Multinational firms, peripheral industrialisation and the recovery of national decision centres: the contribution of Celso Furtado

Abstract

This essay examines the contribution of Furtado to the understanding of the peripheral industrialisation process. His analysis of the role of industrialisation in the development policy of peripheral countries is based on criticism of the international division of labour that has been presented by CEPAL (Comisión Económica para América Latina). Furtado's study of the new dependence situations of the periphery is based mainly on the expansion of multinational firms, the vehicle of the global diffusion of the industrial civilisation. In order to escape industrialised underdevelopment, Furtado advocates recovering the national decision centres in order to better direct technology within the periphery.

Keywords:

• Furtado
• multinational firms
• peripheral industrialisation
• CEPAL
• national decision centres

Acknowledgement

We would like to thank the two anonymous referees whose constructive remarks and relevant suggestions have allowed us to improve the first version of this paper.

Notes

1 For a detailed biography of Furtado, see Mallorquín (2005), Boianovsky (2008) as well as three memoirs books written by Furtado: A fantasia organizada (1985), A fantasia desfeita (1989b), Os ares do mundo (1991) that were assembled in 1997 into the Obra autobiográfica de Celso Furtado, São Paulo: Paz e Terra. See also the website of “The International Celso Furtado Center for Development Policies” (www.centrocelsofurtado.org.br).

2 CEPAL is the Spanish acronym for the United Nations Economic Commission for Latin America (ECLA). The ECLA acronym is only used in this paper when it appears in quotations from authors.

3 See “Preface” of Luiz Felipe de Alencastro in Furtado (2007 [1969]).

4 Simultaneously with the publication of the English version (1950) of Prebisch's study, Hans Singer (working at the United Nations Department of Economic Affairs in New York) published an article (Singer 1950) describing similar results involving the evolution of the terms of trade. The source of the data used by Prebisch was the United Nations report, Relative prices of exports and imports of underdeveloped countries (1949) whose principal author was Hans Singer; as Spraos (1980: 107) states, “because of the anonymity of UN staff publications”, Singer “became the second twin in the ‘Prebisch-Singer thesis’ through a subsequent signed article (1950)”. About the discussions concerning the origins of the formulation of the thesis known in the economic literature as the Prebisch-Singer thesis, see Love (1980), Kay (1989: 31–5), Toye and Toye (2003), and Dosman (2008: 242–4).

5 Among others, we can indicate: Viner (1953), Baldwin (1955), Ellsworth (1956), Meier and Baldwin (1957), Meier (1958), Kindelberger (1958), Harberler (1959), Bairoch (1975).

6 See Rodriguez (1981, 2006) for a detailed discussion of CEPAL's terms of trade deterioration theory, which he differentiates between three versions: the accounting version (related to the effects of this deterioration on the income levels of peripheral and central countries), the cycles version (related to the countries different responses – concerning remunerations – to the cyclical fluctuations of the economy), and the industrialisation version (relating the terms of trade deterioration and the income differentiation with the industrialisation process in the periphery).

7 It is the “development” based on the export of raw materials (that fit the need of the industrial centres), which is an instrument for the import of manufactured goods. That kind of development, the main engine of economic growth (until the upheaval of the international economy from the First World War onward) constitutes, however, a limited phenomenon since modern production techniques only get into the regions connected to the international economy. See Prebisch (1973 [1952]), Rodriguez (1981), Furtado (1976a).

8 Spraos (1980: 109) has analysed the principal criticisms to this hypothesis, concluding that “a deteriorating trend is detectable in the data, but its magnitude was smaller than suggested by Prebisch's choice of series”. By examining the statistical evidence of the terms of trade between primary products and manufactures for the period of 1950–1977, Spraos (1980: 126) states: “Over this period the evidence points to a deteriorating trend in the relative price of primary products”.

9 It must be underlined that no idea of autarky has ever been presented among CEPAL's propositions: imports would even tend to increase as the industrialisation process moves on. According to Prebisch's (1962 [1949]) line of argument, the necessary change in the structure of the imports is “an adjustment of the imports to the payment capacity allowed by the exports”, which amount is not directly determined by Latin America. That structural change would be compulsory in order to reach the industrialisation objective. See also Tavares' analysis (1964).

10 CEPAL, Economic Survey of Latin America, 1970; CEPAL, Tendencias y Estructuras de la Economia Latinoamericana, 1971.

11 It is worth noting here that Furtado's approach to multinational firms was influenced by the pioneering work of Maurice Byé (his thesis director at the University of Paris in the late 1940s; see Alcouffe 2009), “one of the first economists to theorise about the transnational conglomerates” (Furtado 1985: 27), who called his attention to the adaptation capacity of large enterprises at the international level (Furtado 1974b). Another important influence on Furtado's approach to the large enterprises phenomenon was the work of Stephen Hymer (see Section 3).

12 See the analysis developed by Kay (1989) of the approaches to dependency, which he divides in two major currents, the reformist approach (Sunkel, Furtado, and Cardoso) and the marxist approach (Marini, Dos Santos, Gunder-Frank, among others), and also of the debates and critiques that it generated. For a discussion on the dependency approach, see also Rodriguez (2006), chapter 6.

13 See also the discussion on Latin American “development styles” in Rodriguez (2006), chapter 7.

14 Furtado (1970a) considers that the American post-WWII dominance was based on three pillars: (i) the North American military power and their military supervision of the capitalist world, legitimated by the Cold War; (ii) the supremacy of their economy depending on factors like the access to natural resources (internally and externally controlled by American firms), their strong capital accumulation (including during the war), the support of the government for the development of military technology (with indirect benefits to other sectors of the economy), and the increasing volume of foreign direct investments; (iii) the Bretton Woods institutions have made possible, due to the financial capacity of the United States (the only financing source for capital disposal post-WWII), the transformation of the dollar into the accumulation instrument for international liquidities.

15 Love (1980: 62–3) underlines that “Raul Prebisch was not the first researcher to use the terms center and periphery to describe the modern capitalist system. Rather it was Werner Sombart [Der Moderne Kapitalismus]… But [Sombart] did not provide any theory of relations between business cycles and the international distribution of income”.

16 For a critical review of the modernisation theories in the sociology of development, see Bernstein (1971). See also Kay (1989), chapter 4, for a discussion about modernisation and marginality in Latin American school.

17 For a criticism of that process, see Levitt (1970) who analyses the progressive transformation of Canada toward an economic, political, and cultural dependence toward the United States.

18 For the 1950–1965 period of time, Furtado, based on data from various numbers of Survey of Current Business US, affirms that the North American foreign direct investments in Latin America have generated a resources transfer (toward the parent companies or toward the shareholders) three times as large as the United States contribution in terms of new investments and a similar ratio can be found for the rest of the Third World (Furtado 2003).

19 See Cardoso and Faletto (2002 [1969]) for an analysis of the depending capitalism and of the relationships among the multinational firms, the state, and the bourgeoisie within the framework of the peripheral industrialisation.

20 On the topic of the peripheral techno-bureaucracies, see also Furtado's argumentation (1979).

21 That period was characterised by the North American hegemony, notably from the concentration of financial resources in the United States post-WWII and from the worldwide expansion of their firms. That opening up process in the North American economy would differ from the traditional forms (export of goods or of capital) as it took shape as an external projection of the American production system; in other words, the use of their technological funds abroad which would spread worldwide the “technological style” developed in the United States (see Furtado: 1989a).

22 According to the author, “underdevelopment is not a necessary stage in the creation process of the capitalist economies. It is by itself a particular situation resulting from the expansion of capitalist economies that aim to use natural and labour resources in pre-capitalist economic areas” (Furtado 1976a: 145).

23 See the report about Furtado's intervention in the symposium “Firmes multinationales et développement”, Paris, 1977, in Lanzarotti and Masini (1978: 429).

24 Furtado would sum up this matter like this: “No country would of course today envisage technological autarky. On the contrary: everybody is seeking to gain access to all the sources of technological creation. The problem is therefore to identify one's needs and to know what one is buying. Above all, the problem for many countries is to gain access to the production of this, par excellence top-rank product which technology is. Which before all else calls for systematic effort on the part of local research institutes and enterprises. To imagine therefore that the action of multinational enterprises will lead to the same results is pure naivety” (see “Comments by Celso Furtado” in Emmanuel 1982: 124).

25 As Hymer (1970: 445) points out, the pattern of output spread worldwide depends, rather than on market competition, on “the planning decisions of top management in a few corporations whose interest it is to foreclose competition, to restrict the choices offered, and to insure the survival of their own organizations”. And, as he adds, “it does not appear to be socially efficient to allow corporations to monopolize information on new possibilities created by science”.

26 For a discussion on this topic, see Furtado (1974a, 1974b).

27 On that topic, Furtado (1952) does not share Nurkse's point of view (1951) when it comes to the demand (poverty) vicious circle in which the weakness of the revenues of the underdeveloped countries limits the size of the market and the incentive to invest, which, in turn, generates a low productivity that leads to distributing low revenues. For Furtado, Nurkse does not take into account the demand of the external markets, which can increase the global size of the market.

28 Albuquerque's paper establishes a dialogue between Furtado's elaboration on inadequacy of technology (related to the the orientation of technological progress which reinforces income concentration) and the evolutionist's concept of national systems of innovation. From this dialogue, Albuquerque conjectures that an institutional co-evolution is necessary between welfare states and innovation systems at the periphery in order to overcome the constraints to development.

29 For Hugon and Salama (2010), the success of the internal market “bet” depends on various elements: “the absolute dimension of the internal market, depending on the country (larger in China, India or Brazil than in Uruguay), the often large inequality levels and the political capacities of the governments to reduce them by supporting demand through different means (easier access to credit, fiscal reforms, allocations, infrastructure policies)” (Hugon and Salama 2010: 6).