indicating that Third World economies still exhibited the neo-colonial distor-
tion (Petras, 1981, pp. 118–24). In all regions of the developing world, with
the exception of the oil-rich Middle East, the trade gap was increasing.
Growing foreign reserves merely indicated increasing foreign debt or an
incapacity to absorb capital. Debt problems resulting from declining prices
of export commodities had led to austerity programmes, credit freezes,
devaluations, bankruptcies, reduced living standards and political repression.
The burden of debt had reached crisis proportions, and it was precisely the
most industrially advanced regions of the Third World that were having the
greatest difficulty in repaying loans.
Warren was also accused of exaggerating the benefits of foreign invest-
ment. Emmanuel argued that foreign capital continued to displace prof-
itable growth industries in developing countries because of its own
monopolistic and dynamic superiority. The loss to the Third World
economies resulting from the raw materials acquired by foreign investors
was several times greater than the short-term gains provided by foreign
investment in them. Emmanuel supported Warren in his view of capital as
neutral as regards its source, the use to which it is put being more signifi-
cant. But he claimed that the net inflow was derisory compared with what
was needed:
The mere arrival of foreign capital in a country does not ‘block’ anything.
It enslaves or develops the country just as much as any other capital, nei-
ther more nor less. Consequently, if it should happen that capital from
New York were to flow into Calcutta as it flows into San Francisco, we
should have no reason to suppose that Calcutta would not one day be, for
better or worse, the equal of San Francisco. Unfortunately – and this is
where Bill Warren’s mistake begins – (a) capital has never flowed into
Calcutta; (b) under present conditions it seems improbable, if not impos-
sible, that it will flow into Calcutta in the future; indeed (c) Calcutta is not
underdeveloped because it has been invaded by foreign capital but, on the
contrary, because it has been starved of this capital. (Emmanuel, 1974,
p. 75; 1976, pp. 762–3)
Other critics, notably McMichael et al.(1974), accused Warren of exag-
gerating the significance of popular pressures released by independence and
of omitting any analysis of the social forces exerting pressures on govern-
ment or the linkages between ruling groups and external interests: ‘Capital
is mobilized, bargaining takes place, pressures are exerted, nationalization
(of sorts) takes place by something described as the “underdeveloped coun-
tries” ’(p. 93).
98 Understanding Third World Politics