The character of Argentine industrialization

Louis Proyect lnp3 at
Fri Apr 12 07:58:52 MDT 2002

>From Revolutionary History, Volume 2, No 2, Summer 1989. Used by permission.

This account, originating in the author's MA thesis at the University of
Paris, and which appeared in a duplicated form in Spanish in the first
issue of the journal of the Centro de Estudios Historicos y Sociales sobre
America Latina, was first published in Paris in September 1980. It was then
republished in two parts in a printed form in Internacionalismo, no 3
(August 1981) and in no 4 January-April 1982).

The author is a leading member of Politica Obrera, now the Partido Obrera,
an Argentine Trotskyist grouping. (At the time of writing, June 1989, the
leadership of the Partido Obrera has been arrested by the Argentine
government and charged with organising food riots in the shanty towns.) The
Partido Obrera is a large Trotskyist organisation by European standards,
second only in size in its own country to the Movimento al Socialismo
(MAS), once led by the late Nahuel Moreno. Politica Obrera took
responsibility for publishing Internacionalismo in exile as the journal of
the Fourth Internationalist Tendency. After the fall of the military
dictatorship of Videla, Viola and Galtieri, the author added another part
and published it in Argentina in two volumes under the title Historia del
trotskismo Argentino (1929-60) in 1985, and El trotskismo en la Argentina
(1960-1985) in 1986, both by the Centro del America Latina, Buenos Aires

What Kind of Industrialization?

The intervention of the leadership of the Fourth International did not in
any way change the positions of that sector of Argentine Trotskyism with
which it maintained favourable relations. However, in characterising the
country, the latter based itself, not on Trotsky nor on the Bolshevik
tradition of the Third International, but on the Argentine Socialist
theoretician who had developed the most coherent characterisation, the
reformist Juan B Justo.[59] For Justo, the incorporation of the great
majority of national territory into production, largely agrarian, for the
world market, was a typical example of 'capitalist colonisation'. The
backward character of this capitalism, however, did not escape him. There
was a lack of industrial development, agrarian backwardness, and a
predominance of anti-democratic political forms. For him, the thrust of
economic development, which would allow those defects to be overcome, was
foreign capital:

'The entry of great masses of foreign capital is necessary and
inevitable...the great construction enterprises that must be carried out in
order to complete the development of the country, and the working people
who inhabit it, cannot be made by the dissipated and inept local class of
the rich...Foreign capital is going to accelerate the economic evolution of
the country, and with even greater force it is going to accelerate its
political and social evolution.'

This schema, formulated at the start of the century, according to which the
backward countries would, through the influence of external capital, re-run
an economic and political cycle similar to that in the advanced ones, was
taken up lock, stock and barrel by the Trotskyists four decades later,
though with this distinction that they believed that the industrialisation
of the country, and the association of foreign capital with national
capital, had strengthened the Argentine bourgeoisie, and permitted it to
elevate itself as a fully ruling class, and they saw this process as having
been completed. It was on this that they based themselves in order to put
forward the 'Socialist revolution' as the next stage of development. It is
undoubtable that the leap in Argentinian industrial growth, during the
1930s influenced them in drawing that conclusion.

But, had the country been truly industrialised? By the second half of the
last century, Argentina had fully entered the international capitalist
circuit as a producer of primary products such as leather, cereals and
meat, for the industrially advanced nations. The first great industries to
develop, such as cold-storage and the railways, were tied to 'pastoral
Argentina', that is, they consolidated Argentina as an agricultural
off-shoot of industrial development in the world capitalist centres. This
period of prosperity of the economy, based on ranching and commercial
capital, also gave an impetus to the emergence of certain industries which
produced for the home market. It was an industry limited to foodstuffs and
to other essential produce, though it was not competitive, due to the cost
involved and the distance from the world manufacturing centres. It did not
involve industrialisation, as its capacity for expansion was very limited,

' produces without the appearance of heavy industry which would have
characterised the order of other societies totally different from each
other at that same level of per capita income in the nineteenth century,
such as the United States and Germany. Argentina will lose its local and
regional structures of production and consumption, without transferming
itself into an industrial power.'

So the thrust of economic development was agrarian production for the needs
of the industrial powers, and the growth of industry was subordinated to
that, Latifundism was consolidated as a productive unity and the
land-owning oligarchy as the ruling class. This led the Argentine economy
to be subordinated to the accumulation of capital centred in the industrial
nations -- above all, Great Britain. But the latter, owing to the
accumulation of capital, which already overflowed their national borders,
penetrated the backward countries, obtaining investments for their surplus
capital. There was extremely profitable investment in the public services
and bonds of the backward countries, whose capitalist economic development
was thus born already a slave to international finance capital. In our
country, in 1885, 45 per cent of the capital of the railways was in
Argentine hands against only 10 per cent by 1890. The interest paid by
Argentina to foreign capital represented 20 per cent of the total exports
in 1881, 44 per cent in 1885 and 66 per cent in 1886. This process, by
making the country more and more dependent upon the export of its primary
purchases, destroyed any financial basis for an industry of its own. At the
same time, it laid the basis for the political dependence of the state. In
1890, in a global financial crisis, the government emptied the country of
foreign exchange in order to pay the foreign debt and thus foreign capital
appropriated almost the total national surplus.

'The centre of power appeared to shift itself from the producers to the
local representatives of the world centre of decision, such as their
lawyers, financiers and intermediaries.'

The lineal schema of JB Justo failed by not recognising that, considered on
a world scale, capital had already attained its full maturity. In the
advanced countries it showed its hostility towards the exploited without
pretence, and became chauvinist and reactionary. In the backward countries
it competed in obtaining super-profits, that is to say those superior to
the world average, for which it allied itself with the most reactionary
classes. Thus it consolidated the economic, social and political forms of
backwardness, on which their domination was based.

The industrial growth, which started from 1930, was limited to replacing
those industrial products which could not already be bought on the world
market as a consequence of the fall in purchasing power of its primary
exports. The international prices of Argentine products fell by 40 per cent
between 1926 and 1932, while industrial goods maintained their previous
value. The causes of industrial development were not internal but external.

'There was no deliberate will of the governing powers nor an integrated
development of industry as a consequence of the natural process of
expansion, like that which had occurred in the metropoles. The market
existed and it had a measurable and known demand which, until then, had
supplied itself from exports and could also be satisfied through local

The economic content of this 'industrialisation' was dissimilar to that
which occurred in the advanced countries, for in those there was the
relative displacement of the production of consumer goods by that of
capital goods, such as machines and industrial items. The production of
consumer goods continued, and continues, to predominate to an overwhelming
extent in our industrial structure. In the last century the
industrialisation in the advanced countries meant, in social terms, a
transformation of property relations and the expropriation or
transformation of the old feudal classes and their displacement from
political power, by means of a bourgeois democratic revolution. This laid
the basis of the expansion of industrial capital. In Argentina, and in all
backward countries, the old oligarchy associated itself with this
bastardised process of industrialisation, whose dynamic factor was foreign
capital. 'Argentine industry', which was consolidated in the 1930s, was a
consequence of the industrial crisis in the advanced countries and an
off-shoot of the latter:

'The enormous mass of workers condemned to idleness and the high percentage
of unused equipment called for the opening of new markets to recover
stability and the level of production of previous years...Thus was born
"export substitution" in the metropolitan centres. Given that they could
not pay for the complete plants, they installed final-assembly plants in
the underdeveloped countries in order to continue sending them parts. This
strategy, done by all imperialist countries, requires installing
enterprises in other countries and generating captive clients for possible

In the 1930s Argentina anticipated a process that would spread throughout
the world in the subsequent decades.

The distinctive characteristics of this 'industrialisation' are:

(a) The stagnation of industry to a primary level of development. In 1937,
establishments with less than 10 workers were 85.5 per cent of the total,
and subsequently the proportion grew. To this artisan-type basis of
industry one must add that the primary branches continued to be
predominant, particularly those which were typical of the dawn of
industrial production. In 1937 'Food, Drink and Tobacco' comprised 40 per
cent of production, 'Textiles' about 20 per cent, while 'Metals, Vehicles
and Machinery' did not make up 15 per cent.

(b) Consequently there was low productivity in industry generally. In 1937
the productivity per worker in Argentina was 4.5 times lower than in the
USA -- a ratio which could not but worsen.

(c) This freezing of the structure of economic development over-valued land
and farming production. This was already noted in 1933 by the Commercial
Attache of the British Embassy: 'However rapid the growth of manufacturing
industry has been, a large series of requirements exist which can only be
satisfied abroad. Almost all first class articles require for their
production iron and steel goods; the lack of a local coal and iron industry
has hindered the development of a machineproducing industry on an extensive
scale. The only means whereby Argentina can obtain the products of the
latter abroad is by exporting its grain and meat surpluses.' But it was
precisely the prices of those exports that had fallen dramatically on
which, one must add, the state was financially dependent. The same report
points out: 'Argentina possesses great reserves of gold. Approximately half
the reserves were impounded in 1930 and 1931, mainly in order to pay the
debt services and to prevent the currency being devalued.'[60] Just as in
1890, finance capital, with the complicity of the oligarchic government,
delivered a mortal blow to independent industrial development and destroyed
its financial base.

The consequence of the whole process was the political prostration of the
state. The need to maintain the British market for primary products led the
Argentine government to sign the Roca-Runciman pact in 1933 and, in
exchange, the Argentine government made all types of concessions to
Britain, including customs concessions, a transport monopoly in Buenos
Aires, some types of preferential exchange, the closure of the market to
Britain's competitors, and so on. It thus renounced the right to determine
freely the policies of its own state.

The supposed industrialisation of Argentina was a typical example of the
combined development common in the backward countries, where the last word
in technology is combined with agrarian and industrial backwardness. The
backwardness of industry did not prevent the fact that already in 1936 47
factories, or 0.1 per cent of the total, employed 15 per cent of the
workers, and thus the degree of concentration exceeded, by more than 10
times, that of North American industry. [61] This was an industry which was
born monopolised, without passing through the stage of free competition,
which was the motor of its development in the advanced countries. The
industrial census of 1935 indicated that 671 limited companies controlled
2300 establishments which yielded between them more than 50 per cent of the
total production. Based on agrarian and industrial backwardness, this small
group of monopolies obtained enormous profits. The first produced a
constant flow of cheap labour from the country to the town, while the
second saw that market prices were fixed for 90 per cent of the
artisan-type enterprises. The enormous difference in price between the
latter and large-scale industry was pocketed by the monopolies. It was an
industry which lived off its backwardness, exactly the opposite of the
youthful stage of industrial capital in the metropoles, which had fought to
destroy the backward forms of industrial production, such as artisan
guilds, and backward agrarian production, like feudal latifundia.

Argentine industry expanded within the limits fixed by imperialist capital.
Far from aiding the economic independence of the country, it increased its
dependence, by adding to the manufactured goods and the industrial items
and products that had to be bought abroad. Far from securing the Argentine
bourgeoisie control of the state, the political weight of foreign capital
was strengthened, as much by the decisive weight of its participation in
industry as by the increase of dependence on international finance capital.

All this escaped the attention of the great majority of Argentine
Trotskyists in the 1930s, who thought exactly the opposite. In a kind of
way, they were themselves victims of the ideology and propaganda of the
ruling classes, who also saw in their association with foreign capital a
triumph of 'self-determination'. This influence was possible owing to the
lack of a programme which characterised the country and its classes, and
which indicated the objective tasks of the revolution. The light-mindedness
with which they wielded certain figures -- claiming 2.5 million industrial
workers when the 1935 census gives the exact figure of 526 594 'employed in
industry' -- revealed the lack of concern for programme, which left them
open to all kinds of impressionism. Lacking their own programme, they
adopted the only one the Argentine left had produced until then, that is to
say that of reformist Socialism, and tried to draw some 'revolutionary'
conclusions from it. So adaptationist was their enterprise that they
retreated even as regards Juan B Justo's programme, as the latter had
pointed out the incapacity of the native ruling class to create a 'modern'
capitalist country. So the Trotskyists presented it as an examplary
bourgeois class, which had fully completed the objectives of national
liberation and the democratic revolution.

Louis Proyect
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