One reason liberation theologians opt for socialism stands out above all others: their abhorrence of the prevailing capitalist system. If, as many liberation theologians stress, capitalism cannot be reformed to meet the basic needs of the poor or to give them true participation in society, then socialism would seem to be the only real option. U.S. defenders of capitalism point to its record of achievement: the high standards of living achieved by most U.S. Americans. But if one uses the same “realistic” criterion for judging Latin America’s system, the record of capitalism there would lead to a quite negative judgment. The desire for radical change on the part of many Latin Americans seems quite justified.
We need to examine, however, the use of the term capitalism to designate Latin America’s economic system, past and present. In terms of the past, liberation sociologist Otto Maduro dates the development of capitalism in Latin America to the end of the nineteenth century. This would fit with a definition of capitalism as a new mode of production most characterized by industrialization in privately-owned factories that employ wage laborers. Gutierrez, on the other hand, speaks of the initial sixteenth-century conquerors of Latin America as “the first representatives of capitalism.” Pablo Richard takes this point much further. He believes that Latin America constituted a capitalist society from the outset. “The position I adopt here is that Latin America was inserted into the expanding worldwide capitalist trading system ever since the Spanish and Portuguese conquest. From the very beginning, starting with its discovery and conquest, Latin America has developed with a capitalist social pattern.”
Richard bases this assumption on arguments by dependency theorist A.G. Frank who considers “exploitation of surplus value” from the labor of others as the hallmark of capitalism. The points Richard wants to make have validity; the label “capitalist,” however, obfuscates the problem. The native Indian population of Latin America and the resources of Latin America were clearly “exploited”; Latin America had a relationship of dependency imposed upon it by Spain and Portugal; Latin America was inserted into a wider world market from the outset; “backwardness” was not the main cause of Latin American underdevelopment through the centuries that followed.
Latin American countries, however, were not “capitalist societies” from the outset. Even if one assumes that countries in northern Europe had “begun” a form of mercantilist capitalism that would eventually lead to industrial capitalism, Spain and Portugal by any definition remained feudal in character, and Latin America took on their societal traits. Even Marxist critics have sharply criticized Frank’s description which they say ignores the whole question of modes of production. Mariategui’s writings consistently describe Latin America’s economy as a carry-over from feudalism, and he faults it for not adopting the methods and spirit of capitalist productivity. If one makes exploitation of surplus value and serving external markets the defining norms of capitalism, even the ancient Roman empire would fall under the classification of capitalist. To call Latin America capitalist in its very origins may help to fuel moral outrage against the capitalist system, but it greatly oversimplifies analysis.
Through most of its history Latin America has had a hybrid form of economy that defies simple classifications. The haciendas, for example, have been described as semi-feudal, semi-capitalist; feudal in their internal structures and use of coerced labor; capitalist in having external markets.
Even the application of the term capitalism to many present-day economic systems in Latin America raises some questions. In some respects the dominant economic system in some countries resembles more closely the socialist “state capitalism” of the Soviet Union and Eastern Europe than the capitalism of the United States and Western Europe. According to one study, the state in Mexico accounts for 65-70 percent of the GNP. In Bolivia the state accounts for 92 percent of the GNP, higher than in Poland. The same study claims that 50 to 60 percent of the people in Latin America work for the state. Another study reports that the 25 largest non-financial corporations in Brazil are state-owned. These figures, however, refer to the monetized sector of the economy and do not take into account the subsistence level at which many of the poor live.
One of these observations diminishes the substantive critiques of Latin American systems as externally dependent and exploited, and internally elitist and exploitative, so that even many opponents of liberation theology judge capitalism a “dismal failure.” But these observations do warn against simply reducing the problem to a struggle between capitalism and socialism. The term “capitalist” has entirely negative connotations in liberation theology: foreign domination, exploitation of workers, needs of people subordinate to the drive for profits, and concentration of power and wealth. Capitalism historically is unquestionably linked with many injustices and inequities; a strong case can be made against many features of capitalism. The worst problems with capitalism, in my estimation, are linked to concentration of power and wealth, to what Leonardo Boff captures with his reference to “elitist, exclusivist capitalism.”
Capitalism, however, includes a variety of components: it includes small businesses as well as giant corporations; it includes a free market system; it uses self-interest and profits as motivating factors, but its ethos also involves hard work, productivity, creativity and inventiveness. A sweeping rejection of capitalism fails to distinguish these components or structures which need to be weighed separately. A true dialectic process would involve assessing each of the structures within the system. Marx himself recognized this, even though he sought to replace capitalism with socialism. Above all he recognized the immense productive capacities of capitalism. In fact, he argued that socialism could not or should not take over until capitalism had run its course, producing enough goods for all. Trotsky argued that the state-controlled, bureaucratic system which developed in the Soviet Union under Stalin resulted from the undeveloped state of its economy when socialism took over. Trotsky cites Marx who insisted that full development of productive forces was absolutely necessary for socialism. Without this development, capitalist-type struggles would emerge again: “with want, the struggle for necessities begins again, and that means that the old crap must revive.”
If a system is to provide for the basic needs of people, it must develop productivity, along with the virtues of hard work and inventiveness which make productivity possible. At a time when socialist countries have begun to question whether some of its structures may impede growth—in Nicaragua the government has moved away from collectivist farm efforts to allow peasants to work for themselves—liberation theologians need to consider what might be fruitfully retained from “capitalist” structures. Private farms and small businesses have helped greatly in achieving equitable economic growth. The free market system fails when wealth and income are vastly unequal; the market then responds to money, to those who can pay, not to individual preferences. It acts blindly in respect to social costs. But a market can work where purchasing power is more widely dispersed, and measures by socialist governments to replace the market have led to significant failures.