* The making of a fractured society: the case of Latin America.

------------------------------------------------------------------
PRODUCTION, DISTRIBUTION, EXCHANGE AND CONSUMPTION
         
A FRACTURED SYSTEM OF PRODUCTION
  TABLE 1: Latin America, average productivity by active persons by
           sector. Late 1960s, and in US dollars of 1960
  TABLE 2.  UNITED STATES, PRODUCTIVITY BY ACTIVE PERSON,
            YEAR 1957, IN US DOLLARS OF 1950
  TABLE 3.  GROSS DOMESTIC PRODUCT BY ACTIVE PERSON IN UNITED STATES,
                     GREAT BRITAIN AND LATIN AMERICA, 1960
  TABLE 4.  LATIN AMERICA - HEAVY INDUSTRY AS A PERCENTAGE OF TOTAL
            MANUFACTURES, BY GROUPS OF COUNTRIES

A FRACTURED SYSTEM OF DISTRIBUTION
  TABLE 5.  LATIN AMERICA: INCOME DISTRIBUTION BY INCOME GROUPS
  TABLE 6.- SELECTED AMERICAN COUNTRIES: ESTIMATED INCOME DISTRIBUTION
            ( percentage of total income corresponding to each decile)
  A.  CHILE: INCOME DISTRIBUTION, FAMILIES, 1968, IN LEGAL MINIMUM
             WAGES (SUELDOS VITALES)
  B.  CHILE: CONSUMPTION STRUCTURE (PERSONAL) BY INCOME GROUP
  A. % OF POPULATION WITH INCOMES BELOW THE NATIONAL AVERAGE INCOME
  B. % OF POPULATION WITH ONE TO TWO TIMES THE NATIONAL AVERAGE
     INCOME
  1.  INCOME OF THE MIDDLE 60 PER CENT OF THE POPULATION
  2.  INCOME OF THE 15 PER CENT BELOW THE UPPER 5 PER CENT
  3.  INCOME OF THE UPPER 5 PER CENT

A FRACTURED SOCIAL STRUCTURE
  INCOME DISTRIBUTION IN BRAZIL YEAR 1960
  YEAR 1929                     INDUSTRIAL PRODUCTION
  WORKING CLASS (MANUAL WORKERS AND EMPLOYEES) INCOME DISTRIBUTION
                 IN THE USA AND THE UK
  LATIFUNDIO - MINIFUNDIO RATIOS (a) IN SELECTED LATIN AMERICAN
  COUNTRIES  (1950-1960)
  --CHILE - TOTAL PUBLIC AND PRIVATE SECTOR LABOUR FORCE IN THE
          UNIONS, 1966

THE ROLE OF THE ARMY
A CRITICAL ASSESSMENT
  ENGLAND AND WALES - INCOME DISTRIBUTION
  PERCENTAGE OF VALUE ADDED IN COMMODITY PRODUCTION
FOOTNOTES

=====================================================================
[pp. 190-241]              SECOND SECTION
                           CHAPTER TWO
=====================================================================

PRODUCTION, DISTRIBUTION, EXCHANGE AND CONSUMPTION

--------------------------------------------------
Manufacturing, mining & building             26%

Commerce, financing, personal services,
transport, communications, electricity etc.  38%

Agriculture                                  36%
--------------------------------------------------

-------------------------------------------
 TABLE 1: Latin America, average productivity
          by active persons by sector. 
        Late 1960s, and in US dollars of 1960
-------------------------------------------
                        ALL SECTORS
                     %of work   Average
                       force     prod.(US$)
        
TOTAL                  100.0    1,371
Agriculture             42.2      694
Mining                   1.0    6,484
Manufacturing           13.8    2,517
   a) manufacturing      7.7    4,168
   b) handicraft         6.1      419
Building                 4.5    1,116
Basic Services           5.5    2,174
Commerce                10.1    2,731
Other Services          17.3    1,283
--------------------------------------------
                       MODERN SECTOR 
TOTAL                   12.4    5,909
Agriculture              6.8    4,830
Mining                  38.0   15,606
Manufacturing           17.5    8,938
   a) manufacturing     28.1    9,800
   b) handicraft         4.1    1,760
Building                24.8    2,322
Basic Services          25.0    4,276
Commerce                14.0    8,990
Other Services          16.2    2,713
---------------------------------------------
                  INTERMEDIATE SECTOR
TOTAL                   47.7    1,194
Agriculture             27.7      830
Mining                  34.2    1,420
Manufacturing           64.9    1,400
   a) manufacturing     71.9    1,960
   b) handicraft        55.9      470
Building                64.9      800
Basic Services          71.6    1,530
Commerce                76.1    1,990
Other Services          70.5      940
----------------------------------------------
                     PRIMITIVE SECTOR
TOTAL                   39.9      203
Agriculture             65.5      205
Mining                  27.8      246
Manufacturing           17.6      220
   a) manufacturing       -        -
   b) handicraft        40.0      220
Building                10.3      203
Basic Services           3.4      220
Commerce                 9.9      340
Other Services          13.3      160
----------------------------------------------
RATIO MODERN/PRIMITIVE (average productivity)
TOTAL                   29.0
Agriculture             24.0
Mining                  63.0
Manufacturing           41.0
   a) manufacturing       -
   b) handicraft         8.0
Building                11.0
Basic Services          19.0
Commerce                26.0
Other Services          17.0
-----------------------------------------------
        DISTRIBUTION OF THE WORK FORCE
                          MODERN INTERMEDIATE PRIMITIVE TOTAL
TOTAL                    12.4            47.7                39.9       100.0
Agriculture               6.8            27.7                65.5       100.0
Mining                    38.0            34.2                27.8       100.0
Manufacturing        17.5            64.9                17.6       100.0
  a) manufacturing  28.1            71.9                  -          100.0
  b) handicraft           4.1            55.9                40.0       100.0
Building                  24.8            64.9                10.3       100.0
Basic Services        25.0            71.6                  3.4       100.0
Commerce              14.0            76.1                  9.9       100.0
Other Services        16.2            70.5                13.3       100.0
-----------------------------------------------
Source: Anibal Pinto, "Distribución y Redistribución del Ingreso
        en América Latina", EL TRIMESTRE ECONOMICO, No. 162,
        April-June 1974, Mexico, p. 372
-------------------------------------------------

-------------------------------------------------
TABLE 2. UNITED STATES, PRODUCTIVITY BY ACTIVE
         PERSON, YEAR 1957, IN US DOLLARS OF 1950

Agriculture                 3,352
Mining                      7,583
Manufacturing &
Building                    7,140
Services                    7,571
AVERAGE                     6,977
-------------------------------------------------
Source: Anibal Pinto, INFLACION, RAICES
        ESTRUCTURALES, FCE, Mexico, 1973, p.54
-------------------------------------------------

-----------------------------------------------
TABLE 3. GROSS DOMESTIC PRODUCT BY ACTIVE
         PERSON IN UNITED STATES, GREAT BRITAIN
         AND LATIN AMERICA,1960

Sector              United States G.B  L.A.
-----------------------------------------------
Total                       100   100  100
-----------------------------------------------
A  Agriculture               47    93   51

B  Non-Agriculture          105   100  151

I. Goods & Basic Services   128   102
   a) Mining                133    90  473
   b) Manufacturing         125    97  184
   c) Building              120    99   81
   d) Basic Services        147   128  159

II.   Services               90    98   94
-----------------------------------------------
Source:  Yearbook of National Accounts 
         Statistics 1965; Statistical 
         Abstract of the United States, 1964;
         and Anibal Pinto, op.cit in Table 1
-----------------------------------------------

----------------------------------------------
TABLE 5.  LATIN AMERICA: INCOME DISTRIBUTION BY
                                INCOME GROUPS

Income group                     average  average 
                                  income     per
                       % share   (regional capita
                     total inc.     (=100) (US $)
                     L.A.  U.S.A.   L.A.     L.A.

Poorest 20%           3.5    5.9    18.0      68
30% below the median 10.5   19.7    35.0     133
30% above the median 25.4   31.3    85.0     322
15% below the top 5% 29.1   27.1   194.0     740
Top 5%               31.5   16.1   629.0   2,400
-----------------------------------------------
Source: ECLA (The figures, expressed in dollars at
              1960 prices, are for 1965)
-----------------------------------------------

-------------------------------------------------
TABLE 6.- SELECTED AMERICAN COUNTRIES: 
                    ESTIMATED INCOME DISTRIBUTION
        (percentage of total income corresponding
            to each decile)
-------------------------------------------------
ARGENTINA (families):  1953  1959  1961  1970
1st 10 per cent         3.2   3.0   2.9
2nd 10 per cent         4.3   3.9   4.1   4.4(20%)
3rd 10 per cent         5.0   4.4   4.9
4th 10 per cent         5.6   5.1   5.5   9.7(20%)
5th 10 per cent         6.5   5.7   6.1
6th 10 per cent         7.4   6.5   7.1  14.1(20%)
7th 10 per cent         8.3   7.8   8.1
8th 10 per cent         9.8   9.0   9.8  21.5(20%)
9th 10 per cent        13.2  12.8  12.6  15.1
10th 10 per cent       36.8  41.8  39.0  35.2
Upper 5 per cent       27.2  31.8  29.4    -
Top 1 per cent          -     -    16.3    -
--------------------------------------------------
MEXICO (families):     1950  1957  1963 1977[1984]
1                       2.7   1.7   1.3
2                       3.4   2.7   2.2  2.9  4.1
3                       3.8   3.1   2.8
4                       4.4   3.8   3.8  7.4  7.8
5                       4.8   4.3   4.9
6                       5.5   5.6   6.2 13.2 12.3
7                       7.0   7.4   8.0
8                       8.6  10.0  11.3 22.0 19.9
9                      10.8  14.7  17.4 17.7
10                     49.0  46.7  42.2 36.7 55.9 
Upper 5 per cent       40.0  37.0  28.8  -(10th=
Top 1 per cent           -    -    12.0  -   39.5)
--------------------------------------------------
BRAZIL              1960         1972     [1989]
                (pop. rec.rem.)(families)
1                    1.8
2                    2.4         2.0        2.1
3                    3.1
4                    4.2         5.0        4.9
5                    5.3
6                    6.0         9.4        8.9
7                    8.1
8                   10.3        17.0       16.8
9                   13.8        16.0
10                  4           50.6       67.5
Upper 5 per cent    33.0          -   (10th=51.3)
Top 1 per cent      18.0          -
--------------------------------------------------
CHILE (active population)  1968  1981   [1989]
1
2                           4.4   1.8    3.7
3
4                           9.0   4.6    6.8
5
6                          13.8   9.3   10.3
7
8                          21.4  18.0   16.2
9                          16.6  12.3
10                         34.8  54.0   62.9
Upper 5 per cent             -    -   (10th=48.9)
Top 1 per cent                   37.6
--------------------------------------------------
VENEZUELA (families) 1962  1970       [1989]
1                     1.4
2                     1.6   3.0         4.8
3                     3.0
4                     3.7   7.3         9.5
5                     4.6
6                     6.0  12.9        14.4
7                     8.3
8                    13.4  22.8        21.9
9                    17.3  18.3
10                   40.7  35.7        49.5  
Upper 5 per cent     26.5    -     (10th=33.2)
Top 1 per cent        9.0    -
--------------------------------------------------
PERU (families)      1961  1972        [1985-86]
1                     1.0
2                     1.5   1.9           4.9
3                     2.2
4                     3.3   5.1           9.2
5                     4.3
6                     5.9  11.0          13.7
7                     7.6
8                     9.8  21.0          21.0
9                    15.2  18.1
10                   49.2  42.9          51.4
Upper 5 per cent     39.0   -        (10th=35.4)
Top 1 per cent       25.4   -
--------------------------------------------------
COSTA RICA (families)  1961  1971       [1989]
1                       2.6
2                       3.4   3.3          4.0
3                       3.8
4                       4.0   8.7          9.1
5                       4.4
6                       5.4  13.3         14.3
7                       7.1
8                       9.3  19.9         21.9
9                      14.0  15.3
10                     46.0  39.5         50.8
Upper 5 per cent       35.0   -       (10th=34.1)
Top 1 per cent         16.0   -
--------------------------------------------------
COLOMBIA (active population) 1962    [1991]
1                             2.5
2                             3.4      3.6
3                             4.1
4                             4.9      7.6
5                             5.3
6                             6.1     12.6
7                             7.5
8                             9.5     20.4
9                            14.0
10                           42.7     55.8 
Upper 5 per cent             30.4    (10th=39.5)
Top 1 per cent               10.0
--------------------------------------------------
PANAMA (pop. rec. rem.) 1960       [1989]
1                        1.9
2                        3.0         2.0
3                        3.7
4                        5.9         6.3
5                        6.0
6                        6.5        11.6
7                        7.0
8                        9.4        20.3
9                       12.6
10                      44.0        59.8 
Upper 5 per cent        34.5    (10th=42.1)
Top 1 per cent          16.5
--------------------------------------------------
EL SALVADOR (active population) 1961
1                                2.4
2                                3.1
3                                3.2
4                                3.3
5                                4.0
6                                4.8
7                                7.2
8                               10.6
9                               15.8
10                              45.6
Upper 5 per cent                33.0
Top 1 per cent                  18.0
--------------------------------------------------
UNITED STATES (families)     1960-62   [1985]
1                               1.9
2                               4.0       4.7
3                               5.4
4                               6.6      11.0
5                               7.7
6                               8.8      17.4
7                              10.5
8                              12.0      25.0
9                              15.1
10                             28.1      41.9 
Upper 5 per cent               16.1   (10th=25.0)
Top 1 per cent                   
-------------------------------------------------
Source: ECLA and World Development Report 1979, 
        The World Bank, 1979
[] data added in 1995 by R.R.
-------------------------------------------------

As ECLA puts it:
"in the two upper income groups, average income is relatively
very high, which means that there% is a heavy concentration of
total personal income in them. Taken together, their average
income is almost twelve times that of the poorer half of the
population, a difference which is of great significance and has
far-reaching effects. For this is not a comparison between two
small groups, but between the fifth of the population at the top
of the income scale and the poorer half of the population. If
this situation is contrasted with that of an industrialised
western area with a similar population density, it will be found
that the average income of the richest fifth of the population of
the United States is less than five times that of the poorer half
of the population; in the socialist countries the proportion
appears to be a little less than three times as much...

Moreover in the two upper income groups, income rises very
rapidly and unevenly. At the lower limit of the 15% of the
population immediately below the top group, per capita income is
under 500 dollars, while at the upper limit, it is almost three
times that amount. The income of the top 5% is, of course, much
higher still, with a considerable concentration of income." (16).

about three times as much, even in countries as "industrialised"
as Argentina, and as "primitive" as El Salvador (see Table 6,
column "upper 5 per cent").

Moreover, the upper 5 per cent in the United States receive an
income per capita that is 6.25 times that of the poorer half of
the population, while in Argentina it is more than 14 times as
much, in El Salvador more than 20 times as much; Chile about 46
times as much, Brazil more than 19 times as much (in 1960) and
Mexico about 18 times as much.

These figures are important because they prove that in Latin
America so-called "modernisation" did not solve the "fracture" in
the social structure or in the system of production, and, again,
distribution of income reflects both "fractures". Thus, what we
are dealing with here is not a problem of
"underindustrialisation" or "underdevelopment" but one of a
specific model of development, with a specific system of
production and specific system of distribution, hence specific
social structure, and, of course, specific internal dynamics.

As Pinto argues, it is in the upper 5 per cent that receives
about 2,400 dollars per capita where the most of the market
demand is concentrated (17), and, therefore the pattern of this
particular demand acts on the production system in such a way
that, again, reproduces inequalities throughout society.

Sunkel states that:
"as far as internal conditions are concerned, the first and
foremost is obviously the size of the domestic market for the
manufacturing industries that are being established. It is not
only that incomes per head are relatively low in Latin American
countries but that a very unequal income distribution
considerably reduces the possibilities of developing mass markets
for most manufactures. On the other hand, modern technology has
largely been created for mass markets, so that relatively small
markets may mean the uneconomic use of technically up-to-date
equipment, or alternatively the use of uneconomical, deficient
techniques or worn-out equipment". (18).

I will take the case of Chile in 1968 to prove this unequal
distribution of income shapes demand and acts on the system of
production. This choice is valid as representative, because Chile
at that time typified the development of the region as a whole.
To follow my argument, we need the following two sets of data
(19):
----------------------------------------------------------------
A.  CHILE: INCOME DISTRIBUTION, FAMILIES, 1968, IN LEGAL MINIMUM
           WAGES (SUELDOS VITALES)

            l.m wages        % of families       % of total income
-----------------------------------------------------------------
GROUP I       0-2                61.4                 27.7
GROUP II      2-4                25.0                 30.1
GROUP 111     4-6                 7.4                 15.8
GROUP IV      6-8                 2.7                  8.0
GROUP V       8 and more          3.7                 18.4

TOTAL                           100.0                100.0
-----------------------------------------------------------------

B.  CHILE: CONSUMPTION STRUCTURE (PERSONAL) BY INCOME GROUP

                 GROUP I  GROUP II  GROUP III  GROUP IV   GROUP V
Light Consumer
Goods             80.3       78.9       77.4        77.3    60.5
Chemicals         11.6       11.9       12.0        12.6    12.0
Basic primaries    0.2        0.3        0.2         0.2     0.2
Consumer durables  8.0        8.9       10.4        10.0    27.3
-----------------------------------------------------------------
                 100.0      100.0      100.0       100.0   100.0
-----------------------------------------------------------------
Source: (20)
-----------------------------------------------------------------

Elaborating on A and B, it is possible to demonstrate that 15% of
the national light consumer goods market, 19% of chemicals, above
18% of the basic primaries, and, most importantly, above 41% of
the domestic consumer durables market was covered by spending by
the upper 3.5 per cent (21).

And this happened in a society where, approximately, the upper 5%
of the scale received about 23% of the total income. In Table 6,
it appears that the same stratum received almost 30% in
Argentina, 29% in Mexico, 33% in Brazil, 27% in Venezuela, 39%
in Peru, 35% in Costa Rica, 30% in Colombia, 35% in Panama, and
33% in El Salvador.

Therefore, in those countries well over 50% of the consumer
durables market must have been covered by the upper 5 per cent
spending. Thus, this "fracture" in the income distribution tends
to shift the demand to consumption of consumer durables (which
include luxury goods). Thus, there is a pressure upon the
production system that works in the following way, as illustrated
by the case of Chile:
From 1960 to 1970 the value added in metal products grew 165%,
machinery and non-electrical equipment 109.3%, machinery and
electrical equipment 145.1%, and machinery and equipment for
transport 185%, while the total growth in manufacturing was only
71.0%. This latter figure being so because the growth in food was
only 63.7%, textiles 59.3%, shoes and clothes 26.3%, and
furniture 11.2%.
The consequences of such industrial growth are roughly as
follows: the pressure on demand for consumer durables by the
richer strata results in a rapid growth of the so-called (by
ECLA) "dynamic sector", with an increasing demand for
sophisticated technology and means of production that cannot be
obtained in the domestic system of production (this because the
structure of the latter is determined by the income distribution,
which in turn, is a further pressure on imports from the
capitalist mode of production, consequently, a further dependence
upon foreign (international) capital).

From this there follows a growing disparity in productivity among
the various economic sectors, hence further unbalance in the
development of the productive forces: ?????????? Page 205 high
level of technology adds to the incapacity of the system to
absorb enough labour power in the productive sector, resulting in
the industrial development in the region tending to reduce the
average absorption of labour power.

Furthermore, distribution of income again limits the utilisation
of the means of production of high technology, and there is a
generalised situation of underutilisation of productive capacity,
which leads to an "overcapitalisation" of the whole system, and,
again, feeds back onto inequalities in distribution of income. A
relative growth of capital goods occurs accompanied by a relative
growth of the domestic market, but both growths are limited by
the social structure that tends to block any significative
enlargement of the domestic market.

A research document on Chile shows that "in the overwhelming
majority of manufacturing sectors 50% of the market was
constituted by the richer 19% of the scale of income
distribution"..."which lead to an unnecessary diversification,
underutilisation of means of production and high costs of
production" (22).

From this follows that in the Latin American system of production
after 1930, and especially after 1950, the fact that certain
industrial sectors have much faster growth rates than others
arises from the determinants of the economic system in the region
(income distribution within the social structure), and, most
importantly, this fact locates and internal dynamics which
reproduces and even increases the social inequalities
underpinning the whole system.

Therefore, from the perspective of the ruling class in Latin
America, the existence of primitive, intermediate and modern
sectors with appalling disparities in productivity, with
chronically high rates of unemployment, and a significant portion
of the population living on the fringes of society (the
"marginados" of the slums), and the close partnership and
dependence of the economy with international capital, are not
economic "distortions", but structural factors necessary for the
reproduction of the relations of distribution, hence, relations
of production suitable for reproducing the social structure that
maintains the dominance of that particular ruling class. Finally,
the "fractures", at the level of production and distribution, are
not "fractures" that militate against the mode of development
suitable to the contemporary Latin American social structure. On
the contrary, they are "fractures" in a "fractures" society
(polarisation between a tiny ruling class and a huge dispossessed
class of sellers of labour power, with the former living in a
capitalist world, and the latter in a pre-capitalist world) and,
because of this, are component parts of the dynamics of the
system.

Sunkel provides us with a fair description of the phenomenon:
"One of the salient features...in Latin America is the
coexistence in all sectors of economic activity of highly
advanced and very primitive production methods. Heavy
construction equipment is found side by side with picks and
shovels; cost accounting, linear programming and computers...are
used in the decision-making processes in some enterprises and
government departments while the rule of thumb still prevails in
others; highly intensive modern agriculture is seen along with
grazing on natural pastures...Since the volume of employment per
unit of output tends to be much lower at the modern than at the
primitive level of technology, and an ever greater share of
economic activity tends to be performed at the modern level,
employment opportunities - particularly for unskilled labour -
tend to grow very slowly. This is especially the case when, as
usually happens, modern activities replace to some extent output
produced by labour-intensive traditional activities. Given this
situation, and a rapidly expanding labour force, the labour
surplus may well be in the process of being enlarged rather than
absorbed.

There are some indications that this is likely. One is the sheer
size of the increase of total and particularly urban labour force
which has occurred since the 1920s. In 1925 Latin America had an
active population of about 32 million people, which increased to
68 million in 1960. This increase was associated with a profound
structural shift; rural labour forced increased only from 20 to
32 millions while non-agricultural employment increased from 13
to 2#36 million people...Of this, only 5 million people were
absorbed into industrial employment, which means that about 18
million have had to employed in other urban activities. The
structure of urban employment - where the great increase has
taken place - shows signs of the impossibility of accommodating
such large quantities of labour in reasonably productive
activities; the participation of industrial in total urban
employment has declined from about 35 per cent in 1925 to only 27
per cent in 1960. This figure, which refers to the region as a
whole, truly reflects the trend of all major individual
countries. The consequence has been a large expansion of
employment in the service sectors...There are other indications
of the insufficient creation of employment opportunities in most
Latin American countries. The most notorious is the growth and
substantial size of shanty towns, slum or marginal urban areas
characteristic of the large - and medium - cities of the region."
(23).

To summarize, then it is possible to argue that the "fractured"
system of production tends to reproduce, under conditions of the
dominance of capitalist relations of production, some of the main
features of the former mode of production (the colonial):

a)  through maintaining on the "fringes" of society a vast
surplus of labour power (the Indian communities in colonial
times; the minifundia and shanty towns in post-independence
period), reducing the absolute value of labour power;

b)  from a) it follows that the domestic market is unable to
expand significantly through an inner dynamics, unless the social
structure of the system is transformed;

c)  a high level of monopolistic property ownership is required
in order to make a) and b) possible, and to structure a system
with labour processes that reproduce the whole structure of
society (the hacienda in colonial times, the "fractured system of
production" in post-independence period);

d)  a high level of dependence on external factors, related to an
incorporation into more developed economies in order to be in a
position to put in motion a mode of accumulation that does not
endanger a), b) and c).

Therefore, dependence, in the first place, is a feature built
into the system of production in the region. It is a component
part of its structure without which the inner dynamics of that
structure cannot work.

Therefore, from this viewpoint, imperialism is not the original
cause of the contemporary situation in Latin America. As such,
imperialism tries its best to maintain the status quo within the
limits of a relative "social peace", hence the role of
imperialism as the overall supporter of the ruling class in Latin
America. Imperialism is thus the main obstacle to developing any
other mode of production in the region, since it is the senior
partner in the process of exploitation of direct producers in
Latin America, which underpins in the social structure of the
region.

Nevertheless, within this set of determinations, the internal
ones are decisive, while the external are secondary in the sense
that the "fractured" system of production can do better in
"partnership" with the capitalist mode of production, while the
latter can do without the Latin American mode of development
(24).

Consequently, any attempt to replace this "fractured" system must
contemplate the destruction of the whole set of "fractures"
within it. It is the structure as a whole that is at stake, and
not particular parts of it.

Finally, in order to have a more comprehensive understanding of
the distinctive characteristic of income distribution in Latin
America I will undertake some comparisons with income
distribution in a number of capitalist countries (25):

A. % OF POPULATION WITH INCOMES BELOW THE NATIONAL AVERAGE INCOME

Panama          78.5           Netherlands       65.0
Costa Rica      77.0           France            64.0
Colombia        76.0           United States     61.5
Argentina       76.0           U.K               60.0
Brazil          75.0           Norway            55.0
Mexico          72.0
El Salvador     71.0
Venezuela       68.5

B. % OF POPULATION WITH ONE TO TWO TIMES THE NATIONAL AVERAGE
   INCOME

Norway          39.0           Brazil            20.8
U.K             32.8           Venezuela         19.0
United States   31.0           El Salvador       18.5
Netherlands     27.2           Argentina         18.0
France          24.5           Mexico            16.0
                               Colombia          14.1
                               Costa Rica        13.5
                               Panama            13.5

Percentages in A. and B. give us an overall picture of the
differences between the "mass market" in capitalist countries and
the limited market in Latin America. On this basis, we can
examine the region where the "fractures" appear:

1.  INCOME OF THE MIDDLE 60 PER CENT OF THE POPULATION
     (Arithmetic mean of the income for each country: 100)

Norway              93            Argentina        68
United Kingdom      85            Venezuela       66
United States       83            Panama           65
Netherlands         78            Mexico           64
France              74            Colombia         62
                                  Brazil           58
                                  Costa Rica       57
                                  El Salvador      55

2.  INCOME OF THE 15 PER CENT BELOW THE UPPER 5 PER CENT

Venezuela          209            France           190
Mexico             197            USA              170
El Salvador        189            UK               166
Colombia           175            Norway           166
Costa Rica         166            Netherlands      164
Argentina          153
Panama             146
Brazil             145

3.  INCOME OF THE UPPER 5 PER CENT

Brazil             790            France           500
Costa Rica         700            Netherlands      470
Panama             690            United States    400
El Salvador        660            United Kingdom   380
Argentina          620            Norway           300
Colombia           610
Mexico             580
Venezuela          530


If we take Argentina and the United States, for instance, we see
that the difference in income from 1. to 2. to 3. are as follows:

United States = 83, 170, 400
Argentina =     68, 153, 620

The above can be transformed into the following:

United States = 1, 2,    4.8
Argentina =     1, 2.25, 9.11

Wealthy Argentinians are twice as rich as Americans, comparing
the middle 60 per cent of each country, and twice as rich
compared with the following 15% of each country, while the
differences between the 60 per cent and the 15 per cent are
almost the same in both countries. Hence, the "fracture" in this
upper 5 per cent in Latin America is apparent.

The differences for the other Latin American countries are:

Brazil =       1, 2.5, 13.6
Mexico =       1, 3.1,  9.1
Venezuela =    1, 3.2,  8.0
Colombia =     1, 2.8,  9.8
Costa Rica =   1, 2.9, 12.3
El Salvador =  1, 3.4, 12.0
Panama =       1, 2.2, 10.6

This new set of difference points makes even more apparent the
"fracture" at the upper level, and indicates that it tends to
start at the 15 per cent level.

Summarizing, it is possible to state that in Latin America the
large middle income sectors have a much lower income as a
proportion of the national average than their counterparts in the
capitalist countries, and, conversely, the upper 5 per cent has a
much greater income in proportion to the national average than the
same stratum in capitalist countries. here we have located the
"fracture" that ECLA describes as the "greatest concentration of
income at the top of the scale" which is "the principal factor in
the great inequalities existent in Latin America" (26).

Furthermore, the fracture in income distribution also appears as
a fracture at the social level because "the differences of such
magnitude, the habits of consumption of different strata are
different...the groups with low and middle income have forms of
consumption based on national habits and conditions, while the
groups at the top takes its patterns of consumption from the
standards existent in the industrialised countries" (27).

From here, a "fracture" even at the level of daily life: two
different worlds within the same society...hence, "this extreme
inequality does not encourage savings, but contributes to
establishing disconnected modes of consumption". The social
effects are far reaching, since the extreme differences in income
contribute to a rigid class differentiation. Those at the top may
live in an utter different way than those in the rest of society.
On top of this, the inequality fosters the utilisation of direct
personal services, patronage as a way of social intercourse.
Thus, a complete set of pressures to accentuating the existence
of social classes living in compartments (28)

This leads us on to another appearance of this "fractured"
system of production: the social distribution of power.

A FRACTURED SOCIAL STRUCTURE

According to Marx, a major feature of the introduction of
machinery is:

"the constantly growing numbers of the middle classes, those who
stand between the workman on the one hand and the capitalist and
landlord on the other. The middle classes maintain themselves to
an ever increasing extent directly out of the revenue, they are a
burden weighing heavily on the working base and increase the
social security and power of the upper ten thousand." (29)

It seems to me that it is in these "middle classes" that the
capitalist mode of production finds its capacity to utilise for
long historical periods bourgeois democracy as a system of
government. Bearing in mind that the process of industrialisation
in Latin America is based on capitalist relations of production,
one would expect the same processes pointed out by Marx were
taking place in the region. But this is not the case.

This is so, it seems to me, because of some major differences in
the emergence and process of development between both
"industrialisations".

In Western Europe, industrialisation came as a result of a class
struggle between the ruling class of a pre-capitalist mode of
production (feudal in this case) and a rising middle class from
the fabric of that feudal society (bourgeoisie in feudal times),
mediated by the outcome of a class struggle between landless
rural workers and landowners, creating necessary conditions for
widespread capitalist relations of production in the countryside.

In Latin America, industrialisation came as a necessity mediated
by the crisis of the capitalist mode of production outside the
region, and the same ruling class of the Latin American mode of
production played the role of "industrial bourgeoisie".

"In the earliest years of incipient industrialisation (the 1930s)
entrepreneurial mobility is not properly seen as a process of
rapid vertical mobility through business activity. Rather, the
establishment of new industry constituted a transfer of function,
personnel, and capital from commerce, agriculture, and services
into industrial pursuits. Although the entrepreneurs gradually
improved their economic position in the process of shifting their
activities to manufacturing, few experienced a fundamental change
in their position in the class structure" (30).

"The industrialists in Latin America are rarely self-made men who
have risen from the bottom of society. The great majority are
either drawn from the traditional ruling elites or else they are
middle-class immigrants to Latin America...The entrepreneurs
tend to be orientated towards conserving existing social
relations and to seek the support of political and social groups
which share their outlook...Foreign investors, industrial and
commercial entrepreneurs, and large landowners increasingly are
found as directors and stockholders of the same enterprises...The
extensive overlap between agricultural complexes and big business
largely invalidates the notion that there are basic sectorial
conflicts in Latin America between modern urban elites and
traditional rural elites. One of the major political reasons why
agriculture has not been reformed is that reform requires a
frontal attack on politically influential urban big business. The
absence of major conflicts between urban and rural elites at the
advent of industrialisation in the 1930s can be traced to this
overlapping membership. The existence of kinship ties and
property links between agriculture and business helps to explain
the lack of support for agrarian reform among industrialists".
(31)

To quote Cardoso,
"in the type of industrial growth which exists in Latin America,
the composition and functioning of the economic classes are
largely determined by use of the managerial capacities of
immigrants who are active in smaller industries, or by
manipulation of favourable market conditions by entrepreneurs
whose original activity was linked to the agricultural - export
sector - both groups representing small firms of the 'family
type'...It would be an oversimplification to suppose that the
entrepreneurial groups represent 'modernity' and that their
alliance with the lower-class pressure groups is therefore
natural, and sufficient itself to alter the traditional balance.
On the contrary, the history of Latin America demonstrates the
flexibility of 'traditional society'..." (32).

Thus, to summarise the description of the transition to
industrialisation in Latin America as qualitatively different
from that of Western Europe's let us accept the fact that

"whatever view is taken of the degree of rationalisation of this
process, no valid grounds exist for rejecting the main contention
that in Latin America neither the state nor a rising industrial
bourgeoisie has been the principal social force fostering rapid
economic development. Although the state has played an important,
this has not been the result of deliberate decisions on the part
of a bureaucratic or political elite, but the response to
situation imposed by external circumstances. The fact has
considerable political importance and it must be borne in mind
when other factors are evaluated further on. For the time being
it is sufficient to stress that the main changes that have taken
place in Latin America have been the consequences neither of
gradual, qualitative transformations in the modes of production,
coinciding with changes in social relationships and the
'superstructure' nor of a 'peaceful' confrontation (as in
Britain) or a revolutionary one (as in France) between social
classes associated with either regressive or progressive economic
trends". (33)

From this it follows that, whether Latin America:

a)  is passing through a transitional period between a pre-
    capitalist mode of production to the capitalist mode of
    production, or

b)  is taking the path of the early stages of a capitalist mode
    of production, neither

1.  the class structure and class conflicts in Latin America
    society correspond to equivalent periods in the emergence and
    development of the capitalist mode of production in Western
    Europe, nor, therefore

2.  is it scientifically valid to compare both processes of
    industrialisation as different stages (in time) of the same model
    of development.

My argument is that Latin America society is passing through a
transitional period characterised by the specific features of its
current system of production, which, on the one hand, places
limits on the development of a capitalist mode of production,
and, on the other hand, blocks any other forms of development,
unless its current social structure is destroyed.

Let us turn to our "fractured" social structure, focusing our
attention on the middle classes - not the middle classes which
fought against a feudal ruling class in Western Europe, nor the
middle classes growing and active in a capitalist mode of
production. The latter, unlike its Latin American counterparts,
developed in a social context where the ruling class (the
bourgeoisie) was formerly a revolutionary class, therefore its
"conservative stand" is qualitatively different to the
"conservative stand" of the Latin American middle class. What the
middle class in a capitalist mode of production want to preserve
is the capitalist social structure, unlike the middle class in
Latin America which tried to preserve a pre-capitalist social
structure.

From this it follows that, unlike the industrial societies, in
Latin America bourgeois democracy cannot be the "normal"
political structure, but the typical form of government must be a
type of dictatorship (either military, or bureaucratic, as in
Mexico).

Let us examine this social fracture a little more closely,
starting with Jaguaribe's description:

"Latin American societies today are clearly divided between an
upper and middle cluster, forming the new Establishment, and the
rest of the population, forming the  mass. The upper class,
understood in a broad sense, represents, on an average, about 5%
of the population and includes, in forms that vary according to
the levels of development and complexity of the country: 1) the
remainder of the former agrarian patriciate, 2) the higher
(commercial and industrial) bourgeoisie, and 3) the upper
professional middle class. The middle class, representing about
15% of the population, presents a traditional sector, including
larger or smaller numbers of liberal professionals, the civil
servants, the military and the lower bourgeoisie, and a modern
sector, which includes the technical and managerial
professionals, some of them in the military. The rest of the
population is distributed among 1) the lower middle class, mostly
represented by the urban lower echelons of the bureaucracy and
the lower white-collar workers, and 2) most of the working class,
including the urban unemployed groups and the peasants". (34).

Income distribution, again, is a good indicator locating the
positions of the major classes in any system of production. In
the United States and United Kingdom, for example, the difference
in income between the middle 60%, the 15% below the upper 5%, and
the upper 5% of the population, is roughly as follows:

United States  =    1 - 2 - 4.8
United Kingdom =    1 - 2 - 4.5

While in Latin America, the same relation is 1 - 3.5 - 11.3 (see
Table 5).

It is reasonable to conclude that the middle classes are located
in the upper two sectors of the scale, with the upper middle
class within the upper 5 per cent. If this is so, then it appears
that the upper middle class in the United States and the United
Kingdom earn roughly four times as much as the middle 60% of the
population, and that the upper middle class in Latin America
receives roughly eleven times as much as the middle 60%.

On the other hand, the lower middle class in the United States
and the United Kingdom receives twice the income of the 60%,
while in Latin America it receives 3.5 times as much.

Summarizing, the lower middle class in Latin America shares
almost as much as the upper middle class in the United States and
the United Kingdom (in relative terms), and as a whole, the Latin
American middle class roughly shares almost as much income as the
upper 5% in The United States and the United Kingdom.

This means that, unlike the middle classes in the capitalist mode
of production, which are in the middle of the income spectrum,
the middle classes of Latin america are either in the "fracture"
of their society or on the borders of it, so they cannot serve as
a buffer zone and "increase the social security and power of the
upper ten thousand" in the same way as that of the middle classes
in the capitalist mode of production.

This is because they belong to another world, as different from
the world where 80% and more of Latin American people live.

As Clark W. Reynolds states:

"those who think of themselves as belonging to the 'middle
sectors' in Latin America are actually the affluent groups in the
region. Consequently they are not prepared to accept social and
economic policies which will reduce their level of income...They
read literature, watch television programmes, go the the movies
and travel to the holiday resorts and urban centres of the United
States." (35)

But this first "fracture" is not the only one in the social
structure. The middle classes themselves are "fractured" in the
double sense of reflecting the fracture original to the system of
production between the modern, intermediate and primitive
sectors, and from the point of view of income distribution. We
can provide further statistical evidence to substantiate this
point:

-----------------------------------------------------------------
              INCOME DISTRIBUTION IN BRAZIL YEAR 1960

Group A:   upper class (property owners, managers)
Group B:   upper middle class (some professionals, higher
           administrative, medium businessmen)
Group B2:  urban middle class (civil Servants and employees,
           small businessmen
Group C:   wage earners
Group D:   rural workers, urban self-employed, "marginales"
-----------------------------------------------------------------
GROUPS        % of POPULATION     ANNUAL INCOME    $ per capita
                                  % of total
-----------------------------------------------------------------
A                 1                    28               8,400
B1                4                    16               1,200
B2               15                    21                 420
C                30                    20                 200
D                50                    15                  90

Source: (36)
-----------------------------------------------------------------

This confirms that the upper middle class corresponds to the rich
in Latin America and that the rest of the middle class receives
almost five times as much as the lower 50 per cent of the
population, making still more apparent the main fracture in
society, but, at the same time, showing a profound
differentiation - almost triple between B1 and B2.

This secondary fracture may explain why in Latin America from the
1930s onwards, civil servants and employees have played such an
important role in trade unionism, political conflicts and even
revolutionary uprisings.

On the other hand, "modernisation" is in no way helping to erase
this fracture within the middle classes. Data for 1970 reveal the
following for Brazil: (37)

Difference between B2 and B1 = 1 -   3.3 (in 1960 was 1 - 2.9)
"            "     C  and B1 = 1 -  10.0 (in 1960 was 1 - 6.0)
"            "     D  and B1 = 1 -  20.0 (in 1960 was 1 - 4.7)
"            "     D  and A  = 1 - 120.0 (in 1960 was 1 - 93.33)
"            "     D and B2  = 1 -   6.0 (in 1960 was 1 - 4.7)

All in all, after six years of "modernisation" in Brazil, the
fractures became more apparent than ever in the period of
industrialization.

Therefore, given this double "fracture" it is hardly surprising
to read the following research findings:

"The emergence of the middle classes, historically and in the
present period, has not led to a reform of land tenure, to
sustained economic growth, or to the development of citizenship
among the working class...preservation of the latifundia system
system allowed the rightist parties to control the rural
population and its votes, thus maintaining their political
power...In Chile...from 1940 to 1954 there was a regressive
redistribution of total income at the expense of the lower-income
groups: wages fell from 27 to 21 per cent of the national income;
the economic gap between the classes had increased.

Two factors were extremely important in conditioning the growth
and orientation of the middle class: 1) the lack of a middle-
class revolution, resulting in the continuation of the
traditional land-tenure pattern; and 2) the large-scale entrance
of foreign capital from already industrialised capitalist
countries.

The growth of an urban middle class did not become the prelude to
social change. The absence of a fundamental social overturn
indicated that the middle class was not destined to eliminate
traditional patterns in order to further its social advancement.
From the beginning of the century, whenever the middle-class
parties faced a mass, independent working-class movement, they
took the side of the traditional Right, set aside disagreements,
and watched hundreds and thousands of workers jailed and
murdered...the Chilean middle-class depended on and was
subordinate to large landowning groups and large foreign
concerns. The development of privately accumulated wealth and of
capitalist enterprise depended on securing government
office...the middle-class parties were reconciled from the start
to the maintenance of the traditional socio-economic
structure..." (38)

"the Brazilian middle class identifies with and shares the
aristocratic social values of the traditional upper class...and
the new industrial capitalists are in fact fusing with the old
traditional upper class to form a new dominant segment of
Brazilian society". (39)

Therefore, the middle classes in Latin America tend to support
authoritarian rule in the different nation-states, as the only
possible political superstructure adequate to a social system
that presents extreme inequalities in income and style of life as
the most dynamic factors of its development. Factors, of course,
that dialectically are at the origin of the main threats to the
stability and order of such social systems.

This leads us on to an explanation of the Latin American working
class.

"The factory-employed working class emerged as a social force in
most Latin American countries comparatively late in history. Until
World War I the urban industrial working class was almost
exclusively composed of artisans in small workshops. Nuclei of
workers employed in foreign-owned economic enclaves were found
only in the larger countries, namely Argentina, Brazil, Mexico
and Chile. On the average, the artisans shops contained less than
five workers. Few trade unions or working-class political
organisations of any size existed except in the mining areas.
Throughout Latin America radical organisations and ideology were
confined to a small number of workers in particular crafts, and
had little or no impact on unskilled labourers or the rural
labour force." (40)

Nevertheless, initially there were some differences, indirectly
illustrated as follows: (41)

YEAR 1929                     INDUSTRIAL PRODUCTION
                               AS % OF GDP
-----------------------------------------------------------
Argentina                           22.8
Mexico                              14.2
Brazil                              11.7
Chile                                7.9
Colombia                             6.2

In the year 1914, in Argentina, the number of persons working per
manufacturing unit was 10, while in 1895 there were only 7. (42)
In Chile, 1n 1929, 70% of the manufacturing units had less than
five persons each. (43)

But, by the year 1970, manufacturing output as a % of GDP was as
follows:

Argentina                        35.3
Mexico                           23.6
Brazil                           25.0
Chile                            25.2
Colombia                         18.6
Peru                             22.6
Venezuela                        12.2
Source: ECLA

With the following percentages of population working in mining,
manufacturing, construction, and basic services:

YEAR 1969 (Source: ECLA)

Argentina      36.9             Guatemala       15.5
Brazil         23.3             Honduras         12.3
Mexico         23.3             Nicaragua       17.4
Colombia       23.0             Panama          17.0
Venezuela      27.2             Dominican Rep.  14.2
Peru           25.8             Ecuador         20.4
Chile          31.6             Paraguay        20.1
Uruguay        31.7             Bolivia         21.1
Costa Rica     19.6             Haiti           n.d
El Salvador    19.1

This enables us to state that in at least half the countries of
the region factory workers are a substantial force in society,
and that the rest of the countries are reaching that level very
rapidly. Hence, our analysis of the wage-earners in the region is
valid for the totality of the Latin American nation-states.

The fracture at the level of the system of production also
affects the wage-earners. From Table 1 we can see that 17% of the
labour force in manufacturing is working in the primitive sector,
64.9% works in the intermediate sector, and 17.5% in the modern
sector. On the other hand, the same Table 1 shows that 44% of the
workers in the manufacturing sector belong to handicraft
industries.

For the purposes of my analysis we will use the term working
class to include wage-earners and employees. This group forms the
following percentage of the labour force in the following
countries:

Chile          72.8          Colombia         57.3
Argentina      69.9          Peru             48.1
Uruguay        69.5          Brazil           48.0
El Salvador    68.2          Ecuador          47.7
Costa Rica     63.6          Dominican Rep.   44.1
Mexico         63.6          Panama           42.5
Venezuela      60.1          Honduras         39.7

Source: ECLA's Statistics for the late 1960s

For the whole continent about 60 per cent of this working class
is composed of wage-earners, and the remaining 40% employees. In
research undertaken by the author in Chile in 1972 (44) I found
that 1.5 per cent of the wage-earners had an income two to four
times as much as the lower 80% of the wage-earners. This group
had an income lower than twice legal minimum wages, the same
income as roughly 50 per cent of the employees.

Consequently there is ground for stating that the "fracture" at
the level of income distribution appears within the working class
with striking differentiation, which provides sound basis for
fostering a labour aristocracy supporting the system.

One dramatic example of this was the role played by the trade
unions of the copper industry in Chile in the coup d'etat that
overthrew Allende (45)

But this is not only a feature of the Latin American mode of
production. The working class in a capitalist mode of production
also presents a similar pattern of income distribution:

 WORKING CLASS (MANUAL WORKERS AND EMPLOYEES) INCOME DISTRIBUTION
                 IN THE USA AND THE UK

     (In percentage of the total income of the sector) (46)

             Poorer 20%     30%      30%    15% below    upper 5%
                                          the top
-----------------------------------------------------------------
  USA
(year 1946)     4.8          17.0     36.8       26.3        15.1

  UK
(year 1960)     8.9          21.4     33.5       23.3        12.9
-----------------------------------------------------------------


It is apparent that this pattern is very similar to Latin
American inequalities at the same level. The critical point in
the case of the region I am dealing with is given by the
"synthesis" between these inequalities in income and the
"fracture" at the level of production, together with specific
characteristics of the rural working class and the existence of a
huge percentage of "marginales", which tends to produce a lack of
class solidarity and low level of labour organisation; and again,
a relative degree of "social security" for the ruling class.

"Much greater possibilities exist than in Western Europe and
North America for maintaining tight social domination in
democratic legal forms. This is due above all to the existence of
huge captive rural populations dependent upon local big
landowners...In short, a continent with a ruling class confronted
with little serious threat from below - whether by peasant or
worker insurrection or at the polls by worker's or peasants'
parties. Only in two countries have working class parties got
even a third of the vote: Chile, and Peru in the Constituent
Assembly elections of 1978." (47)

Let us examine firstly these "captive rural populations" through
a description made by Barraclough and Domike in an analysis of
the agrarian structure in seven countries of the region in the
1960s - Argentina, Brazil, Colombia, Chile, Ecuador, Guatemala
and Peru:

"Tenants and workers on the large estates depend upon the PATRON
for employment - there being no alternatives - and for a place to
live. Wage and rental agreements can be adjusted to suit the
landowners convenience so that all productivity increases and
windfall gains accrue to him. Permanent improvements such as
buildings or fruit trees belong to the estate even when all the
costs are borne by the tenant. On many large plantations
residents are strictly forbidden to make improvements without
permission for fear they would acquire vested interests in the
land or take resources away from the production of the plantation
cash crop. Residents of the large estates can be expelled at will
in traditional areas where there is neither a strong central
government nor a labour union to defend them. The ICAD
researchers found haciendas in certain Andean regions which
required that people of the neighbouring communities work without
pay in order to have the right to use the paths and bridges on
the property. In some cases the administration's consent is
required even to receive visitors from outside or to make visits
off the property. Even though it was prohibited as long ago as
the seventeenth century, the practice of "renting out" workers
still persists. And corporal punishment is still occasionally
encountered on some of the most traditional plantations and
haciendas. Tenants and workers depend on the patron for credit,
for marketing their products and even for medical aid in
emergencies. Food and clothing are frequently obtained through
the estate's commissary and charged against wages or crops. With
the abolition of compulsory servitude during the last century
peones and tenants now have the right to leave but, with few
alternatives, job opportunities and little education, this
possibility often appears to be as much of a threat as an
opportunity for improving their lot". (48)

Minifundia in rural areas, and shanty towns (poblaciones
marginales) in the cities are the fences that maintain tenant and
workers in such conditions of labour. About 65.6% of the rural
population lives in the primitive conditions of minifundia, which
means "a lot of land which is too small to provide full
employment for one family (2 man-years\0 and cannot yield an
income sufficient to sustain a standard of living considered to
be the adequate minimum for the region considered" (official
definition of CIDA - International Commission for Agrarian
Development).

According to CIDA, in the 1960s the dimensions of minifundia were
as follows: Argentina, 43.2% of the total number of farms;
Brazil, 22.5%; Colombia, 64.0%; Chile, 36.9%; Ecuador, 89.9%;
Guatemala, 88.4%; Peru, 88.0%.

LATIFUNDIO - MINIFUNDIO RATIOS (a) IN SELECTED LATIN AMERICAN
COUNTRIES  (1950-1960)

Countries           Area          Income
------------------------------------------
Argentina           270             66
Brazil              546             61
Colombia            491             36
Chile             1,549             72
Ecuador             618            165
Guatemala         1,732            399

(a) average land area of a latifundio as a multiple of the
average land area of a minifundio, and income per latifundio
(gross value of agricultural output per farm unit) as a multiple
of income per minifundio.
Source: CIDA
-----------------------------------------------------------------
---
This "fracture" within rural areas at the level of production is
another component part of the structure of domination by the
ruling class, because it is a part of the internal dynamics of
the system in two major ways: - it provides an indirect supply of
labour power and weakens the solidarity within the rural working
class. Thus, it is a mechanism in the entire system of production
as a dynamic factor in the reproduction of the rural relations of
production, and, indirectly, in the mode of production in Latin
America.

The "poblaciones marginales" (shanty towns) play the same role in
the cities as minifundia in the rural areas. According to Dale
Johnson "about 25 per cent of the population of major cities earn
no regular incomes and are crowded into the most squalid of
slums". (49)

Petras describes this sector as a "subproletariat" that
"encompasses a large mass of semi-employed and irregularly
employed individuals who scratch a living through a great variety
of low-paying, unproductive activities: as penny vendors of a few
cheap articles, personal servants, car watchers, shoeshiners,
newspaper and lottery vendors, occasional day labourers, etc. The
urban subproletariat is nor directly related to industrial
production, yet it numerically exceeds the number of all
manufacturing workers, including artisans". (50)

The size of the "marginal" sector is large enough for it to
constitute a major element in the supply of surplus labour power,
with all the variety of effects on the realms of production,
distribution and functioning of the social structure discussed
above.

The other manifestation of "fracturing" within the working class
in the Latin American region is its relative lack of
organisation.

Again for the purpose of my argument, Chile is a good average
example:
-----------------------------------------------------------------
--CHILE - TOTAL PUBLIC AND PRIVATE SECTOR LABOUR FORCE IN THE
          UNIONS, 1966

Total Labour Force minus:                         2,935,060
-------------------------
a) age group 15-17 that cannot be       172,113
   union members
b) employers                             39,239
c) armed forces and police               65,000     276,352
                                         ------------------------

Total Labour Force that can form unions           2,658,708
Total Labour Force in private sector unions         314,795
Total Labour Force public sector in "associations"  215,781
                                                    --------
Total Labour Force in unions & "associations"       530,576

As a percentage of the Total Labour Force: 19.5

Source: Chile's Ministry of Labour figures, compiled by Clotario
Blest for a research in 1970
-----------------------------------------------------------------

As Angell comments "of a labour force of nearly three million,
about 10 per cent are organised in unions recognised by the
state. But if we add to this total those state workers who have
formed gremios or "associations", which in theory should not act
like unions, but in practice do, then the percentage in union-
type organisations rises to nearly 20 per cent - relatively high
for Latin America" (51).

What interests us here is that this low level of labour
organisation occurs for both structural and political reasons. At
the structural level, the existence of significant primitive and
intermediate sectors in the system of production produces a high
percentage of units of production with less than 10 workers,
which reduces the number of the labour force that can form
unions, and, at the political level, the ruling class discourages
the organisation of labour either actively or else - as
notoriously in the case of Mexico - puts the entire labour
organisation under the rule of the state.

The combined effect of the fracture at the level of production
and at the level of social structure, in this particular
instance, tends to foster a situation where the trade unions
become an instrument of the labour aristocracy and not of the
working class as such, as all the evidence indicates, it is
through reducing the income of the rest of the working class that
the labour aristocracy improves its lot.

Summarising, the fractures (in the realms of production,
distribution, class structure, and political organisation) affect
the Latin American working class creating within it the tendency
to weaken its capacity of organisation as wage-earners in
general, and within each sector of production. Moreover, it
fosters the appearance of a labour aristocracy which may back
the ruling class in its necessity to maintain the situation as a
whole. A society where one fifth of the population lives in a
different world than the remaining four fifths, but both
portions of that society being the cause and the effect of each
other, because they are articulated through a social structure
which maintains the whole together.

Thus all the striking major inequalities, apparent
discontinuities, and apparent existences of pre-capitalist labour
processes, in the social formation we are dealing with, are
articulated components of a unique system of production with an
internal economic social dynamics that reproduces the social
structure which coheres the pieces together. This has been
possible, mainly, because the colonial social structure was able
to absorb capitalist relations of production during a period in
which the strength of the colonial ruling class was at its peak,
and the social uprisings against that social structure failed to
destroy it.

Even such major class uprisings as that in Mexico in 1910, and in
Chile in 1970-73, illustrate that strength, and "flexibility"
coming from that strength, in two different stages of development
of the social structure of the Latin American mode of production.

In 1981,
"Mexico's economy makes all sorts of consumer goods, from TVs to
cars, from Coca Cola to toilet paper, but it can't make the
things that make them: 82 per cent of the machines, tools,
materials, and spare parts are imported, mainly from the United
States...then what went wrong with its celebrated revolution?
From 1910 to 1916 the rural masses galloped over field and
mountain...But these landless revolutionaries failed to unite,
and urban labour sided with the bourgeoisie to form "red
batallions" in 1915 that broke the back of Villa's army and boxed
Zapata into the hills of Morelos. Mexico's government slipped
into the hands of bourgeois and petty-bourgeois nationalists, a
movement of mestizo officers, upcoming lawyers, rural scholl-
teachers, medium landholders, new industrialists, provincial
intellectuals, political bosses, angry journalists, unemployed
engineers, and opportunist bureaucrats...they made peace with the
US and British oil companies in 1923, opted for a state-supported
capitalist road of development, and nailed down their political
power during the 1930s when President Lazaro Cardenas laid the
foundations of today's corporate state...organised workers,
peasants, teachers, and bureaucrats onto unions belonging to the
new single 'revolutionary party' which became today's ruling PRI.

With class war raging, reformist leadership kept urban and rural
labour separated - the surest guarantee of 'stable' bourgeois
power.

In the 1940s industrialisation strengthened the growing
bourgeoisie, and conservative presidents listened to the bankers,
industrialists and big landholders. They invited the
transnational corporations in to 'develop' the country.
Rockefeller-funded 'green revolution' got its start in Mexico in
1943, ushering in an era of modern agribusiness. It soon reduced
most parcel owners and ejido farmers to debt and to sale or
rental of their best lands, pushing them into survival farming on
the hilliest least irrigated acreage...specialised crops for
export, for animal feed, or for food processing replaced much
acreage of traditional foodstuffs and set Mexico on the road to
becoming a huge food importer.

Today, after 30 years of 'development', Mexico's supermarkets
brim with goodies made by the transnational corporations. The
Aurora Supermarket regularly displays 20 shelves of toilet paper
in different brands, textures, colours and prices. But only one
fourth of the Mexicans can afford: the rest wipe themselves with
newspaper or, in the countryside, a smooth stone...The dozens of
models of automobiles that choke Mexico City...are for the 13 per
cent of the people..." (52)

I provided this long quotation because it gives a vivid account
of some of the most important "fractures" in the Latin American
system:

a)  The middle classes utilizing urban labour to wipe out rural
uprisings (mediated by the structural fracture between urban and
rural working classes);

b)  The middle classes defending the core of the system of
production in order to avoid the uprooting of the large-
landowners in the ruling class (mediated by the fracture between
the ruling class as a whole and the rest of the society);

c)  The ruling class, through the hands of the upper middle
class, passing over to imperialism the key sectors of the economy
(even under the label of 'nationalism') (mediated by the fracture
at the level of the mode of accumulation, which is based at this
stage on the purchasing of the means of production (except land)
from an alien mode of production (capitalist), and realization of
part of the surplus value in the same alien mode of production;
from here dependence on the capacity of imports, and, hence,
dependence on imperialism);

d)  The institutionalisation of labour organisation as a
component part of the state (mediated by the fracture of the
working class at the level of the labour aristocracy);
e)  The partnership ruling class-middle classes keeping the rural
social structure largely intact even after an agrarian reform
(mediated by the homogeneity of the ruling class which at the
same time is both landowner and merchant, exporter and
industrialist - this homogeneity is in reality the fracture at
the level of the whole social structure seen from a different
angle, since it is precisely this homogeneity which makes
possible the fracture of the whole productive social system).

The Mexican revolution in 1910 illustrates this point very well:

"The original owners of the urban property were members of the
old landowning aristocracy...so, with the revolution and agrarian
reform, the large landowning class received rents again, and this
time, increased, from its urban properties...Thus, at the same
time, while the wages went down because of the massive migration
to towns, and the prices went up, the urban rents also went
up...and the large landowners received a greater share of the
national income than before the revolution...The basic
industries: cement, iron and steel, glass, etc, were financed
with part of the fortunes made from urban rents and public
credit".

Therefore, the large landowning class "expropriated" by the
Mexican revolution, became richer and, on top of that, the core
of the "new" (but so old) ruling class of industrialists,
merchants, bankers and...after some time, landowners (buying back
the best expropriated lands). By 1948 "there were a middle class
and a new elite. The latter being formed by the coalition of the
first and second generations of revolutionaries with the remains
of the self-styled conservative and flexible aristocracy". (53)

Or, to come back to the original moment, this time in Chile, and,
in the year 1882,

"Many of the new and important landowners were primarily urban
capitalists who drew their social standing, political power, and
economic wealth centrally from their urban operations. Depressed
agricultural prices starting in 1876 caused many estates to
change hands and again made further land available to the new
urban rich" (54).

The types of development which followed the Mexican revolution
are an example of the major dynamics in all the other countries
of Latin America in the same period, which, at the most
generalised level, is as follows:

After independence, the collision with the capitalist mode of
production, led to the Latin American mode of production to adapt
its mode of development to fresh conditions: increased demand for
labour power to produce raw materials and foodstuffs for export
and to build the facilities for that export: roads, railways,
transport and storage facilities. Thus, creating a massive
migration from countryside to towns that, in its turn, enhanced
the need to feed and clothe urban populations with the consequent
pressures on food and textiles industries, on the one hand, and
on the capacity to import, on the other hand. This led to a type
of individual development with a low level of technology, because
the availability of labour power made this type of industrial
development possible. Only in those sectors directly linked with
exports was modern technology utilized to cope with the margin of
profits left by the international prices of commodities.

Later, roughly after World War I, the shift in production in the
capitalist world (relatively less purchasing of raw materials and
foodstuffs because of higher technological levels, and greater
trade in manufactured products within the capitalist mode of
production) exerted further pressure on the Latin American
economies to produce enough for their domestic consumption,
because its capacity for importing diminished, and, internally,
the massive migration from countryside to town continued, given
the incapacity of the rural economy to sustain the growth of rural
population.

Since the colonial mode of production was based on an extremely
unequal social structure, its ruling class had to develop a
system of production that reproduced this main instance of the
social structure at a similar level of inequality. Such
inequality being possible because of the availability of
unlimited surplus labour power, had its critical point in the
dimension of its domestic market. Capitalist relations of
production could not guarantee to the post colonial ruling class
the maintenance of a domestic market at the necessary low level,
but, conversely, capitalist relations of production were the only
possibility for maintaining that ruling class in international
trade.
Thus, only a highly regulated development of capitalist relations
of production could do the trick. Only an industrial development
tightly handled from a central body could avoid the danger (for
that particular social structure) embodied in the development of
capitalism at the stage of free competition. Therefore, the state
of that social structure assumed the role of investor and main
force in the "modernisation" of the region. Paradoxically enough,
in Latin America state capitalism appeared before the development
of competitive capitalism, as a need by the ruling class
belonging to a pre-capitalist social structure to absorb
capitalist relations of production in its productive system
without jeopardizing that social structure. The state, then,
undertook to maintain the former mode of distribution, adapting
it to the needs of a restricted development of capitalist
relations of production. Thus, this specific social structure
adapted its system of production to a new level, and gave a new
level of development to its domestic market without jeopardizing
the political domination of the landowners-merchants-
manufacturers ruling class.

Such a state, of course, needed a political instance that was
authoritarian, which was not in contradiction with the political
instance during colonial and early post colonial times. Of course,
the degree of authoritarianism depended upon pressure coming from
the class struggles fought by peasants and/or urban workers. Side
by side with the development of "modernisation" came the growth
of a working class and the appearance of middle classes that
wanted to share power and wealth with the ruling class. On the
other hand, to maintain within a process of "modernisation" such
an unequal social structure brings forward added pressures
against such a system by sectors of the new working class, which
threaten to crack or even destroy the corporate state that
maintains the fractured system of production ( a threat, for
instance, that the Chilean ruling class assumed was apparent in
Chile, in September 1973, during Salvador Allende's government).
It is necessary to bear in mind that the "fractures" at the level
of the working class, both rural and urban, with the labour
aristocracy behaving as a buffer zone, is not an absolute
guarantee for the ruling class, but relative, as with any
guarantee of social peace in any social system.

Thus, from the 1920s onwards, the making of such a corporate
state was an enterprise undertaken by the ruling class through a
degree of sharing sectors of power with the emergent middle-classes,
the latter utilizing the unrest of the working class as a lever to
improve its capacity for bargaining with the ruling class. This
was the phase, some decades ago, known as "populist" eg. Peron in
Argentina, Getulio Vargas in Brazil, Lazaro Cardenas in Mexico,
Pedro Aguirre Cerda in Chile etc.

It was what many scholars called "the middle class revolution",
the "first step of development" - arguing that that the middle
classes in Latin America had the same progressive character as
the middle classes in Western Europe during the industrial
revolution.

Yet, as I indicated in the third section of this chapter, this
was not so. It goes without saying that in the 1960s, after three
decades or more of "middle class revolutions", the social
structure in Latin America remained fundamentally the same as
before, with greater inequalities at the level of income
distribution and ever more concentration of poverty. The only big
difference was that the upper middle class became richer than
previously.

For the purposes of illustration let us say that in Chile
"between 1930 and 1960 there were substantial changes in the
economy and forms of organisation of Chilean society, which,
nevertheless, did not alter the structure of economic power and the
wide extremes of concentration in landownership and means of
capital" (55).

In that period, in Chile as in the other countries of the region,
the fracture at the level of the working class meant that the
"popular" political parties, even the Communist Party in Chile in
the 1940s, opposed the organisation of rural labourers, as a
concession to the landowners for the sake of relative "social
peace and order". A further proof of my point on "populism"
is that this process then threatened the rural social structure
in Brazil in 1964, the entire fabric of Chilean society in 1973,
the domination of the rancheros in Uruguay in 1973, and the
ruling of the estancieros in Argentina in 1976; the ruling class
then returned to the old and basic form of government for such a
social formation: military dictatorship.

Writing in the 1960s, Pinto states that:

"There have been three decades of considerable transformation in
the productive systems of the most important countries of Latin
America. It is important to discover whether any corresponding
changes have taken place in the social and political
'superstructure' of these countries during the same period. If
the main criterion is the capacity to adapt to the new objective
economic circumstances, then the only general conclusion is that
such adaptation as has taken place has been extremely precarious
and limited...the traditional parties have only to a very limited
extent represented the interests of the new industrial
entrepreneur group. It would be pointless to look in the whole
region for one right-wing grouping explicitly identified with this
new social sector. A variety of bonds, ranging from financial
support during election campaigns to the defence of the specific
claims of the new industrialists, unite both these
sectors...There are many reasons for this and among the most
important is the survival of the traditional institutional
structure, which has hardly been affected by the developments of
the past three decades...There also exists a considerable degree
of intercommunication between the property-owning groups, which
very often unite the different functions of landowner, industrial
investor, importer and financier in various combinations within
a closely-knit group of people, or even within the same family or
social circle...In spite of the weakening of the landowners'
political power resulting from the changes of the last decades,
no Latin American country has been able to implement a reform of
agriculture as profound and extensive as appears essential to
remove the disparities and to broaden the domestic base for an
efficient development policy" (56).

This specific form of absorption of capitalist relations of
production by a pre-capitalist social structure had puzzled many
scholars, because the political forms of dominance of the whole
system tend to be authoritarian; Boron describes this as follows:

"In recent years a major preoccupation of everyone interested in
Latin America has been the extreme fragility of its democratic
institutions. This incurable weakness has even made itself felt
in Chile and Uruguay - countries once celebrated as living proof
of bourgeois democracy's viability in peripheral capitalist
societies. From a theoretical point of view, the last ten or
fifteen years have demonstrated that in a significant number of
Latin American further capitalist development requires the
dismantlement of institutions, practices and values traditionally
associated with bourgeois democracy. We are confronted, then,
with a paradox...the development of capitalism rests upon
persistent violation of the institutional structure and political
ideology which are held to be the most authentic product of the
'genius' of capitalism. The stunning realisation that economic
liberalism requires and generates political despotism shattered
the optimistic expectations of the fifties and early sixties. For
those earlier view had assumed, in a veritable fanfare of
economic mechanicism, that capitalist development in Latin
America would eventually eradicate the chronic plagues of
caudillismo and political instability, rooted in the weakness of
capitalism in the area...everyone knows that these reformist
hopes suffered a cruel blow. Capitalist development did, indeed,
take place, and yet the political crisis reached levels without
precedent in the history of the continent...The old
dictatorships...had themselves formerly been seen as the supreme
exponents of a ferocious and insurmountable system of repression.
But when compared with the scientific barbarism of the new
dictatorships, this classical gallery has paled into a mere
collection of petty patriarchal despots and dilettantes of
authoritarianism". (57)

The solution to the puzzle is that authoritarianism is the most
suitable form of political dominance that the ruling class of the
Latin American social structure can utilise to maintain the main
features of the social structure which absorbs capitalist
relations of production. It suits a system of production such as
the Latin American, where the only homogeneous social levels are
found within the boundaries of the ruling class. From this it
follows that those political parties most directly related to the
upper class are the most articulated in their role, while those
related to the middle and working classes do not really represent
the interests of their respective classes as a whole.

THE ROLE OF THE ARMY

The army being one of the political expressions of the ruling
class in any society structured into classes, it is only natural,
then, that in the continent the army was the ever present arbiter
which set the rules of the game and the limits to
"democratisation" when necessary. "Democratisation" is limited by
the functioning of the fractured system of production as a basis
of its fractured social structure. Thus, this "democratisation"
cannot correspond to the standard of bourgeois democracy, the
latter being a product of the capitalist mode of production.

"One of the basic institutions setting these limits (limits
within which the executive acts) is the army, which must be
counted as a major Latin American rule-maker. In this capacity,
the military functions in two ways. First, it is often an active
rule-maker, taking the initiative in creating and stabilising
policy. Secondly, it sometimes operates as a veto-wielder". (59)

The above makes sense with the army being a component part of a
corporate state where the government must play the double role of
economic agent and political organiser, and where the state must
bind the various parts of an extremely unequal social system

In this context,
"While variants do exist, the established ideology of the Latin
American military asserts the urgency of counter-insurgency and
the need for AUTHORITARIAN ECONOMIC DEVELOPMENT (underlined by
R.R.) While nuances were somewhat different, this b!sic theme was
common to the two most influential military schools - the ESG in
Brazil and CAEM in Peru - and may now almost be described as the
official ideology of the Latin American military. This does have
some 'traditional' overtones - notably its sense of military
superiority - but the key development is the rejection of
popularity as a legitimate military-political aim" (60).

The behaviour of the Chilean armed forces is illustrative. At the
end of the nineteenth century, Chile was governed by an oligarchy
based on mining, trade, and large landed estates (latifundia)
closely linked with British imperialism. In 1891, when British
imperialism wanted to seize all Chilean saltpeter against (then
President) Balmaceda, the Navy assumed the pro-British leadership
and overthrew Balmaceda. Thus, the domination of these sectors of
the oligarchy was consolidated. But at the beginning of the First
World War, the crisis of saltpeter occurred. Forced by economic
realities, the country embarked on a phase of industrialisation
in order to manufacture substitutes for some previously imported
products. Together with industrialisation, the large, struggling
proletarian masses appeared. There was a period of social unrest.
From 1924 to 1932 there were several military coups. In the face
of a stubborn oligarchy that clung to its former privileges, the
Armed Forces welcomed "social reforms" and "repression". They
believed it was necessary to reform so that nothing could change,
and to repress the working classes in order to prevent their
organisation. The industrial entrepreneurs joined the dominant
sectors of landowners and the mining and trade oligarchy then
supported by the US imperialism that was beginning to take
control of the economic structure. During the time of the Popular
Front, in 1938, the Armed Forces preserved their class origin,
located more and more in small-, middle-, and lower-bourgeois
professionals, and did not oppose reformism the consolidation
of the state as the main industrialising agent.

The group of industrialists grew and the strength of the
bureaucratic bourgeoisie was born under the shadow of the
development of the state. They governed in collusion with
oligarchic financial and commercial sectors, while imperialism's
control, aided by the Second World War, became more general and
solid. At the same time, contradictions between the industrial
entrepreneurs of some sectors and imperialist consortiums acting
in Chile began to increase. The state served these dominant
classes and US imperialism. During this period, successive
governments felt capable of repressing the struggles of the urban
and rural proletariat, cornering the Armed Forces in a useless
role of internal decoration and consolidating the Carabineros Corp
(national police force organised in a military fashion) as the
real armed forces of repression against the people. The Armed
Forces as an institution, felt themselves disintegrating and
believed that they could recover their real role of upholding the
state only if they could get parity treatment with the
politicians, who were seen as ineffective in controlling the
surge of popular mobilisation.

In September 1970, Allende won the presidential election and a
political crisis ensued. Once more, the Armed Forces saved the
system, although this time without resorting to overt repression.
The Armed Forces took over the leadership of the disconcerted
bourgeoisie, they supported Allende, generally submitting to his
programme on the one hand and establishing very definite limits
of compliance with him on the other. In October 1970, Allende met
with the Army, Navy and Air Force general staffs and adopted a
three points commitment with the military: economic support to
modernise the war material; agreement that no politician, except
for Allende (as president) could interfere in the appointment of
the high command, and agreement that the Armed Forces integrate
themselves to the key areas of the national economy.

Three years later, in September 1973, the Armed Forces considered
that the reformist planning of Allende was no longer capable of
preventing the assault of the working class against the whole
social system, and destroyed the entire bourgeois
institutionality in the country (61).

The extremely unequal mode of distribution (hence, of income
distribution) originated in the system of production in Latin
America, gives to the "fractures" in the social structure the
double character of pivots of the dynamics of the system and weak
links in the social fabric. Thus, the social fabric can be kept
together only through some form of authoritarian rule. Hence, the
high profile of the military presence in Latin American politics.
This presence takes various forms, either a low profile as in the
so-called democracies of Colombia and Venezuela, or sheer
presence as in Argentina, Bolivia, Chile, Haiti, Honduras,
Uruguay, passing through what has been conceptualised as
"constitutional exclusivist regimes" (Goran Therborn) as Mexico,
Costa Rica and Brazil. This latter form of government, it seems
to me, is the highest form of "democracy" that the Latin American
system of production can afford, because it articulates the
"fractures" in a corporate state without the political tensions
produced by military rule.

Moreover, the Armed Forces being a component part of the state,
reflect its main features: its role as an active agent at the
levels of economy, society, and politics. This major role of the
Latin American corporate state mislead most of the left-wing
political parties in the region, most notably the communists and
socialists in Chile in the period 1970-73, which thought that the
state being so powerful, access to government could produce the
necessary conditions for attempting a social revolution from
within the state. Facts proved them wrong.

A CRITICAL ASSESSMENT

Some scholars may argue that the inequalities in income
distribution in Latin America today are roughly the same as in
the early stages of capitalist development in the countries of
Western Europe and the United States. Therefore, Latin America is
currently at an early stage of capitalist development, and not in
the different modes of development. Its seems to me that they may
be right as far as statistics are concerned, but wrong in their
argument.

--------------------------------------------------------------------
             ENGLAND AND WALES - INCOME DISTRIBUTION

Year 1803               Year 1867               Year 1908
---------               ----------              ----------
% Pop.      % Income    % Pop.     % Income    % Pop.   % Income

 1.4          15.7        0.5         26.3       2.2        30.7
31.7          59.4        1.5         10.6       2.5         7.5
66.9          24.9        8.3         13.7       7.7        11.1
                         15.3         10.7      14.6        12.6
                         74.4         39.1      73.0        38.1

Year 1929               Year 1938               Year 1949
---------               ---------               ---------
% Pop.      % Income    % Pop.     % Income     % Pop.   % Income

 0.55         16.2        0.44        11.9       0.01        0.8
 1.0           6.4        0.8          5.7       0.3         5.1
 2.7           8.4        2.3          8.3       0.6         4.5
 8.1          10.9        8.2         14.4       2.1         8.3
26.1          26.5       88.3         59.7      10.6        19.7
61.5          31.6                              86.4        61.6

Year 1969-70
------------
% Pop.     % Income

 0.5           4.3
 1.5           5.5
 6.9          14.2
45.3          51.9
45.8          24.1

Source: (62)
-----------------------------------------------------------------

It is evident that for the years 1867. 1908 and 1929, there are
similarities with the income distribution in Latin America in the
1960s (see Table 5). But, as we indicated before, income
distribution as an indicator is valid only if it is taken as a
component part of a wider analysis relating to its relations of
production, hence social structure and mode of distribution, and
from this, a second level of relationship to the pattern of
consumption of the sectors in the specific society under
analysis.

In the late XIX century in England and Wales, the main relation
of production was capitalist, both in rural and urban areas.
Moreover, capitalist relations of production originated within
the English and Welsh system of production, therefore its
spreading was at the basis of a rapidly and urbanising economy
supplying its domestic market with consumer goods and capital
goods to increase the productivity of the whole system of
production, and that system was exporting its manufactures,
adding to the internal pressures for enlarged capitalist
production. On the other hand, the population engaged in
agriculture was 22% in 1850, 9% in 1901, and 6% in 1950 (63).
Thus, the pressure to raise the productivity in the rural areas
pointed to the need of overall capitalist relations of production
there. Therefore, the regressive pattern of income distribution
in England and Wales at that time represented only a temporary
blocking to enlarged capitalist accumulation, that, on the other
hand, was having an outlet through export to other capitalist and
pre-capitalist societies.

Conversely, in Latin America in the 1960s, between 40-50% of the
population was engaged in rural activities where a substantial
part of the relations of production were pre-capitalist, and in
those urban places where capitalist relations of production were
the most important, the industrial development was being carried
out through limits posited not for the income distribution as
such but for a social structure which was at the basis of the
particular pattern that income distribution took, this
distribution thus being an indicator of the mode of distribution
as pre-capitalist. Moreover, capitalist relations of production
in Latin America didn't arise from within the system of
production, but were brought from outside it, and absorbed
conditional on the permanence of the social structure. Thus, the
industrial sector in the region was producing consumer goods for
the domestic market and importing capital goods from the world
capitalist market, blocking in another way the development of a
capitalist mode of production.

In other words, what for the capitalist mode of production meant
a permanent state of crisis as part of its development (the
contradiction between enlarged rate of profits, which goes
against an even distribution of income, and the need of enlarged
markets to realize the surplus value, which tend to pressure in
the direction of distributing the income horizontally), for the
Latin American system of production was a superstructural means
for maintaining that system under conditions which suited a
particular social structure. It follows from this that similar
patterns in income distribution are a reflection of different
economic and social structures in specifically different systems
of production.

If we hold to the argument of an "early stage of capitalist
development", in Latin America, it could still be argued that the
United States had an extremely unequal income distribution in its
early years of capitalist development, alongside a substantial
percentage of rural workers. 64% of the labour force was engaged
in agriculture in 1850, 38% in 1900, and 22% in 1950.

But, again, the relations of production in the USa were different
to those in Latin America in 1970:

"In America, of course, most of the farmers were owner-
occupiers - men who owned or were in the process of buying their
farms...Above all, the high levels of income in agriculture
arising from the abundance and cheapness of land and the gains
from rising land values, and the ease of obtaining land for
farming, provided the alternative occupation which kept real wages
high in industry. The scarcity and dearness of labour made for
rapid improvement and replacement of machinery in both industry
and agriculture...with a rising level of demand in the
market...American agriculture provided foodstuffs and raw
materials for an economy that grew even faster than Britain in
terms of population and industrial output...and there was a
growth in demand for implements, machinery, transport, processing
and storage facilities" (64)

All this, of course, was notoriously different to rural Latin
America, and even urban latin America in the 1960s and 1970s.

Therefore, the argument must be posed upside down: how is it
possible for an unequal income distribution to exist in a society
with such a relatively advanced industrial production. To
illustrate my point, I will quote statistics given by the World
Bank in the year 1976:

PERCENTAGE OF VALUE ADDED IN COMMODITY PRODUCTION

United States           64.2
United Kingdom          63.8
Argentina               61.4
Brazil                  62.0
Chile                   51.7
Mexico                  58.9

Moreover,
"By the end of the 1960s investment represented about 20 per cent
of the Latin American domestic product, a higher proportion than
that prevailing in other developing regions, with the exception of
Southern Europe. Furthermore, Latin American countries were
financing this investment with internal savings to a larger
extent than the other developing regions..."

But,
"Investment has not always been allocated by either the public or
the private sector in such a way as to maximise growth, benefit
the lower income groups, or reduce external financial dependence.
For one thing, there has generally been an exaggerated allocation
of investment to housing, especially for the upper and middle
income groups...Investment in Latin America is both lower in real
value than the figures suggest and less productive than better
allocation would have allowed. Other factors, such as the demand
of select groups of trade unions for disproportionately high
wages, and the frequent subsidising of capital through over-
valued exchange rates, low interest rates, the waiving of duty on
imports of machinery, and tax exemptions, tend to make industries
over-capitalised and to make  the imports contents of the
investment unnecessarily high...Bad allocation of investment has
seriously limited its yield, and kept human resources unemployed
when they could have been working productively" (65)

The above description reflects the Latin American system of
production at work. And it works in such a way, as I indicated
through this thesis, because of the needs of the ruling class to
maintain the old social structure as the social fabric of a new
system of production.
-----------------------------------------
FOOTNOTES (pp. 287-294)

1) Marx, GRUNDRISSE,p.99
2) Ibid., pp. 99-100
3) Ibid., p. 85
4) Ibid.,p. 89
5) Social accidents refer not only to the class struggles within each
particular social formation but to inter-relations between social
formations (hence, between modes of production). For instance, military
conquest, or economic dominance (as with that of imperialism), is in
the first place an affair of the ruling class of a specific social
formation which encroaches into another social formation, and this
affair constitutes a class struggle between that ruling class and some
of the social classes belonging to the victimized social formation.
As a matter of fact, this particular aspect of the class struggles,
has been the cause of most important "social accidents" in history.
One of them,of course, is the colonization of Latin America.
6) John G. Taylor, FROM MODERNISATION TO MODES OF PRODUCTION: A
CRITIQUE OF THE SOCIOLOGIES OF DEVELOPMENT AND UNDERDEVELOPMENT,
Macmillan, 1979, London.
7)"Agricultural land...by 1910 had come to be owned under several
different systems of landholding...the latifundio is the large estate.
It is called, in various parts of Latin America: hacienda, estancia,
or fazenda. By 1910 it was the predominant type of landholding in
Latin America.One estimate had it that in that year 834 HACENDADOS
owned two thirds of Mexico, and the situation was much the same in
Chile, Argentina, and Brazil. Despite the fact that land was owned
in large units, the hacienda system...was characterized by subsistence
farming in small plots...small individual holdings, called peonias
or caballerias...or ranchos in Mexico, or chacras in Argentina...have
continue to play a minor role in the Latin American landholding
scheme of things...In general, by 1910, the large landholding unit,
inefficiently farmed in small plots, was the characteristic
agricultural form in Latin America". Gordon, op. cit., pp. 20-21
8) All data on Argentina in this section is based on Aldo Ferrer,
LA ECONOMIA ARGENTINA, LAS ETAPAS DE SU DESARROLLO Y PROBLEMAS
ACTUALES, Fondo de Cultura Economica, Mexico, 1965. I did choose
Argentina as an example of the colonial social structure "absorbing
capitalist relations of productions, because it is the only country
in the region that hadn't a huge amount of labour power available.
Thus, what the Argentinian ruling class did through intensive use
of capital in the rural areas, the ruling class in the rest of the
continent achieved through use of intensive labour. Both schemes,
nevertheless, leading to the same end as far as the social structure
is concerned.
9) Anibal Pinto, INFLACION, RAICES ESTRUCTURALES, F.C.E., Mexico,
1973, p. 60."...la emergencia de un sector industrial y su complejo
moderno se presenta como UNA SUPERPOSICION SOBRE LA ESTRUCTURA
TRADICIONAL, que apenas se modifica, salvo en aquellos nudos donde
habia concentrado su efecto el modelo primario-exportador. Sin
embargo, como ya se dijo, a menudo esas areas avanzadas no se
reforzaron o complementaron".
10) This arrangement is taken from LA MANO DE OBRA Y EL DESARROLLO
ECONOMICO DE AMERICA LATINA EN LOS ULTIMOS ANOS, ECLA, E/CN.12/L.1,
1964.
11) The adding of the percentages gives 94.4 and not 100. This is
because ECLA left aside civil servants and military personnel.
Nevertheless, for the purposes of my analysis this makes no
difference.
12) See Anibal Pinto y Armando de Filippo, NOTAS SOBRE LA ESTRATEGIA
DE LA DISTRIBUCION Y LA REDISTRIBUCION DEL INGRESO EN AMERICA LATINA,
in El Trimestre Economico, Mexico, Abril-Junio 1974, No.62, pp. 357-
375; and Anibal Pinto, HETEROGENEIDAD ESTRUCTURAL Y MODELO DE
DESARROLLO RECIENTE DE LA AMERICA LATINA, included in INFLACION,
RAICES ESTRUCTURALES, F.C.E., Mexico, 1973, pp. 104-140.
13) Marx, GRUNDRISSE, p. 96
14) "The position of the classes to one another depends more on
relative wages than on the absolute amount of wages"..."that is
according to the RELATIVE SHARE of the total product, or rather of
the total value of this product, which the workers receive". (Marx,
THEORIES OF SURPLUS VALUE, L.W., London, 1972,Part 2, p.419).
"The first category, that of the consumers (whose revenues are in
part not primary, but secondary, derived from profit and wages), is
much broader than the second category (producers), and therefore the
way in which they spend their revenue, and the very size of the
revenue give rise to very considerable modifications in the economy
and particularly in the circulation and reproduction process of
capital".(Ibid., p.493)
15) ECONOMIC SURVEY OF LATIN AMERICA, 1968, ECLA, E/CN.12/825/REV.I,
July 1969, pp. 10-15.
16) Ibid., p. 12.
17) Anibal Pinto, CONCENTRACION DEL PROGRESO TECNICO,included in
INFLACION, RAICES ESTRUCTURALES, F.C.E., Mexico, 1973, pp.38-103.
"Si se toman las cifras de la CEPAL para la America Latina habria
fundamento para suponer que el grueso de la demanda efectiva reside
en...el 5% con...ingreso personal promedio de 2,400 dolares por ano.
El 45% restante, que tendria un promedio de 400 dolares por ano y el
saldo del 50% de unidades receptoras con ingresos menores, con un
promedio de 120 dolares, indudablemente se hallan imposibilitados
para dedicar sus entradas a otros gastos que no sean los mas vitales
de 'pan, techo y abrigo'..." (p.86).
18) Osvaldo Sunkel, THE STRUCTURAL BACKGROUND OF DEVELOPMENT PROBLEMS
in LATIN AMERICA: PROBLEMS IN ECONOMIC DEVELOPMENT, Edited by Charles
T.Nisbet, The Free Press, New York, 1969, p. 31.
19) My argument is based on Sergio Ramos Cordova, CHILE, UNA ECONOMIA
EN TRANSICION?, Casa de las Americas, La Habana, Cuba, 1972,
pp. 190-226
20) Ibid., p. 191 (for A), and p.197 (for B).
21) Structure of demand for every sector, is as follows:
                                         GROUPS
                         I     II     III     IV      V      total
Light consumer goods   29.46  31.44  16.19   8.16   14.77     100
Chemicals              26.41  30.12  15.92   8.60   18.92     100
Basic primaries        22.72  40.90  13.64   4.54   18.18     100
Consumer Durables      18.22  20.61  13.43   6.43   41.30     100
---------------------------------------------------------------------
22) CORFO, Gerencia de Industrias, EFECTOS DE LA ESTRUCTURA DEL
CONSUMO SOBRE EL CRECIMIENTO DEL SECTOR INDUSTRIAL, Santiago de Chile,
mimeo, 1970.
23) Sunkel, op.cit, pp. 11-12. "The population of the favelas in Rio
do Janeiro increased from 400,000 in 1947, to 650,000 in 1957, and
900,000 in 1961, representing 38% of the city's total population. In
Colombia, in Buenaventura, 80% of the total population lives in shanty
towns. In Chile, people living in shanty towns increased from 10% of
the total population in 1952, to 14% in 1960. In Peru, this growth
was from 10% of the Lima's population in 1940, to 21% in 1961.
According to ECLA's figures for the 1970s, around 40% of the total
Latin American population lives as 'marginal'."
24) One indicator is that Latin American ruling class was forced to
attempt an alternative mode of industrialization since the late
1960s, given the failure of the import-substituting industrialization
phase. This alternative mode was, once again, based on "partnership"
(dependence) with imperialism: production of manufactured goods and
other commodities for the world capitalist market and not for the
domestic market. Conversely, capitalist mode of production does not
need external factors to reproduce itself. The statistical data on
foreign trade for the United States in particular, and for the
industrialised countries as a group shows that trade with the non-
industrialised world is not critical. As Bettelheim argues: "the
'blocking' of the development of the productive forces brought about
by imperialist domination is thus effective at both poles, the
dominating and the dominated. Obviously, these consequences are much
more visible and dramatic for the poor countries, but from the
standpoint of theoretical analysis this DOUBLE EFFECT must not be
ignored"...."Indeed, we must not overlook the fact that the
possibility of exploiting the cheap labour of the dominated countries,
and of buying cheaply the products supplied by these same countries,
puts a relative brake upon technical development in the advanced
capitalist countries as well. This is why we observe that when
economic relations between imperialist countries and dominated ones
are at their most difficult (in time of war, for example) both groups
of countries are able to achieve exceptionally rapid progress in
some of their branches of production. Thus, during World War II,
India was able to start a process of industrialization, and the
same development occurred in several countries of Latin America
(Argentina, Brazil, Chile). On their part the industrialized
countries, finding themselves more or less cut off from 'their'
sources of cheap raw materials, were led to develop industries for
the production of substitutes (e.g. synthetic rubber, artificial
fibres). Industries like these generally prove capable of supplying
something more than substitutes, namely, products that play a
considerable economic role and the cost of which, as a result of
technical progress, eventually stands comparison with that of the
'natural products' obtained by exploiting 'cheap labour' (Chilean
nitrate and German synthetic nitrate, is another case. R.R.) (Charles
Bettelheim, THEORETICAL COMMENTS,  Appendix I to Arghiri Emmanuel,
UNEQUAL EXCHANGE. A STUDY OF THE IMPERIALISM OF TRADE, N.L.B.,
London, 1972, pp. 307-308). Nevertheless, there is a qualitative
difference in this process as far Latin America is concerned:
further 'industrialization' in Latin America means further dependence
from world capitalist market because of the structural characteristics
of its society, and the ruling class in the region must stretch its
"flexibility" to remain as such. Conversely, from the structural
point of view, further industrialization in the capitalist mode of
production means consolidation of the capitalist class structure.
25) All the data that follows comes from LA DISTRIBUCION DEL INGRESO
EN AMERICA LATINA, ECLA, E/CN.12/863, September 1970.
26) Ibid., p. 85.
27) Ibid.,p.22."In countries with especially rigid class systems -
particular in Indo America - the social distances separating the
strata of society are so great that it is only a minor exaggeration
to say that the different classes in the same country live in
different worlds". (George I. Blanksten, THE POLITICS OF LATIN
AMERICA, included in THE POLITICS OF THE DEVELOPING AREAS, Ed. by
Gabriel A. Almond and James S. Coleman, Princeton, New Jersey,
1960, p.259.
28) Este es un efecto del muy discutido efecto de demostracion, pero
cabe destacar que solo afecta al grupo de ingresos mas altos, por ser
el unico con ingresos suficientes.Los grupos de ingresos que se hallan
en los tramos inferiores e intermedios de la distribucion siguen
ajustandose principalmente a los estandares de consumo nacionales.
Asi, una desigualdad extrema producida por una gran concentracion del
ingreso en la cumbre no alienta el ahorro, sino que contribuye a
establecer modalidades de consumo desvinculadas entre si. Un grado
menor the desigualdad podria haber obligado a los grupos de ingresos
mas altos a mantener modalidades de consumo basadas en las realidades
nacionales y por lo tanto, quizas podria haber alentado el ahorro.
Las repercusiones sociales de la concentracion del ingreso tienen mas
importancia.Las enormes diferencias de ingreso entre los que se
hallan en la cumbre de la escala y la masa de la poblacion
contribuyen mucho a establecer marcadas diferencias de clase. Los que
se hallan en la cumbre pueden vivir en forma totalmente distinta de
la que esta al alcance  del grueso de la poblacion. Se senalo antes
que las modalidades de consumo del grupo de ingresos mas altos no se
basan en estandares nacionales. A esto se agrega que la gran
disparidad de ingresos fomenta el uso de servicios personales
directos. El ingreso del 5% de ingresos mas altos es (en promedio)
15 veces superior al del tramo intermedio inferior de la distribucion,
y 25 veces superior al de la quinta parte mas pobre de la poblacion.
Esto permite que se mantengan servicios personales en mucha mayor
escala que en los paises industrializados.Las grandes diferencias
en las modalidades de vida impiden una efectiva convivencia, y hacen
muy frecuentes los contactos personales sobre la base amo-criado,
todo lo cual contribuye a la existencia de agrupaciones sociales muy
diferenciadas". (Ibid., pp. 22-23)
29) Marx, THEORIES OF SURPLUS VALUE, Part 2, p. 573.
30) Dale L. Johnson, THE NATIONAL AND PROGRESSIVE BOURGEOISIE IN
CHILE, included in DEPENDENCE AND UNDERDEVELOPMENT, LATIN AMERICA'S
POLITICAL ECONOMY, by J. D. Cockcroft, A. Gunder Frank, and D.L.
Johnson, Anchor Books, U.S.A., 1972, pp. 172-173.
31) James Petras, POLITICS AND SOCIAL STRUCTURE IN LATIN AMERICA,
M.R., New York, 1970, pp. 23-25."Through the bonds of kinship and
friendship with members of the landowning class the urban business-
man is more likely to hold a conservative outlook than to want to
modify the existing structure of society"..."In his study of
industrial managers of large industrial firms in Chile, Dale Johnson
noted that"..."this group of Chileans is largely composed of members
of the nation's traditional elite families'. Studies of industrial
elites in Peru, Brazil, Argentina, and Mexico contain similar
findings" (Ibid., pp. 22-23).
32) F.H. Cardoso, THE INDUSTRIAL ELITE IN LATIN AMERICA, included in
UNDERDEVELOPMENT AND DEVELOPMENT. THE THIRD WORLD TODAY, Ed. by Henry
Bernstein, Penguin Books, London, 1978, pp. 202-203.
33) Anibal Pinto, POLITICAL ASPECTS OF ECONOMIC DEVELOPMENT IN LATIN
AMERICA, included in Claudio Veliz (ed.), OBSTACLES TO CHANGE IN
LATIN AMERICA, O.U.P., London, 1968, p. 12.
34) Helio Jaguaribe, POLITICAL DEVELOPMENT, A GENERAL THEORY AND A
LATIN AMERICAN CASE STUDY, Harper & Row, New York, 1973, p. 395.
35) Clark W. Reynolds, MEXICO Y BRASIL, MODELOS PARA LIDERAZGO EN
AMERICA LATINA?, included in EL TRIMESTRE ECONOMICO, No. 164,
October-December 1974, Mexico, p. 868.
36) Jose Serra and Maria C. Tavares, MAS ALLA DEL ESTANCAMIENTO.UNA
DISCUSION SOBRE EL ESTILO DE DESARROLLO RECIENTE, included in
DESARROLLO LATINOAMERICANO, ENSAYOS CRITICOS, Jose Serra (ed.),
F.C.E., Mexico, 1974, p. 239.
37) Ibid., p. 241.
38) James Petras, op. cit., pp. 38-42.
39) Charles Wagley, AN INTRODUCTION TO BRAZIL,  Columbia University
Press, New York, 1963, p. 126.
40) Petras, op.cit., p. 13.
41) Celso Furtado, ECONOMIC DEVELOPMENT IN LATIN AMERICA, Cambridge
University Press, 1976, p. 108.
42) Ricardo M. Ortiz, HISTORIA ECONOMICA ARGENTINA 1850-1930,
Ediciones Pampa y Cielo, Buenos Aires, 1964, Vol.II, p. 205.
43) Instituto de Economia, LA ECONOMIA CHILENA EN EL PERIODO 1950-63,
Editorial Universitaria, Universidad de Chile, Santiago, 1965, p. 7.
44) Robinson Rojas, LA LUCHA POR LOS SUELDOS Y SALARIOS, paper in
CAUSA ML, bi-monthly political journal, Ed. by Robinson Rojas,
No. 22, January 1972, Santiago, Chile.
45) Robinson Rojas, THE MURDER OF ALLENDE, AND THE END OF THE CHILEAN
WAY TO SOCIALISM, Harper & Row, New York, 1975, pp. 157-159.
46) Ibid., footnote 25, p.26
47) Goran Therborn, THE TRAVAIL OF LATIN AMERICAN DEMOCRACY, New
Left Review, No.113-114, 1979,pp. 75-76.
48) Solon L. Barraclough and Arthur L.Domike, AGRARIAN STRUCTURE IN
SEVEN LATIN AMERICAN COUNTRIES, included in LATIN AMERICA, PROBLEMS
IN ECONOMIC DEVELOPMENT, Charles T. Nisbet (ed.), The Free Press,
1969, p. 101.
49) Dale L. Johnson, ON OPPRESSED CLASSES,  included in DEPENDENCE
AND UNDERDEVELOPMENT, p.269.
50) Petras, op. cit., pp. 17-18.
51) Alan Angell, LABOUR AND POLITICS IN CHILE, in LATIN AMERICAN
AFFAIRS, Raymond Carr (ed.), Oxford University Press, 1970, p. 103.
The table is also from this source.
52) Jim Cockcroft and Ross Gandy, THE MEXICAN VOLCANO, in Monthly
Review Magazine, May 1981, pp. 34-36.
53) Edmundo Flores, LA SIGNIFICACION DE LOS CAMBIOS DEL USO DE LA
TIERRA EN EL DESARROLLO ECONOMICO MEXICANO, included in LA ECONOMIA
MEXICANA, I, ANALYSIS POR SECTORES Y DISTRIBUCION, Leopoldo Solis
(ed.), F.C.E., Mexico, 1973, pp. 23-28.
54) Jay Kinsbrunner, CHILE, A HISTORICAL INTERPRETATION, Harper
Torchbooks, New York, 1973, p. 104. It is illustrative to know that
in 1882, twenty three of the fifty richest families in Chile were
of landowners. The rest accounted for miners, bankers, businessmen
and merchants.
55) Anibal Pinto, INFLACION, RAICES ESTRUCTURALES, F.C.E., Mexico,
1973, chapter on "Desarrollo Economico y Relaciones Sociales en
Chile", pp. 246-283.
56) Anibal Pinto, ASPECTS OF ECONOMIC DEVELOPMENT, in C. Veliz, 1968,
pp. 21-23.
57) Atilio A. Boron, LATIN AMERICA: BETWEEN HOBBES AND FRIEDMAN, in
New Left Review, No. 130, November-December 1981, pp. 45-46.
58) George I. Blankesten, THE POLITICS OF LATIN AMERICA,  in THE
POLITICS OF THE DEVELOPING AREAS, G. Almond and J. Coleman (eds.),
pp. 455-531.
59) Ibid., p.524.
60) George Philip, THE MILITARY INSTITUTION REVISITED: SOME NOTES
ON CORPORATISM AND MILITARY RULE IN LATIN AMERICA, Journal of Latin
American Studies, Vol.12, No.2, 1980, p. 430.
61) See Robinson Rojas, THE CHILEAN ARMED FORCES: THE ROLE OF THE
MILITARY IN THE POPULAR UNITY GOVERNMENT,  included in THE CHILEAN
ROAD TO SOCIALISM, Dale Johnson (ed.), Anchor Books, New York,
1973, pp. 310-322.
62) A SOCIALHISTORY OF ENGLAND 1851-1975, pp. 216-217
63) Philip S. Bagwell and G. E. Mingway, BRITAIN AND AMERICA. A STUDY
OF ECONOMIC CHANGE 1850-1939, Rouledge and Kegan Paul, London,
1970, p. 60.
64) Ibid., pp. 63, 16, 87.
65) Adalbert Krieger Vasena and Javier Pazos, LATIN AMERICA: A
BROADER WORLD ROLE, Ernest Benn Ltd., London, 1973, pp. 72-73.


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Róbinson Rojas, "Latin America: Blockages to Development", PhD
dissertation, 1984, London pp. 190-241