A recent post explored the concept of unequal development, under-development and the exploitation of the third world proposed by Amin several decades ago. In this post, we continue exploring Samir Amin's  "Unequal Development: An Essay on the Social Formations of Peripheral Capitalism" from 1976, and focus upon his analysis of capitalism - what it is, how it is formed and its impact.

On the development of capitalism:

• "Insofar as conventional historiography has confused money with capital, and trade with capitalism, it has discovered capitalism everywhere – in ancient China, among the Phoenicians, the Greeks, the Romans, the Arabs of the Middle Ages, and so on… In reality the concentration of money-wealth in the hands of merchants did not automatically lead to capitalism. For that to happen there was also needed a breakup of the dominant pre-capitalist mode in the formation to which effects of long-distance trade had been added – a breakup such as to result in the proletarianization, that is, separation of the producers from their means of production so that the way to a free labor market was opened." (p. 33)

• "…capital is not a thing but a social relation, since the vector of relative prices depends on both the rate of wages and the rate of profit; it shows that economic rationality is not an absolute, that it stands no higher than the rationality of the social relation that determines the division of social labor time into paid labor and surplus labor." (p. 61)
  

Defining capitalism:

• "I have defined the capitalist mode of production as being characterized by the exclusive appropriation by one class of means of production that are themselves the product of social labor. This exclusive appropriation by a certain class, although it has historically taken the form of individual ownership of the means of production, may also take collective forms. Capitalism exists wherever means of production that have been produced by social labor are not managed by society as a whole but by a section of the latter, which becomes a "bourgeoisie." Capitalism makes its appearance when the level of development of the productive forces is sufficiently advanced for these means of production, which are themselves products, to be no longer simple enough to be manageable by the individual producer." (p. 59)
  

On confronting capitalism:

• "A society that wishes to control its future must first and foremost take a long view – have a lengthy "time prospect." This was the case with the precapitalist societies, in which the dominant instance was not the economic but the politico-ideological one… all it [Capitalism] can offer them is an alienating ideology, that of the "consumer society," a short-term prospect of "growth" of consumption without any reference to real human needs. This shortening of the time-prospect results from the dominant function of the rate of surplus value. It is the rate that determines the pace of accumulation, and so, ultimately, the "rate of discount" on the basis of which choices are made. It seems to give rationality to what is irrational… In fact, "economic calculation" is nothing more than an ideological justification of the way capitalist enterprises spontaneously behave… The crisis of our civilization is wholly concentrated in this absurd contradiction of human time." (p. 70-71)
  

Talking with undergraduate and graduate students has led me to believe that fewer people are investing their time in books. Wikipedia provides the long version, and Twitter keeps us up to date. One important thing that we have lost, in development studies and generally, is a more grounded understanding of where ideas came from and how they developed over time (beyond that Wiki link). In the practice of international development, I believe this is part of the reason we tend to see ideas be recycled (it appears we are not passing those lessons learned on very well). Hence, this series of "Thought Provoking" quotes from books. These posts may not encourage readers to pick up the books discussed, but I hope they broaden our vision of what knowledge is available to us.

This posts presents an essential read in development economics: The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else (2000) by Hernando de Soto:

Setting the stage:

• "Capitalism stands alone as the only feasible way to rationally organize a modern economy. At this moment in history, no responsible nation has a choice. As a result, with varying degrees of enthusiasm, Third World and former communist nations have balanced their budgets, cut subsidies, welcomed foreign investment, and dropped their tariff barriers. Their efforts have been repaid with bitter disappointment. From Russia to Venezuela, the past half-decade has been a time of economic suffering, tumbling incomes, anxiety, and resentment; of "starving, rioting, and looting," in the stinging words of Malaysian prime minister Mahathir Mohamad." (1-2)
  

The problem:

• "…if people in countries making the transition to capitalism are not pitiful beggars, are not helplessly trapped in obsolete ways, and are not the uncritical pioneers of dysfunctional cultures, what is it that prevents capitalism from delivering to them the same wealth it has delivered to the West? Why does capitalism thrive only in the West, as if enclosed in a bell jar? In this book I intend to demonstrate that the major stumbling block that keeps the rest of the world from benefiting from capitalism is its inability to produce capital." (4-5)
  

The solution:

• "In the West, for example, most formal property can be easily used as collateral for a loan; as equity exchanged for investment; as an address for collecting debts, rates and taxes; as a locus point for the identification of individuals for commercial, judicial, or civic purposes; and as a liable terminal for receiving public utility services, such as energy, water, sewage, telephone or cable services. While houses in advanced nations are acting as shelters and workplaces, their representations are leading a parallel life, carrying out a variety of additional functions to secure the interests of other parties. Legal property thus gave the West the tools to produce surplus value over and above its physical assets." (51)
  
• "Many of these dwellings are not worth much by Western standards… But there are a great many such dwellings, and collectively their value dramatically outweighs the total wealth of the rich." (33)
  
• "The lack of legal property thus explains why citizens in developing and former communist nations cannot make profitable contracts with strangers, cannot get credit, insurance, or utility services: They have no property to lose. Because they have no property to lose, they are taken seriously as contracting parties only by their immediate family and neighbors. People with nothing to lose are trapped in the grubby basement of the precapitalist world." (56)
  
• "Government programs to give property to the poor have failed over the past 150 years whether they followed the bias of the right (private property rights through mandatory law) or of the left (protecting poor people's land in government-run collectives). The crippling political agendas of "left versus right" are largely irrelevant to the needs of most people in developing countries. These people move out of the law not because the law has privatized or collectivized them but simply because it does not address what they want." (169)
  

Ideas worth discussing:

• "Everyone will benefit from globalizing capitalism within a country, but the most obvious and largest beneficiary will be the poor." (190)
  
• "… in a developed country, the farmer's son who wishes to follow in his father's footsteps can keep the farm by buying out his more commercially minded siblings. Farmers in many developing countries have no such option and must continue to subdivide their farms for each generation until the parcels are too small to farm profitably, leaving the descendants with two alternatives: starving or stealing." (57)