Peru and the Rise of a Capitalist Subsistence Economy
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Peru and the Rise of a Capitalist Subsistence Economy

The work of Jan Lust on Peruvian capitalism and, in particular, the development in the Neoliberal era of what he terms a "capitalist subsistence economy" offers interesting insights into contemporary peripheral capitalism formations, as well as the possibility..
Peru and the Rise of a Capitalist Subsistence Economy

The work of Jan Lust on Peruvian capitalism and, in particular, the development in the Neoliberal era of what he terms a "capitalist subsistence economy" offers interesting insights into contemporary peripheral capitalist formations, as well as the possibility for comparative research on the development of subsistence economies and subsistence sectors outside of the Peruvian case.

Lust's Capitalism, Class and Revolution in Peru, 1980–2016 begins with an important contradiction of contemporary Peruvian politics, whilst elites on both the right and social-democratic left have been fractured and weakened by corruption scandals and elite conflict the socialist left has not been able to capitalise on this weakness and to mobilise people onto the streets, against elites, to seize power.

Important for Lust has been the inability of the Left in Peru to react to the changing composition of its electoral base with the advent of Neoliberal capitalism in the 1980s. Central to this is an inability of the Left to understand the evolution of class structures in Peru and the way in which these changes have limited the traditional methods of socialist mobilisation.

The key to this for Lust lies in the dynamics of economic crisis which between 1985 and 1990 laid the basis for Fujimori's rise to power in 1990 and the beginnings of neoliberalism in Peru. Central to this was the role of economic crisis in eroding existing class-based solidarities through a growing informalisation of labour, through unemployment, the growth of subcontracting and labour casualisation – central to which was the weakening of the trade unions.

This process is built for Lust on a broader understanding of the dynamics of capitalism and class within Peruvian capitalism. A primary export economy, dependent upon external capital Peruvian capitalism has maintained its place within the global division of labour as a primary commodity exporter, with limited development of a strong domestic bourgeoisie or a domestic industrial base. This has produced for Lust a significant division between the export-oriented sector, and the sector serving the domestic market, a divison between major international corporations, and domestic "micro-enterprises" which play a significant role in Peruvian capitalism. This division has been exacerbated by neoliberalisation. On the one hand Lust notes declining manufacturing between 1980 and 2015 (from 17.7 to 13.5% of GDP, mirroring other deindustrialising developing states) as well as a growth of micro-enterprises in the economy in the same period, becoming he argues the most important providers of employment in the economy.

This role of micro-companies is for Lust fundamental to the nature of Peru's model of development, externally dependent and export-oriented, capitalism in Peru hasn't produced the kind of domestic revolution which has been able to include a significant totality of the Peruvian population within its operations. Peruvian capitalism is fundamentally a capitalism which services markets of the global north, and as such isn't directly able to produce levels of employment and prosperity for the majority of Peruvian workers, and the Peruvian economy remains fundamentally reliant then upon micro-enterprises which are largely non-capitalist in character, a fact exacerbated by the crisis of profitability in the 1970s. Alongside then the decline of manufacturing, this trend is linked to the growth of the services sector, particularly low-skill, traditional services which come to provide both low-wage employment and low-skill services towards the reproduction of labour (food, basic goods, transportation healthcare, childcare etc.).

The conversion of Peru in an economy of micro companies finds its origin in the country’s role in the international division of labor. As its main function is to provide the raw materials for the enlarged reproduction of capitalism abroad, this means that a large number of individuals in the working age are in fact superfluous. The mining sector, the principal provider of the required raw materials, employs only a very small part of the EAP.

Although the country’s conversion into an economy of micro-business undertakings is structurally rooted in the international division of labor, the conversion itself is principally the consequence of the economic crises in the 1980s, the restructuring of the companies in the 1980s and 1990s, and the implementation of neoliberalism in the 1990s. The crises reduced employment opportunities in big companies and diminished real income. Salaries and wages were not sufficient anymore for the reproduction of labor-power and forced individuals to set up their own (micro) companies. Micro companies serve as a safety net for all those individuals who have not been able to find adequate employment.

In noting this Lust notes a distinction that others such as Partha Chatterjee and Kalyan Sanyal have argued for in the Indian context, a distinction between capital-as-accumulation and capital-as-governance of labour. For Sanyal this is a distinction between capital as a system of accumulation, and capital as a system of govenmentality – governing the subjects under it. For Chatterjee it is the distinction between the state and civil society as the domain of corporate capital, and the domain of political society, as the domain of non-corporate capital. Central to both is a split between capitalism's ability to reproduce profitability and its ability to reproduce the conditions for human existence, tendencies which they argue have significantly diverged under late capitalism, reproducing ideas of a dual economy between capitalist and non-capitalist sectors, split between two tendencies, corporate capitalism with its tendency towards increasing profitability and expansion of capital and non-corporate capital with its subsistence ethic.

In Peru Lust is also arguing for the presence of a dual economy, but one in his terms divided between the advanced capitalist sector and the capitalist subsistence economy. Whilst the advanced sector forms the sector of modern corporate capital, the capitalist subsistence sector is on the other hand marked by low levels of productivity and remuneration, and by the proliferation of micro-enterprises and forms of self-employment and own account work in which individuals sustain themselves outside of the advanced capitalist sector. As then in the thought of Chatterjee and Sanyal, central to the existence of the capitalist subsistence economy is the problem of the reserve army of labour.

Businesses in the CSE function as a safety net for all those individuals that have not been able to find employment in the advanced economy. In Peru, it might be argued that the reserve army of labor not only encompasses the unemployed and the underemployed, but, in fact, all those individuals that are employed in the CSE. Palma (1988, 37) explains that countries at the periphery of the world capitalist system have a permanent surplus of workers that does not have other possibilities than to start small businesses. These business undertakings are characterized by a scarcity of capital and a high level of work intensity.

Thus whilst both sectors of the economy are money-based, market-oriented and profit-driven they remain governed by different logics, the advanced sector is driven by the expansion of accumulation of capital and the maximisation of the profit rate, the subsistence sector isn't driven by expansion nor the same levels of profit maximisation, but rather the simple reproduction of labour power.

The CSE is similar to what has commonly been called a subsistence economy in the sense that the economic surplus is minimal and the economic activities employed are meant for the reproduction of survival, i.e., the companies in the CSE do no tend to reproduce themselves at enlarged scale. Companies in the CSE are businesses that, in general, do not invest in what is called human capital or in technological development (the production of absolute surplus value dominates over the production of relative surplus value). Not only the quantity of surplus value appropriated seems to be too low to expand constant capital, but also low wage costs do not “stimulate” these businesses to replace variable capital for constant capital. As can be expected, FDI is not directed toward companies in the CSE.

As against however the old model of dual economy producing a division between the modern and traditional sectors Lust highlights the relationship of dependence between the advanced and subsistence sectors. In particular the way in which the presence of a subsistence sector allows the advanced sector to externalise the costs of raw inputs and of the reproduction of labour through cheaper commodity prices and cheaper costs of basic goods, a fact which allows the advanced sector to hold down wages and not provide a living wage because workers can live cheaply off of the subsistence sector and find additional work there. This relationship is understood by Lust as one of  super-exploitation, in which workers "receive a remuneration that appears not to be sufficient to reproduce their labor-power". This definition of super-exploitation refers not to a definition of exploitation within the subsistence sector, and therefore between the owners of microenterprises and employers, but between the corporations within the advanced sector dependent upon low-wages in the subsistence sector, and workers of the subsistence sector. This tendency produces competition within the subsistence sector for survival:

In the case of Peru, super-exploitation is a reality for the majority of its working population because of (i) the weakness of the labor movement (ii) the enormous number of low skilled employees that compete with each other for small temporary jobs; and (iii) the ferociousness of price competition between the huge amount of micro-businesses. In addition, although the super-exploited individuals produce for “their” own market and for the market of the advanced economy, this does not impede the companies to pay wages below the costs of reproduction. The individual negative effect of super-exploitation, wages and salaries that are too low to reproduce one’s own labor-power, is “solved” by the credit system and by sharing one’s household with other individuals, among other “measures”.

This process has also come then to alter the class structure of the Peruvian economy. From the old division between the middle class, divided itself between modern and traditional, the industrial proletariat and the rural peasantry, the neoliberalisation of the 1990s this has seen the development of new class fractions. Firstly an intermediate class containing sections of the middle-class but also elements of the self-employed, own account workers, owners of micro-enterprises and elements also of the urban semi-proletariat including informal workers, street vendors etc. At the same time the proletariat has increasingly seen a rise in semi-proletarianised workers, casual workers and own account workers, as well as workers working multiple jobs, working in both traditionally proletarianised sectors as well as in self-employed or own account work (putting-out work etc.). The same has occured amongst the peasantry in which increased urban migration has seen an increasing mix of agricultural and own account work through processes of semi-proletarianisation alongside traditional forms of subsistence (market-oriented) production.

Such transformations in turn have come to transform the nature of class struggle in the country. The traditional methods for the Peruvian Left were the mobilisation of proletarianised labour, and peasant mobilisation against the exploitation of landlords and struggles over land ownership, yet the weakening of the labour movement through economic crisis, and its fragmentation through the development of a growing capitalist subsistence sector  allowed for the state to pursue a class struggle from above, repressing organised labour and rural movements and increasing then the power of corporate capital and the advanced sector. Whilst then Lust notes the advanced elements of the working class struggle are in those advanced sectors such as mining and manufacturing, where the contradiction between valorisation and labour is most evident, the organisation amongst the more varied elements of the subsistence sector, and intermediate and semi-proletarian groups, in which such a contradiction is less evident and mediated by a series of other factors, has been non-existent on the Left.

As Lust then notes, the failure of the Left in Peru has been to live up to this reality, which has seen it tend towards a more social-democratic elite-led movement from above, than a socialist movement from below. Central to this has been the failure of the Left to build its politics on an understanding of the structure of Peruvian capitalism. "The socialist Left forgot that a thorough understanding of social reality is a precondition for changing it."

Lust's study provides however the basic markers for this kind of thinking. In highlighting the role of low-skill, low-remuneration micro-enterprises based on relations of super-exploitation between advanced and subsistence sectors, and centred around the reproduction of labour through employment and cheap commodity production, he is describing whole economic sectors found all across the global south. These sectors, which are perhaps overlooked by economists and social scientists, have increasingly become important in employment and economic production across the global south and will play then not only an increasingly important economic role but also a political one.