Emerging Countries:
The Marxism-Institutionalism Controversy
Sergio Ordóñez
Marxist Response ( ...continuation )

From that perspective, proposing that the function of the State is to define property rights and not to maintain the hegemony of the ruling group, as North does, implies shifting the social conflict between classes exclusively to the competition and dispute for property rights, and as a result, social antagonism disappears. For North, economic institutions are contractual organizations that specify and structure property rights, and the social conflict is present with two dimensions: (1) between agents that look to reduce and make more “efficient” transaction costs; and (2) between the agents and “governors” of the State, which structures property rights to maximize the “rent,” and as such, enjoys the competitive advantage of exercising the violence that the rights of exclusion give it.

In this framework, developing or emerging countries that have had “successful” development, have achieved this because the second level of social conflict agents have superseded the State, forming an “open” regime of property rights that allows access to sources of wealth more or less for the entire society, which increases production. On the contrary, “lagging” countries maintain “closed” regimes of property rights, resulting from the fact that the State and its governors have superseded the agents, monopolizing sources of wealth and excluding large swaths of the population from access. Going from the latter situation to the former would require a combination of a shake-up, or a “first order shock,” which render unviable the current definition of property rights, with a “second order shock” that would imply, as a result of the first, the formation of a new political governing coalition oriented towards a new “open” definition of property rights, which would complete the social “change trajectory” (Rivera, 2010). The previous sums up the Institutionalist explanation for the difference between “successful” and “lagging”28 developing countries.

Alternative Explanation of the Differences Between “Successful” and “Lagging” Developing Countries

An An alternative explanation for the differences between developing countries in the context of new capitalism, ranging from Marxism to Gramsci, is based on two elements: (1) the theoretical guidelines developed result from recovering the Gramscian way of thinking, which is oriented to understanding the importance of hegemonic-institutional processes in the current rise of the new development phase, “which includes the specific situation of developing countries,” in combination with a constructive criticism of institutionalism, oriented towards assimilating its most important contributions into the body of Gramscian theory, with the consequent enrichment of the theoretical body; and (2) the study of the concrete historical experience of the various countries and their origins, a question that will be addressed below, for Latin American countries in light of the recent experiences of Asian countries.

The corporate historical block of Latin America’s main countries, principally Brazil, Argentina and Mexico, is the result of a passive revolution29 that began in the 1930s and lasted until the 1950s, by which resistance to the historical project based on industrial nationalization from the hegemonic classes up to that point, that is, landowners and the agro-mining-exporting bourgeoisie, and even the industrial bourgeoisie,30 can only be constructed thanks to a push from the interests, demand and mobilization of the labor and agricultural classes, which gives the State the relative economic-political sovereignty and autonomy to promote industrialization, based on economic intervention. This is a situation in which the State substitutes the class in industrialization, and with this, economic lag is compensated for by a drive towards policies, which translates into sovereignty, particularly in relation with the United States, “a country where the hegemonic classes and social groups are extremely commercially and diplomatically dependent,” and into the State obtaining relative autonomy from the classes and hegemonic groups.

As a result, the new corporate historical block in Latin America’s main countries is composed of the following classes and groups: (1) landholders and the agro-mining-exporting bourgeoisie that makes up the hegemonic group, a group inherited from the post-colonial period and whose economic expansion is tied to rents and land ownership, which means this group earns money off of rents and, at the same time, depends on its relationship with banks, foreign commercial and industrial groups, especially from the United States, and its own political and diplomatic relationships; (2) the nascent industrial bourgeoisie, ally of the hegemonic group, whose economic growth is tied to the new internal market, and its political intellectuals, that is, the political bureaucracy related to state management of the substitution of imports; (3) subordinated classes and groups, that is, the labor class, the farmer and popular-urban groups, as well as political intellectuals of the first two groups, like union bureaucracies, which are part of public institutions; and (4) intermediate groups, that develop and acquire a protagonist role as the accompanying processes of urbanization and educational and university coverage progress.

The social conflict is recognized and resolved by distributing economic surplus resulting from increases in labor productivity, through three-way negotiation among classes and groups in corporate organizations (institutions), under State tutelage, which beyond implying that they earn money off of land rents, gives the historical block a distributive character.31

28 The combination of “crashes” is necessary to “get out of the trap of falling behind,” understood as “a pattern of societal functioning that tends to reproduce itself with institutional mechanisms” (Rivera, 2010: 78).

29 According to Gramsci, in a situation of historical crisis, dominant groups and classes that want to create new conditions to revolutionize productive forces, which necessarily implies moving towards socializing production and the development of a social division of labor, and requires developing and integrating unknown historical-political-cultural elements and even contrary elements, but necessary to incorporate technological development and to preserve their hegemony. This requires supporting the hegemony with a passive revolution or revolution-restoration and transformism, which implies transforming from a State with more or less important participation, but always passive, from subordinate groups and classes. See Gramsci (1933: C. 15, paragraphs 17, 59 and 60), (1932-1935: C. 10 paragraphs 6 and 61), (1931-1932: C. 8, paragraph 236) and ([1934: C. 22, paragraphs 1 and 11). Also see Buci-Gluksmann, 1977 and De Felice, 1977.

30 The coparmex in Mexico actively opposes policies from Cárdenas. This conflict reached its culminating point in 1936, during the strike of La Vidriera. The owner-farmers were against expanding agricultural reforms, manifested during the legislative reforms implemented starting in 1933 (when the “farmers,” who supported this expansion, imposed themselves on the “silent,” who resisted), although this opposition was more on the state level (Hamilton, 1983). In other Latin American countries, for example, Rouquié (1987) says that North American economic agents and their local intermediaries were opposed to Vargas’ project to construct a steel plant in 1941 (which the us government finally decided to finance with a loan from Eximbank, hoping to make Brazil an ally in war), while in Argentina, the large weight of the agro-exporting bourgeoisie and liberal ideology impeded development of industrialization and heavy industry, which were finally developed when the State intervened.

31 Fernández (2010) mentions a “matrix of actors” in similar terms, a concept that can be assimilated to the historical block in a strictly economic sense.