THE POLITICAL ECONOMY OF RAW MATERIALS
AND DEPENDENCE THEORY,
GEOPOLITICS REVISITED
Helge llveem
International Peace Research Institute, Oslo
Paper presented to the
XIth International PoliticaZ Science Association Congres ,
Edinburgh, 16-22 August 1976
The problem
The 'resource crisis' no doubt has given increased weight to
the spatial dimension of the global political economy.
I am
referring to the perception of a crisis, not to its 'objective
existence', which is disputed.
And I am referring to the per-
ceptions which are held in the dominant, center economies of the
international system.
Concern about dependence on foreign supply of natural
resources - land, energy, or raw materials - is far from being
a new phenomenon.
The concern has been found salient enough
to (partially) explain why big powers have gone to war, governments have decided to colonize or re-colonize whole subcontinents, and corporations have organized or taken part in the
overthrow of locally elected governments which they have seen
as a (potential) threat to supply security.
Any of such
measures as have been taken, or have been contemplated, have
been defended on the ground that they were last-resort action
against attempts to 'strangulate' the supplied nation (Kissinger
1975) or to maintain an open international market of resources
which is seen as a prerequisite to peace (Leith et al., 1943).
The concern probably has been particularly manifest in
periods of crisis, such as the 1938-45 period, the Korea war
and the 1973-75 p e r i o d s . T h i s has led many observers to the
conclusion that in such periods the crucial problem has been
that the normal functioning of the market has been invaded, in
fact upset, by the political system:
become 'politicized'.
resource flows have
It is true that resource markets in the
periods referred to have been subject to processes and structures that have largely imposed themselves on the market
mechanism.
What is hot correct is that this superimposure on
the market of the political system is particular, is only true
in periods of crisis.
Ever since the first empire of some size
and duration (at least the Roman)
set up external supply lines
that made peripheral imperial nations resource areas subordinated to the imperial center, the market has been 'rigged'
by politics.
It is an ahistorical, often superficial and at .
times perhaps
'structure-blind' perspective that have made
observers overlook this fact.
- 2 -
This point, in the present context
mostly treated for its
theoretical and methodological importance, is the first proposition to be brought out in this paper.
do with a reverse phenomenon:
A second point has to
the tendency to 'politicize'
certain key concepts and thus make them practically inoperable
in linking theoretical empirical analysis to policy proposals.
I am thinking in particular of the term 'interdependence', which
is presently being used - purposedly or not - to represent
phenomena that are often best analyzed and understood in terms
of dominance or imperialism theory.
To some extent, the same is
true with the use of the dependence concept.
I wish to point
out certain possible ways of overcoming these patterns of
theoretical underdevelopment that follows from the use of
dependence terminology for purely political-demagogical purposes.
In so doing, I shall make a third point of analysis that
relates the notion of a crisis in resource flows during the
first part of the 1970s to the question of dependence.
As the
present paper is part of a much larger ongoing study, I will
2)
make my observations in brief.
to a (necessary) logical order:
They will be made according
first, a framework for the
analysis of market power is presented; then the problem of
dependence is raised; and finally the notion of a crisis and
possible changes in the power structure of raw material markets
are taken up.
Market power and dependence
In both economics and politics textbooks, it is rather usual
to find a strong bias toward
seeing the state as the sole
possessor and executor of power to manipulate the market
mechanism.
Thus, in reporting between-the-wars turmoils in
resource markets, even an outstanding political economist like
Hirschman sees "national sovereignty over commercial policies"
as the main problem (Hirschman, 1945).
Once checked, the
abuses of trade for power policies would be gotten rid of.
Decades before, other analysts had established the firm as a
chief actor, operating monopolies or oligopolies in their
respective resource markets (Bukharin, 1 9 1 5 ) .
Below, some data
- 3 -
are presented to support the conception that this is at least
as true of the present international economy (Table 1 ) .
A similar neglect of the basic facts - to which I return is implicit in Bergsten's portraying of the present raw
material-producing and -exporting peripheral countries' attempts
to associate over their market interests as a 'threat' to the
industrialized world, or the center (Bergsten, 1973).
The fact
that a major share of the supply of raw material originates in
the Third World does not mean that a capacity to influence
markets, as in a monopoly situation, automatically is there.
Geopolitics means, put briefly, that at least political organization is added to space, to the geographical dimension:
the
location of supply sources.
The fact that a small number of firms account for the major
share of supply flows internationally (and nationally) is a much
more important piece of knowledge in this respect.
In order for
a raw material commodity to have a value in the market, it will
pass through at least the following 'stages':
prospection (the
identification of its existence and location), extraction or
production, marketing, transportation, distribution.
Depending
on the context in which it appears, it may in addition be
refined, further processed, stocked, retransported, redistributed, etc.
In this product line, peripheral countries may
share in the control at some stage(s).
Due to the fact, among
others, that these countries historically have been subjected
to specializing at the extractive level, been directed to a
monopsonistic market (colonial mother-land and/or firm, or
sphere of interest) and only recently have started to change
this situation through nationalization, going into processing
and the like, they find themselves in an asymmetric relationship
vis a vis their counterparts, be they transnational firms, big
center country governments, or rather both.
The firm, more
often than not, will share in, sometimes practically exclusively
enjoy control at all these stages, because it has integrated
operations in all of them in one global organization under one
single command.
And in addition, it often operates a cartel
with other firms in order to regulate whatever controversy, or
challenge from third parties, may occur.
Table 1.
,~
Concentration in orne selected primary commodity
industries and selected areas
Commodity IArea (market)
. Alum 'niuml } ~vorld
IYear
Ifirms
6
6
6
4
3
4
1
G"966
1966
19G6'
United States 1 1972
United States 1972
1972/73
Japan
Bolivia
I
Zinc 2)
Tin 2 )
II
li"1 ket share
of these firms
ln area, 9"
NO. of
I
Copper 2)
Lead 2 )
-
,---
Nickell) ; \lJorld -/
Diamonctsl):World
Platinum
1)
i
iHorld
'
,1):\1
Zlrconlu,1l
: ·"or 1-'1~
Iron 3 )
2)
Bananas
2)
Cocoa
Coffee 2 )
Cotton
Meat
Rubber
Sugar
Tea
Tobacco
Rice
Vegetable
oil
J
Virtual
imonopolies
I
I '.
IUnited States 11970 I
~
1970-72
.VJorld
I
)VJorld
: France
1969
1969
France
4
United Kingdom! 1971
I
United Kingdom'
I
United Kingdom
'J
I
United States :1972
IUnited States ;1970
Iworld
11964
(~k:t economies)
jGermany F.R.
;196'7
:United States , .197?
I
World
1969
I
,
1
junited KJ,ngdom I 1969
I
i United Kingdomi1971
I
States
!1968
Uni te~
1
i
i
IUnited
I
States !1967
I
3
2
2
5
5
5
4
4
12
3
4
1
1
II
i
!'.
85
95
75
70
90
70
70
I
I Pr:i.nat'y
aluminium proc..
Alumina produc'ti.on
I Bauxite production
Refined copper
Lead smelting capacity
Zinc sD~ltin~ cap,city
(State Corporation)
I
I
I
I
I
(International Nickel Co. )
(de Beers)
(Rustenburg)
(v.Iah Chang)
54
Raw steel
68
40-60
90
Soluble coffee
Processing of green
25
coffe, linported
Ground coff.o
60
50
Spindles
25
Looms
Processed meat
56
Meat packing
23
New rubber
80
47
65
4
25
43
90-95
46
4
56
3
Level of
processing/
production
Refining capacity
Rice milling
1) H. Hveenl, "The Political Economy of Rm.J Hatcrials", ffilmeo, J'1arch
197~; various so~rc s referred to in the paper.
2) Data collected by the UNCTAD Commodities Division.
3) H. Erdenli & B. Real, L'internationalisation dans la
IREP, Grenoble, 1974, mimeo,
siderurgie~
- 5 Let us assume, then, that peripheral countries, individually
or rather in collusion, move into all (or the most important of)
these stages and set up transnational production, marketing and
distribution systems, as in particular certain Latin American
governments now wish to do.
In order to assess the consequences
of sucn an eventuality, it is necessary to make a distinction
between the various stages of the product line as operational
or consequential aspects of world-wide resource flows, and on
the other hand the strategic or influential aspects which are
technology, information, capital and organization.
The present
power of firms over global product lines is the result of fargoing past 'mixings' of finance with technological skills,
organizational innovation and information to establish operations
at those stages which were mentioned.
Apart from the recent
inroad by the oil-extracting countries into the financial part
of the system, there has so far been no successful attempts to
take a share of control over others.
Nor is the accumulation
of an oil surplus by certain OPEC members as yet having any
impact in
the direction of changing basic processes and
structures of allocation of financial power internationally, or
reallocating
financial capital.
These are some important reasons why the percentages of
market shares presently held by a small number of firms, practically all originating in big center economies, represent a
realistic picture of power structures.
Trends towards decon-
centration through nationalizations and vertical integration
into global product lines by peripheral countries are most
prominent in oil, bauxite and copper, extraction and refining.
Of approximately 350 cases of peripheral country take-over of
a foreign-owned subsidiary in food and raw materials between
I960 and 1974 (Un, 1 9 7 4 , a & b ) , a considerable number took
place in a handful of countries and involved various forms of
take-over, from private local business buying out a foreign
owner to full state take-over within an overall strategy of
socialization, not all of them representing any real change in
power.
Both operational and strategic aspects of market power are
related to actors:
governments.
firms, private shareholders, a landowner,
I propose, in addition, to introduce the concept
- 6 of systemic power, or, rather - since the term 'power' ought to
be reserved for actor-related behaviour - systemic aspects of
resource market relations.
By these I mean given (existing)
standards and levels of consumption, development, buying power,
etc.
that are historically determined and structure present
(and future) flows.
In other words, the very fact that most
of the production of peripheral countries, whether monocultural
or not, is marketed in the center economies according to their
level of industrialization, resource consumption and economic
growth rates, and tastes represents in and by itself an
important structural constraint.
Dependence and 'interdependence':
An attempt at
clarifying a theoretical and conceptual mess
From the point of view of a center economy - a center-based
firm or an industrialized country - dependence on the periphery
is first of all a matter of resource imports.
Dependence on
these areas'as markets for manufactured goods and as labor
reserves is, however, increasing.
Juxtaposed to this type of unilateral dependence is the
dependence of periphery societies on imports of technology,
skills, capital and other means of industrial development from
the center.
And out of two unilateral dependencies, linked to
each other as unit A depends on unit B for something and
B depends on A for something else and exchange takes place,
results
accordingly in a situation of bilateral dependence.
In the terminology of present-day political rhethoric:
'interdependence'.
This simplified view of the world is having its proponents
even in scholarly works.
It implies that there is equality
between A and B; that both parties gain from the exchange
because they each trade according to respective comparative
advantages and production complementarity; that their respective
production factor loadings - or their respective capabilities
to improve their comparative advantages - are constant and
immobile; that the value of the goods exchanged is set by the
market mechanisms; and that they both contribute to and enjoy
- 7 a non-conflictuous relationship to the extent they open up for
trade and reduce autarkic policies.
Because there are also
units C, D, etc. which similarly trade with A and B and
between themselves, the system is one of multilateral dependence:
units are not only directly dependent on other units,
but also indirectly.
We may retain the distinctions between unilateral, bilateral
and multilateral as well as between direct and indirect
dependence, as useful analytical tools.
It follows from my
observations on market power, however, that the content of
the 'interdependence' thinking, as represented above, is
theoretically unacceptable, or at least problematic.
Bilateral
dependencies are, as in the center-periphery case, often
'asymmetrical; the equality assumption, thus, is erroneous.
Partly because the relationship is asymmetrical at the outset,
as e.g. in a relationship resulting from post- (or neo-)colonial
rule, gains from trade are unequally distributed (Amln, 1 9 7 4 ) .
The assumption of equality, or mutually beneficial exchange,
has further been proved wrong by the terms of trade analysis
(Prebisch, 1950) and in pointing out the unequal sharing of
technology, skills, inter-industry linkages, etc. in a typical
center-periphery exchange, that of raw materials against
manufactures
(Singer,
1 9 5 0 ; Hirscbman, 1 9 6 6 ) .
Yet further
steps in the critical analysis of international trade has been
taken by the
'unequal exchange' theory which points out that
unequal sharing of benefits does not primarily take place at
the level of nations, but at the level of classes or labor
forces (Emmanuel, 1 9 6 9 ) .
In the dependencia tradition, finally,
a holistic perspective is applied, presenting the dependence
relationship as a complex structural-social system and
stressing its functional and all-encompassing effects on the
local (peripheral) society.
The dependencia tradition has been subject to increasing
attention outside Latin America in recent years, and some of
its basic propositions put to empirical testing.
I do not
propose to review these efforts in detail here, but confine
myself to the following observations.
Firstly, many efforts
- as pointed out by Cardoso ( 1 9 7 6 ) - do not recognize the fact
that dependence theory, as in the Latin American tradition (or,
8
I would say, in general) cannot be reduced to a few propositions
that are analyzed totally out of the context of a holistic
perspective as that which the theory represents.
Secondly,
when this is being done, it is quite possible to disprove the
proposition of what may be referred to as the
school':
'Gunder Frank
that growth in the periphery is impossible under
conditions of a close relationship of economic interaction with
the center.
This proposition has been erroneously generalized
to be valid for all peripheral areas.
Externally dependent
growth in the periphery is, thirdly, possible, but it does not
(automatically) mean development, since the internal distribution of the gains from growth in the present international
system normally will be skewed.
Which means, fourthly, that
,the dependence relationship basically is a political-structural
one.
The 'lucky minority' which does
share in growth, through
association with the center, performs a maintenance function
in the system and guarantees its stability, as far as its power
and will to do so goes.
Where it stops, or where it shows
signs of being weakened from within or threatened from outside,
the power of the center is mobilized.
This, as we know, may be done in a variety of different ways,
from improving the terms of trade of the peripheral country
in order to strengthen the local elite (and one's influence
on i t ) , to employing such strategic aspects of power as
referred to above, or going outside the economic sphere and
employing military or diplomatic sanctions - or threats of the
same.
International relations in raw material markets of the
recent decades present numerous illustrations:
the US govern-
ment agreeing to increase coffee prices in order to strengthen
Latin American governments during the Cold War (Howe,
1965);
Japanese firms securing raw material supplies through marketing,
management and/or export credit contracts with the supplying
country; one US firm employing its international financial and
organizational strength to pressure the Allende government on
the expropriation question (Moran, 197 ); the US government
using the military and political guarantee of the United States
and her comparative autarchy in energy to bargain a more conciliatory trade policy from her allies-competitors, Japan and
the EC (the Federal Republic of Germany)
(Knowles, 1 9 7 4 ) .
- 9 All this supports the observation that the term 'interdependence'
"... for those who wish to maintain United States
leadership ... has become the new symbolism, to be used both
against economic nationalism at home and assertive challenges
abroad"
(Bergsten, Keobane and Nye, 1 9 7 6 ) .
And it stresses
the necessity of analyzing dependence relations in a context
of political, military, and general economic factors, not solely
in^terms of market relations, even when the various aspects of
market power are taken fully into account.
Thus, what may be termed single-factor dependence, unilateral or oilateral, of a center unit on raw material sources
in a periphery (or in general, an external) area must be
analyzed in terms of what probabilities there are that such
dependence cannot be controlled for by any of those means which
are, or may b e , at the disposal of the center unit.
Unit C's
vulnerability in raw material markets is, thus, a function of
the probability that the conditions for its imports of raw
materials from P may be manipulated by P, or by some third
unit, without C being able to control against suck an
eventuality.
Moving to a two-factor dependence relationship, it is a
commonly held belief that not only is P dependent on C for its
industrialization (importing technology for exporting raw
raw materials), but C is dependent on keeping P as a relatively
non-industrialized unit in order that P will not become a competitor to C.
Such dependence on a 'classical international
division of labor' is believed to have led C to actively
preventing P from industrializing (the colonial situation) or,
if it could not be prevented (completely), to controlling P's
industrialization through direct investments or otherwise
assuming
command
of
6)
it.
Present trends to industrialize P with investments and
other forms of assistance from C is not necessarily a disproof
of the thesis that C is (to some extent) dependent on the
classical international division of labor.
The point is not
simply to maintain an exchange of raw materials against manufactures, an often too simplistic way of describing the
division, but to maintain growth and development inequality.
In strict economic terms, for instance, this would mean that
- 10 those sectors, or stages of the product line which represent
high value added are 'preserved' for C.
In more general terms,
they represent stages of opportunity for a fuller development,
of all the benefits that growth may give to a society and to
those living in
it.7)
This vertical dependence relationship
then allows industrialization to take place in P areas, but at
lower (subordinate) stages of refining and manufacturing.
In addition to the economic and social aspects of vertical
dependence, there is the technical aspect, illustrated e.g. by
the exclusive use of specific processes in transforming mineral
ore into metals and further downstream into first, second
stage etc. manufactured goods.
Their use is made exclusive
through patenting and licensing, aspects of technological
dependence.
These patterns of vertical dependence represent
a system of integration where raw material industries quite
often have ceased to be sectors or branches apart and have
become more or less integral parts of world-wide manufacturing
activities.
When, moreover, these vertical structures of
dependence are linked to the horizontal structure, that is
the spatial dimension, it will be seen for instance that a
major US producer of armaments is dependent on a Canada-based
firm for some of its secondary metal; this firm takes part of
its primary metal from a Norway-based firm which has its
refined mineral ore imported from a Caribbean-based smelter.
If the various units occupying some task in this structure
were independent sellers and buyers, there would have been an
intricate network of dependence relations, often approximating
bilateral symmetry, often again perhaps giving the P unit, at
the bottom of the vertical division of labor, a position of
strength.
Bilateral and unilateral, direct and indirect cross-
country relations of dependence have been assembled and integrated under one roof, that of the transnational firm.
The
dependence of a number of periphery countries, branches of
industry of semi-industrialized or smaller industrialized
countries on one or a small number of firms is a more visible,
more important pattern than the dependence of the firm on a
number of different units, performing their particular
functions linked to each other in one product line, but
practically non-integrated in terms of bargaining and decision-
- 11 -
making power.
This is 'organized dependence'
(Hemes,
1975).'
This structural asymmetry - the local affiliates of the
firm being ruled, as fragmented units within one system of
command - has been subject to increasing attention and concern
among the former.
There have been moves to form alliances
of workers within transnational firms, and as mentioned, there
are moves to form associations of producer-exporter countries,
the conditions and possibilities of which I am currently
investigating.
extent
They are still a far cry from reaching the
of collusion within and among firms.
They are also
appearing in a situation where firms for long have been conglomerating and diversifying their operations and thus become
more difficult to attack according to a material-by-material,
or branch-by-branch, approach and with sufficient information
about all the intricacies of its operations.
In addition,
peripheral units are still monocultural and export-oriented
and thus strongly dependent on being linked to the world market
through a big transnational firm, whether the link is in the
form of direct ownership by the firm, a joint venture or
minority participation, or a 'simple' trade relationship.
Changing dependence patterns?
A few empirical observations
Monoculturality means, inter alia, that employment and current
expenditure are both highly dependent on one product (except
for some minerals where production is labor-intensive).
Here
a tendency towards a decreasingly monocultural production
structure in the Third World can be observed, at an aggregate
level:
Whereas in the period 1 9 5 8 - 6 5 there were as many
cases of
increasing as of decreasing monocultural production in the
periphery nations, between 1965 and 1972 the number of cases
(of a total of 77 periphery countries) of decreasing monoculturality was twice
that of the opposite pattern
1 7 , 28 showing no change).
(32 against
In particular, periphery countries
specialized in coffee and cotton exports decreased their
dependence on these products.
At the opposite end, the crude
petroleum exporting countries were the main
monoculturals'.
9)
'increasingly
- 12 On the other side, dependence on imports of raw materials
of the 'big center economies on the whole seemed to increase
somewhat during the same period.
Most of this increase
originated in Canada, Australia and South Africa; there has
been an overall reduced relative dependence on the periphery,
although in absolute terms, in volume, imports to the center
have increased radically.
As an illustration I have assembled
some figures on the United States' import dependence in some
basic materials
(Table 2 ) .
As is well known, Japan is relatively much more importdependent in raw materials than are the United States, while
the EC occupies a position in between.
At least the following
elements seem to have been part of the strategy of Japanese
'firms, backed by the powerful Ministry of Trade and Industry
(MITI), during the last decade or so:
- to diversify into Australia, South Africa and other
resource-rich non-Third World countries; thus, Third World
shares in Japanese material imports fell from 90 to 45 percent
in the period 1 9 6 5 - 7 4 in the case of iron ore, from 75 to 45
percent for bauxite, and from 75 to 35 for manganese;
- in the Third World, Japanese firms to a considerable
extent seem to
have cashed in on a certain desire to diversify
away from excessive dependence on the United States and the
EC;
- the Japanese firms may have been less concerned with
competition from periphery industrialization; as an example,
while the US reduced (in relative terms) imports of copper and
tin alloys (the very two mineral industries in which the
Third World enjoy a considerable smelting and refining
capacity), Japan increased hers;
the relationship between the firms and the state has been
more harmonious and cooperative than in the case of the US,
where anti-trust traditions and cross-cutting pressures from
industrial lobbies have created more disharmony (Snyder, 1966)
(a difference, though, of degree, not a fundamental o n e ) .
Irrespective of these trends towards decreased (singlefactor) dependence on imports from the periphery, such
- 13 Table 2.
Basic (strategic) raw material imports of
the United States
A: Total imports
as a percentage of
consumption
B: Third World imports
as a percentage of
total imports
1972
1965
1974
Bauxite
92
100
100
Cobalt
100
n.a.
54
76
71
60
52
l.974
52)
13
Copper (unmanufactured)
16
Iron ore
32
a
49
100
100
100
'Manganese
78
93
78
Petroleum, crude
65
69
Petroleum products
21
SOl)
98
86
Tin
75
Unwrought 100
Alloys
94
100
88
8
Natural rubber
Unwrought
Alloys
C: Defense consumption as a percentage of total
consumption in US
7
Tungsten
70
n.a.
65
8
Zinc (unmanufactured)
47
n.a.
30
8
SOURCES:
A: Hearings of the Permanent
Subcon~ittee on Investigation
of
the Committee on Government Operations~ United states Senate,
Materials Shortages, Part 1, Sept. 1974.
B: UN and International Monetary Fund annual statistics.
C.
Annual Report of the Joint Committee on Defen e
Production~
Congress of the United States, 1975, delivered 19 January ]976.
1) Approximate, my estimate. Consists of Residual fuel (63%), Unfinishotl
oil (47%), and Distillate fuel oil (10% ~mported).
2) A part is imported as aluminum from
notably Canada.
'lor industrialized
coun~ries,
14
dependence still exists as long as any amount which represents
a difference to firms or to the national economy as a whole
has to be imported.
What that 'indifference margin' is, will
depend on several factors.
A public French commission put
the margin at which a supplier might have a bargaining option
at 30 percent of the total consumption of a buyer (Matteoli,
1975),
but the margin in fact could be much lower.
In par-
ticular, the sensitivity to drops in supply would be great in
strategic materials.
Take the case of US imports of chromite.
There are no
important reserves in the US, and current consumption is
100 percent imported:
about 40 percent from the USSR, another
30-35 percent from South Africa and Rhodesia.
The US government
has not applied sanctions on Rhodesian exports of chromite and
ferrochromite, no doubt out of
concern about this tight
dependence on politically sensitive supply lines
(although
the Rhodesian supplies do not amount to more than a 10 percent
of total US consumption).
It may be that the apartheid regimes of Southern Africa
enjoy some leverage vis á vis
the US government due to the
dependence of US firms and defense industries on imports of
strategic materials, but it may also be that such supplies are
what these regimes have to pay in order to have a sympathetic
US business and defense community in a world which tries to
isolate them politically.
In the case of black majority rule,
US vulnerability might increase.
In view of the fact that
considerable imports of strategic materials originate from
the main strategic-military adversary, the Soviet Union, and
the second main supplier is Southern Africa, there certainly
is some concern over import dependence in US government,
defense and business circles
(Table 3 ) .
In its relationship to the Soviet Union, the US government
at present probably will have no difficulties
in offsetting
mineral import dependence against Soviet dependence on imports
of US wheat and technology.
Or, the dependence that occurs
according to a single-factor analysis may be traded against
some non-economic factors, such as e.g. Soviet desires to
maintain detente, to keep the US from playing too friendly with
- 15 -
Table 3.
ensitive US imports of strategic
1 73 figures
Po l'l: ti ca lly
materials.
Import' as a per
cent age of total
national consumption
Chromite ore
Ferrochrome
Manganese ore
Ferromanganese
Antimony
100
Titanium metal
Falladium
Platinum
Vanadium
28
Source:
Percentage of total imports
originating from
(a) South Africa (b) Th
& Rhodesia
USSR
30-35
35-40
50
n.a.
15-20
40
Ore
110
Metal (China(Taiwan) 20)
33
71
35
51
100
100
41
25
35
35
15
15
60
See source C, Table 2.
China, and so on.
That is:
the dependence is no longer a single-
factor bilateral relationship, exchanging minerals for food, but
is transformed into (or perhaps originates from) a multi-factor
relationship, where political and other factors are added to
and influencing the economic one(s).
In some respects it may
even approach a multilateral relationship to the extent that
third parties play a role in determining the form and content
of the relationship between the two parties concerned.
Dependence relations are seldom stable; they tend to b e ,
though, under conditions of strong asymmetry as in a colonial
or neo-colonial situation.
One reason, in addition to those
already mentioned, is that there is not one, universal definition of the interest in, the value of a good or an event to
all actors concerned.
Political, economic and moral con-
siderations may give those who influence, or hope to influence,
supply lines and dependence margins differing interests.
This
makes it problematic to define dependence in terms of interests,
the value actor A attaches to having a certain material in a
given quantity from B.
10)
- 16
When we talk about strategic materials, which are 'strategic'
because they are considered as 'high interest' goods, we talk
about a certain society or a political system, the modern warfare system which means an armaments race which in its turn has
led to a colossal and rapidly growing consumption of minerals.
With disarmament, one would expect that the 'interest' in, say,
titanium would drop.
Further, present consumption levels of a
good number of other materials are a function of luxury consumption, rapid circulation of goods, in short of overconsuming
upper and middle classes in the center.
If people e.g. chose
massively to not eat excessively instead of trying to slim-fit
after having eaten, the interest in soybeans, meat, etc. would
similarly drop.
What is intended by these remarks is not that
an analysis of dependence in terms of interest or value definition is impossible or unfruitful, but that it ought to be
properly related to the social goals and position of those
whom it concerns; and that it should be dynamic, not static
as most analytical
efforts
so far have tended to be.
11)
Aspects of a 'crisis' and some center responses
Official government and business concern over sensitive supply
lines obviously took a big step
in 1973.
upward after the OPEC actions
Various ways of overcoming dependence on a periphery
which was perceived as increasingly uncontrollable were considered.
1.
At least five alternative options were brought up:
Reduce consumption of materials, and/or more recycling
(the ecologist t h e s i s ) ;
2. Concentrate on politically safe areas where resources are
still plentiful and organize a joint policy on resource
use among the industrialized nations (the IEA strategy);
3. Diversify supply into politically manipulable parts of
the periphery, that is countries that are rather unlikely
to join the producer-exporter associations;
4. Move into 'non-territories' such as the ocean bed and
start mineral extraction from there;
5. Increase use of own national resources (the
Independence' strategy).
'Project
- 17 -
Option 1 does not seem to be taken as seriously in government
and business circles at present as it was during the first
months after the 'oil crisis'.
The Club of Rome studies e.g.
presently seem to be more criticized than appreciated for their
predictions about resource scarcity.
Option 2 is probably more
operational, although it takes time before massive new investments in e.g. Australia yield results and the IEA is beginning
to function.
Option 3 is clearly practized, as for instance
shown by the massive new investments in Brazil, Indonesia,
etc.
12)
Option 4 is behind strong pressures on the US govern-
ment to allow or guarantee protection for mineral extraction
from the ocean before any international ocean bed regime has
been agreed upon.
It is believed, however, that the ocean bed
resources available (and even sub-economic at present) are much
overestimated.
Remains option 5.
far seems to be a complete failure.
'Project Independence' so
There are political,
economic and ecological constraints to putting this option into
operation, although the latter differ widely:
while Japan seems
to be bound to import a sizeable share of her material consumption indefinitely, the United States in theory could reduce her
dependence on imports considerably.
There may be
several reasons why this is not being done,
including domestic opposition due to fear of pollution, economic
reasons and lack of labor force willing to do the job.
No doubt,
therefore, options 2 and 3 are the preferred ones under present
conditions and for the foreseeable future.
One of the main
reasons why, is of a political nature (I base the suggestion
more on logical reasoning than on empirical proof, though):
As I have shown above, dependence on imports of raw materials
may be offset or controlled for by making the supplier dependent
on oneself, politically, militarily, economically.
Thus, a
leading power unit will establish a number of bilateral relationships based on strategic advantages, with those whom it wants
to control.
In order to facilitate co-ordination, avoid that
some bilateral subordinate get tempted by an alliance with
some other subordinates in order to multiply his dependencies,
a system of multilateral and multifactor dependence may be a
preferred option.
- 18 -
Such reasoning has been manifest in the policy of the US
government with regard to the IFA, and it may be developed
further.
One possible direction is a combination of options
2 and 3 as in the thoughts of the Vice-Chairman of the US
Industry Council, Arthur Harrigan, who in a recent article in
National Defense suggested that a constellation of a new type
among the capitalist nations might, or should,
develop.
13)
It
would consist of the strongest economies plus those countries
with the greatest natural resource potentials and the most
advanced means for controlling the flow of resources in the
world.
This would be the new First World, the purpose of which,
according to the author, would be to constitute a sort of 'core
area' to the 'Free world', forming a military-political-economic
alliance that would be self-sufficient in all vital resources
and protect self-sufficiency against communist threats.
Members
would be the three big - the United States, Japan and Federal
Germany - and Canada and Australia among other rich countries,
plus South Africa, Brazil, Iran and Saudi Arabia.
Together they
would control at least 40 percent of world trade and more than
2/3 of all world-wide direct investments; militarily they would
constitute an alliance of key areas in all the main regions of
the world outside the Socialist world, and no doubt they would
represent a formidable resource area.
There are trends that indicate that such a capitalist
'core area' is in fact developing.
They include a massive US
military build-up of Iran; increasing military and economic
ties with South Africa; important assistance to technology-weak
Saudi Arabia; Australia retreating from the
'resource nationalis
of her deposed Labour government; and a joint position of the
three big center nations in international negotiations, such as
on the UNCTAD raw material programme and the Paris negotiations.
An analysis of investment patterns probably would, as I have
indicated, show similar trends.
But the Harrigan idea also confronts certain major problems.
First, it might meet considerable opposition among business
interests at home:
many big U S , Japanese and West German firms
have large investments and trade interests in
periphery -
and center areas falling outside the 'core area' that - logically
- would receive special privileges at the expense of non-core
areas and quite probably become monopolized at the expense of
19
a good number of firms.
Secondly, even the governments of the
three dominant nations would hesitate to divert attention from
non-core areas or provoke their hostility for being 'excluded',
in such a way that they loose influence.
Even a sensitive
dependence relation gives opportunities for penetration and
control that are too important to be neglected or set aside as
'second class' relationships.
One way of solving the
problem would be to extend membership, but that would run against
a natural interest among the dominant units of the 'core' to
keep membership and thereby insecurity due to the possibility
of defection, as low as possible.
Another way would be to let
those periphery areas which are let into the club take on
'sub-
imperialist' roles in their respective regions.
A third problem would be whether Japan and Federal Germany
in fact would agree to such a club that would tend inevitably
to be dominated by the United States.
I have suggested that
certain important aspects of the Japanese strategy after 1973
is not in line with that of the US.
Both Japanese and German
leaders will have to weigh the advantages of going-it alone
in their relations to the resource-rich periphery against
(dis)advantages of joining an American umbrella.
Even if they
cannot establish tight (colonial type) spheres of interest in
the periphery, they have shown at least since the mid-1980s
that they can compete effectively with the US in world markets
at
practically all stages of the product line; dependence on
US political and military capabilities have not prevented them
from doing so.
Here, two observations should be made.
One is a counter-
proposal to what seems to be a widespread view of the postworld war period:
that political-military and political-economic
questions were separated or otherwise unrelated
Keohane and Nye, 1976).
They were not.
(Bergsten,
The United States could
create the post-war economic system on the basis of its military
strength and unquestioned political leadership of international
capitalism, and it enjoyed a leading position in the economicfinancial sphere until the mid-1960s.
When Japanese and West
European firms then began to challenge US business positions in
the most important manufacturing markets, inter alia leading to
weakened balance of payments, the US retorted by employing the
- 20 -
'latent stick' - its military and financial (monetary) supremacy.
The devaluation of the dollar in 1971 was one such weapon,
bringing the military guarantee into negotiations on economic
questions another.
This mounting conflict and the erosion of
the monetary system more than any other factors contributed to
the 'disturbances' of mineral and raw material markets from 1972
on, and to speculation, buying up of stocks, etc. that sent
prices in the marginal (the 'free') markets up.
If developments in the energy sector is a valid indicator,
the IEA so far seems not to have harmonized policies of the
three big.
for example, there is tough competition in the
marketing of nuclear reactors.
And OPEC members to a large
extent is approached bilaterally on oil supplies.
The 'oil crisis' also brought to the forefront tensions
between the state and the firms over price margins, supply
policies, etc.
I propose that the state-firm relationship in
either of the big nations is fundamentally not a very or a
14)
permanently conflictuous
one.
The two are clearly too inter-
dependent on each other:
intervowen through 'interlocking
directorships' or simply common class bclongingness; the state
being dependent on the firm for major contributions to balance
of payments, to employment, to technology (including that used
by the military, by crucial infrastructure, e t c . ) ; the firm is
dependent on the state for political-diplomatic and military
support, either as
between firms
pressure or repression. The conflict
and states, at the transnational level - such as
between the big three referred to - is a more crucial one.
Its evolution will probably be the single most important factor
in shaping the future of the interantional capitalist system.
Is there, thus, a run between contending forces on both
sides of the global center-periphery division?
If the big
three became more split, the 'cere area' became impossible and
at the same time the forces forming unity in the periphery grew
stronger, present power structures would be changing.
If, on
the ether hand, OPEC split while the IEA and further on the
'core area'
idea worked, there would clearly evolve an even
more asymmetrical order.
When political, economic tedhnological
and ecological aspects are considered in their mutual relationship, chances exist for effective producer associations in
- 21 -
bauxite, manganese, tin, phosphates, cocoa, tea, hard fibres
and some other materials.
Time will be a crucial factor and
many such associations would improve their chances if they
were linked together in order to prevent that firms play one
material against another by substituting and/or diversifying.
However, political will (in practice, absence of neo-colonial
t i e s ) , organizational skill and financial support (by OPEC)
that would put an association in a position to sustain a prolonged embargo and/or buyer boycott, are decisive factors, so
far mostly lacking. And as Australia's role is rather important
to the bauxite exporters and Brazil's decisive to those
exporting manganese, prospects do not seem too bright.
Present multilateral negotiations - both the.prolonged
deliberations under UNCTAD auspices and the dead-locked Paris
conference - have a particular importance in this respect.
It
will most probably not result in any agreement that changes
power relations and alters conditions of dependence; it is
even highly unlikely that the big center nation governments want
such an agreement.
This probably means that the negotiations
on their part are intended to put brakes on periphery efforts
to take other action unilaterally, such as strengthening
producer-exporter associations, while the center itself may step
up support to their firms' efforts to substitute and diversify
supply lines while 'negotiations' continue.
This
situation where one side alters the context and the conditions
of the bargaining setting while the other does not, is nearer
to cheating than anything else.
The center's experience in 1973 was that it no longer
exclusively controlled the capitalist world economy.
trying to regain control.
It is now
The periphery's future will be
considerably influenced by what policy OPEC, or individual OPEC
members, adopt towards these efforts by the center.
Here lies
immense conflict potentials, even within the periphery.
There
is, however, one option which periphery leaders, even so-called
'moderate' or 'nationalist bourgeois' ones, may be increasingly
tempted to choose as they realize
by the
that they are being cheated
'new international economic order' diplomacy:
to
reduce their dependence on world markets and thereby increase
their power and autonomy.
In the longer run, an increasing
- 22 -
disbelief in the virtues of an export-oriented strategy or
Bather a general disillusion about the
'Western capitalist
model' with its values, development strategy and so on may
become a much more serious crisis than anything the center has
experienced in the recent past.
Notes
1) One indication is the behavior of the research community:
during or just after the crises, a great number of reports
and comments on raw material suppliers occurred in
scholarly journals and books.
2)
A monograph is under preparation.
Two preliminary and incomplete drafts have been made:
"The political economy of raw
materials and the conditions for their 'Opecization'",
March 1 9 7 5 , mimec.
68 pp. + annexes; and "Producer associations", December 1 9 7 5 , mimco. 91 pp. + annexes.
3)
For a further discussion, see Helge Hveem 1 9 7 3 , and my "The
technocapital structure and the global dominance system",
paper presented at the ECPR Workshop in Strasbourg,
April 1 9 7 4 , mimeo.
4) See for instance neo-classical economists as e.g. reflected
- in Paul Samuelson's Economies textbook; or
5) Andre Gunder Frank, 1 9 6 7 .
An example of empirical testing
of the proposition on growth in the periphery is Patrick J.
McGowan, "Economic dependence and economic performance in
Black Africa", The Journal of Modern African Studies, 14,
No. 1 ( 1 9 7 6 ) , pp. 25-40.
This example suffers from a lack
of appreciation of the wider, contextual character of
dependence theory.
6) Hirschman (1945) shows that the Germans before World War II
held such a view, even in their policy toward European
neighbours; but this view has quite probably been instrumented
in British and French colonial policy and in the investment,
trade and technology transfer policies of several industrialize
countries and firms right up to the present.
7) I am not equating growth and development, nor am I overlooking
the obvious negative aspects of modern economic growth
patterns with high resource consumption, waste production,
etc. that represent aspects of over- or maldevelopment. These,
however, are themes which are not taken up in the present
context.
8)
See footnote 2.
9)
This may partly be explained by the important rise in the
posted price of crude OPEC oil in 1 9 7 1 , as our data are based
on the value of exports.
I employed a ± 5% margin of error
in order to control for other possible 'accidental' factors
affecting the figures.
10)
H e m e s , 1 9 7 5 defines A's direct dependence on B as 'the
product of A's relative interest in an event and B's share
of the control over the event'.
p. 60.
11)
Similar arguments are put forth by Chouchri and Bennett
Commenting on a two-dimensional measure of the importance
of individual minerals, one dimension being the centrality
of the mineral to the State's economy, the other being the
overall availability of it (including political and economic
factors):
"The most serious difficulty with such assessments
,
is their static nature. Technological innovations, changes
in tastes
, interaction between prices and availability,
and changes in consumption patterns all interject highly
variable effects, the implications of which one difficult
to gange.
In addition changes in the position of one mineral in the field are inextricably bound with changes in the
position of all other minerals."
See their "Population,
.Resources, and Technology: Political Implications of the
Environmental Crisis", International Organization, Vol. 26,
no. 2, Spring 1972, p. 198.
12)
The stock of direct private investments from the DAC (OECD)
countries in Brazil rose from 3728 in 1966 to 6150 million
US dollars in 1972, in Indonesia they rose from 254 to 1200
million, according to OECD estimates.
The two were in 1972
the single most and the seventh most interesting country for
investment in the periphery, respectively.
The others from
no. 2 to 6, were: Venezuela 3700 millions (3500 in 1 9 6 6 ) ,
Mexico 2650 (1790), Argentina 2300 (1820), India 1660 (1300)
and Panama 1650 (830). After 1972 investments has been rising
rapidly in Brazil and Indonesia, whereas at least Venezuela
has been disinvesting.
13)
National Defense, quoted in Information, Copenhagen 15th July,
1976. Mr. Harrigan is believed to be an unoffical spokerman
for the futurologists of Pentagon.
14)
For an account of state-firm collusion in France during the
'oil.crisis', see Philippe Simmonot, Let complot petrolier,
Paris: Editions Alain Moreau, 1976.