushing prices upward. In time, expensive oil would turn into expensive inputs for large-scale agriculture and multiple industries.

More relevant for us is the global dimension. The USA compensated for the decline in oil productivity through imports. The overall tendency was reflected in increasing dependency: in 1966 US imports of oil represented 20 percent of consumption, in 1973 it was 36 percent (Huber, 2013: 188). From this angle also, prices would go up since the USA was losing control of the market. While from 1966 to 1972 the average wellhead price of oil in the USA increased from US$2.88 to US$3.89, with the oil shocks real prices exploded. These trends exacerbated the decline of American petro-Fordism as a national regime; it could no longer satisfy domestic demand with regulated prices.

Core Decline, Semiperipheral Industrial Rise

Semiperipheral rentier states became increasingly central in world oil supply. The USA could not regulate prices permanently. Growing American dependency on OPEC oil reflected this problem. Moreover, Third World industrialization enlarged the number of oil importers competing for a fraction of world oil (Moore, 2009: 31–33).

In this context, the OPEC shock of 1973–4 imposed a quadrupling of oil prices in a couple of months (Coronil, 1997: 55; Hausmann, 1981: 253). The shock contributed to turning a core decline into a transformation of world capitalism. US loose monetary policy before and after the OPEC shock helped American corporations in buying foreign oil (Arrighi, 2010: 322–324). In time, the American trade deficit with OPEC was transformed, through petrodollar recycling, into cheap credit for a group of semiperipheral industrializers (Lipietz, 1987: 140–145). Of course, industrializers did not wait for recycled petrodollars to come in order to begin this process. Semiperipheral industrialization can be traced back to the 1940s and 1950s, the moment when capital-intensive accumulation became the organizing principle of economic policy in Argentina, Brazil and Mexico. But it was in the 1970s that the semiperiphery closed the distance vis-a-vis the core in terms of degree of industrialization. Almost simultaneously, however, control of finance capital, not industrial accumulation, became the dominant logic in world capitalism. In time, core countries deferred their crisis by passing the hot potato of the declining significance of industrialization to a set of states located directly below them in the hierarchy of wealth.

One can talk of a ‘transfer’ of the most harmful effects of the core crisis since the rise and fall of semiperipheral industrial power in the 1970s was a planetary outcome of the exhaustion of the core regime of accumulation and the monetary policies and financial mechanisms it used to weather the problems created by higher input prices and declining profitability. First it was loose monetary policy which provided the impetus to petrodollar circulation in First World banks. The last step was the monetarist orthodoxy of the early 1980s.

Petrodollar Illusions

Capitalism’s socio-natural dialectic underlay the transition to neoliberalism. In emphasizing petrodollar circulation I argue that the transition rested on the petrodollar illusion. A situation was created where capital, in the form of an OPEC surplus deposited in First World banks, created an illusion of unlimited sources of debt-financing industrialization. Between 1973 and 1982 OPEC nations accumulated a surplus of some US$400b. Of this amount, 24 percent was deposited in European banks. The USA got 22 percent mainly from Saudi Arabia through bilateral deals. Of the USA’s share half went into government bonds. Thus, the other half, 11 percent of OPEC’s surplus, could have gone into American banking (Spiro, 1999: 128).

While not OPEC’s entire surplus went to semiperipheral industrializers through First World banks’ recycling, a significant amount did. These banks received up to 35 percent of the surplus: 24 percent in Europe plus up to 11 percent in the USA (although we need to consider OPEC’s own borrowing as somewhat lowering this amount). Nonetheless, OPEC’s surplus created the illusion of a flood of deposits. Their unregulated recycling, in turn, exploded into a flood of credit. Petrodollars were multiplied and re-lent through emerging financialization (Lipietz, 1987: 159).

Brazil and Mexico were among the selected debtors. Both had been prominent in the history of Third World debt and their particular characteristics as leading semiperipheral economies made them attractive: strong states, growing domestic markets, already industrializing economies. They also had some under-capitalized nature. Brazil had the Amazon and Mexico had oil. By 1978, Brazil and Mexico together accounted for 38 percent of publicly guaranteed Third World debt held by commercial banks (Spiro, 1999: 130). There was a connection between the expansion of bank lending as a result of petrodollars and the expansion of the external debt in Brazil and Mexico. Economists have made the link with empirical data that connects the recycling of petrodollars with the Latin American debt of the 1970s (Wiegand, 2008: 4).

Later, it was in part the collapse of Latin American debtors in the 1980s, particularly Mexico, that imposed the generalization of neoliberalism in the world economy. In the 1970s, however, the monetarist shock had not yet arrived to end the credit boom. The petrodollar illusion created an articulation where semiperipheral nature (oil, but also agrarian change, as we will see) became an underwriter of semiperipheral industrialization.

Venezuela and OPEC: The Rise of a New Oil Rent

Let us now examine the conditions for the emergence of the petrodollar illusion. The petrodollar illusion has its origins in 1973–4 when world oil prices increased four-fold between October 1973 and January 1974. OPEC’s extraordinary command of the most productive oil fields in the world made possible its claim to a higher rent than in the pre-1973 period.¹⁰ At this stage of the story, the early 1970s, we can observe three main currents in world capitalism.

First, there was falling profitability in the core. Second, there was a process of inflationary growth in the most dynamic economies of the middle-tier of world capitalism. This growth went hand in hand with the rise of multiple dictatorships (Argentina, Chile, Brazil and South Korea) or persistence of de facto single-party rule (Mexico) throughout the semiperiphery (Borón, 1981). The victory of political repression in the semiperiphery was partly the reason why an increasing proportion of global capital moved there in the form of finance capital (i.e. loans).

The third factor, the link between core stagnation and semiperipheral inflationary growth: the oil shocks and the increase of OPEC’s oil rent. These rents, recycled as loans, provided a form of articulation between semiperipheral states’ oil and semiperipheral industrialization. OPEC countries became exporters of money-capital (Ominami and Hausmann, 1985: 457). This way, the appropriation of nature by the oil states was fully integrated into the financialized circuits of capitalism.

The shock of 1973–4 was not the product of oil scarcity or of a rise in production costs in OPEC countries. Although capitalization of world oil was under way its main cause was US production. Behind OPEC’s quadrupling of oil prices was a reorganization of global power relations. It was the outcome of the struggle between the oil states as landowners and core capitalist states over who sets prices and who appropriates the bigger share of net earnings (see endnote 10). Breaking with a period where they received a rent determined by world market prices managed by US hegemony, in the 1970s OPEC was able to transform this relation and impose on the world what Venezuelan scholars conceptualized as an ‘absolute rent’. In their view, it was the transition from an OPEC rent determined by world market prices to world market prices determined by the level of OPEC rent (Coronil, 1997; Hausmann, 1981). OPEC’s ‘absolute rent’ was an outcome of power relations between core capitalist states and oil states. It enlarged the oil sector’s net earnings by increasing prices. These higher prices, in fact, were consistent with the rising US oil production costs that American policy tried to control through cartelization. In time, then, the absolute rent of OPEC established the world oil market as we know it today.

In this history Venezuela had a leading role. The creation of OPEC in 1960, in part an outcome of Venezuela’s lead, coincided with the creation of Venezuela’s first state-owned oil company (Mommer, 1996: 133). The country was one of the early advocates for higher oil rents, be it through taxation or through higher prices, as in absolute rent (Hausmann, 1981: 241). Following these initiatives, by 1970 OPEC had decided on a series of arrangements that could increase world market prices and untie them from US control. These developments were given impetus by OPEC’s reaction to the Yom Kippur War and culminated in the oil shocks of the 1970s (the two peaks in Figure 2). These shocks were outcomes of a struggle by oil states to appropriate a higher rent through the expansion of net earnings. The shocks signaled a new conjuncture, where petrodollars globalized the decline of petro-Fordism.

Figure 2.

Evolution of OPEC, Venezuelan and Mexican oil rents.

OPEC was able to profit from this new relation between global capital and oil states. By 1976 all oil-exporting states had nationalized their oil industry. The process was translated into an OPEC boom. This is indirectly shown by the trajectory of the oil rent as a percentage of OPEC’s GDP as seen in Figure 2. The graph uses the World Bank’s ‘oil rent’, defined as the difference between the value of crude oil production at world prices and total cost of production. I take it as an indirect manifestation of the notion of rent discussed here.

All through the 1970s, oil rents increased as a proportion of the overall OPEC product. By 1979 rents contributed 49 percent of Venezuela’s GDP and an average of 69 percent of GDP for the rest of OPEC. The USA entered into a trade deficit with OPEC nations and used devalued dollars to buy oil. The rentier regimes, in turn, experienced ‘petrolization’ (Ominami, 1986: 128). That is, they experienced negative substitution: non-oil production and particularly manufacturing stagnated while oil exports rose. For OPEC (excluding Venezuela) while oil rents averaged 39 percent of GDP in the 1970–82 period, manufacturing averaged 8 percent. Venezuelan averages were 28 percent for oil rents and 16 percent for manufacturing.

Venezuelan negative substitution was not as dramatic but still the share of manufacturing in its product was much lower than it was for semiperipheral industrializers (World Bank, 2014b).

While Venezuela and OPEC had a boom in oil rents but did not industrialize massively, something different happened in other semiperipheral countries like Brazil and Mexico. These acquired massive debts but did transform their agro-industrial bases. I will not try to explain Venezuela’s (much less OPEC’s) failure to industrialize significantly, a puzzling phenomenon when one considers the potential of rents as financing industrialization or a more broad based development. But the so-called Dutch disease, experienced in Venezuela under the form of petrolization, cannot be discarded as a preliminary explanation. In fact, Coronil argued that since the Dutch disease seldom afflicts advanced economies, while seeming endemic to many Third World countries, it should be renamed the ‘neo-colonial disease’ (Coronil, 1997: 7). He shows nonetheless that ethnographic research is needed to explain why abundance fueled a circulation boom in Venezuela’s case of neo-colonial disease. The particularity of Venezuela’s bourgeoisie with an esprit de corps that unifies it as a rentier class above all its fissures should be taken into account. There were struggles, but they tended to gravitate around the distribution and circulation of rents. They were contradictions within a predominantly rentier class rather than contradictions opposing a rentier to an industrializing bourgeoisie. Therefore, the rentier character of this class, derived from Venezuela’s position in world accumulation as oil supplier, undermined its role as industrializing bourgeoisie (Coronil, 1997: 284, 358). For the rentier bourgeoisie, however, not all was lost. Oil could provide higher incomes for all (without redistribution) in boom times, as in the 1970s. Rents acted as a deterrent to class conflict until prices decreased with the negative oil shocks of the 1980s. By 1995 Venezuela’s exceptional place in Latin America was undone; it combined the highest rate of inflation with the lowest rate of growth on the continent (Coronil, 1997: 42).

Latin American Agro-Industrialization: Brazil and Mexico in the 1970s

Brazil and Mexico, the other main semiperipheral economies of Latin America, could not go for the rentier option, although the discovery of important oil fields in Mexico in the late 1970s brought temporary petrolization (Dávila Aldás, 1983). The contribution of oil exports to total exports increased from 3 percent in 1970 to 62 percent in 1982. On the other hand, the contribution of manufactured exports to total merchandise exports decreased from 32 percent in 1970 to 9 percent in 1982 (Bazdresch and Levy, 1991: 245). Merchandise exports declined in real terms. All in all, between 1979 and 1982 Mexico temporarily fell into the neo-colonial disease through petrolization.

Nevertheless, the Mexican and Brazilian starting point in the 1970s was at a significantly higher degree of industrialization than most of the semiperiphery (Figure 1), and their industrial peak in the 1970s was more impressive than the most. In order to de-industrialize their economies a temporary case of neo-colonial disease like that of Mexico would not do. It had to be a real world-historical change in the rules of the game like the one imposed by neoliberalism. Before that world-historical reversal came, Brazilian and Mexican elites adopted an industrializing semiperipheral path.

Brazil: Semiperipheral Agro-Industrialization in Forced-March Mode

In the context of global petrodollar recycling Brazil attempted an ambitious economic transformation. While the origins of industrialization in Brazil date from the 19th century, it the forced industrialization brought about by the II Plano Nacional de Desenvolvimento of 1974 marked a historical transition. This was a plan instituted by the military dictatorship as a response to the world crisis. Some called it ‘forced-march industrialization’ (Castro and Souza, 1985; Hirschman, 1987). During the unfavorable context of the oil shock, the dictatorship forced the process of industrialization. Via massive indebtedness, it attempted the endogenous production of strategic raw materials and capital goods. This was not the ISI of the postwar era. A new agro-industrialization for exports was its new foundation.

In the context of core de-industrialization, the Brazilian dictatorship carried on with debt-led industrialization. The appearance of new credits was made possible by petrodollar recycling (Carneiro, 2002: 96). The natural resources of OPEC became partial underwriters of Brazil’s own experiment with producing strategic socio-ecological resources: oil, metallurgy and hydroelectricity. In the case of oil, notwithstanding the effort, its production remained sluggish throughout the 1970s, and from 1973 to 1979 the quantity of oil imports increased by 50 percent (Carneiro, 2002: 74). No oil earnings for Brazil, as opposed to Mexico.

Still, the notion was that the production of these resources was a necessary condition for endogenous development. There is still debate around the question of the success of Brazil’s forced-march industrialization. Some found it to be a success in liquidating the crisis and underdevelopment at the same time (Castro and Souza, 1985), while others, on the other hand, describe it as a failed structural adjustment (Carneiro, 2002). A world-historical perspective helps in solving this impasse. The II Plano was successful as a response to the crisis and as a project for Brazilian industrialization, as is evident from the fact that Brazil’s IVA/GDP ratio is higher than in most advanced economies. It probably marked the consolidation of the passage from restricted to capital intensive industrialization (Cardoso de Mello, 1982). This industrial rise, however, came during what, in the longue durée, was a cyclical phase. While Brazil, Mexico and others collectively closed the industrialization gap between their economies and the core, world capitalism transited towards a neoliberal regime where industrialization lost its trait as a sign of coreness. As Figure 1 shows, the neoliberal era shows an overall decline in industry’s significance. While the core’s industrial decline has been the most far-reaching, in terms of national per capita income core countries have been able to maintain a comfortable lead (Arrighi, 1991; Arrighi et al., 2003).

While the Latin American semiperiphery got into serious debt in order to compete with the industrialized world ‘the USA [was to] cut short these struggles by establishing a new development game that valorized the species of capital that First World countries in general, and the USA in particular, preferentially possessed. This species of capital is finance capital’ (Arrighi et al., 2003: 21). This decline of industry is probably temporary. A post-neoliberal era might revive its centrality. However, the historical irony is that Brazil’s industrialization was successful at the same time that financialization, not industrialization, became the dominant logic of the capitalist ecosystem. The 1970s industrialization, then, was successful in keeping Brazil (and Mexico) from falling back into the periphery of capitalism, but it simultaneously affirmed its middle-tier character by betting on means which were rendered secondary by emerging financialization. The 1970s were a success from the perspective of semiperipheral development. Brazil’s average GDP growth in the 1966–81 period was 7.5 percent.

The II Plano of 1974 was a turning point from the semi-autonomous ISI of the postwar era (1945–73) to the export-led industrialization of the 1970s and 1980s. It was the moment when petrodollar recycling expanded the scope of the semiperipheral rise. However, agrarian change preceded this process, something often overlooked in discussions of Brazil’s turning point. The uneven development of ISI into an export-led agro-industrialization was under way in agriculture since the late 1960s, when the Brazilian miracle of rapid growth began (Furtado, 1981). The ‘conservative modernization’ of agriculture after 1966 transformed a predominantly extensive agricultural regime based on frontier expansion to one that combined extension with a new emphasis on intensive exploitation of nature. This strategy produced a higher rate of exploitation in the countryside. There was an introduction of Green Revolution technologies, genetically modified seeds and the increased use of chemical fertilizers. Also, there was a mechanization of production and the emergence of new export crops such as soy (Brussi, 1998: 259–264, 2000).

This strategy marked the military regime’s technological fix to the decline of the coffee economy. The use of technological and chemical methods to increased yields signified a new impetus for the intensive aspect of exploitation. With this new drive, Brazil’s nature provided another source of financing for the industrial rise of the 1970s. Export of commodities such as soy and oranges became more important after 1975 (Carneiro, 2002: 75). The ‘modernized’ agricultural sector increased Brazil’s exports from US$2.74b in 1970 to US$25.5b in 1985 (Brussi, 1998: 266). A socio-ecological transformation underpinned this growth, symbolized by the growth of land covered by soy production, which overtook that of coffee in the early 1970s (see Figure 3). Also, it was symbolized by an increasing ‘meatification’ of the agricultural sector, where the growth in pastures for cattle partly accounts for the persistence of an extensive regime of agrarian expansion. All in all, a new intensive-extensive agricultural regime kept growing: an intensive exploitation of labor and nature based on genetics, chemistry and mechanization combined with extensive depredation of land, including the Amazonian and Center-West regions (Brussi, 1998; Ianni, 1979).

Figure 3.

The rise of soy in Brazil during the 1970s.

It was in this context that new voices emerged opposing the deforestation of the Amazon where, by 1970, more than 10 million hectares had been deforested (Prates and Bacha, 2011). The Brazilian agricultural frontier, the main driver of deforestation, expanded at a higher rate than that of industrializers such as Mexico and de-industrializers such as the USA. During the period from 1961 to 2001, for example, the ratio of agricultural land to total land increased by 6.2 percent in Mexico and decreased by 7.9 percent in the USA. In Brazil this ratio increased by 82.7 percent! Soy production, together with cattle ranching, accounts for the high rate of deforestation taking place in the Amazon.

The deep cause of deforestation was the incorporation of Brazilian nature into the capitalist world economy as a way of garnering export earnings (Brussi, 1998, 2000). The acceleration of incorporation came during the 1970s, after the dictatorship’s forced-march industrialization of agriculture. The logic of this agro-industrial change was not the attainment of food self-sufficiency (even if that is a reality for Brazil, as opposed to Mexico; see Barkin, 1990), but rather the transformation into a ‘nature-exporting society’ (Coronil, 1997). Displacement of peasants, intensive and extensive exploitation of nature and the emergence of new class struggles in the countryside mark the legacy of the 1970s socio-ecological transformation (Ianni, 1979).

Agro-industrialization in the 1970s was far from delivering the better conditions for all that liberal economists predicted. As for what is commonly called industrialization, that is the growth of urban industries, they also depended on the combined exploitation of nature and labor at high rates. In terms of rural labor, during Brazil’s industrialization era the price of labor-power was determined primarily by the production of the small agricultural producers (Furtado, 1981); thus, the easiest way of lowering this price for urban industries was to lower the prices paid to small farmers and peasant producers. Implicated in the process through which small farmers, rural laborers and peasant producers ‘subsidized’ urban wages was the extensification of agricultural food production (contemporary with soy-led intensification). The low price of labor-power was made possible by agriculture’s combination of cheap labor-power and newly opened lands (Oliveira, 1972). Particularly, rural laborers and small peasants were subject to a double structural subordination: to rural landowners and to urban capital. And in their role as bearers of labor-power, they contributed to the expansion of industrial capitalist accumulation in three ways. First, producers engaged in subsistence agriculture followed the commodity frontiers opened by new roads and development projects that penetrated deep into the Amazonian, the Northeast and the Center-West regions (Brussi, 1998; Ianni, 1979; Sá, 1973). There, they could be used for the deforestation and initial cultivation of the land, and later displaced or controlled by landowners. These landowners benefited from this socio-ecological preparation of land, this accumulation of labor, which they expropriated from rural producers. Second, the high rates of exploitation of rural laborers, small farmers and peasants as producers of basic consumption goods for urban markets secured another form of transfer of value, from their expenditure of labor, towards urban classes. The low cost of foodstuffs derived from the exploitation of rural labor made possible the lowering of the price of both urban and rural labor-power (Oliveira, 1972: 18). Third, the migration of rural laboring populations to urban areas provided a pool of cheap labor for urban/industrial accumulation.

Urban workers were the other forced underwriters of industrializing capitalist accumulation, as quantitative data on the divergence between real wages and productivity during Brazil’s industrialization shows (Colistete, 2007). Today precarization has become a main theme for militants, but in the case of Brazilian industrialization precarity has been a central element since the early development of Brazil’s variant of semiperipheral Fordism (Braga, 2012).

In terms of the capitalist ecosystem for accumulation, however, the story was one of success. New Brazilian exports became central in world capitalism. The historical convergence of the ‘conservative modernization’ of agriculture since 1967 and the emergence of petrodollar recycling after 1973 made Brazilian agro-industrialization possible during the 1970s. There was no upward mobility into First World status, but Brazil did not fall into a ‘newly underdeveloping country’ condition as happened, for example, to South Africa (Martin, 1990, 2013). Of course, the high cost of the Brazilian strategy (measured by the degree of indebtedness and therefore subordination to core monetary policy) was to turn the success of the 1970s into a ‘failure’ in the early 1980s. The turn only came when monetarism avoided the worsening of advanced capitalism’s crisis by switching its problems onto the semiperiphery.

Mexico: Industrial and Socio-ecological Change

Mexico’s socio-ecological transformation provides a different angle on the semiperipheral rise of the 1970s. While industrial activities were the organizing center of accumulation in Mexico since the 1940s (De la Garza Toledo, 1988; Fujigaki Cruz, 1997), it was only in the 1970s that the degree of significance of industry for the Mexican economy surpassed that of industry for core economies. There was a significant expansion of classic Fordist industries in Mexico during this decade. ISI attained its peak in 1975, when 80 percent of the materials used in the fabrication of cars were of Mexican origin (Carrillo and García, 1987: 310). After 1976, however, an industrial change began. The guiding principle was the need to change the industrialization model, basically the need for an agro-industrialization for exports. While the transformation had its roots in the conjuncture of the 1970s, particularly in the recession of 1976, it developed more forcefully after the 1982 default. Under pressure from international institutions such as the IMF and World Bank, Mexican authorities implemented different industrialization programs such as the Programa de Fomento Integral de Exportaciones in 1985 or the Programa de Concertación con Empresas Altamente Exportadoras of 1987. Under these programs the auto, petrochemical and computer industries among others were given incentives which ranged from subsidizing the buying of machinery to the providing of water, electricity and petroleum inputs at subsidized prices (Cypher, 1991). Overall, as in Brazil, while the end of the decade was a difficult period, in terms of economic performance the 1970s were a success. Mexico’s average GDP growth for the 1966–81 period was 6.7 percent.

The crisis first arrived in Mexico with the recession of 1976. The Mexican peso was devalued and both the desarrollo estabilizador and desarrollo compartido discourses were bankrupt. With the Mexican recession came the turning point in the uneven development of ISI into an export-led regime. That same year, however, Mexico announced important discoveries of oil fields which became important in deferring the effects of the crisis (Barkin, 1990: 92). Thus, while Brazil was restricted to the receiving side of petrodollar recycling, Mexico joined in the boom in rentier earnings (see Figure 2), making it more attractive to international lenders (Barkin, 1990: 95). While the ephemeral richness of oil made possible the deferral of conflict through government spending in social programs, the emergence of the maquila regime in the auto industry prefigured a new era of precariousness for labor. The combination of this new industrial regime with a socio-ecological transformation of agriculture, which I will unpack shortly, had deleterious effects for development in the future. It deepened the distorted nature of the Mexican economic model (Barkin, 1990).

The auto industry’s use of semiperipheral labor as cheap labor-power meant that laborers’ wages were significantly depressed. Consequently, ceteris paribus, the use of semiperipheral workers secured a higher rate of exploitation than the use of core workers. And as in Brazil, the labor of peasants and small agricultural producers was central in the reproduction of urban labor-power (Warman, 1988: 9). But, in contrast to Brazil, the import of traditional foodstuffs became increasingly problematical for Mexican development. By the early 1980s, imports of maize were between 25 percent and 35 percent of domestic consumption.

Moreover, in order to impose lower wages, two methods were used by the auto industry. First was the moving of a part of the production process to areas without a tradition of militant labor. This meant establishing factories in the northern states. Second was the feminization of labor common to the maquila regime (De la Garza Toledo et al., 2001). The turn towards the world economy symbolized by this process of export substitution and institutionalization of precarious labor conditions led to the increased indebtedness of the Mexican state, since it needed to compensate for the low wages paid by companies engaged in flexible accumulation.

In terms of agrarian structure, the re-orientation of the economies towards the world market led to a loss of food self-sufficiency for Mexico and the rise of a neoliberal food regime in both Mexico and Brazil (McMichael, 2009). Mexico with its sorghum and Brazil with its soy were implicated in this process. Production capacity was reoriented towards the middle and upper classes, local and foreign. Resources were used in a manner that assured high protein diets for the wealthy and middle classes and only partial reproduction for the poor. This socio-ecological transformation was the product of the successful industrialization of agriculture. In the case of Mexico, it was the second Green Revolution of the late 1960s, when animal feed used in the production of meat began to be embraced as a substitute for food production (DeWalt, 1985). This second Green Revolution, following the steps of the earlier revolution in wheat yields, joined together the introduction of these new feed crops with the increased mechanization of production (see Figure 4).

Figure 4.

The rise of Mexico’s green revolutions (wheat and sorghum).

In Mexico, during the 1970s there was an annual rate of increase of 13 percent in the use of fertilizers, while the use of tractors grew at a rate of 9 percent during the postwar era (Barkin, 1990). As Figure 4 shows, there was an impressive increase in the production of sorghum (an animal feed) from the mid-1960s, and it contributed to the disarticulation of food production. While the land used for the cultivation of animal feed increased, the land devoted to the three basic sources of food (corn, wheat and beans) was reduced from 10.6 million hectares in 1965 to 7.2 million in 1979. It peaked again at 11 million in 1994 and as of 2011 it was back to 7.6 million hectares (FAO, 2014). The process went on while the population increased and the total land involved in agriculture was extended by 50 percent (Barkin, 1990). And while the ‘meatification’ of Mexican agriculture was under way, the fact remained that during the 1970s more than 35 percent of Mexicans had no access to meat (Barkin, 1990).

This model of development contributed to a disarticulation of these economies (De Janvry and Garramón, 1977). Semiperipheral agro-industrialization, however, did not implode from within alone. It was undermined by its link to the world-economic cycle of the 1970s. Furthermore, as with the case of Brazil, while from the perspective of socio-natural wellbeing this agro-industrialization can be considered a step backwards, it was in fact a success for capitalist accumulation, for a time.

The End of the Petrodollar Illusion and the Debt Crisis

The effects of the global crisis were deferred by debt-led growth in the semiperiphery. But this impressive growth depended on unstable factors. First, it depended on the import capacity of core countries. This import capacity was fragile, itself resting on credit-based consumption. Second, it depended on historically low interest rates, like those of the 1970s. Thus, when US economic policy took a monetarist turn around 1979–82, the corresponding rise in interest rates broke down the global conjuncture. The consequences were deleterious for highly indebted countries of the Third World. In 1982, Mexico announced that it would suspend payment on its debt. The Latin American debt crisis that followed was the unintended consequence of the crisis of core Fordism and its management: first cheap credit (Keynesianism), then spiking interest rates (monetarism). Monetarism brought temporary orthodoxy. It meant an emphasis on ‘macroeconomic stability’ indicated by opposition to debt finance and support of balanced budgets. It lowered inflation through high interest rates. But it disregarded the issue of stagnant growth. Keynesianism was inflationary; monetarism was disastrous for debtors. This world-historical reversal prefaced the neoliberal restructuring of the 1980s, when semiperipheral countries transferred billions of dollars to the core of world capitalism via debt-servicing and cheap primary commodities.

Mexico and Brazil were not the victims of excessive debt. The problem was the hegemony of the dollar (Parboni, 1986) and the change in the rules of the capitalist game that the USA was about to impose. Dollar hegemony made Third World debtors vulnerable to the effects of US monetary policy. The raising of interest rates by the Federal Reserve reversed the 1970s trend.

The interest on the external debt of developing countries rose from negative rates in the 1970s to positive rates in the 1980s. Latin American debts reflected changes in US interest rates (Furtado, 1981: 51–52). Thus, the share of interest on the debt in the GDP of Third World countries increased in tandem with the rise in US interest rates from 1980 (Duménil and Lévy, 2002: 397).

The collapse of GDP growth rates in the 1980s (2.9% for Brazil; 2.3% for Mexico) indicates the harmful effects of this turn of events. The high cost of the debt, in its turn, can be blamed on the concatenation of two factors. First, there was the highly indebted and politically repressive agro-industrial rise of the semiperiphery. And second, a monetarist attack that broke the link between cheap credit and industrialization. What followed was a decade of net transfers of capital from the Latin American semiperiphery to core financial institutions. As is clear from Figure 5, all through the 1980s Latin America made net transfers to core banks, since much of the debt paid in that decade was debt accumulated from First World banks during the 1970s. Mexico and Venezuela had the most erratic trajectory in terms of this variable, always above (in the positive trends of the 1970s) and below (in the negative trends of the 1980s) the Latin American aggregate. Latin America as a whole, of course, reflects the trends in these three economies. In any case, the net positive transfers peaked in the 1970s, and the net negative transfers did so in the 1980s, clearly tracing a cycle from boom to bust in external financing fueled by the petrodollar illusion.

Figure 5.

From absorption of foreign capital to a decade of net transfers abroad.

Conclusion

After 1982, the world-economic conjuncture of the 1970s was undermined. During the 1970s core countries stagnated while some semiperipheral states seemed to be undoing the historical legacy of imperialism and of the core/semiperiphery/periphery structure. However, this historical transformation of the 1970s was a transition from the postwar configuration of sustained growth and prefaced the rise of neoliberalism after 1982. What the neoliberal turn of the 1980s brought was a new wave of net transfers of financial resources from the Latin American semiperiphery to core countries. The rise of monetarism in the core made the semiperipheral advance difficult to sustain. The efficacy of the monetarist attack was possible, nonetheless, because semiperipheral industrialization was being questioned from within by popular movements. Workers and peasants had no interest in the maintenance of a regime that was premised on their exclusion from its benefits while at the same time increasing the degradation of environmental conditions. The capitalist solution to resistance was a neoliberal regime even more exploitative (of labor and nature). The neoliberal promise of a biotech-based revolution in agricultural yields, and thus of a reduction in official world hunger, has been a failure (Moore, 2010: 400).

I examined the historical conjuncture that prefaced neoliberalism through the Latin American experience and its relation to petrodollar circulation. The analysis centered on the involvement of Brazil, Mexico and Venezuela in this configuration. Essentially, the world-historical transformation of the 1970s turned out to be useful for core capitalism. It provided an outlet for the capitals that were undergoing valorization problems in First World countries. For the Latin American semiperiphery this conjuncture was paradoxical. Successful industrialization liquidated old forms of subordination (Prebisch, 1986: 482–483), but brought new ones under financialization.

The question is what happened after this successful industrialization, a process extended to the countryside as agro-industrialization. The new competition with the core in terms of agro-exports and manufacture was increasingly dominated by finance capital and its valuation of labor and nature in terms of short-term profitability. Speculation and the abstract processes of financial profitability transformed the world economy. Time was required before the Latin American industrializers could ‘adjust’. The IMF and the World Bank stepped in with the aim of short-circuiting this adjustment. The deleterious effects of that intervention are well known: forced debt-servicing, environmental degradation, industrial deceleration, corporatization of food production, etc.

The semiperipheral industrialization of the 1970s, then, was a temporary way out of the world crisis. The transformation of 1966–82 belongs to the temporality of the ‘conjoncture’ (Braudel, 2009): a transitional phase within the overall cycle of postwar rise and fall of the USA-led world regime of accumulation. The precarious 1970s configuration was not reproducible in the long term. But the reversal since the 1980s is relative. While the mid-level position of the Latin American semiperiphery was re-affirmed, the conditions of the overall core/semiperiphery/periphery structure were transformed. If auto-centered accumulation via extension of the home market is to be realized, the industrialized semiperiphery has an agro-industrial base to support it. Therefore, future struggles over the world hierarchy of wealth will be of a different nature. A historical perspective grounded on the notion of capitalism as global ecosystem for accumulation will be tasked with explaining the meaning of these new struggles.

Footnotes

Acknowledgements

I want to thank Jason Moore and Dale Tomich for their support and for our discussions regarding the ideas presented here. Ben Marley and Brendan McQuade read early versions of this article and offered useful suggestions. Finally, I want to thank the anonymous reviewers for their detailed comments and useful criticism.

Funding

A Clark Fellow Travel Grant from Binghamton University contributed towards the cost of travel to Brazil for research used in this article.

Notes

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