Book Review: Underdevelopment in Peru: A Profile of Peripheral Capitalism by Jan Lust

Underdevelopment in Peru offers a comprehensive examination of underdevelopment in Peru, studying its political, economic and social aspects. The author defines underdevelopment as the absence of sustainable inclusive economic development. Lust posits that Peru’s role in the international division of labour is a central force perpetuating this condition. Structured into nine chapters, the book navigates from the theoretical and analytical foundations of underdevelopment to a documented exploration of its various social and economic dimensions. These include the social class structure, labour dynamics, social segmentation, the role of the state and an examination of the impact of the COVID-19 pandemic. Lust underpins these insights with data sourced from a variety of outlets, including national databases such as those from the National Institute of Statistics, the Peruvian Central Bank and the Ministry of Production.

In the initial two chapters of the book, Lust constructs his theoretical framework drawing from Marxist perspectives to explore the global nature of capitalism and the impact of globalization. Central to his analysis is the concept of the international division of labour, which he contends is pivotal in revealing Peru’s position within the global economic landscape. This concept, combined with the notions of an advanced economy (AE) and a capitalist subsistence economy (CSE), allows Lust to incisively assert that this division and the ensuing dependency relationship between a peripheral country like Peru and advanced economies are instrumental in comprehending the internal dynamics of the nation.

The dominance of extractive industries in Peru has engendered an economic and social dynamic characterized by rampant super-exploitation, relaxed labour regulations and substantial incentives for the influx of foreign direct investments (FDI). This shift was largely catalysed by the implementation of neoliberal policies during the 1990s, particularly under the administration of Fujimori, driven by both external and internal factors. Consequently, this trajectory hindered Peru’s capacity to embark on an industrialization process that could have added value and retained it within the country. Lust’s work offers valuable insights into this phenomenon, including practices like outsourcing and subcontracting to replace permanent workers with temporary labour, thereby alleviating companies of the obligation to provide extensive worker benefits.

Another crucial aspect of this perspective on underdevelopment is that capitalist societies tend to prioritize the development and utilization of technology in sectors that yield higher returns, often neglecting other sectors that could, in the long run, complement the growth of the entire industry. Lust refers to this phenomenon as ‘Productivity Heterogeneity’, which plays a pivotal role in fostering informality within the country, a prevalent issue in Peru, reaching levels of over 70%. The persistence of informality has been an ongoing challenge in Peru’s development discourse and is, in part, a consequence of inadequate public services and a regulatory framework that imposes burdensome regulations on formal businesses (Loayza 2007). Lust elucidates that wages in Peru fall short of sustaining labour-power, and informality, coupled with meagre salaries, exemplify instances of super-exploitation.

Moreover, Lust underscores an essential relationship to explain the underdevelopment paradigm, which revolves around the interplay between the Engels–Marx correlations of the economic base and the superstructure, particularly the state. The noteworthy connection to dependency theory lies in the premise that the national superstructure is shaped by its international base. It is through the political, economic and social interventions of the national superstructure that the international base influences the national foundation. This is instrumental in comprehending how non-economic systems wield international influence, impacting crucial economic decisions in a peripheral nation.

After the review of the theoretical frameworks, Lust provides a comprehensive analysis of the role of Peru in the world economy as well as the internal components of the base and the superstructure. One relevant historical point as mentioned before is the establishment of neoliberalism during the government of Fujimori which followed a regional trend after a deep economic crisis during the 1980s. In this context, Peru as a peripheral country participates in the global value chain through a process of outsourcing. This creates a stagnation of labour rights and reduces in general the role of Peru to export natural resources, a situation that has not changed since colonial times.

The book also highlights the glaring inadequacies in social security, particularly concerning limited access to health insurance and education, underscored by the state’s inability to effectively address these pressing challenges. Lust characterizes the Peruvian state as a dependent capitalist state, leaning towards pro-FDI policies, and partially attributes the deficiency of progress to the weakness of the Left. He introduces the concept of ‘state capture’, where capital exerts significant influence over governmental decisions. However, to provide a more comprehensive perspective, it seems relevant to supplement the assertion that the Left is the primary driver of underdevelopment in the country with other analytical elements. These additional elements should revolve around foundational factors like the state of education and healthcare systems, to name a few.

Another intriguing facet that could have enriched the book is an exploration of the mechanisms of racialization in Peru as a peripheral country. As Bhattacharyya (2018) argues, the processes that have underpinned capitalist development have, in many instances, been socially enacted as racialization. This implies that racialized marginalized groups find themselves at the lower rungs of the socio-economic hierarchy due to a set of practices, mechanisms and policies intentionally designed to hinder their upward mobility, perpetuating this cycle across generations. One pertinent framework to apply in this context is the lens of racial capitalism. How does the analysis of dependency intersect with race? Several scholars have emphasized the importance of incorporating race into the analysis of dependency. Marini, for instance, contended that the substantial pool of indigenous labour, reinforced by immigration flows, provided the demographic surplus necessary to sustain super-exploitation (Marini 1973). Similarly, Reis N and de Oliveira FA (2021) underscored that structural racism and patriarchy constitute integral components of peripheral capitalism, and they should be closely tied to the notion of super-exploitation.

In summary, Lust’s book provides a thorough examination of the historical events that have contributed to Peru’s underdevelopment, while establishing a strong theoretical foundation that enables readers to grasp the intricate factors influencing this economic state.