Long post - This list deserves it

[Zeynep Tufekcioglu <zeynept@xxxxxxxx>]

Hello listfolk,

Below is an article of a friend of mine in Britain, in extenso. At first I
thought of summarising it. Then, I browsed the latest digests of the list.
With all the space taken up by, well, ya know, all *that*, I decided that I
should post the whole article, since also the article did not really render
itself to summarising. Those not interested, kindly forgive & delete.

Zeynep
(Author, btw, is David Yaffe)


Globalisation: a redivision of the world by imperialism

Globalisation is the latest fashionable term used to describe the all
pervasive forces of a rampant capitalism. It suggests a new stage of
capitalism in which multinational companies and financial institutions,
attached to no particular  nation state, move their capital around the world
in search of the highest returns, and in so doing create a truly global
market and global capital. In fact, as David Yaffe argues in this article,
the degree of internationalisation of capital is only now approaching those
levels existing before 1914. And far from being new, we are seeing a return
to those unstable features of  capitalism which characterised imperialism
before the first world war.


The strongest supporters of the globalisation standpoint are the neo-liberal
right. A recent convert to their free market orthodoxy - it is said in order
to save itself from the chop (The Guardian 20 May 1996) - has  been the
United Nations Conference on Trade and Development (UNCTAD), an organisation
set up 32 years ago to provide reports on trade and development from the
perspective of developing countries. Its recent World Investment Report 1995
(WIR 1995) reads like an eulogy on globalisation.

=91Enabled by increasingly liberal policy frameworks, made possible by
technological advances, and driven by competition, globalisation more and
more shapes today=92s world economy. Foreign direct investment (FDI) by
transnational corporations (TNCs) now plays a major role in linking many
national economies, building an integrated international production system -
the productive core of the globalizing world economy=92 (WIR 1995 p xix).

However its own report produces a wealth of statistical material which shows
a very different picture emerging.

Transnational or multinational?

Throughout its report UNCTAD uses the term transnational companies. In fact
transnational companies  are relatively rare.  Most companies are nationally
based, are controlled by national shareholders, and trade and invest
multinationally with the large  majority of their sales and assets in their
home country.=20

A recent study of the world=92s 100 largest companies taken from the Fortune
Global list showed that in 1993 only 18 companies maintained the majority of
assets abroad. The internationalisation of shares  was even more restricted.
2.1% of the board members of the top 500 US companies were foreign nationals
with  only  5 of  the top 30 US companies listed having a foreigner on their
boards. All the companies seemed to have benefited from industrial and trade
policies of their own countries and at least 20 would not have survived if
they had not been saved in some way by their governments ( Fin. Times 5
January 1996, The Economist 24 June 1995).

UNCTAD=92s own index of transnationality based on shares of foreign assets,
foreign sales and foreign employment shows 40 of top 100 multinational
companies in 1993 have more than half of their activities abroad, with the
average for the whole group at 41 per cent, falling to 34 per cent for US
Multinationals, which comprise nearly one-third of the total.  Even these
figures are misleading as Nestle, which tops the list with 92 per cent,
limits non-Swiss voting rights to 3 per cent of the total. In addition most
research and development (R&D) takes place in the home country. For US
multinationals, the share of R&D performed by majority owned foreign
affiliates was only 12 per cent in 1992 (WIR 1995 pp xxvi - xxx, and Wade=
 p19).

Finally  a recent study by  Hirst and Thompson (H&T), based on company data
for 500 MNCs in 1987 and 5000 MNCs in 1992-3, assessed the relative
importance for MNCs of home and foreign sales and assets of particular
countries, mainly US, UK, Germany and Japan. They found that between  70 and
75 per cent of  MNC value added was produced in the home nation.  They
conclude that international businesses remain heavily =91nationally=
 embedded=92
and continue to be MNCs rather than TNCs (H&T pp 76 - 98). However, that
international companies are nationally based and trade and invest
multinationally  tells us little about the overall strategic importance of
the 25 - 30 per cent activity conducted abroad - a point that we shall
return to below.

An integrated production system?

Foreign direct investment is linking many national economies but, but far
>from this leading to an =91integrated production system=92, it is=
 reinforcing
the economic domination of the vast majority of the world by a small number
of imperialist countries.  Multinational companies have become the principle
vehicle of imperialism=92s drive to redivide the world according to economic
power.

Since 1983 FDI  has grown five times faster than trade and ten times faster
than world output (The Economist 24 June 1995). This process is being
reinforced with recession and stagnation continuing to afflict the major
imperialist economies. From 1991 to 1993,  worldwide FDI stocks grew about
twice as fast as worldwide exports and  three times as fast as world GDP.
MNCs FDI in 1995 was estimated at  $230bn, producing a worldwide FDI stock
of $2,600bn (1995) with worldwide sales of foreign affiliates at $5,200bn
(1992) and up to $7,000bn, if subcontracting, franchising and licensing are
taken into account.

Investment stocks and flows, inwards and outwards, are concentrated in the
imperialist countries and particularly  in the competing power blocs, the
=91Triad=92 of the European Union, Japan and the  United States and their
regional cluster of countries. 70 per cent of the outflows from the
imperialist countries (60 - 65 per cent of total world flows) comes from
only five countries, France, Germany, Japan, UK and US. Continual
repositioning has taken place among them and in the recent period the US has
reasserted its lead accounting for one quarter of the world=92s stock and
one-fifth of world flows (see Tables 1 and 2).

The relative change in the balance of economic power since the end of  the
post-war boom  is highlighted  by  US share of the world outward stock of
FDI falling from 52.0 per cent in  1971 to 25.6 per cent in 1994, while
Japan=92s share rose from 2.7 per cent  to 11.7 per cent. The European Union
is the dominant imperialist bloc and  Britain, a rapidly declining
industrial power, still retains a formidable imperialist presence.


Table 1: Outflows of FDI from five major imperialist powers 1982-1994

           1989         1992         1994         1982-1986       1987-1991
Country                                    (outflows $ bn)(Share in world=
 total)

France    20             31             23                5%               =
 11%
Germany   18             16             21               10%              =
 10%
Japan     44             17             18               13%              =
 18%
UK        35             19             25               18%              =
 14%
US        26             39             46               19%              =
 13%


Table 2  Shares in total FDI stock  1971 - 1994=20

Country   1971               1980                1990            1994

France    5.8%               4.6%               6.6%              7.7%=20
Germany   4.4%               8.4%               9.1%              8.6%
Japan     2.7%               3.8%             12.1%             11.7%

UK        14.5%             15.6%             13.8%             11.8%
USA       52.0%             42.8%             26.1%             25.6%=20

(Data from WIR 1995 and Multinat. Corp. in World Development  UN, NY 1973)

Over the last 10 years FDI outflows from Third World countries have more
than doubled growing from 5 per cent of world FDI outflows  in 1980-84 to 10
per cent in 1990-94, reaching 15 per cent in 1994. However this does not
represent a significant step towards a more integrated system since most of
the capital flow comes from a small number of the so-called newly
industrialising countries (NICs), mainly in Asia, with Hong Kong alone
contributing 64 per cent of the total. Hong Kong outflows seriously distort
the overall figures. A lot of the other outward investment results from
companies in NICs forced by  rising wages to move labour-intensive FDI to
lower wage countries in the same region.  Of real significance is the fact
that only 6 per cent of  FDI outward stock is accounted for by Third World
countries.  It is a great deal lower than their share of  exports in world
exports, and   GDP  in world GDP, at 23 per cent and 21 per cent=
 respectively.

The recession which hit most imperialist countries in 1990-92 and the
stagnant economic growth of the following years, while reducing overall FDI
outflows from the imperialist nations, saw a much greater share of them go
into the Third World, and, in particular, China. FDI inflows into Third
World countries increased from $35bn (17 per cent of the total) in 1990 to
$84bn (37 per cent) in 1994, and is estimated to reach $90bn in 1995, nearly
40 per cent of total FDI outflows (Table 3).=20

The flows into the Third World were however very concentrated.  79 per cent
of FDI inflows into Third World countries in 1993 went to only ten countries
including China.  With nearly $28bn, China was the second largest recipient
of FDI (after the United States) taking 37 per cent of the total going to
Third World countries. FDI outward stock was likewise highly concentrated
with 67 per cent of Third World stock in just ten countries in 1993. Asia
accounted for 70 per cent of total flows into Third World countries in 1994.
Latin America and the Caribbean  received 24 per cent with two countries,
Mexico and Venezuela, accounting for 71 per cent of the region FDI inflows.
On the other hand FDI into Africa has declined from 11 per cent of Third
World inflows in 1986-90 to 6 per cent in 1991-93 and to 4 per cent in 1994.
Finally privatisation was the main reason for the $6.3bn flows into the
ex-socialist countries of central and eastern Europe in 1994,  turning
former domestic companies into foreign affiliates of multinational
companies.   =20


Table 3: Inflows and Outflows of FDI 1982 - 1994

                1990      1992       1994       1982-86    1987-91    1994  =
 =20
Country group   ($ billion)                      (share in total)

Imperialist:=20
Inflows         176        111        135           70%        82%       60%
Outflows        226        171        189           94%        94%       85%

Third World:=20
Inflows         35           55         84           30%        18%      =
 37%
Outflows        17           19         33            6%         6%      =
 15%

(Discrepancies between outflows and inflows are due to data collection=
 problems)

Our argument can be further substantiated by looking at FDI in terms of its
distribution among the worlds population.  The Triad countries comprising 14
per cent of the world=92s population attracted some 75 per cent of FDI=
 flows.
If we add to this the population of the ten highest recipients of FDI in the
Third World, then 43 per cent of the world=92s population received 91.5 per
cent of FDI between 1981-91. This includes all of China with a population of
1.2bn. If we only include China=92s population in the coastal regions where
most FDI is concentrated then only 28 per cent of the world=92s population
receive 91.5 per cent of  FDI. On this basis between 57 and 72 per cent of
the world=92s population receive only 8.5 per cent of total world FDI (H&T
p67-68). This is hardly a picture of an integrated production system but one
that is highly concentrated and very unequal.

Highly concentrated and very unequal

=91...a fall in the rate of profit connected with accumulation necessarily
calls forth the competitive struggle. Compensation of a fall in the rate of
profit by a rise in the mass of profits applies only to the total social
capital and to the big, firmly placed capitalists.=92 (K Marx)

UNCTAD=92s support for countries opening up their economies to FDI shows=
 quite
brazenly its neo-liberal  sympathies:=20

=91In today=92s increasingly open and competitive global economic=
 environment,
the performance of countries - best measured in terms of per capita income
(as a proxy measure for welfare) and growth - depends significantly on the
links they establish with the world economy=92. Unusually, we are provided
with a definition of a competitiveness as the ability of firms =91to survive
and grow while obtaining their ultimate objective of maximising profits=92
(WIR pxxvii,p150) - which helps to explain today=92s increasingly unequal=
 and
monopolistic global environment. Growing competition for profits creates an
inexorable tendency towards monopolisation as it is only the =91big firmly
placed=92 companies which can survive in a world where capital accumulation=
 is
stagnating. Growing monopolisation of markets for goods, investment,
technology and raw materials, through mergers, acquisitions and FDI, are the
result of multinational companies relentless search for ever greater profits
to compensate for a  general fall in the rate of profit. This creates a very
different =91global environment=92 than that promoted by the UNCTAD report.=
=20

 We have already showed how FDI by predominantly nationally based
multinational companies is concentrated within a number of competing power
blocs. It is also controlled by a small number of multinational companies
within those blocs. There are in the region of 40,000 multinational
companies having some 250,000 foreign affiliates. However the largest 100
multinational corporations (excluding those in banking and finance) had an
estimated $3.7 trillion worth of global assets with $1.3 trillion outside
their respective home countries. This accounted for a third of the combined
FDI stock of their countries of origin. The world=92s 500 largest industrial
corporations employ 0.05 per cent of the world=92s population and control 25
per cent of the world=92s economic output;  and a mere one per cent of all
multinationals own half the global stock of FDI. Two-thirds of world trade
is controlled by multinational companies with half of this trade, or $1.3
trillion exports, intra-firm trade between multinational companies and their
affiliates. In the case of US multinationals, $4 out of $5 received for
goods and services sold abroad by US multinationals are actually earned from
goods and services produced by their foreign affiliates or sold to them.

The concentration for a certain range of products is even greater. In the
case of consumer durables the top five firms control nearly 70 per cent of
the world market in their industry. In automotive, airline, aerospace,
electrical components, electrical and electronics and steel industries, five
firms control more than 50 per cent of output. In oil, personal computer and
media industries the top five firms have more than 40 per cent of sales (K
p223). The total sales by foreign affiliates of 23 multinational companies
accounted for 80 per cent of the total world sales in electronics. 70 - 80
per cent of global R&D expenditure and 80 - 90 per cent of technology
payments are within MNC systems. Far from this presenting a picture of an
=91open and competitive=92 environment we have one that is increasingly
controlled and increasingly monopolistic.   =20
=20
The same principles which lead to the concentration of capital in the hands
of a few large corporation determine the extent and direction of FDI. The
forces of monopoly consolidate at a global level. Most FDI going into the
imperialist nations is =91ownership-switching=92 - for mergers, acquisitions=
 and
privatisations as opposed to new establishment or =91greenfield=92=
 investment.
In the case of FDI going into the United States in 1993, 90 per cent in
value was for acquisitions of existing companies.  For US outward FDI the
ratio of the number (data on values are not available) of new establishments
to acquisitions  was 0.96  in other imperialist countries compared to  1.8
in Third World countries.=20

In a classic piece of understatement UNCTAD informs us =91FDI is not a=
 panacea
to break from the vicious circle of underdevelopment=92 in the Third World.
That is certainly true. For the strategic importance for MNCs lies in its
ability to generate adequate profits through the access it provides  to
essential markets and productive resources throughout the world.=20

MNCs FDI inflows to Third World countries accounted for only 7 per cent of
Third World domestic  investment in 1993. As we have discussed earlier, it
is mainly is concentrated in only 10 countries. These countries have an
average  GDP per capita of $6,610 and come into the top sector of middle
income countries.  MNCs are looking for high, guaranteed profits, relatively
large domestic markets or easy access  to such markets, good social and
industrial infrastructure, a skilled workforce at low cost, political and
economic stability, open economies and easy repatriation of profits. Africa,
for example, is now of limited importance, in spite of high rates of return,
because  of widespread poverty and political and economic instability. Not
surprisingly, FDI in Africa is concentrated in countries with important raw
materials, particularly oil.  =20

Official rates of return to US FDI in Third World countries in 1993 at 16.8
per cent were nearly twice the level in imperialist countries at 8.7 per
cent. The rate of return in the primary sector  in Africa  was a massive
28.8 per cent. Actual rates in Third World countries are probably even
higher once transfer pricing and other tax avoidance devices are taken into
account.=20

MNCs use Third World countries as a low cost, profitable location for
export-oriented industries. In the late 1980s and early 1990s the share of
foreign affiliates in exports were as high as 57 per cent in Malaysia (all
industries), 91 per cent in Singapore (non-oil manufacturing). In 1990,  44
per cent of  total manufactured exports  in Brazil and 58 per cent in Mexico
were by foreign affiliates of MNCs.  =20

The trend is accelerating for many MNCs to move manufacturing and services
industries  out of high labour cost countries to ever cheaper ones in the
Third World as competition for markets and demands on profits from
shareholders intensifies. Morgan Crucible, the UK speciality materials
group, is typical. It is shifting production to low wage economies in
Eastern Europe and Asia.  Average labour costs are  $1.50 an hour in eastern
Europe compared to $26 an hour in Germany. At its new Shanghai plant
workers were paid $1 a day compared with $31 an hour in Japan. It was doing
this despite a 20 per cent increase in profits. Similarly British Polythene
industries (BPI), Europe=92s largest polythene film producer, reported an
increase of pre-tax profits from =A38.61m to =A311.5m. It closed its plant=
 in
the Midlands where workers were paid =A315,000 a year, to move to China=
 where
workers are paid $1,000 (=A3670) a year. BPI chairman said that: =91We had=
 to go
there or see our business disappear=92 (Financial Times 12 September 1995).
Such trends will  reinforce and extend existing inequalities in all
countries concerned.


UNCTAD ignores such realities when in promoting FDI, it highlights the rapid
increase  of inflows into India as a result of its governments recent
neo-liberal economic policies. =91By the turn of the century it is estimated
that India=92s middle class will include over 9.4m households earning over
$9,000 per annum.=92 This is in a country with a population of over 800m
people,  the vast majority of whom live in dire poverty. Similarly Asia is
seen as an area with a growing and potentially high spending middle class.
If present day growth rates continue, =91the middle class in Asia could top
700m by the year 2010, having $9 trillion spending power - 50 per cent more
than the size of the US economy today.=92  This in an area where 180m urban
dwellers and 690m rural people lack safe drinking water and access to proper
sanitation and overall 675m people live in absolute poverty. =20

Finally, FDI inflows into  the Third World have been used by  imperialist
countries to export  environmentally polluting industries and factories.
Japan, in what UNCTAD refers to as =91house-cleaning=92 its domestic=
 industrial
structure, has financed and constructed a copper smelting plant run by PASAR
in the Philippines. Gas and water emissions from the plant contain high
concentrations of boron, arsenic, heavy metals, and sulphur compounds that
have contaminated water supplies, reduced fishing  and rice yields, damaged
forests and increased the occurrence of respiratory diseases among local
residents (K p31). It is not just the low wages - $1.64 an hour  compared to
an average $16.17 in the United States - which make the Mexican maquiladora
zones attractive to MNCs but also their loose environmental regulations.
Studies have shown evidence of massive toxic dumping polluting rivers,
groundwater and soils and causing severe health problems among workers and
deformities among babies born to young women working in the zone. The
workers are housed in dwellings in shanty towns that stretch for miles with
no sewer systems and mostly without running water (K p131-2). =20

The spectre of 1914

The rapid internationalisation of capital since the mid-1970s has, to a
significant extent, brought the capitalist system closer to  pre-first world
war conditions. The openness of capitalist economies today is no greater
than before 1914. The main players are the same but the balance of economic
power between them has changed. Merchandise trade (exports plus imports) as
a percentage of GDP is close to the levels of 1913 (Table 4). FDI stock has
been estimated at 9 per cent of world output in 1913 compared to  8.5 per
cent in 1991.  But there are differences which in fact add to the growing
instability of the capitalist system.

Table 4: Ratio of exports plus imports to GDP at current market prices (%)

Country   1913          1950          1973          1994

France    30.9           21.4           29.2          34.2
Germany   36.1           20.1           35.3          39.3
Japan     30.1           16.4           18.2          14.6=20
UK        47.2           37.1           37.6          41.8
US        11.2            6.9           10.8          17.8
 ( Fin. Times 18 September 1995)

$1,230bn a day flows through the foreign exchange system as financial
institutions and multinational corporations hedge, gamble and speculate on
the movement of national currencies. The financial system has now an
unprecedented autonomy from real production and represents an ever-present
threat to economic stability as it rapidly redistributes =91success and
failure=92 throughout the system.  Third World debt at a record $1,714bn in
1994,  continues to grow despite massive debt repayments which bleed those
countries dry.  Labour migration is far more restricted than in before the
first world war leaving whole populations imprisoned in untenable social
conditions.  Inequalities between rich and poor countries and between the
rich and poor in all countries have reached unprecedented levels and are
still growing.

The fundamental shift in the international balance of economic power has
removed the dollar as the anchor of the capitalist system. Nothing exists to
replace it. Neither Japan nor an increasingly fractious European Union are
in a position to take over the United  States global role. Inter-imperialist
rivalries are growing and trade wars are being constantly threatened. Far
>from being a beacon of capitalist progress =91globalisation=92 is a sign of
economic decay and increasing instability in a world of obscene and growing
inequality.=20
=20
WIR 95: World Investment Report 1995: Transnational Corporations and
Competitiveness, United Nations New York and Geneva 1995. Most of the
statistics are taken from this and earlier reports unless otherwise=
 indicated.=20
H&T: Paul Hirst and Grahame Thompson Globalisation in Question, Polity Press
1996.
K: David C Korten When Corporations Rule the World, Earthscan Publications
Ltd, London 1995.
Wade: Globalization and its Limits: The Continuing Economic Importance of
Nations and Regions IDS Sussex University May 95.



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