As soon as the subject of underdeveloped countries comes up, a whole series of recipes is put forward, from both the left and the right, aimed at ‘getting them out of it’. On the bourgeoisie’s side, emphasis falls on the expansion of markets, the free movement of capital, and international cooperation, whilst recalling the history of the development of capitalism in the advanced countries. On the national-communist side, the same principles are put forward but with, as a bonus, the magic potion of the ‘socialist’ example; the argument carries weight, moreover, as it comes from the champions of national independence (proletarian internationalism being there merely for show). Furthermore, as Russian imperialism lacks the means to sustain its policy, the military threat is, all things considered, less severe than that posed by the United States. But this advantage has its downside, for what the backward countries lack most is capital, and capital is not the main source of wealth in the Eastern Bloc countries either; similarly, the masters of the world market are neither the people’s democracies nor the USSR, but the Western countries and Japan. Ultimately, backward countries – when they have the opportunity – strike a skilful balance between the different imperialisms and borrow from each the recipes that they lavish upon them, albeit not without ulterior motives.

If there is one area into which we shall not venture, it is that of the recipes for development. Not that we consider it labour lost, that a backward country is doomed, in the present context, to remain backward; under certain very specific conditions, the USSR and then China succeeded where all others failed, and it is precisely this that enables them to present themselves as ‘models’ of development. History may well offer similar opportunities to certain backward countries. But what has become most evident, most clear to us, is that in each case it was a matter of an accumulation of a capitalist type which – for Russia – swept away the proletarian revolution after a few years and which – for China – consolidated the great-power policy of the Maoist national-communists. This point has been sufficiently developed in our party work for us not to revisit it here. It is not, for us, a matter of practising defeatism, but of taking a dispassionate view of reality.

For communists, the problem of development cannot under any circumstances be viewed from the economic angle, but only from a political angle; in other words, one must always ask whether economic development advances the political interests of the proletariat in all countries. Here, everything depends on historical conditions: until 1870, the victory of the bourgeois revolution in Europe enabled the capitalist economy to free itself once and for all from the last fetters of reactionary monarchist society; the European proletariat was thus able to sever all ties with the petty bourgeoisie and the liberal bourgeoisie once and for all. In truth, the success of the proletarian revolution in Europe would have spared all backward countries their long march toward a hypothetical development: the industrial might of the European countries would have come to their aid, not through the usual mercantile means, but through an unequal exchange to the benefit of the backward countries. The outlook was exactly the same after October 1917, except that the revolution had broken out in a backward country which was desperately awaiting aid from the proletariat of the advanced countries: the solidarity affirmed by the Baku Congress with the peoples of the East was likewise a part of the prospect of a close link with the Western proletariats. The failure of the Western revolution swept away these hopes, and from then on, the era of properly national revolutions for political and economic independence opens: Russia for the Russians, China for the Chinese, Asia for the Asians, etc... Proletarian internationalism has been replaced by a sprinkling of independent nation-states, respecting territorial integrity and major international agreements: this is the very image of the bourgeois world that we see before us today. Under these conditions, the national independence struggles of the colonised countries lost their revolutionary character in the short term, as there was no Communist Party to take them up as its own cause; on the other hand, with a view to a distant proletarian revolution, national independence offers the possibility of implanting a local class struggle, a workers’ movement, and the struggle for power and the Soviets. What is therefore important for us, as communists, is to follow this evolution without ever falling into the trap of supporting anti-imperialism. The greatest imbecility – which all left-wing movements blithely share – is to claim that local setbacks suffered by an imperialist country can weaken imperialism. If American imperialism were defeated, in Indochina for example, one of its French, Japanese, or Chinese cronies would immediately fill the vacuum; this might alter the balance of power, but would in no way undermine global capitalism.

On the other hand, the current struggles against imperialism are of great interest: they shake up archaic social structures, modify relations between social groups, forcibly introduce the market economy and money, and, finally, they can provoke, in the imperialist metropolises, a reaction from the working masses. This brings us back to the necessary link with the proletariat of the advanced countries, all the more so as nowhere in the Third World does an autonomous reaction by the working class yet clearly emerge.

In analysing further on the relations between imperialist countries and backward countries, we have therefore sought to highlight the close interdependence that exists between the two worlds, and which confirms that the political fate of the proletariat will be decided simultaneously in both. This great path, this great prospect, can only be realised if the revolutionary masses prepare for the fall of capitalism in its most advanced bastions.

A) Global flows – When considering the overall flows in private investment in the advanced capitalist countries, as shown in Table 1, we must draw two lessons:

1) Throughout the two imperialist world wars, the export of finance capital has increased considerably and has penetrated even the most remote territories. The unity of the global capitalist market is accomplished. More precisely, the premature interruption of the First World War due to the Russian proletarian revolution slowed the pace of accumulation and therefore of capital export (+$9 billion between 1914 and 1938). The Second Imperialist War came to complete the work of the First by destroying an enormous mass of capital and men: the expansion of finance capital felt the effects of it (+$27 billion between 1938 and 1962).

2) Imperialist wars effect a re-division of the world between victors and vanquished. The great victor of the past half-century will have been American imperialism: a victory sketched out after the First World War, a triumph after the Second World War. The great vanquished are the old European colonial powers (Britain, France, Belgium, etc.). ‘The victory of democracy over fascism’, as the French Communist Party and its leftist descendants call it, was in fact the triumph of the most militarist and fascist country in the world: America. Its share of total private investment abroad rose from 8% in 1914 to 65% in 1962. Meanwhile, the Western ‘democracies’ disinvested, both from other advanced capitalist countries and from the colonies.

1) General trends – Backward countries are by no means isolated from global capital flows. Table 2 shows that net capital inflows to backward countries more than tripled between the average for the 1950s–60s and that for the 1960s–68; the share of private capital rose from 30% to 45% in 1968, and its volume quadrupled, whilst that of public capital tripled.

Whatever the causes may be, the penetration of money-capital, which has accelerated since the end of the Second World War, has, almost across the board, dissolved the old natural bonds of backward economies and has led to the poverty, expropriation, and proletarianisation of the agrarian masses.

a) Public capital. – There is, of course, no point in distinguishing between flows of capital on the basis of whether they are public or private; we do so merely to facilitate the exposition.

Public capital generally serves:
     – to step in for private capital in the sectors where the latter is lacking (due to insufficient profitability);
     – to focus on the stability and general development of capitalist society (education and training, subsidies and loans, transport infrastructure, the armed forces, etc.), even if this means sacrificing certain bourgeois strata.

This general role of public capital is found again in the movement from the advanced countries to the backward countries, namely:
     – Repayment by backward countries of loans previously taken out and now due. 60 per cent of public loans are used to repay other loans;
     – Orders for ‘goods and services’ placed with the firms of the imperialist countries in exchange for long-term government loans.

These public capitals are known under the cynical name of ‘aid’ or ‘donations’. For the narrow-minded petty-bourgeois, the very acme of ‘aid’ is ‘multilateral aid’, which comes from international institutions such as the IBRD, which the Americans control. ‘Aid’ furnished in this form accounts for only 10% of public ‘aid’, compared with 90% for ‘bilateral aid’, which is more openly tied to a certain number of economic and political conditions. By way of illustration, here are some authoritative statements on multilateral ‘aid’:
     – Kennedy: ‘Helping underdeveloped countries to modernise and safeguard their political independence, that is to say, to strengthen their ties with NATO’.
     – E. Black, Director of IBRD: ‘The three main benefits for American business are: foreign aid immediately provides significant markets for American goods and services; it promotes the development of new overseas markets for American companies; and it fosters the free-enterprise system in recipient countries, within which American companies can thrive’.

It should be added that, today, all public ‘aid’, wherever it comes from (whether from the USA or the USSR), rigorously pursues the same type of aims. Future aid from advanced socialist countries can only be unequal, that is to say, to the exclusive disadvantage of those same advanced countries, without taking its market value into account.

Within public aid, the proportion of long-term loans has been steadily increasing (25% in 1960, 35% in 1965 of new investments): this is hardly surprising, given that backward, heavily indebted countries are unable to meet their loan repayments and are forced to seek debt moratoriums. By way of example, here are a few countries which, between 1956 and 1968, had to ‘consolidate their debt’, that is to say, request a grace period:

– Brazil: 2 times, totalling 500 million dollars
– Turkey: 2 times, totalling 470 million dollars
– Ghana: 2 times, totalling 270 million dollars
– Indonesia: 3 times, totalling 500 million dollars
– Argentina: 3 times, totalling 810 million dollars

Tables 3 and 3a show the continuous increase in the external public debt of the backward countries. Overall, annual repayments amount to approximately 9.5% of the total value of exports from backward countries; in other words, this amount must absorb the bulk of the profit realised on these exports. However, this is merely an average, and for 1968 the World Bank reported the following rates:

– Over 25%: Brazil, Argentina, Indonesia,
– 20 to 25%: Mexico, Tunisia,
– 15 to 20%: India, Pakistan, the U.A.R., Yugoslavia,
– 10 to 15%: Colombia, Peru, Chile, Costa Rica, Paraguay, Uruguay, Turkey, Ghana.

We can therefore see that it is the most developed countries – those making the greatest effort of accumulation – that have the highest rates of indebtedness: under the capitalist system, and in the imperialist era, poverty is indeed a vicious circle!

In 1967, the World Bank declared that ‘servicing past official debt already cancels out 2/3 of official capital flows to developing countries’. The same source went on to specify the percentage of new public loans allocated to debt repayment:

– Latin America: 87%
– Africa: 73%
– East Asia: 52%
– Middle East: 40%

And it forecast for 1977, respectively: 130%, 121%, 134%, 97%!

The same experts estimate today that in 30 years’ time, if loans are granted at a rate of 3% over 25 years plus a 5-year ‘grace period’, and if the total exports of the backward countries increase by 5% each year, the ratio of repayments to export receipts will be... 40%! It should be emphasised that an interest rate of 3% is very low in the current circumstances, and that an average increase in exports of 5% is the maximum achievable for most of the ‘major’ backward countries. This prospect is certainly cause for celebration amongst the dispossessed masses of these countries! Above all, it must strengthen the conviction of all revolutionaries who know that only a proletarian revolution in the advanced countries can put an end to such a tragedy.

b) Private Capital. – Contrary to what happens in the advanced countries, foreign private investment is located in large part in the extractive industries of the backward countries. Table 4 provides evidence of this.

Nevertheless, new investment is increasingly being channelled into the secondary and tertiary sectors. Indeed, sources of raw materials are now well known and exploited: they no longer require significant new investment from imperialist countries. Furthermore, as economic difficulties provoke social discontent, many governments in backward countries cheaply give themselves an anti-imperialist tinge by nationalising all sources of raw materials and the equipment used to extract them; in the ‘worst’ case, foreign companies lose everything – usually in return for indemnities and compensation – whilst in the ‘best’ case, they take a stake in national companies and limit their investments to a minimum.

Other sectors are therefore beginning to be favoured, and all backward countries are, in fact, encouraging foreign investment in these sectors by promulgating ‘investment codes’. Table 5 gives an idea of American investment abroad by type and destination. In 1954, the United States was investing 6% of its private investment in the manufacturing industries of the backward countries; by 1958, this percentage rose to 10%, and by 1964 it stood at between 15% and 20%. Does this mean that the imperialist countries are aiding the development of the capital goods sector? It is well known that one of the characteristics of underdevelopment is the predominance of the consumer goods sector over that of capital goods. Yet this is precisely the case; foreign investment is concentrated in light manufacturing, assembly plants and services; these activities are often export-oriented and, indeed, a glance at Table 6 reveals that at least 80% of manufactured exports from backward countries consist of consumer goods or office equipment.

Foreign capital has no interest in promoting the production of capital goods in backward countries, if only for reasons of the market and competition; when it does so, it joins forces with national capital by setting up companies with distinctly native-sounding names... It often holds a minority stake, as it brings with it patents, equipment, supplies, technology, and technicians, which make it the real master. One need only consider the damage caused to the Chinese economy by the abrupt withdrawal of Russian assistance! Generally speaking, moreover, industrial concentration requires vast nearby markets to dispose of the output: yet such markets do not exist in backward countries, and foreign investors are by no means prepared to wait decades to finally see their investments become profitable; in the meantime, it is necessary to explore the markets of advanced countries, which have protected themselves very effectively against this sort of eventuality. Consequently, this type of investment is confined to the primary processing industry, which, thanks to low cost-prices (advanced automation and very low wages), can supply certain Western trusts; for example: the enormous FRIA complex in Guinea and the Annaba steelworks in Algeria. The Brazilian complex of Minas Gerais is an exception in that, having been financed from abroad, it has integrated into the local economy thanks to the pre-existence of already developed regions; but in most cases, once this type of investment has been made, the balance of payments of backward countries is thrown out of balance by the repatriation of profits, which occurs sooner or later and is all the more significant the greater the initial investment was.

We have discussed on several occasions the association of foreign capital with national capital, which makes it possible to reduce the amount of the former and to present them as ‘collaborators’ in national development. Table 7 shows, from the angle of ‘portfolio’ investment and above all of export credits, the role of other sources of financing.

To assess the scale of the profits realised on foreign investment, we must turn to the American statistics, which are the most comprehensive: Tables 8 and 8a.

We can therefore see the enormous mass of repatriated profits, whose comparison with new investments reveals, for the USA between 1959 and 1965, a positive balance of 3.5 billion dollars. For this period too, we see that profits withdrawn from Latin America and Asia are being used to finance the investment flow deficit with Europe! It should also be noted that the flow with Europe has itself now reversed, and that repatriated profits exceed new investment.

Foreign investment, according to the Tricontinental Conference, results in the outflow of sums of money 2 to 3 times greater than the initial investment; for the decade 1950–1960, figures of between 20 and 25 billion dollars are often cited for the repatriation of dividends and interest toward the imperialist countries.

For 1960–1962, the UN had calculated that this burden, relative to the foreign exchange reserves of the backward countries, amounted to 17% for Latin America and 33% for Western Asia.

When we speak of repatriated profits, it follows that those left in the country are reinvested: in this respect, foreign capitalists prefer reinvestment in the country to the injection of new capital, and this is notably what explains why private investment has remained virtually stagnant, whilst its cumulative total has not ceased to grow.

Table 8a provides some profit rates for illustrative purposes: one may gauge their magnitude in the mining and petroleum sectors, which will come as no surprise to anyone.

According to the American government, the rate of officially repatriated profits is said to have been 15.7% in 1964 and 14.6% in 1965; the Pearson report cites an overall net average of 10 to 12% on capital, to which the non-repatriated amounts would obviously need to be added.

According to the Revue de Défense Nationale of May 1970, ‘the average profit of the oil industry in the Middle East is 24%, compared with a global average of 12 to 13%’. The rates of profit obtained are therefore generally high, whereas the initial outlays are rather small and quickly recouped.

Table 9 thus shows accordingly that, for American non-financial corporations, income from overseas investments as a proportion of their total profits rose from 10% in 1950 to between 20% and 25% in the 1960s. This growing mass of capital enables the companies concerned to offset the tendential fall in the rate of profit: however, it must be emphasised that when the mass of repatriated profits is greater than or close to the capital exported, the resulting increase in capital on the national market accelerates the general fall in the rate of profit; hence the need to conquer new foreign markets in advanced countries.

To conclude on this point, that is to say, to show to what degree foreign investment can be remunerative, here is what a certain W. Salant reveals: an average American direct investment of $1,000 generates a return of $106 in the very first year, $214 by the end of the 10th year and, through the play of successive returns, the initial outlay is amortised for the investor in five and a half years!

2) Developments in the major advanced capitalist countries. – The exploitation of backward countries represents, for imperialism, an inexhaustible source of profits and provides political clout in the permanent struggle for the division of the world. Viewed from this perspective, the respective position of the major imperialisms has evolved significantly since the beginning of the century.

Table 10 shows us that it will have taken American imperialism two world wars to bring down the old colonial powers. Between 1914 and 1962, the share of the cumulative amount of American private investment rose from 8% to 65% of total foreign investment. In contrast, France and Germany have lost or divested virtually everything, whilst England regressed steadily. The picture this table gives is fundamental because it clearly establishes each country’s position: whatever the development of certain advanced countries in recent years may be, it must not make us lose sight of the colossal role played by American investment in both backward and advanced countries. Indeed, on consulting Table 11, it appears that Italy, Germany, and Japan have significantly increased their share of investment in backward countries over the past 10 years, to the extent that – in 1968 – they together account for 25% of annual net inflows of public and private capital toward these same countries, compared with 10% in 1957. Extrapolating the curve as it stands, we could say that by 1980, the USA will export 35% of total capital and Italy, Germany, and Japan 40%: even if this were to happen, it is the total mass accumulated by the USA that would still tip the balance in its favour, particularly as these tables take no account of on-the-spot reinvestments, which are all the more substantial the greater the initial investments – which is particularly the case for the USA. But in reality, the evolution of direct private investment in backward countries shows that not only is the USA not slowing the latter down, but that its annual share is constantly growing! And this is despite the fact that Italy, Germany, and Japan have seen their share rise from 3% to 16%: it would appear, in fact, that their progress has been made at the expense of the old colonising powers, whose spoils they divide among themselves, such is the extent of American dominance in certain sectors.

France has retained numerous links with its former colonies in Africa and Asia (Cambodia), and whilst its global share has fallen from 17.4% to 11.6% in terms of public and private capital, it has retained its position (15%) in annual direct investment in backward countries. In 1968, France was therefore, and by far, the second-largest exporter of capital toward the backward countries; but it lagged far behind the USA: in 1956, the amount of its private investment represented a third of that of the USA; by 1968, it represented only a quarter. Whilst the USA increased its private investment by 25%, France increased its by only 5%. This puts the ambitions of French capitalism with regard to the ‘Third World’ into their proper perspective.

We had very little data available to analyse trends in capital exports by destination. Subject to further studies, Table 8 showed that American companies channelled 34% of their capital to Latin America, 37% to Asia, and 29% to Africa. As for public capital, Table 12 presents a very different picture, since between 1964 and 1967, 67% of it was channelled to Asia; this corresponds closely to the American offensive across the whole of South-East Asia, an offensive that aims to completely eliminate the remaining influence of Great Britain, France, and the Netherlands in that sector. Indeed, the average ‘net public aid’ provided by the USA between 1964 and 1967 amounted to $732.34 million, which is 8 times more than the combined amount from France, England, the Netherlands, and Germany. Only Japan’s net public aid (148.92) comes close to that of the USA. Based on the figures given in this table, we can broadly outline the directions taken by public capital from the main advanced countries, which may be summarised as follows:
     – Germany has channelled its public capital mainly into Asia (65%) and, more particularly, into Arab countries (50%).
     – France and Italy have channelled the bulk of their public capital (over 90%) into Africa.
     – Japan: East Asia (65%), India and the Middle East (30%).

It appears that 75% of public capital exported to Latin America is American capital: its share stands at 69% for Asia, 44% for North Africa (France = 42%) and 25% for Black Africa (France = 29%, England = 21%). In total, more than 60% of public capital exported to backward countries is American capital.

C) Conclusion. – When analysing capital flows toward the backward countries, it is important to emphasise their significance in terms of volume. Admittedly, these flows are far more substantial between advanced countries alone; yet their impact on capital-poor countries is far more serious, from both an economic and a political point of view. We have given a glimpse of this by showing the formidable indebtedness of backward countries; a country-by-country study would show that foreign capital – public and private – has never been concerned with developing the economies of these countries, but only with serving the interests it represents. Moreover, the bourgeois world openly acknowledges this view, whilst claiming that it is possible to reconcile divergent interests. Not a year goes by without some backward country or other being held up as an example, whose growth rate is supposed to lift the population out of its poverty; this kind of prophecy has generally been short-lived, and on this point we refer the reader to the article ‘Imperialism and Underdeveloped Countries’ published in issue No. 80 of Le Prolétaire. In fact, the objective the imperialist countries pursue is as much political as it is economic. The American economist Samuelson, speaking of American ‘aid’, declared:

‘Has America obeyed, in doing so, considerations of altruism or by long-term concerns? Given that there are 15 non-Americans for every American on the globe, the future of the United States will be closely conditioned by the stability of an international order that is not hostile to Western society; it is therefore incontestably advantageous for the United States to help other countries develop’.

All the bourgeois quibbles about ‘aid’ to underdeveloped countries ultimately boil down to this: consolidating or imposing governments favourable to the imperialist metropolises in order to facilitate financial and commercial exchanges that are advantageous to the latter. Competition between imperialist countries over the division of backward countries is therefore a political struggle aimed at consolidating their economic power beyond their own borders.