The August issue of New Times, Moscow, carries an interesting article entitled “The Developing Countries: Economic Front” by Prof. Rostislav Ulanovsky. Whatever its purpose, it is significant if for no other reason than that the Soviet Press seldom carries so pitiless an exposure of the weaknesses of developing countries.
The article starts by acknowledging all that the developing countries have achieved. It points out how in the twenty years from 1950 to 1970 their total industrial production increased four-fold and agricultural output by 68 per cent, the value of their exports jumped from $19 billion to $53 billion and their gross per capita national product rose from $ 140 to $ 225.
But all this does not impress Prof Ulanovsky. For, in his view, most of the developing countries have been unable to build an independent economy wielding a national income capable of providing the resources needed for extended reproduction and improvement of the people’s material and cultural standards of life.
Grain Output
Prof. Ulanovsky is particularly concerned about the food position in the third world which has seriously deteriorated on account of the growth of population which has increased from 1,080 million to 1,800 million from 1951 to 1973 (66.5 per cent). Thus while the population of the developing countries has come to account for 72 per cent of the total of the non-socialist countries, their share in the average grain production in 1971-74 was only 46 per cent (381 million tonnes out of a total of 821 million). Indeed in certain regions the output of food declined rather than increased since the mid-sixties – by 13 per cent in Africa, by six per cent in the Middle East and by three per cent in Latin America.
Only two developing countries – Thailand and Argentina – remain exporters of food. Most others have become critically dependent on imports from the United States, Canada, France and Australia which have risen steadily – from 26 million tonnes a year in 1961-65 to 33 million in 1966-70 and 39 million in 1971-74.
Prof. Ulanovsky, of course, does not let slip the opportunity to take a swipe at the food exporting countries for a trebling of the prices between 1971 and 1974 – wheat sold at $ 62 a tonne in 1971 and $180 in 1974. But there can be no question that the crux of his criticism is directed at the developing countries themselves for their failure to contain the population explosion and to raise their food production to meet their needs.
Prof. Ulanovsky takes due note of the fact that trade between the developing countries and members of the Soviet-led group of nations increased by over six times from 1960 to 1974. But he does not draw much comfort from it because of two factors. For one thing, “trade and economic links with the countries of the socialist community amounted in 1972-73 to only 4.8 – 5.1 per cent, of the newly free countries’ foreign trade.” For another, the trade between the developed capitalist countries and the third world trebled between 1955 and 1972 (from $33 billion to $100 billion).
Prof. Ulanovsky makes an even more shattering point when he states that the relative importance of the developing countries for the economy of the industrial capitalist states substantially declined from 1955 to 1970. “While the total exports of the latter increased 3.7 times over, the percentage falling to the share of the developing countries dropped from 28 to 19 per cent” and “while their imports also increased 3.7 times over, the share of the third world fell from 28 to 18 per cent.”
Inevitably the trend is reflected in the export of capital. The share of the developing countries in America’s foreign investment, for instance, dropped from 48.7 per cent in 1950 to 27.5 per cent in 1970, though in absolute terms the flow of foreign capital into these countries increased from $54 billion in 1960-65 to $61 billion in 1966-70.
What worries Prof. Ulanovsky most is the great leverage the multinationals have acquired in the developing countries. He admits the governments concerned have become aware of the dangerous implications of this development and that they are nationalising foreign investment in order to acquire control over their national resources. The figures he cites are almost frightening.
Investment
According to UN experts, Prof. Ulanovsky writes, one-third of the direct investment abroad by multinational corporations was in the third world countries in 1972 and in 1971 their subsidiaries marketed in these countries goods worth $110 billion which was equivalent to 27 per cent of the aggregate national product of these countries and nearly double their total exports. Similarly, he relies on UN statistics to point out that “the rate of nationalisation in the developing countries in 1970-74 was double that of the sixties.”
The trouble is that this part of Prof. Ulanovsky’s article does not mesh with the earlier part. For, if the third world is critically dependent on industrial capitalist states for the import of food, capital and know-how, if its economy continues to be linked intimately with theirs and if its importance for them has “substantially diminished” both as a market and as a supplier of raw materials, except in special cases of which oil is by far the most important, how can nationalisation by itself serve as a major instrument for bringing into existence a new international economic order?
Prof. Ulanovsky does not – and perhaps cannot be expected to – concede that the multinationals may well account for a substantial part of the increased industrial production in many developing countries. He emphasises instead the profits they take out – $ 23 billion in the second half of the ’sixties. He also underscores the fact that, despite their activities in the developing countries and the state-to-state aid received by them from the industrial capitalist states, the gap between the per capita income of the people in the two groups increased from 8.4 times in 1953 to 16 times in 1973. But in the very process of bringing out the total turnover of the multinationals in the third world – $110 billion in 1971 – he acknowledges their role, though only indirectly.
Distortions
The multinational corporations doubtless introduce grave distortions in the pattern of production and consumption and can hamper the growth of a national entrepreneurial class in a country like India where it exists. But these are not the problems which are Prof Ulanovsky’s principal concern. He is mainly worried about the outflow of profits and as such should have dealt with two related issues – whether most of the developing countries could have done as well as they have in terms of raising the gross national product without the capital, know-how and management the multinationals have brought in and whether there is a substitute for them if industrialisation is to be the goal of the third world countries.
This raises the question of what the Soviet Union and other communists have done and can do for the developing countries. Prof Ulanovsky does not deal in detail with this question. But, as he himself has brought out most forcefully, the cooperation between the Soviet group and the developing countries has not helped change the basic pattern of economic relationship in the world. This must mean that the former must be willing to do far more for the latter than in the past if the West’s economic hegemony is to be shaken. But are they so willing? And, perhaps more importantly, are they even able to do so without making basic and far-reaching changes in their own economy?
How then is one to interpret the purpose behind the article? On a surface view, it can be said that Prof. Ulanovsky’s intention is to encourage the take-over by governments of western investments in the developing countries. But in that case, he would not have been at pains to emphasise their diminishing importance for the West and their critical dependence on it. The question therefore, remains unanswered unless the Kremlin itself is caught in a dilemma and Prof. Ulanovsky has only given an expression to it.
The Times of India, 22 September 1976