Salama Kela

Introduction:

It has become obvious throughout the years social justice is not possible under a capitalist system. The same applies to responding to the basic demands put forward by the Arab revolutions[1]. It is also clear that through systematic exploitation of the peripheries, capitalism contributes to making the domestic conditions of each of those countries unfit for the implementation of the principles of social justice[2]. Based on this, the concept of an economic and political alternative in the broad sense of the word was proposed[3]. Initially, the focus was on a class-oriented alternative, which meant that it is basically proposed by an anti-capitalist class. The alternative also involved a bigger role by the state as far as economic development is concerned, which is not the case under the capitalist system where the state does not prioritize the interests of the people.[4]  The role of the state has to be determined in the light of a number of actual experiences, some of which failed and others achieved the required development yet were stalled later. In fact, the region does have a long history of failures and mistakes that can be learnt from.

This paper will focus on industry as a core foundation of an alternative economy and an integral part of development. Following years of undermining industrialization in the Arab region, marginalizing industries that flourished at the time of nationalist governments, and the dominance of the neoliberal system, establishing an economy in which industry becomes an integral is quite a challenge. There is, however, a difference between tackling the revival of industrialization, which is quite a broad concept, and alternative industry, which is more about practicalities and setting a realistic plan that can be implemented on the ground[5]. It is always possible to propose solutions that are theoretically ideal, but far from practical simply because the present conditions do not allow their implementation. For example, dealing with technical details of an alternative industry is not realistic unless there is a regime change in which the class that comes to power prioritizes industrialization because it serves its interests as well as the interests of the people. In this case, a number of priorities have to be decided in order to start the practical steps towards industrialization. For example, should the priority be given to heavy or light industries? To the manufacturing of cars, trains and the like or basic commodities for daily consumption? To goods that replace imported ones or goods for export? To industries related to agriculture or linked to the manufacturing of weapons? Setting priorities depends on a number of factors, on top of which are the availability of raw materials, human resources, scientific expertise, and the ability to regulate the local market vis-à-vis global capitalism. While these factors are necessary upon designing a detailed practical plan based on available data, yet this is not the stage with which this paper is concerned. That is why the approach here will be rather general in the sense that it will deal with the broad steps to be taken towards industrialization.

The emergence and expansion of industrialization:         

Capitalism started with the emergence of industrialization in the late 18th century in England where the shift from agriculture to industry took place. This shift constitutes the conventional emergence of capitalism and “conventional” here means the process that started with the primitive accumulation of capital in countries in which the Industrial Revolution was influential[6]. England, in fact, constitutes the classical model of the emergence of capitalism and the developments that took place there were not replicated in any of the other countries that adopted capitalism or were influenced by the English experience. France, for example, got rid of the feudal system through a historic revolution in 1789 then started gradually following in England’s footsteps through shifting to industrialization, but it was not until the dictatorship of Luis Bonaparte in the mid-19th that the adoption of industrialization remarkably accelerated[7]. In Germany, industrialization slowly took over in an already-fragmented feudal system, yet it was in the Bismarck era that industrialization witnessed substantial development, which meant that Germany was relatively late. The same applies to Japan where the state was the founder of industrial corporations that were later privatized. By that time, which also saw the peak of imperialism, capitalism had started becoming the dominant global model[8]. In addition to the role the state played in the shift towards industrialization, it was also easy at the time for industry to move from one country to another for a number of reasons such as the low cost of industry, the medium size of projects[9], and the basic technology that could be easily emulated[10]. Industry was also suitable for non-specialized labourers, thus traditional craftsmen were able to be involved in the new system[11].

The emergence of industrialization in England is largely attributed to a growing population that necessitated the mass production of textile, which then became the first field to be industrialized. This was followed by mining industries[12]. Industrialization first depended on regular craftsmen who decided to take part in the initiative. The adoption of steam power constituted a major leap in the shift towards industrialization. For Lenin, the Industrial Revolution was the combination of textile, iron, and the steam engine[13].

Industrialization started with machines that manufactured textile then developed to include the manufacturing of those machines, for which factories were built[14]. Therefore, there emerged two types of factories: ones that manufacture machines and others that use those machines to manufacture commodities. The mechanization of the manufacture of machines, or machine tool industry, constituted the peak of industrialism or what Karl Marx called “modern industry”[15]. Machine tool industry is, in fact, the core of industrial development since it is only when a country is capable of manufacturing the machines it needs for manufacturing commodities that it is considered industrially developed. This point has to be taken into consideration when looking at industrial alternatives since in many cases the focus was solely on the manufacturing of goods while overlooking the importance of the manufacturing machine tools, hence maintaining subordination to global capitalist centres and remaining unable to establish a self-sufficient economy[16].

The ordeal of industrial expansion:

The emergence of industrialism and the accompanying dominance of the capitalist system necessitated looking for the raw material needed for industry as well as markets in which products can be sold. This played a major role in the imperialist wave that started in the 19th century and allowed industrial countries to drain the resources of their colonies while turning them into markets for their products and preventing them from shifting to industrialization. With the advent of the 20th century and following decades of industrialization in the centers and lack of industrialization in the peripheries, a huge gap developed between the two whether in terms of development, capital, markets, or expertise[17]. The situation was aggravated by the adoption of the market economy, which further hinders the shift towards industrialization[18]. That is why it was obvious that industrialization in the peripheries is not possible under the capitalist system.

The 20th century witnessed a number of industrialization initiatives, some of which failed while others succeeded. Some of those experiences resisted or overlooked the capitalist system while others emerged within the capitalist framework and at times were supported by it as will be demonstrated.

Industrial expansion in the imperialist era:

In the 19th century, the major industrial countries were England, France, Germany, the United States, and Japan, which at the same time were the countries that vied for controlling the world. The expansion of industrialization was accompanied by the emergence of imperialism through which industrial countries made sure that industrialization does not reach the peripheries even if this necessitated waging wars against them[19]. The Soviet Union was the first country to break this link between industrialization and capitalism as it adopted a socialist system. This was the case in other countries, on top of which was China. The socialist case resisted the capitalist system and severed all linked with the capitalist market. However, there were industrialization attempts that took place within the framework of capitalism. Such attempts can be classified into three types: import-substitution industrialization, export-oriented industrialization, and production offshoring.

First: Import-substitution industrialization:

This means replacing imported goods with local ones[20], a strategy that emerged in Latin America in the 1930s and 1940s through the Economic Commission for Latin America and the writings of Argentinian economist Raul Prebisch[21]. This strategy is based on detachment from the capitalist centers through protecting local markets and a greater state role[22]. However, Thomas Coutrot and Michel Husson note that the successes of this initiative were hindered by the pressures it kept facing and which could not be overlooked for good. For example, it was not possible to end subordination to capitalist centers in different industrial aspects. It was easy to substitute imports in traditional industries such as food and clothes or major intermediate industries such as glass, cement, and steel, but it was not possible to do this with industrial goods, which still had to be imported[23]

Coutrot and Housson explain that production is divided into two parts: consumer goods and capital goods. It is possible to produce consumer goods on the local level and replace imports, but that is not applicable to capital goods, which have to go through the global market[24]. This is when the import problem emerges once more together with deficits in the trade of balance on one hand and the role played by the capitalist centers on the other hand. The country in this situation is expected to export its local products, which leads to the model of export-oriented industrialization, or to borrow money to deal with deficits. In both cases, the country is back under the control of capitalist centers[25].

This means that import substitution can only be done with basic consumer goods, but manufacturing production tools remains a problem. This led to the failure of the Latin American experiences and the emergence of a new model in which multi-nationals work in these countries to bridge the technology gap. This means that work will be divided between national capital that focuses on traditional industries and multinational corporations that deal with more advanced industries such as cars and electronics[26].

This arrangement implies that industry in the country in which such model is introduced will never move to the next level and will keep advanced industries monopolized by the capitalist centers while still giving those centers access to the local markets of these countries.

Second: Export-oriented industrialization:

As mentioned above, export-oriented industrialization is one of the solutions to face deficits in the balance of trade and there were several countries that resorted to this strategy with the support of capitalism in order to change the structure of its economy and production[27] and those mainly focused on exporting industries[28]. This model was mainly applied in South East Asia, particularly in the countries referred to as the Asian Tigers (South Korea, Singapore, Taiwan, and Hong Kong). The experience of these countries was based on supporting capitalism, particularly American capitalism, as a means of countering the communist expansion that followed the triumph of the Chinese revolution in 1949, the eruption of Korean War in 1951-53, and the revolution in Indo-China. Capitalist centers allowed the four countries to develop their industry and economy and provided them with experts. They first started with import-substitution industrialization, which is always seen as a priority in most experiences of that type regardless of the bigger pictures that determines the strategy required for development.

However, the thin markets of these countries necessitated exporting locally produced goods and focusing on export-oriented industrialization. In fact, Ibrahim al-Essawi notes that export-oriented industrialization was not really a matter of choice for these countries, but rather the result of exhausting the benefits of the import-substitution policies owing to thin markets and shortage of foreign currency[29]and also because low wages constituted the relative advantage in these countries[30]. Essawi adds that growing global demand in the 1960s and the early 1970s and the tariff privileges provided by capitalist countries greatly contributed to the success of the Asian Tigers. However, industrial progress was accompanied by wage increases, which meant that the low wage advantage disappeared, hence leading to the reduction of the value of these countries’ exports in the global market. This was accompanied by the emergence of rival countries or “other tigers,” as Mahmoud Abdel Fadil calls them, which kept the low wage advantage[31].

These countries were Malaysia, Thailand, and Indonesia, which also started with the import-substitution policy then were forced by their thin markets to adopt the export-oriented model[32]. These countries did not establish an industrial base as was the case with South Korea or Taiwan. That is why they were more susceptible to market fluctuation, especially with the growth of protectionism and the emergence of China as an invincible rival as of the 1990s[33]. That is why those countries went through a stage of financial activity that did not last for long and ended with the crisis that took place in 1997.

It is obvious that two factors played a major role in the success of these experience for a number of years such as low wages and tariff privileges provided by capitalist states. However, labor rights movements had a negative impact on the first while protectionism ended the second. This led to the eventual failure of industrialization in those countries and demonstrated that the global market is still in control.

Third: Production offshoring:

At a later stage of the import-substitution model, corporates from capitalist centers started operating in the peripheries in order to provide the technology that was lacking in the host country[34] that also does not have the ability to manufacture the products of these corporates. A major example was that of Ford in Brazil, which became home to several multinationals in the 1970s owing to the size of its markets. However, Ford, like other companies, was faced with a self-competition problem as their products in Brazil started competing with their products back home, so eventually it closed its factories in Brazil.

In the 1980s, capitalist countries started focusing more on South East Asia for export-oriented production. This initiative reached its peak in the mid-1980s in the stage known as the “strong yen,” in which Japan decided to relocate many of its industries in South East Asia in order to overcome problems associated with the high exchange rate of the yen and the high wages of labourers[35]

This initiated a tendency by capitalist centers to move their industries to peripheries to reduce production costs. That is why they always chose countries known for cheap labor. While this started with Japan, it was also applied by the United States that moved many of its industries to South East Asia whether to merge with other companies to solve funding problems or to guarantee low wages. In the first case, South Korea was the main target of American capitalism as several major Korean companies became branches of American companies, especially in the automobile industry. In the second case, the United States operated briefly in the New Tigers, yet China was the ultimate ideal choice not only because of cheap labor, but also because of the size of its market.

Such models can initially give the impression that capitalist centers are no longer persistent in monopolizing industries and are no longer hindering industrialization in the peripheries. However, it is the type of industry allowed by the centers that proves the falsity of such assumptions, for none of those models was totally liberated from the control of the capitalist centers and the global markets. This is because industries either focus on basic products, but never expand to machine tools or rather constitute branches of mother companies in the capitalist centers. Even in cases when industries expand beyond consumer goods such as in Korea, Taiwan, and China, such industries do not contribute to the local markets at all, but are directly exported, which means they are not part of the economy. They only use the labor force of these countries, but do not benefit them. The collapse of socialism played a major role in applying the same system in East Europe as European, particularly German, capital dominated local industries in these countries and established factories in which they took advantage of cheap labor.

Therefore, imperialist capital has for decades been taking advantage of cheap labor in different parts of the world and whenever wages increase in any country, capitalist countries withdraw their businesses, leaving large numbers of unemployed labourers, a deficit in the balance of trade, and at times a collapsing economy. Not only does the economy not benefit from these industries, but no steps are also taken towards developing the skills of the labourers.

In addition to decreasing production costs, capitalist countries were also driven by the recession that prevailed in their local markets as a result of fierce competition. This was especially the case in the United States in the 1970s when it suffered from a deficit in its balance of trade as a result of the competitive edge of Europe and Japan. That is why its major industries such as automobiles, planes, and warships suffered greatly in the 1980s and moving many of its industries to South East Asia, especially China, was a way out of the impasse.

The countries that adopted the above-mentioned industrialization models faced several challenges related to lack of independence from the global market. For example, in the case of import substitution, those countries did not have markets that were big enough for the products manufactured locally since that success of any industry is linked to its ability to find a market in which it can make profit, which was not the case. Shifting to export-oriented industrialization was, therefore, not a choice. This model was linked to the existence of markets to which products can be exported, which mean markets of the capitalist countries. The exporting process is facilitated by the privileges capitalist centers give to manufacturing countries and which were withdrawn when the centers’ economic conditions necessitated the implementation of protectionism. The industries on which peripheral countries depended for a while started collapsing, which proved that this model was not permanent, also because it is subject to the control of the capitalist powers.

With the exception of China that is now taking real steps towards becoming a modern industrial state, all industrialization models in the peripheries failed even in cases when great successes were achieved at the beginning. This is demonstrated in the cases of Brazil, the Asian Tigers, and the New Tigers. With the exception of South Korea, all the countries in South East Asia suffer from economic crises. The same applies to Latin America including a country that went through several reform attempts, including politically, such as Brazil. China remains a special case because it started the process of industrialization before being involved in the capitalist system and is also undergoing continuous technological and scientific development and now has the expertise that prepares it to become a superpower. That is why it is extremely important to distinguish between countries that became industrial outside the capitalist system, such as the socialist countries, and those that operated under the umbrella of the capitalist powers. This also explains why the Soviet Union is another unique case since it is one based on severing all ties with the capitalist system, thus achieving industrial independence.

It is also noteworthy that in addition to economic independence, industrialization has to be linked to technological and scientific progress and has to benefit the people who work in it and the population as a whole. This is the exact opposite of the models supported by capitalism, where labourers are exploited and resources are drained.

Conclusion:

The question that poses itself at the moment is: what is an alternative industry? It is the type of industry that covers all sorts of products from machine tools to consumer goods. However, planning an alternative industry requires, as mentioned in the beginning, setting priorities to determine where to begin. This is due to the fact that before the practical part, there is a technology gap that needs to be bridged and factors related to education and scientific development that need to be taken into consideration. There is also the market that needs to receive manufactured products since, as demonstrated, a thin market undermines industrialization.                          

---

[1] This issue was previously tackled in detail by a group of researchers in a conference held in Cairo on May 18-19, 2014 and published by the Arab Forum of Alternative and the Rosa Luxemburg Foundation in a volume entitled Social Justice: Concept and Policies after Arab Revolutions: https://www.afalebanon.org/index.php?option=com_k2&view=item&id=445

[2] This issue was previously tackled in detail by a group of researchers in a volume entitled Social Justice in the Arab Region between Street Politics and Political Paths published by the Arab Forum for Alternatives. The researcher published a paper in this volume entitled “Capitalism and Social Justice” (pp. 49-67):

 https://www.afalebanon.org/index.php?option=com_k2&view=item&id=504

[3] The researcher attempted to present a broad concept of alternative economy in a paper entitled “Social Justice and Alternative Economy” published by the Arab Forum for Alternatives in a volume entitled Alternative Economy in the Arab World: Concept and Issues (pp. 13-39): https://www.afalebanon.org/index.php?option=com_k2&view=item&id=553

[4]See Salama Keileh’s “Capitalism and Social Justice.”

[5] Fouad Morsi. Backwardness and Development: A Study in Economic Development [Arabic]. Dar al-Mustaqbal al-Arabi, 1982, p.7.

[6] See Imperialism and Economic Development in Developing Countries [Arabic]. Beirut: Dar Ibn Khaldoun, 1980. P. 16.

[7] Paul Bairoch. Le Tiers-Monde dans l’impasse.

[8] Ibid.

[9]Ibid.

[10] Ibid.

[11]Ibid.

[12]Ibid.

[13]Ibid.

[14] Ibid.

[15] Imperialism and Economic Development, p.9.

[16] The idea of a self-sufficient economy was tackled by a number of Marxist thinkers such as Mohamed Dwidar, Ramzi Zaki, and Samir Amin. See Ramzi Zaki’s Self-Sufficiency between Theoretical Hopes, Harsh Realities, and Objective Conditions [Arabic]. Kuwait: Dar al-Shabab for Publishing, Translation, and Distribution, 1987.

[17] Salama Keileh. Socialism or Barbarism [Arabic]. Beirut: Dar al-Konouz al-Adabiya, 2001.

[18]Alternative Economy in the Arab World.

[19]Alternative Economy in the Arab World.

[20] Anwar Abdel Malak et al. The Military and National Movements: Egypt, Japan, Congo, Vietnam, and Pakistan [Arabic]. Beirut: Dar Ibn Khaldoun, 1979.

[21] Fouad Morsi. The Crisis of Arab Economic Development [Arabic]. Baghdad: Al-Thawra Publishing House, 1979.

[22] Thomas Coutrot and Michel Husson. Les Destins du tiers-monde.

[23] Ibid.

[24] Ibid.

[25]Ibid.

[26] Ibid.

[27] Mahmoud Abdel Fadil. Arabs and the Asian Experience [Arabic]. Arab Papers Series 26. Beirut: Center for Arabic Unity Studies, 2012, p. 10

[28]Thomas Coutrot and Michel Husson.

[29] Ibrahim al-Essawi. Asian Tigers and the Quest for Development in Egypt [Arabic]. Cairo: Dar al-Thaqafa al-Gadida, 1995, p. 120.

[30] Ibid. p. 115.

[31]Ibid. p. 119.

[32]Ibid. p. 121

[33] Mahmoud Abdel Fadil, p. 10.

[34] Mahmoud Abdel Fadil, pp. 122, 169, 182.

[35]Thomas Coutrot and Michel Husson.