Understanding Capitalism in the Third World

How Marxists understood capitalist development – or its absence – in Latin America, Africa and Asia changed dramatically over the course of the twentieth century. Broadly speaking, in the first half of the century Marxists believed that the countries of Latin America, Africa and Asia were underdeveloped because they were not capitalist. In the second half of the twentieth century most socialist scholars turned this interpretation on its head and argued that tricontinental countries were underdeveloped because they were capitalist. This radical revision was part the result of changing socio-economic conditions, and part the product of changing revolutionary strategies in the Third World. This chapter examines ruptures as well as continuities in Marxist approaches to underdevelopment and shows that how we understand capitalist development matters.


Before the 1960s, the Old Left espoused the view that underdevelopment was the result of the absence of capitalism. From the 1920s to the 1940s, the official position of the Comintern (also called the Third International – the association of Communist Parties founded by the Bolsheviks to promote worldwide socialist revolution) was that all colonial and post-colonial countries were feudal. Feudal, in this sense, meant societies ruled by landlord and merchant classes whose power and wealth derived from exploiting the peasantry by overtly violent, non-market means (see Chapters 1 and 9). In this line of argument, feudal ruling classes in alliance with imperialists – the capitalist classes in industrialised countries – blocked the kind of economic competition that gives rise to technological advances and modern market societies.

Therefore, according to the Old Left, because the colonies and post-colonies were not-yet-capitalist, or pre-capitalist, they lacked the preconditions for socialism. Consequently, the Comintern’s mandate for communists and their allies in underdeveloped countries was to pursue a ‘two-stage’ revolutionary strategy. To hasten their country’s transition to capitalism, they should first promote anti-feudal and anti-imperialist struggles. Then, after the capitalist transition, ‘the national bourgeois revolution’, socialists should redirect their efforts to anti-capitalist revolution. In this scenario, before their countries were capitalist, peasants, workers and other subordinate classes would form tactical alliances with those sectors of the local capitalist class – the national bourgeoisie – that had conflicts with, ergo were oppressed by, the imperialists and their feudal allies. In stage two, after the feudal classes were overthrown and the imperialists weakened, revolutionary peasants and workers would shed their erstwhile bourgeois allies and struggle for socialism. While this summary of the Comintern’s ‘line’ on Third World revolution is schematic, to my mind the policy prescriptions tended to be schematic too. However, most major communist leaders, including Lenin, Stalin and Mao Zedong, advocated some version of this explicitly linear scenario of two-stage revolution.

Adherence to the Comintern’s prescriptions led communist parties and radical activists in Latin America, Africa and Asia into some strange pacts. Especially at the time of the Second World War, when pursuing both the two-stage revolutionary strategy and the Comintern’s United Front Against Fascism, communists ended up supporting an assortment of unsavoury dictators and repressive regimes. For instance, communists in Nicaragua backed Anastasio Somoza, and the Cuban Communist Party supported Fulgencio Batista long after he turned from reformism to reaction.


In the 1960s, radicals turned this scenario for Third World revolution upside down. In Latin America, the revolution from below began when Fidel Castro and Ché Guevara led an armed uprising against the dictatorship of Batista, Washington’s lackey in Cuba. Before and after the triumph of the Cuban Revolution in 1959, Castro and Guevara cast aside reformist politics associated with Latin America’s communist old guard: they advocated socialist revolution throughout the Third World. Although the Cuban leaders’ political analysis was rooted in the country’s special history of rapid capitalist development, led by US-owned sugar companies, Castro and Guevara applied this thinking to all countries of the Third World. To this end, the Cuban government forged a new International, the ‘Tricontintental Congress’ bringing together revolutionaries from the post-colonial world. Notwithstanding Cuba’s reliance on Soviet economic and political support, the Castro government played a leading role in challenging the politics of the Old Left, which remained the official ‘Moscow line’ for revolution in the Third World.

A combination of events set in motion political upheavals in the 1960s: anti-colonial struggles in Africa, Asia and the Caribbean, the civil rights movement in the United States, and Washington’s war in Vietnam. In this era, the influence of the Cuban Revolution should not be underestimated. Castro and Guevara inspired revolutionaries around the world to found parties that regarded the Cuban Revolution as their model. In 1968, student revolts sparked rebellions in other sectors of society against the Vietnam War and against white supremacy in the United States, against capitalism in Western Europe, and against Soviet-style socialism in Central and Eastern Europe. Large demonstrations in the United States, Paris, London, Mexico City, Rio de Janeiro, Rome, Berlin, Prague, Warsaw and Tokyo – some verging on uprisings – manifested widespread rejection of the status quo and disaffection with the politics of the Old Left.

These upheavals gave birth to a New Left. Following in the footsteps of Castro and Guevara, the New Left repudiated Old Left politics, especially its vision of the Third World. Radicals in developed and developing countries virtually swept away the doctrine that neocolonial countries were feudal and lacking the preconditions for socialist revolution. They turned this thesis upside down and argued that the countries of Latin America, Africa and Asia had long been capitalist, and that capitalism – not its absence – caused underdevelopment. In this revision of Third World history, capitalism developed in distorted forms in post-colonial countries and conditions there were particularly ripe for socialist revolution.

The shift in Third World revolutionary politics was a tsunami of major proportions. In the broadly Marxist debate of the 1960s and 1970s about the causes of underdevelopment, three schools of thought stand out. Dependency theory quickly became the orthodoxy in the field (Frank 1969), followed by World Systems theory (Wallerstein 1979), a variation on the dependency theme. In this theoretical current, capitalism is – first and foremost – a system of international exchange in which ‘metropolitan’ or imperialist countries appropriate ‘surplus’ from colonial or /neocolonial countries. The major conclusions of this theory are (a) that European trade took capitalism to the far reaches of the colonial world, where it took root as long ago as the sixteenth century; and (b) that capitalism – understood as surplus appropriation among countries through international trade – caused underdevelopment in colonial countries and development in imperialist countries. Dependency remained the prevailing wisdom in Third World Studies for several decades. It left behind as one of its most enduring – and to my mind troublesome – legacies the almost unquestioned view that colonial and post-colonial countries have been capitalist for a very long time – at least since contact with Europeans.

A different approach to understanding capitalism in the Third World was grounded in more traditional Marxist methods. Unlike dependency theorists with their almost exclusive focus on exchange between countries, Marxist scholars viewed class relations – a relationship rooted in processes of production – to be the motor force of capitalist transitions. To understand development and underdevelopment, Marxists analysed the social forces that promoted and prevented transformations to free wage labour, particularly in agriculture (Brenner 1977). This approach focused on how large landowning classes appropriated surplus products and surplus labour from the people who directly worked the land. Overall, Marxists sought to understand how and when peasants became proletarians, and how these processes affected technical change and economic growth (Weeks and Dore 1979).

The Marxist literature on development and underdevelopment veered away from dependency theory in a number of crucial ways. Marxists tended to hold a more contradictory view of the history of capitalism – its uses and abuses – in the Third World. In the Marxist framework, capitalism rests on exploitation in production: on the propertied classes’ appropriation of the labour (or labour power) of people who own no property and who, therefore, have to sell their labour power to survive. Because capitalism engenders competition among capitalists over profits, inter-capitalist rivalry tends both to increase the exploitation of workers and to drive forward technical change. In short, capitalism promotes growth and development – of a particular sort. Consequently, competition among capitalists creates conditions for – or the possibility of – improving workers’ standard of living (see Chapter 4). Whether or not this occurs depends on workers’ struggles against capitalists, not on some technical fix inherent in capitalist production. In sum, whereas dependency theorists see capitalism as an unmitigated evil, most Marxists see capitalism as an evil that rests on class exploitation and political subjection, but mitigated in so far as capitalism contains within it a drive to raise labour productivity. In capitalist societies increasing labour productivity tends to be harnessed to intensifying exploitation; however, technical change, resulting in higher productivity, potentially liberates humankind from some of the drudgery of work.

But emancipation from toil – even in this narrow materialist sense – is more of a possibility in post-capitalist societies than within the belly of the capitalist beast. From this perspective, Marxists regard some aspects of capitalist development in the Third World as exploitative and progressive: using ‘progressive’ not in the sense of good, fair or just, but in the sense of creating conditions for economic advancement that might promote human liberation, instead of exploitation, in a socialist order.

A related difference between dependency theory and Marxist theory is that in the former, Third World countries have been capitalist for something of the order of five hundred years, while in the latter capitalism has had a more recent history in the post-colonial world. Marxist scholars frequently emphasised the heterogeneous and zigzagged nature of capitalist transformations in Latin America, Africa and Asia (Cooper et al. 1993). Nevertheless, in my view, swayed by the current in Third World history, some Marxist writers tended to overemphasise the capitalist nature of agrarian change and to minimise the staying power of non-capitalist relations. Rather like explorers on the lookout for the earliest sightings of free wage labour, they might have been predisposed to making a discovery. As a consequence, I thinkthere was a tendency even within the Marxist tradition to present a great variety of different kinds of social upheaval as the capitalist transition, or, more commonly and cautiously, as major turning points on the capitalist road.

The last body of broadly defined Marxist writings on the rise of capitalism in the Third World was a kind of ‘third way’. A school of thought known as ‘articulation of modes of production’ sought to meld together elements from dependency theory and traditional Marxism (Foster-Carter 1978). Writers of this persuasion emphasised the ways that capitalism coexisted with non-capitalist social forms. Overall, they argued that non-capitalist class relations persisted only (or mainly) because capitalists appropriated surplus labour and/or products from peasants. Ergo, non-capitalist class relations survived into modern times only when and if they played a functional role in capitalist development.

The broadly defined Marxist debate of the late twentieth century about the causes of development and underdevelopment was exciting. To understand Third World capitalism and anti-capitalism in our time we would do well to read – or reread – the literature at the heart of those international controversies. In these debates, scholar/activists tried to understand the world in order to change it. With the benefit of hindsight, but at the riskof flattening out a rich and fertile field, I propose that notwithstanding key differences in the three schools of thought, taken together they tended to portray the Third World as capitalist, or as far advanced on the capitalist road, a road with few detours or byways. Once the political tide had turned from the Old Left to the New, the view that colonial and neocolonial countries were not capitalist (that they were ‘feudal’), or that they retained significant non-capitalist elements, fell into disrepute.


Leaders of anti-imperialist movements in Latin America, the Caribbean, Africa and Asia were at the forefront of the new-wave history of the Third World. In each epoch the call for change adapts itself to the radical rhetoric of the time. It is not surprising that in the 1950s and 1960s, anti-colonial leaders used the language of anticapitalism and professed a commitment to socialism. Independence struggles were pitted against the world’s capitalist powers; for this reason, the language of socialism seemed to lend itself more readily to the discourse of anti-colonialism than the language of feudalism and capitalism. Yet, with few exceptions, after independence new governments in Asia, Africa and the Caribbean fostered capitalist development.

Following the Cuban Revolution, Latin American radicals also adopted the language of socialism – even in countries seemingly ill suited to anti-capitalist or post-capitalist movements. With communism the enemy of the US government, it is unsurprising that throughout Latin America anti-imperialism was framed in the ideology of the enemy’s enemy: Marxism. The Frente Sandinista de Liberación Nacional (FSLN) in Nicaragua grasped the transformative power of the new Third World history. Many leaders of the FSLN wrote history; they reinterpreted the past with the explicit objective of inspiring their compatriots to revolutionary action. From its formation in 1961, the FSLN disseminated its vision of Nicaraguan history through pamphlets, songs and speeches. After a popular armed insurrection defeated the Somoza dictatorship and brought the FSLN to power in 1979, the Frente Sandinista created a historical institute whose mission was to remake ‘official history’ in the image of the Sandinista vision of the past.

The FSLN’s re-vision of the past portrayed Nicaragua as a country of rebellious rural proletarians that was ripe for socialism. The Frente’s founder, Carlos Fonseca, initiated the new history, retelling the national story as a sequence of popular uprisings against US imperialism. Fonseca’s history recovered Augusto Sandino, the leader of a guerrilla peasant army that fought the US occupation of Nicaragua from 1927 to 1933. Where Somocista history had banished Sandino the ‘rural bandit’, Sandinista history resurrected Sandino the ‘saviour of the nation’. In Fonseca’s interpretation of the past, Nicaragua was a nation of revolutionary worker peasants who repeatedly, and against all odds, resisted US intervention. In this version of the past, Sandino was both father of the nation and the embodiment of the Nicaraguan national character. Nicaraguans could fulfil their national destiny by following in the footsteps of Sandino and of his direct successors, the Frente Sandinista de Liberación Nacional.

Jaime Wheelock, leader of the Proletarian Wing of the Frente Sandinista, developed the Sandinista school of history into the leading current in Central American revolutionary thought. Wheelock, an accomplished historian, said he wrote his most important book, Imperialismo y dictadura: Crisis de un formación social, to persuade party militants that their struggle was not simply antidictatorial and anti-imperialist, but anti-capitalist (1979, p. 12). In Wheelock’s interpretation of the past, Nicaragua possessed all of the preconditions for socialist transformation. Its capitalist transition occurred at the end of the nineteenth century, and by 1960 national capitalism had developed to a mature stage. Wheelock argued that Nicaragua was a country of rural proletarians who, because of their class position and political consciousness, would join an anticapitalist revolution.

Subsequently, a number of historians argued against the Sandinista view of the past, saying it reflected their political ideology and presented an inaccurate interpretation of history. In the counterinterpretation, Nicaragua was a pre-modern society of landlords and peasants as recently as the 1940s and 1950s. And, although capitalism developed rapidly in the 1960s, class consciousness changed slowly and the world-view of rural people tended to be more backward looking than forward looking. Rural workers violently evicted from land in the previous decades retained a deep longing for landholding. Consequently, rather than developing a working class or socialist consciousness, poor Nicaraguans aspired to return to what they viewed – somewhat romantically – as their traditional peasant way of life. In the counter-history, Nicaragua had a small, highly unorganised working class, a weak and fragmented communist movement, and scant tradition of socialist thought in the twentieth century. In short Nicaragua was not, as Wheelock argued, ripe for socialist revolution (Dore, forthcoming).

Whatever the merits and demerits of Sandinista history, unlike their rivals from right to left across the political spectrum, only the FSLN was successful in leading a powerful movement against the dictatorship. The Sandinistas’ success rested on their ability to galvanise the imagination of the masses of Nicaraguans. This they achieved, in part, by rewriting history. Paradoxically, the anti-capitalist discourse that played a role in inspiring Nicaraguans to take up arms against the dictatorship, when put into practice in the countryside provoked large numbers of peasants to take up arms again: this time against the Sandinistas and their revolution.

Not surprisingly, after Wheelock became the Sandinista Minister of Agriculture, his vision of history strongly influenced state policy in the agrarian sector. Despite peasant demands for land, the FSLN refused to distribute land to the tiller. Wheelock declared that because for several generations the majority of the agrarian poor were rural proletarians, and because capitalist class relations had predominated in the countryside for over a century, distributing land to the peasantry would be a retrogressive step.

The Sandinista Agrarian Reform created large state farms and the government promised to deliver on the classic demands of rural workers: improved wages and working conditions. In line with socialist ideals, the Ministry of Agriculture set about encouraging workers’ participation – if not control – over what the FSLN hoped would become huge, high-tech farming complexes. In the event, large numbers of rural Nicaraguans opposed the Sandinistas’ statecentred agrarian policy and continued to press for land distribution to peasant households. When the Sandinista government ignored peasant demands, many rural people joined the Contras, the armed opposition founded and funded by the US government to overthrow the Sandinistas (Dore and Weeks 1992).

By the middle 1980s it became evident that the Sandinistas’ vision of Nicaraguan society and history clashed with the world-view of most people in the countryside. In 1986 the Sandinistas tacitly acknowledged that they had made a great mistake; they reversed the state-centred agrarian reform and began to distribute land to peasant households. But by then the revolutionary fervour of the insurrection and Somoza’s defeat was spent, and the difficulties of survival in the face of US opposition gave the Sandinistas little scope for assuaging peasant unrest. In the end, the Sandinistas lost the elections of 1990. Defeat came as a shock; although with the benefit of hindsight it seems clear that the FSLN’s demise should have been a death foretold. Their vision of Nicaragua’s past was more myth than history. While myth served the Sandinistas well in armed opposition, in power the FSLN’s use of the past to guide policy-making antagonised the majority of rural Nicaraguans. More importantly, in the elections of 1990, like the elections of 2001, the US government poured in money and advisers to defeat the Sandinistas.


Debates about the extent and timing of capitalist development are not ‘just academic’. The link between Sandinista history and policy is but one example of how understanding the past – trying to ‘get history right’ – helps us to comprehend the politics of the real world. Although it is impossible to ‘get history right’, as Marxists we believe that there is a past that happened, and understanding the complexities of past societies helps us to interpret the present and to think about the future. In the case of post-colonial countries, their recent histories of capitalist development often are reflected in contemporary class relations and class consciousness, which in turn have a bearing on strategies for radical social change.

The Marxist approach to history stands postmodern history writing on its head. Postmodern historians argue that subjectivity and relativity so condition all events – both how they took place and how they are understood – that there is no such thing as ‘a past that happened’. History is only interpretation: ergo any one interpretation of the past is as good (or bad) as any other (Munslow 1997, pp. 1–35). Marxists, on the contrary, see writing history as a process that involves a productive tension between trying to understand a past that happened, and interpreting the past in order to grasp important dynamics of historical change. For as Marx famously said, revolutionaries try to understand the world in order to change it.

Marxists do not believe that historical conditions determine the possibilities and impossibilities for revolutionary change. If we have learned anything from the history of the twentieth century, it is that the relationship between history and social change is more indeterminate than determinate. Most Marxists, however, subscribe to the idea that particular historical/material contexts, including but certainly not restricted to class and property relations, condition the possibilities and impossibilities for social change. The Sandinistas knew this; one of their great strengths was that they believed that history mattered, that the past would validate their revolutionary strategy. Like many radical thinkers of the late twentieth century, the Sandinistas argued that their country had been fully capitalist for a long time. With this framework, the Sandinistas, like other revolutionary leaders in post-colonial countries, may have exaggerated the role of the proletariat in Third World countries in leading struggles for socialist change.

Thinking about the great shifts in understanding the history of capitalism raises questions about the politics of the Old and New Left. Whereas the Old Left vision of Third World countries as uniformly ‘feudal’ was problematic in that it obscured social changes tending in the direction of capitalism, New Left interpretations of post-colonial countries as fully capitalist seem equally problematic; they camouflaged the activities of non-capitalist classes, and tended to underestimate the weight of non-capitalist relations, which in certain times and places remained considerable in countries of the Third World.

From the vantage point of the early twenty-first century, when capitalism is aggressively turning the entire world into its ownimage, studying times and places where capitalism had not transformed, or fully transformed, landscape and society can provide important lessons. Historical perspectives might allow us to distinguish what is old and what is new about globalisation – capitalism in its current stage. Revitalising controversies about capitalism’s rise – and fall – in Africa, Asia and Latin America could make an important contribution to the contemporary anti-capitalist debates.

With politicians, pundits and academics across the globe proclaiming that capitalism is triumphant – that we are at ‘The End of History’ and ‘There Is No Alternative’ to capitalism (TINA), it is not surprising that many people now find it difficult to imagine that capitalism can come to an end. In our era, with critics of capitalism frequently silenced in universities, the very institutions supposedly devoted to protecting freedom of thought, we are taught to forget – not to remember – that capitalism is but one historically unique way of organising society. The apparently common-sense belief that capitalism prevailed everywhere on earth in modern times has contributed to ‘naturalising’ capitalism: to legitimating the notion that capitalism is the natural way for human society to be organised. In these times, it is difficult to imagine that capitalism can be overthrown. By studying the history of capitalism, especially in countries of the Third World, we can remember that capitalism had a beginning, and if capitalism had a beginning it will probably alsohave an ending. Another world is possible.

Elizabeth Dore


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