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The political economy of development
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Reprinted by permission of Andre Gunder Frank (Róbinson Rojas)
Andre Gunder Frank (1992)
Marketing Democracy in an Undemocratic Market
"Democracy" is in, and "development" is out as buzzwords for the "Third World." The very "development" idea and word are in apparently terminal crisis. The new idea to replace it is "democracy." When Gandhi was asked what he thought of "Western Civilization," he answered "it would be a good idea." We can say as much of development and democracy as well. However, for the Third World, "democracy" is likely to become no more real in the future than "development," or Western Civilization for that matter, did in the past. Instead like the latter, "democracy" may well become a flag - or the figleaf - for continued exploitation and oppression of the South by the North.

In Abraham Lincoln's words therefore, there can be little real and meaningful democratic government by the people, of the people, and for the people any part in the "Third World" South as long as their economic possibilities are limited and their policy options are controlled by their participation in the whole world economy, which is run from the North. Of course, there is no present claim or forseeable hope of making decisions for the whole world economy on a democratic basis. As long as this lack of democracy remains for the world economy as a whole, political democracy in any "sovereign" part thereof can be of limited scope at best.


"Development" ideology has been the flag and figleaf of political economic reality and policy for the Third World since the end of World War Two. Yet, economic underdevelopment persists and has partly been even aggravated in most of the Third World South in the face of almost all manner of ideological solutions and political efforts to overcome it. This story is not new and requires little elaboration here. However, there are some new ironic twists of late, which merit note in the present context. In this regard, I may be permitted to repeat some reflections in my recent and partly autobiographical and autocritical essay "The Underdevelopment of Development" (Frank 1991b).

Real world system development has never been guided by or responsive to any global and also not to much local "development" thinking or policy. In this world economy, sectors, regions and peoples temporarily and cyclically assume leading and hegemonic central (core) positions of social and technological "development." They then have to cede their pride of place to new ones who replace them. Usually this happens after a long interregnum of crisis in the system. During this time of crisis, there is intense competition for leadership and hegemony. The central core has moved around the globe in a predominantly westerly direction. At the sub- system levels of countries, regions or sectors, all "development" has ocurred through and thanks to their (temporarily) more privileged position in the inter"national" division of labor and power. The recently prevalent notions of "national development" are the result of a myopic optical illusion. These notions and the illusion are derived from a self-interested selective tunnel vision perception. It lacks an objective global assessment of real world development. This development ideology was based on and is now doomed by this self-illusory perception. It is less and less sustainable in the face of hard reality. Instead as suggested above, we now need to replace this development theory, as well as micro-supply and macro-demand side economic theories, by another one. We need a more rounded, dynamic and all-encompassing supply and demand side economics to analyze, if not to guide, world economic and technological development.

The most widespread political ideology and "development theory" for the last decade or two has been that "national development" is best pursued through the "magic of the market" by letting "free enterprise" promote "export led growth." The stellar "models" are South Korea and Taiwan. These two have indeed done well in the world market recently. Unfortunately for the ideological model however, their success was not the result so much of free enterprise as of state intervention. Moreover, their state's ability to do so was in turn based on three earlier political factors: Pre-war Japanese colonialism, post-war American imposed land reform, and massive cold war subsidies. Beyond the "peculiarities" of these cases, the thesis that all or even many other countries could copy their "success" is a fallacy of composition. The world market could not absorb the exports of a China size Hong Kong. The need for better economic analysis, however, does not mean that there is or can be a "model" of or for development, which would be applicable or copyable around the world.

Unfortunately for the ideological peddlers of this political model and for the many countries of Latin America, Africa, and South-East Asia who pursued essentially the same export led growth strategy, outside the city states Hong Kong and Singapore, it failed miserably elsewhere. Moreover, the possibilities of continued success by Korea and Taiwan is now increasingly questioned (eg. Bello and Rosenfeld 1990), not to mention the political and social costs of these dictatorships while they lasted. The reason, of course, are the exigencies of competition in the changing world market, particulary during the new world economic recession since 1990.

In this increasingly technological competition in and for the world market, it is not yet clear who has made the grade to survive. To put it differently, in this world economic game of musical chairs, it is not yet clear who will still have a seat when the music stops the next time, as it well may in this new recession. Perhaps Korea and Taiwan have, but more than likely they have not; and their success in carving out a world market share will be temporary at best.

However, it is clear that outside Japan much of the remainder of Asia, Africa, and Latin America, as well as most of Eastern Europe and the Soviet Union have not made the grade. Resource saving industrial development and the development of a service / information society deprives them of their "traditional" world markets for raw materials and reduces their comparative advantage as low labor cost producer exporters. At the same time, technological upgrading to remain competitive in the world market has failed in most of this "third" and "second" world, but of course also in many sectors and populations in the industrially developed "first" world and particularly in the United States.

What is a realistic prospect, therefore, is the growing threat to countries, regions and peoples to be marginalized. That is, they may be involuntarily de-linked from the world process of evolution or development. However, they are then de-linked on terms, which are not of their own choosing. The most obvious case in point is much of sub-Saharan Africa. There is a decreasing world market in the international division of labor for Africa's natural and human resources. Having been squeezed dry like a lemon in the course of world capitalist "development," much of Africa may now be abandoned to its fate. However, the same fate increasingly also threatens other regions and peoples elsewhere. Moreover, they may be found everywhere: In the South (eg. Bangladesh, the Brazilian Northeast, Central America, etc.); in the ex-industrial rustbelt, the South Bronx, and other regions and peoples in the West; and in whole interior regions and peoples in the "socialist" East, eg. on both sides of the Sino-Soviet border.

Events in 1989-90 must accelerate and aggravate the marginalization of millions of people in Eastern Europe and the Soviet Union. Discarding the already squeezed out lemon of Central Asia is the political position, for instance, represented by the Russian President Boris Yeltsin. The southern inhabitants' wrath at having so long been exploited in the past and demanding its cessation for the future is understandable. So is the appeal to [or discovery of] "traditional" ethnic and national identity and inter-ethnic strife in response to aggravated economic deprivation, such as 30 per cent unemployment in parts of Soviet Central Asia. However, political "independence" and inter-ethnic strife in Central Asia or Central Africa now can afford them little economic benefit in the future. On the contrary, the erection of politically motivated ethnic and other barriers to economic interchange, and even exploitation, threatens to convert them separately and altogether [back] into backwaters of history. [However, the "Centrality of Central Asia" was a fact of history for millennia before the world's present North-South arrangement took shape in the sixteenth century, as I argue in Frank (1991c)]. Many of these regions are more likely to be Latinamericanized, and some even Africanized and Lebanonized, instead of achieving the West Europeanization to which they aspire.

People in all these and other places may now be sacrificed on the altar of growth pole "development" policy. They fall victim to efficient competitive participation in the international division of labor in the world capitalist market and to contemporary social evolution. However, the West may well receive much more migration by the few who can, among the many who wish, to escape this marginal existence in Central America and Africa. North America and Western but soon maybe also Eastern Europe and Japan will be the magnets. Many people prefer to survive exploited by the division of labor in the North than to suffer death by war and starvation or marginalized life without hope in the South.

The incorporation of various parts of the Third and formerly "Second" worlds into possible American, West European and Japanese led economic blocs may seem to contradict this process of marginalization. Nonetheless, for the majority of the people involved, such "incorporation" does not contradict but actually reenforces marginalization. The reason is that their regions and resources, and their own labor and buying power, are incorporated into these regional political economic blocs in formation only to bolster the fortunes of the economic powers and the competitive capacity at the top of these blocs. Therefore, incorporation into these blocs only occurs insofar as there is anything to exploit at the bottom. Where and when people's labor or purchasing power cannot contribute to this end, they remain or are marginalized just the same. Indeed, the competitive pressures both within and among these economic blocs only exacerbate the process of marginalization within the blocks from top to bottom. That is why, for instance, masses of Canadians have already complained about the Canadian- American free trade pact; and spokespersons of labor in Canada, the United States and Mexico warn that the extension of this zone to Mexico would increase either the exploitation or the exclusion of labor or both in all three countries. Moreover if a country is incorporated into a political economic bloc, it is also more exposed to having to tow the political line of the bloc's dominant power. That would deprive the dependent country of a measure of the political begnine neclect, or the "Sinatra Doctrine" of being able to "do it my way," which it might otherwise enjoy in a wider world of economic marginalization.

In other words, another economic irony is that a dual economy and society may now indeed be in the process of formation on a global scale at this stage of social evolution in the world system. However, this new dualism is different from the old dualism I rejected in my earlier writings (Frank 1967 and others). The similarity between the two "dualisms" is only apparent. According to the old dualism, sectors or regions were supposedly separate. That is, they supposedly existed without past or present exploitation between them before "modernization" would join them happily ever after. Moreover, this separate dual existence was seen within countries. I correctly denied all these propositions. In the new dualism, the separation comes after the contact and often after exploitation. The lemon is discarded after squeezing it dry. Thus, this new dualism is the result of the process of social and technological evolution, which others call "development." Moreover, this new dualism is between those who do and those who cannot participate in a world wide division of labor. To some extent, the ins and outs of this world division of labor are in part technologically determined. Thus, this new dualism may partake of the old technological dualism.

Ironically also, the same present day political and ideological changes in Eastern Europe through which its people aspire to join the First World in Western Europe now threaten instead also to place Eastern Europe economically in the Third World -- again, for that is where it was before. Poland has already been Latin Americanized. The earlier dependent agricultural [and only temporarily, oil] export economy par excellence of Romania will be lucky and thankful if it can even recuperate that position, now in competition with Bulgaria, which developed agribusiness for export during the "socialist" regime.

The same problem obtains a forteriori in the Soviet Union. A few parts of Russia and the Ukraine were westernized by Peter the Great and industrialized by him, Witte, and Stalin. But most of the Soviet Union at best still is a third world economy, like Brazil, India, and China, which also have industrial capacities, especially in military hardware. The Transcaucasian and Central Asian regions, whether they remain in the Soviet "Union" or not, are not even likely to be Latin Americanized, but rather economically more Africanized or, God forbid, politically Lebanonized. The same sad fate may befall much of southern Jugoslavia, whether it remain one or, more likely, become several.

Bitter experience has shown that "Second World" "socialist" "national development" in China, the Soviet Union and Eastern Europe was unable to break out from or overcome the constraints of competition in the world economy. These countries of the "second" world, like those of the "third" world, are handicapped by their position in the world economic international division of labor, quite irrespective of being blessed by political democracy or cursed by its absence or failure. They are constrained by their lack of foreign exchange, or in one word by their lack of dollars. The events of 1989 and 1990 eliminated all remaining ideological legitimacy and credibility in this "second" world "socialist" countries. However, while many observers limit their attention to the bankruptcy of the "socialist" component of this ideology in Europe and Asia or Africa, reality has undercut its "nationalist" component equally or even moreso. For other national development strategies in Africa, Latin America, and Asia were essentially similar and often failed equally or even moreso. So we observed in our comparative review above of economic policy by Communist parties, military dictatorships, and their successor democratic governments. Thus, the long term economic irony is that the prospects for "another" national development by any other political means, whether separately or together, are not good. On the contrary, these prospects are now quite bad for the underdeveloping Third World regions of Eastern Europe and the Soviet Union. However independently of their national ideology or state policy, they are equally bad and in some cases even worse for most still underdeveloping Third World regions elsewhere.


The 1980s marked the transition in much of both the East and the South from the ideology of "development" to that of "democracy." Yet these same 1980s also should have demonstrated the policy irrelevance of national political ideologies in an international world economy.

The most important international and national economic and political policies adopted and implemented around the world during the 1980s were often contrary to the "dominant" ideologies. These in turn were largely irrelevant to the necessary political economic responses to world economic conditions beyond anyone's control. In my review of the revolutions in Eastern Europe in 1989 (Frank (1990a) and in my answer to Francis Fukuyama (Frank 1990b), I sought to demonstrate that his ideological thesis that "in the long run ideology wins out over the material world" was belied by material reality. The latter proved the opposite in recent years -- and threatens to do so again in the coming ones:

In the 1970s, the same export/import led growth strategies were adopted by Communist Party led governments in the East (Poland, Romania, Hungary) and Military Dictatorships in the South (Argentina, Brazil, Chile).

In the 1980s, the same debt service policies on the IMF model were adopted and implemented by Communist Party led governments in the East (Poland, Hungary, Romania, Jugoslavia) and by Military Dictatorships, other authoritarian governments, and their successor democratic governments in the South (Argentina, Brazil, Mexico, Philippines).

There were variations on the theme of debt service, but it is difficult to correlate, let alone explain, them by reference to the political color or ideologies of regimes or governments: The most stellar pupil of the IMF was Nicolae Ceaucescu in Romania, who actually reduced the debt until the lights went out, first for his people and then for himself. In Peru, on the other hand, the newly elected President Alan Garcia defied the IMF and announced he would limit debt service to no more than 10 percent of export earnings. Actually, they were less than that before he assumed office. Then, they rose to more than 10 percent under his presidency. Real income fell by about half, and the novelist Vargas Llosa sought to succeed to the presidency after moving from the political center left to the extreme right. But what does that mean, if anything? The Peruvian people voted against Vargas Llosa, elected Fujimori -- and got "Fujishock." The economic policies of the new president have been exactly the ones his rival offered and his voters rejected! Now they have cholera. Communist General Jaruselski in Poland and the populist Sandinistas in Nicaragua also implemented IMF style "adjustment" and "conditionality" on their people. Both did so without the benefit of pressure from the IMF, since Poland was not a member and Nicaragua had no access to it. In Nicaragua, there was "condicionalidad sin fondo," that is conditionality without the Fund and without any bottom or end to the Sisyphus policy. Hungary had the most reformed economy and the most liberal political policy still led by a Communist Party in the Warsaw Pact. Yet Hungary paid off the early 1980s principal of its debt three times over -- and meanwhile doubled the amount still owed! That is more than Poland or Brazil or Mexico, which on the average paid off the amount of debt owed only once or twice, while at the same time increasing its total only than two times. No matter, the Solidarnosc government that replaced General Jaruselski and the Communist Party in Poland now benefits from IMF membership and imposes even more severe economic sacrifices on its population than its predecessors.

So was economic policy any different in the "socialist" East before the arrival of democracy -- or for that matter is it now that democracy has "finally" arrived in Eastern Europe? Take Poland for instance. Why did the governments of the Communists Gomulka and Gierek, the Communist General Jaruselski and Solidarnosc's Prime Minister Mazowiescki all implement the same anti-popular policies? Indeed, Solidarnosc and the Communists proposed essentially the same weak economic reforms in 1981 before General Jaruselski imposed martial law on December 13. Then, he lacked the political power to impose even the Solidarnosc sponsored reforms; because he was governing with martial law instead of the people's will represented by Solidarnosc! Where and what is the democratic expression of that will now that Solidarnosc is in power (or rather in government) and is using its popular good will to force even more drastic anti-popular economic belt tightening on the population than the previous government? The same question might be asked of the governments, democratically elected or not, in Hungary, Jugoslavia and elsewhere. In Hungary's first free elections, all parties agreed to follow the IMF prescriptions after the election.

So are there any "ideological" lessons to be learned from the comparisons and patterns of these economic policies - or successes and failures? Well yes, some: In the cases of Latin America and South East Asia, it is still possible to appeal to "nationalist" "anti-imperialism" and sometimes even to "socialism" to voice and mobilize popular opposition to these political economic austerity polices. Nowhere is that now possible in Eastern Europe -- since "Socialism is a failure" and the Communist parties are discredited. They engineered the domestic economic crisis in the first place and then implemented the debt service and austerity policies. And of course, they were subservient instruments of Russian imperialism. So nobody could appeal to them or their policies. On the other hand, the West represents the future. Moreover, the Western IMF and its policies were the "secret weapon" and "de facto ally" of the opposition groups. They are now in power or making their bid for it thanks primarily to economic and secondarily to the political crisis, which was engendered by the implementation of these austerity "adjustment" policies with IMF support. So now there is not only no economic but also no political alternative to further austerity policies, which are tied to IMF and other Western advice and conditions.

The economic crisis has been expanding and deepening in Eastern Europe and the Soviet Union. The economic crisis and related economic factors contributed materially to the desire and ability of these social (and also ethnic/nationalist) movements to mobilize so many people at this time for such farreaching political ends. The decade of the 1980s, indeed beginning in the mid 1970s, is now called "the period of stagnation" in the Soviet Union and generated accelerating economic crisis and absolute deterioration of living standards in most of Eastern Europe, (as also in Latin America, Africa and some other parts of the world, vide Frank 1988). Significantly especially in Eastern Europe, this period also spelled an important deterioration and retrocession in its relative competitive standing and standards of living compared to Western Europe and, even to the newly industrializing countries (NICs) in East Asia.

Moreover, the course and (mis)management of the economic crisis generated shifts in positions of dominance or privilege and dependency or exploitation among countries, sectors, and different social, including gender, and ethnic groups within the Soviet Union and Eastern Europe. All of these economic changes and pressures generated or fuelled social discontent, demands, and mobilization, which expresses themselves through enlivened social (and ethnic/nationalist) movements -- with a variety of similarities and differences among them. It is well known that economically based resentment is fed by the loss of "accustomed" absolute standards of living as a whole or in particular items and by related relative shifts in economic welfare among population groups. Most economic crises are polarizing, further enriching, relatively if not also absolutely, the better off; and further impoverishing both relatively and absolutely those who were already worse off, including especially women.

Thus, the momentous economic and political changes of perestroika and glasnost in the Soviet Union and Eastern Europe and therewith the end of the cold war did not simply emerge, like Pallas Athene out of Zeus, from the head of Michael Gorbachev. He said himself that they were "inevitable." As [economic] necessity is the mother of [political] invention, had Gorbachev himself not existed, he would have had to be invented. His pragmatic praxis outpaces and overturns ideological preconceptions, including his own and those of his opponents at home and abroad. The exigencies of the world economy generated all manner of pragmatic praxis and political ironies in the 1980s.

The political irony is that "really existing socialism" failed not least because of the unsuccessful implementation of import/export led growth models and IMF style austerity policies in the East. Yet "really existing capitalism" pursued the same models and policies in the South and also failed. However, nobody in the West or East says so; and nobody in the South any longer has a plausible "socialist alternative" to offer. Why was there a "change of system" in (part of) the East in the face of failure, but none in the South in the face of the same failure? Jeanne Kirkpatrick was wrong when she said that "totalitarian" countries in the East don't change, while "authoritarian" ones in the West do. Actually, it is arguable whether in either case there was any "change of system," or an "end of history." The new democratic regimes will be able to resist and counter the exigencies of the world economy even less than their totalitarian predecessors.


Another example of ideological confusion is the currently fashionable "privatization," which is also identified with "democracy." Unfortunately, this ideologically promoted privatization is no remedy for the ills of the Central/Eastern Europe, any more than stabilization and privatization policy have been for the ills of Latin America and elsewhere. Indeed, during the present world wide recession, these privatization policies can only socialize and aggravate poverty further.

The current privatization craze is just as economically irrational and politically ideological as was the earlier nationalization craze. It makes very little difference whether an enterprise is owned privately or publicly; for all have to compete with each other on equal terms in the world market. The only exceptions to this rule are public enterprises that are subsidized by the state budget, and private enterprises that are also subsidized from the state budget and/or are otherwise bailed out "in the public interest." Well known examples in the United States are Detroit's Chrysler Corporation; Chicago's Continental Bank and Trust Company (at the time the eighth largest US bank); the Ohio, Maryland, California and Texas Savings & Loans; and even New York City. Moreover, in the market, public and private enterprises can both make equally good and bad investments and other management decisions. In the 1970s, (public) British Steel overinvested badly, and (private) US Steel underinvested badly. In the 1980s, both closed down steel mills over the public objections of labor. So did the private steel industry in Germany under a Christian Democratic government and the public steel industry in France under a Socialist government.

Privatizing public enterprises in the East and South now at bargain basement share prices that double next week on the national stock exchange is just as fraudulent a practice as nationalizing loss- making enterprises and paying for them above market value, or nationalizing profitable enterprises with little or no indemnification. This now you see it, now you don't game is all the more egregious in the case of enterprises in the East and the South which are now privatized and bought up with devalued domestic currency purchased (or swapped for debt) by foreign companies or joint ventures with foreign exchange from abroad. In sum, the privatization debate is a sham; it is far less about productive efficiency than about distributive (in)justice.


At first sight, it is curious how free market "capitalism" and electoral political "democracy" are now fashionably identified as though they were inseparable if not indistinguishable. On further consideration however, this new fashion may be little more than a way to sell more "capitalist" market inequality and disempowerment dressed up as "democratic" self-determination.

Like money of course, electoral democracy appears very desireable, especially when one does not have any. Then it is easy to appreciate the coming of elections among multiple parties and a freer press to debate political and other options, etc. This is particularly the case in the "Socialist" East, where oppressive Communist Party bureaucracies and foreign domination have hamstrung economic development and political expression. The return of electoral democracy is also welcome in those parts of the South, in the Americas and Southeast Asia, where military or other authoritarian regimes have run the economy into the ground and into a hole of debt. The human cost has been first tens of thousands assassinations, disappearances and torture, and then increased hunger, disease, infant mortality, crime, etc. A whole generation suffers from tragically reduced life opportunities. It should not be necessary to point out that all this has been quantitatively and qualitatively worse in the (capitalist) South than in the "socialist" East. However, the new democracies offer little hope to reverse this human tragedy.

In the face of this material world history, some people may well wish now to associate democracy with the free market and/or capitalism. In the East, most people associate capitalism with promises of a bright future. In the South, however, capitalism is associated with bitter experience past and present. In some countries, the dismal state of the economy again threatens the democratic state. Unfortunately, the Poles are already experiencing the same bitter fruits of market/ democracy (cum debt) as the Argentineans, Brazilians and Filipinos have in recent years.

On the other hand, the "successes" of the East Asian NICs and Japan have scarcely been associated with much electoral democracy. Japan has had elections, but the LDP has been unalterably dominant almost as long a the PRI in Mexico. Moreover, the LDP and PRI factions do not reflect alternatives of political choice as much as of personal leadership. South Korea, Taiwan, and Singapore have "prospered" under completely authoritarian regimes, which are only now beginning to yield in response to economic success. In Hong Kong, of course, there has been and still is no question or discussion of any kind of political democracy by either the near mainland Chinese or the distant insular British. The Hong Kong Chinese, per contra, demand democratic self-determination with their feet, if not with their voices and votes.

In the West, that is in North America, Western Europe and more recently in parts of Southern Europe and Oceania, political social democracy has been much less the cause than the effect of economic success in the capitalist market - and importantly so in the world capitalist market. These countries in the West have been able to afford the precious luxury of electoral political democracy only where and when the basis of their economic wealth afforded it to them. It is of course delicate and controversial to point out that without a regime of West/South relations based on "imperialism" and "colonialism" in the past and "unequal exchange" to this day the West would not have been able to gain and maintain its basic economic wealth, income, social democracy -- and therewith also political democracy. Unfortunately for them, the "socialist" countries in the East were only very moderately able to benefit from such inflows of income from the South. The reasons for this failure have less to do with the inadequacies of socialist planning at home than with their inadequate insertion in the world market abroad. As for the dependent South, it has long suffered economically, socially and politically from the support that it affords to economic development and political democracy in the West.

The Third World is of course the clearest case of the failure of electoral popular democracy to govern the material world or to implement its own economic policy. Where is the democratic governance over the material world or even of economic policy by, of and for the people of Argentina in the elected governments of Mrs. Peron, the Junta generals from Videla to Galtieri, and the elected presidents Alfonsin and then Menem ? All of them implemented one unpopular economic austerity policy or another. All failed to satisfy both the consumer desires of the people and the producer development of the nation/ country/ state. After an already decade and a half long crisis, in 1989 national income declined by another 10 percent and the people's income declined by 50 percent. In recent years, the share of wages and salaries declined from 50 percent to 20 percent of national income. Now the populist Peronist President Menem is imposing even more austere economic policies than his predecessor Alfonsin did.

In Peru, under the democratically elected APRISTA President Alan Garcia, national income declined by 20 percent in 1989 and the people's income probably by more than 50 percent. Is that the "democratic" governance over the material world by, of and for the people? The Peruvians voted against the IMF stabilization policy offered by the "shure in" candidate Vargas Llosa and elected the "dark horse" Alberto Fujimori instead. Dark horse indeed, for they got the "Fujishock" of their lives when the new president implemented the very economic policy his rival had threatened and the electorate had rejected. In Central America, the economic crisis has ravaged the economies of all countries about equally, irrespective of democracy in Costa Rica, more or less veiled military power behind the thrones of the elected presidents in El Salvador and Guatemala, or "Marxist" "socialism" in Nicaragua, which implemented "condicionalidad sin fondo" of its own accord, as observed above. Of course, the U.S. sponsored contra war helped shoot up the rate of inflation beyond 30,000 per cent a year anyway.

Then, the Nicaraguans were presented with a choice between continuation of conscription and the war (threatened by Bush against the Sandinistas) and money (offered by Bush to Chamorro). The Nicaraguan people chose money and peace. Yet, the winning side delivered only some of the peace but none of the money it promised. The Panamanian "elected" and American installed President Endara went on a lenten fast/hunger strike in the attempt to get the money he says he was promised for his people. For first due to the embargo and then to the invasion, Panamanians now suffer from 50 percent unemployment. Little wonder -- or is it? -- that the East Germans, like the Nicaraguans and any normal electorate, also voted with the pocketbooks. But to how much avail? They became a dependent economic colony of the West and got 2 million, going on 3 million, unemployed for which they had not bargained instead.

Why did all these electorates vote their short term pocketbooks? Because they had no better choice. Yet their Hobson's choice and their elected governments completely failed all these and other electorates. Why did and do all these governments follow essentially the same economic policies in the face of the same material economic circumstances? They all did so, because they had to, with the possible exception of the Kohl government in West Germany, which may have had some less costly options it declined to use. That is, these governments all had to do not what "the people" wanted, but what economic circumstances demanded. However, not simply the "national" economy and its wealth or poverty constraints on the exercise of the popular will was determinant for the policy "choices" that were and are made. It was and is first and foremost the dependence within the world economy which sets out the narrow margins of "democratic" choice and policy. So is there really a "democratic end (of evolution) of history"? Or does the electorate only chose the political leaders on each of a hundred odd "sovereign" national houseboats, which float on an ocean of changing economic currents and recurrent storm crises, over which governments have no control whatsoever? Even the steward and/or the passengers who might have rearranged the chairs on the deck of the Titanic had more "democratic" powers of self determinant choice by, of and for the people. However, on the Titanic 80% of fourth class passengers died; 60% of third class; 40% of second class; 20% of first class. The rich and powerful at least have a "democratic" first choice, both on the Titanic and elsewhere. Money talks louder than idea(l)s.

So when Fukuyama says that "we have to recognize that an important revolution is under way in the world, and in that revolution, ideas count," we should exercise a bit more care than he does to recognize just what ideas that may be and why they count. It is an ideological coverup to claim that what is happening in Germany and elsewhere is done first and foremost in the good ideological name of democracy or even secondarily in the bad ideological name of nationalism. Both ideologies serve to cover up both rank materialist motives and real material forces. In this regard as well, Fukuyama's thesis cannot stand up to the evidence - or even to much of his own analysis.

There is little material basis if any to expect significant improvements in these economic-political relationships in the world economy in the foreseeable future. On the contrary, material development in the world economy is likely to make matters worse in the short and medium/long run. As long as the debt burden continues and even mounts in the near future, the debt ridden economies in South will continue to suffer and the debt will continue to threaten their democracies. Alas, the same is true of the new or aspiring, but still debt ridden, democracies of Poland, Hungary, Jugoslavia and elsewhere in Eastern Europe. Any financial arrangement a la IMF, o even the commercial terms for the proposed new European Bank for Reconstruction and Development, can inevitably only maintain and aggravate these burdens and dangers. Such policies would extend the same burdens dangers on to other parts of Central and Eastern Europe and perhaps the Baltic Republics.

World economic material and labor saving long run development is furthering marginalization of ever larger parts of the Third World along the African way. However, industrial and agricultural progress and decline in the West are also marginalizing growing parts of its population into racial, ethnic and other drug and crime ridden ghettoes. Now that massive unemployment and increased regional differentiation and social polarization is also coming to the East, it too is threatened by the same kind of economic, social and political marginalization. Indeed, in Southern parts of Jugoslavia and the Soviet Union, not to mention Western and other parts of China, this marginalization is already making its mark.

So it is hardly the case that market and democracy, or economic and political freedom, always go together. In fact, the opposite could be argued equally well. In an electoral democracy, it is one man (now, fortunately one person), one vote. In the market, it is one dollar, one vote. That is, many dollars, many votes; no dollars, no vote. Indeed, those who have or can earn only few or no dollars at home are marginalized not only from voting economically, but tend to be also excluded from voting politically. It is no accident that the most marginalized poor vote the least in elections. In the United States they are 50 percent, and the homeless have no residence and therefore not even the right to vote.

Similarly, those who have no or earn only few dollars abroad, but only pesos or zlotys at home, are also marginalized both economically and politically in the world system, unless they now have marks or yen. The yearly "Economic" (really political) Summits of the Group of Seven (G 7) offer a vivid illustration of this principle. They illustrate it all the more so, since the G 5 only admit Canada and Italy into their circle by traditional noblesse oblige. Moreover, the charmed circle of real decision makers is limited to the G 3 governments or central banks of only the United States, Germany and Japan, with even those of Britain and France on the outside looking in. There is also a wider sort of consultatory circle of 24 OECD industrialized countries with some voice, but no vote. In the political economic councils of the world outside the UN General Assembly's talking chamber, the rest of (wo)mankind, however, who live in the "Third" and "Second" worlds in the South and East, have no real voice or vote.

What is worse, the market not only excludes the already dollarless from this political influence at home and abroad. The operation of the market is also generally both domestically and internationally polarizing to make the rich richer and the poor poorer -- and thus even more marginalized. The Bible tells us that this is not a recent fact of life, when it observes that "to those that hath, shall be given; and from those that hath not, shall be taken" even the little economic and political vote that they have. Of course, the market like a lottery does offer the opportunity to some, and the illusion to many, to win a better position in it, mostly through the exercise of some temporary monopoly power, legal or illegal, moral or immoral. That opportunity is what makes the market - and the lottery - so attractive to so many, including the losers. The latter, however also have one other political option to press their case to be heard: they can and do mobilize themselves through social movements to exercise another form of democracy.


Thus, the operation of the global economy precludes the exercise of real national sovereignty and the implementation of truly democratic decisions by the people, of the people, and for the people, especially in Third World countries. The reasons for this impossibility of liberal representative democracy are many, and we can here recall only a few, which are internal and external to the countries concerned.

Even the best of newly democratically elected parliaments can be no more than an ineffective talk shop if it's powers are limited by a constitution and/or a judiciary, as well as parts of the executive branch that are hold overs from a previous undemocratic regime. That is the case today in Chile for instance. General Pinochet deliberately had the Constitution written so that it would preclude the exercise of democracy. The judiciary is also a hold over from his dictatorship and continues to rule or threaten to rule all sorts of democratic initiatives to be unconstitutional or otherwise illegal. General Pinochet himself continues as Commander in Chief of the Army and has publicly declared that the Army is independent of and not subject to the control of the democratically elected president, not to mention the parliament. Just before leaving the presidential office moreover, General Pinochet also introduced changes into the administration of the economy in general and the Central Bank in particular, which intentionally and now effectively preclude both parliamentary and presidential influence over a whole series of vital economic decisions. However, this was only some icing on the cake; for the new democratic government in Chile, just as elsewhere, is in any case obliged to continue pursuing the selfsame economic policies, which were initiated by the undemocratic military predecessors.

Indeed, these specifically Chilean arrangements are only particular examples of widespread general limitations to the exercise of democracy by, of, and for the people. The most obvious general limitation is that imposed by the generals themselves. All around the Third World from the Philippines through South and West Asia, throughout Africa, and in Latin America armed military power continues to stand behind the new democratic throne. Democratically elected governments in Pakistan and Thailand were recently again overthrown by their armies. President Aquino in the Philippines and both Presidents Alfonsin and Menem in Argentina have suffered various military coup attempts. Civilian presidents, not to mention the legislatures, in El Salvador and Guatemala are powerless in the face of the effective power of their military forces. In Brazil and elsewhere in Latin America as well as throughout Africa, the options of any civilian government are ever conditioned and limited by the ever present threat of governing under a military sword of Damocles. That sword may fall again elsewhere as it did in Thailand and Pakistan. These military forces and their commanding officers were often trained by, and are still under manifold influence of, the Western powers. However even if they were not, these militaries would still be an arm of the anything but democratic economic elites in their respective countries. They did and continue to pursue economic policies, which are in their own and their foreign partners' interests. These policies are certainly not designed or implemented in the interests of the majority of the people or in accordance with the desires they express through their democratic votes. Certainly not the democratically elected parliaments and hardly even any democratically elected presidents or their ministers are in a position to pursue any alternative economic policies.

However, the greatest structural limitation to the exercise of democratic policy by, of, and for the people is their participation and place in a world economy, over which they have and can have no control whatsoever. To put it the other way around, effective democracy is limited indeed if it extends only to the formulation and implementation of relatively unimportant domestic political policy; and it is barred from effective intervention in the most important economic policy decisions, which are made outside the range of democracy by, of, and for the people. What is worse, the economic policy of others elsewhere not only conditions the economic policy of the government at home; but that foreign economic policy may also intervene directly in the political process and the very nature of the government at home.

We may briefly review only two related examples of American economic policy decisions, which had far reaching world wide economic and political consequences. The October 1979 decision by the Chairman of the US Federal Reserve, Paul Volker, to raise the rate of interest and thereby also to increase the value of the dollar was the single most important cause of the debt crisis and therewith the depression and "lost decade" of the 1980s in much of the Third World. The same decision also promoted the recession, which began in 1979 and helped elect Ronald Reagan to the presidency. By law, the American electorate and Congress, and even the American President, had and have no right to intervene in such a decision by the Federal Reserve. Law and political "sovereignty," as well as of course all economic reality, prevent any democratic or other influence by, of, or for the people in any part of the Third World on any such decision which is vitally determinant of the economic welfare and political options for its people.

The Reaganomic response to the 1979-82 recession at the American presidency and Congress then set the stage for the major events in the world of the 1980s and into the 1990s. Contrary to the ideology of "getting the government off our backs" and eliminating the US deficit and debt, Reaganomic Military Keynesianism increased the budget deficit, promoted the trade deficit, tippled the foreign US debt to $ 3 trillion, and already in 1986 converted the United States into the world's greatest foreign debtor. However, the pump priming demand created through heightened military expenditures and domestic and foreign borrowing for the same by the United States maintained afloat not only its own economy in the 1980s, but also that of the entire West and of the East Asian NICs to boot. The cost were borne unwittingly and unwillingly by the Soviet Union, Eastern Europe, the Middle East, Africa, and Latin America, among others. The world recession since 1979 and American economic policy already occasioned the decline in the Soviet Union's sources of foreign exchange through the export of oil and gold. Then, President Reagan's military spending for "star wars" and in support of "regional" armed insurgencies against the governments of Afghanistan, Ethiopia, Mozambique, Angola, Nicaragua and others outcompeted the Soviet Union into bankruptcy and currency inflation. Perestroika and its failure as well as the end of the Cold War were the economic and political results.

So was the "revolution of 1989" in Eastern Europe. Its "socialist" economies were caught up in the same debt crisis as Latin America and Africa, as we observed above. Eastern Europe suffered severe recession and Africa and Latin America severe depression in the 1980s; and both experienced sharp declines in their ability to compete in the world economy, if only because investment in new technology and human capital as well as social services were sacrificed to servicing the increased foreign debt. In all three regions, the authoritarian governments and regimes that [mis]managed this economic and therefore also political crisis became totally discredited. Then, they were or are now being replaced by "democratic" ones instead -- which have to continue to manage the same economic crisis. In the 1990s, severe economic depression is ravaging the Soviet Union and Eastern Europe as well -- without yet letting up in Africa and Latin America. China and India still escaped many of the consequences of the crisis in the 1980s. However, their economies nonetheless suffered as they opened up to the world economy. Thus, China and India are now in more critical positions and may still also be visited by serious recession or depression in the 1990s. Moreover, the renewed world recession since of the early 1990s can still turn into a depression in the West as well.

Thus, Reaganomics and Thatcherism not only were supposed to, but also did hit the poor hard, and much of the middle classes as well. However, the polarizing effects of Reaganomics, Thatcherism and their carbon copies elsewhere to make the rich richer and the poor poorer were not limited to any "domestic" or "national" economies. The consequences were world wide. In a single world economy, these are the costs borne by the weakest to support the benefits and policies of the strongest. Yet no national, let alone world, electorate or democratically elected national or world parliament was ever given an opportunity to chose between this world-polarizing economy and policy or any possible alternative thereto. Nor could liberal parliamentary democracy in scores of countries provide therefore -- and democracy in a hundred countries even less so!

To exercise any real democratic government by the people, of the people and for the people anywhere in the world, they would have at a minimum to have a vote for the American Congress and President, who make some of the economic and political decisions that vitally affect the interests of the peoples of the world. Yet, not even the "foreign" right to vote in American elections would be sufficient to afford democratic control. For not even American voters can control Federal Reserve economic policy; and now its policy is also subject to conditions set by the Bank of Japan and the German Bundesbank -- which in turn are also not subject even to their own electorates.

However, even the economic policies of the G7, the G3, or the G1 are not autonomous, let alone democratically controlled. For if they were or could be, these policies could and would prevent the recurring recessions and inflations, that they are "supposed to" prevent or at least ameliorate. In fact however, the course of the world economy is beyond the control of any and all policy makers, who mostly respond too little and too late and/or only make matters worse. [The Washington Post's former financial correspondent Bernard Nossiter so demonstrated in his Fat Years and Lean: The American Economy Since Roosevelt, reviewed in Frank 1991a]. If that is the sad record of economic policy makers in the center[s] of the world economy, economic policy makers in the Third World periphery - including the [ex] "second world socialist countries" - are a forteriori out to lunch when it comes to making and implementing economic policy.

Thus, the people or even their "democratic" government in any Third World [and ex-second world, now thirdworldizing] country lack the slightest control or even influence over the economy or economic policy at home, let alone abroad or in the world economy as a whole. So what sort of "democracy" is that, which does not afford the people control or even influence over the literally most vital events and decisions affecting their lives? This liberal electoral democracy in "sovereign" countries is still better than none at all of course, but it is not real democracy by the people, of the people, and for the people in Lincoln's sense. Nor can it be. This sort of democracy can however, especially when newly introduced after a long dictatorship, give some people a brief illusion of power and self determination -- until reality catches up with them, as it is already doing in Argentina, Poland, and elsewhere.


Thus, liberal electoral democracy is not the be all and end all -- even of democracy, let alone of history or its idea. Another increasingly important part of democracy are the non-party social movements, particularly in civil society, or what may be called participatory "civil democracy" (Fuentes and Frank 1990, Frank and Fuentes 1990).

In the absence of political democracy in the East and also but less successfully so in the South, people had massive recourse to civil democratic social movements to lay the basis for electoral party democracy in the first place. All the New, Civic, and other Forum movements in the GDR, Czechoslovakia, and Hungary sought to maintain their identity and independence from the new political parties. Yet all these movements were soon overwhelmed by the electoral process and the imperatives of running the state. Perhaps the blessings of multiple political parties (Hungary already has 50 of them!), elections and parliaments appear so important after so many years without them, that people tend to neglect the equally important other processes and institutions of civil democracy. In Latin America, the social movements had less impact on bringing forth the turn to electoral democracy. However, they have also survived more and better since the onset of these democratic governments; since they are more concerned with peoples' economic survival, the threat to which remains or even grows.

It remains to be seen, however, whether the electoral and parliamentary democracy now touted by Fukuyama and others can offer more opportunities for popular self determination than this participatory civil democracy did. It can be argued that the new de jure electoral and parliamentary state institutions de facto serve effectively to disenfranchise people in Eastern Europe and parts of the Third World, like the Philippines and South Korea, again after their massive exercise of participatory democracy. How much democratic self determination, contra Fukuyama, can these institutions guarantee and afford the people, especially if their economies are Third World-ized?

Therefore, it would be tragic now to abandon the conquest of this civil democracy to the blessings of the exercise only of political democracy through political parties, which contest elections for a government to run the state (as best it can under the external and domestic economic constraints).

For in the West and the South, civil democracy increasingly complements political democracy everywhere, precisely because of the limitations of the electoral process organized through political parties. Social movements arise and mobilize people for a myriad of economic, social, cultural and political causes and demands of the population, which elections and the government cannot provide or do not offer without the popular pressure exercised through this civil democracy. Indeed, it is again the economic crisis, especially in the South, which obliges people to organize and mobilize themselves in grass roots social movements. These movements promote participant democracy and alternative production and distribution to defend livelihood and identity against the ravages of the economy and the neglect or domination by the state. Of course as observed above, it was also first and foremost the economic crisis in Eastern Europe and the Soviet Union, which fuelled the social movements to demand and achieve some economic perestroika and political glasnost there. The need for the same or other social movements acting in and through civil society will also remain after the installation of elected governments based on political parties.

At the same time, such social movements in civil society, no less and often more than political parties in government, will also represent regional and ethnic or nationalist interests and demands. The best we can hope for is that each will recognize the others' equal right to existence within the political institutions of the state and the international community of states. The worst we can fear is that ethnic, nationalist, and chauvinist groups will go into renewed armed battle with each other in another process of balkanization and fascistoid authoritarianization to threaten us all. However, this resurgence of nationalist and ethnic authoritarianism would be the fruit of the aggravation of the same crisis in the world economy and especially in its southern and eastern sectors, for which economic privatization and political democracy are now being ideologically sold and bought as the finally sure fire snake oil remedies, when in reality there is no end to history.


Thus like money, democracy is very desireable, especially when one does not have any. However also like money, democratic decisions that are only in the hands of "them" and not "us" may also be used as instruments of oppression and exploitation. That is certainly the case when effective democratic control, like money, is monopolized by the few against the many. That is also precisely what the market does, and the world market a forteriori. The [world] market concentrates both money and decisions, democratic or otherwise, in the hands of the few at the expense of the many. The spread of political democracy in the South and East, however welcome for other reasons, is not powerful enough to impede, countermand, counteract, let alone to eliminate, the economic forces operating in the world economy. These economic forces are far more determinant of peoples welfare than their own decisions or those of or their democratically elected governments. Moreover, many of these world economic forces are largely beyond anyone's control. Some of the appeal to political democracy is a coverup for the helplessness to manage their own affairs, to which people in these democracies are exposed. Participant civil democracy in civil society is the peoples' answer and their alternative instrument of struggle.


Amin, Samir 19??. La Desconnection, Paris: La Decouverte. UK Ed at Zed ??

Bello, W. and ? Rosenfeld 1990. ??

Frank, Andre Gunder 1967. Capitalism and Underdevelopment in Latin America. New York: Monthly Review Press.

----- 1988. "American Roulette in the Globonomic Casino: Retrospect and Prospect on the World Economic Crisis Today" in Research in Political Economy, Paul Zarembka, Ed. Greenwich: JAI Press, pp. 3-43.

----- 1990a. "Revolution in Eastern Europe: Lessons for Democratic Socialist Movements (and Socialists)" in The Future of Socialism: Perspectives from the Left. William K. Tabb, Ed. New York: Monthly Review Press 1990, pp. 87-105. Also in Third World Quarterly (London) XII, 2, April 1990,pp.36-52.

------ 1990b. "No End to History! History to No End?" Social Justice, San Francisco, Vol.17, No. 4, Dec. 1990. Also ENDpapers 21, Nottingham,No.21,Autumn 1990,pp.52-71.

------ 1991a. Review of Bernard Nossiter's Fat Years and Lean: The American Economy Since Roosevelt, unpublished.

------ 1991b."The Underdevelopment of Development" Scandinavian Journal of Development Alternatives, June Published in Spanish in an expanded version as El Subdesarrollo del Desarrollo: Ensayo Autobiografico con una Blibliografia de sus Publicaciones Caracas: Editorial Nueva Sociedad 1991.

------ 1991c. "The Centrality of Central Asia" Studies in History, New Delhi, forthcoming.Also Comparative Asian Studies, Free University Press for Center for Asian Studies Amsterdam, forthcoming.

Frank, A.G. and Fuentes, M. 1990. "Social Movments in World History" in S.Amin, G. Arrighi, A.G. Frank & I. Wallerstein Transforming the Revolution. Social Movements and the World- System.

Fuentes, M. and Frank, A.G. 1989. "Ten Theses on Social Movements" World Development XVII, 2, February.

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