Tuesday, June 22, 2010


Political economists like Robert Gilpin take into account several theories of US capitalism that he says are ignored by neoclassical economists. For example, he discusses the core-dependency theory.

This ‘core-dependency’ theory was originated by Immanuel Wallerstein, in The Modern World-System: Capitalist Agriculture and the Origins of the European World-Economy in the Sixteenth Century, New York: Academic Press, 1976.

The core is the advanced industrialized countries, a major source of capital and investment. The periphery is primarily a source of raw materials, food and labor. “Historically, the core has power over the periphery because a rupture of their ties would be more costly to the latter than the former” (Gilpin, 143).

The fact is, as Wallerstein points out, if it weren’t for the rich resources and cheap labor of the pre-capitalist world, Anglo-European capitalism could not have been developed. This remains the case today.

Economists tend to mention the ‘intellectual labor’ of scientists and engineers as necessary to modern technological development. They ignore the manual labor by millions of people involved in the extrication of resources.

Let’s take the case of coltan, which has become indispensable in the functioning of the Western business world. This is a primary resource used in the manufacturing of cell phones, computer chips and other technological devices. Coltan is found in 3 billion-year-old soils, like those in the Rift Valley region of middle Africa, western Australia and central Asia.

“ Columbite-tantalite - coltan for short – is one of the world's most sought-after materials. Refine coltan and you get a highly heat-resistant metal powder called tantalum. It sells for $100 a pound, and it's becoming increasingly vital to modern life. For the high-tech industry, tantalum is magic dust, a key component in everything from mobile phones made by Nokia (NOK) and Ericsson and computer chips from Intel (INTC) to Sony (SNE) stereos and VCRs.”
Essick, Kristi, “Guns, Money and Cell Phones”, The Industry Standard Magazine
June 11 2001, http://www.globalissues.org/article/442/guns-money-and-cell-phones

The Democratic Republic of Congo (DRC) is a main source of coltan. It is suffering through a terrible civil war, in which local militia and Western corporations are involved. Approximately 40,000 are dying a month from war-related causes; thousands of women are being raped.

"'There is a direct link between human rights abuses and the exploitation of resources in areas in the DRC occupied by Rwanda and Uganda,'" says Suliman Baldo, a senior researcher in the Africa division at Human Rights Watch, a New York-based nongovernmental organization that tracks human-rights abuses worldwide.” (Essick, op cit).

How are multinational corporations involved in this crisis? While not directly engaged in fighting or even mining, a U.N. report states that companies trading minerals are "the engine of the conflict in the DRC" (cited on http://www.thecongocause.org/mining.htm). Companies sell coltan to processing companies, which in turn sell to tantalum capacitor manufacturers - whose clients are high-tech companies such as Ericsson, Intel and Nokia.

These companies deny acquiring coltan from either side in the civil war raging in the DRC. But, like the provenance of diamonds, there is no independent monitoring to prove this. What is clear, is that we in the West and elsewhere around the globe, are dependent on coltan as a resource. Sectors of the DRC have become dependent on the cash provided by coltan sales. This is not, however, a chicken and egg question of what came first. We know that multinational corporation approached countries in Africa for coltan first.

Pre-coltan days, people in the DRC were mainly farmers and peasants. Now many, including children, are mining coltan under horrendous conditions, and unpaid, under conditions of virtual slavery.

In the present day international division of labor (euphemistically called 'globalization'), manual work involved in the extrication of raw resources is done by people in the ‘developing world’ and in dependency regions within the 'developed' world (such as coal mines in Virginia, USA). The intellectual work is done in the ‘advanced, developed world.’ The US’ manufacturing base has been replaced by the service sector (banking, hospitality, tourism etc).

This is because the labor costs of mass manufacturing are much lower in the developing world.

Take a look at the labels in your clothing. Here you will see a smorgasbord of developing countries that have made your clothes, and most of your other ‘stuff’. This is because of low labor costs. We in the developed world are actually dependent on this labor for most everything we own!

How did this come about? Political economists like Robert Gilpin vaguely ascribe the inequality between rich and poor countries to lack of education in poor countries. But this is not an accident. The ‘free trade’ model imposed on poor countries, has resulted in the deterioration of educational systems in those countries. Developing economies have switched from subsistence farming to cash crops subject to the risky environment of the global market. Many poor countries were forced to beg for loans in the 20th century from the IMF. Loans were given with strings attached: all health, education and welfare services had to be privatized.

The result has been a degradation of social life in loan-receiving countries, who are also saddled with huge interest bearing debts. In short, privatization/globalization has increased inequality,

In the last decade, this unfortunate state of affairs has been referred to as 'neocolonialism.' The adverse consequences of the core-dependency relationship is widely recognized by the IMF and other international institutions. See these 1999 remarks which critique 'globalization':
Birdsall, Nancy, “Carnegie Endowment for International Peace: Globalization and the Developing Countries:The Inequality Risk”, 1999.

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