9_Law and State_Volume 17

Underdevelopment, Dcpcndcncia, and Modernization Theory 57
etc. However, just as, e.g., the 19th century provides a multitude of
instances of Latin American governments not acting, or not having to act
passively and as the executors of foreign capital interests, so too the most
recent past shows that an increasingly sensitive Latin American public
has contributed toward a change in the relationship between Latin American
governments and foreign investors20. To an increasing extent, investors
from western European countries or Japan are competing against
American enterprises and are increasing Latin American governments’
scope for negotiations. This development would be difficult to comprehend
using a structural-mechanistic dependency schema.
The effects of foreign enterprises ultimately could only be completely
comprehended if one were able to compare the present situation of Latin
America with that which would have arisen, had foreign investments
never been made. Concerning the income effect, one might well come to
the conclusion that the national income of Latin American countries and
the growth rates of the last decades could hardly have been reached without
the investments of foreign enterprises. It is surely a speculative question
to ask what industrialization, to which at present no alternative is
visible, would have looked like or whether it would have been possible at
all without foreign capital investments. Condemning foreign investment
activities within the framework of industrialization as being exploitive,
while at the same time complaining when foreign capital withdraws or is
not invested, amounts however to a schizophrenic way of thinking. Although
it can be observed that foreign capital is happy to see the rule of
“law and order” in the investment area and consequendy has been all too
ready to give preference to Latin American dictators over “resdess”
democracies21, there are nevertheless solid reasons for formulating the
hypothesis that, without foreign direct investments, in every case we
could expect a great, and at times perhaps even greater degree of repression
than that which actually exists, along with the attendant high social
costs, if capital had to be obtained, formed and diverted into industrialization
exclusively within the country itself.
3rd Thesis
Industrialization by means of import substitution has not lowered
reliance on imports, but transformed and increased it. Foreign debts have
grown larger and dependencia has been extended.
The strategy of import substitution, for which there was no realistic
alternative, sought to attack balance of payments problems at their roots
and to free exports and export earnings from their dependency upon