- James Petras is Binghamton University, New York Professor
Emeritus of Sociology whose credentials and achievements are long and impressive.
He's a noted academic figure on the left and a well-respected Latin American
expert. He's also a prolific author of hundreds of articles and 64 books
including his latest one titled "Multinationals on Trial: Foreign
Investment Matters," co-authored with Henry Veltmeyer, and subject
of this review.
-
- Henry Veltmeyer has collaborated with Petras before on
previous books. They include "Globalization Unmasked," "Social
Movements and State Power," "A System in Crisis" and others.
He's Professor of Sociology and International Development Studies at Saint
Mary's University, Canada and Universidad Autonoma de Zacatecas, Mexico.
He's also Editor-in-Chief of the Canadian Journal of International Development
Studies and, like Petras, is a prolific author of many books and articles
focused mainly on Latin American issues, globalized trade, alternative
models and approaches and progressive social movements.
-
- "Multinationals on Trial" deals with a core
issue of our time - the economic power of giant corporations, their dominant
role as agents and partners of imperialism, and the way they plunder developing
nations. The book is a powerful indictment of unfettered "free market"
capitalism and how foreign direct investment (FDI) is its main exploitive
tool. Below is a detailed review of its compelling contents.
-
- The authors state upfront how controversial corporate
giants are, especially with regard to their "type of capital,"
how they use it operationally, and "the conditions associated with
it." Specifically, the book deals with foreign direct investment (FDI)
and debunks the following commonly held notions:
-
- -- that it's "indispensable" to accessing essential
financial resources;
-
- -- that it brings with it "collateral benefits"
like "technology transfers" and job creation; and
-
- -- that overall it's a "catalyst of development"
and thus an "indispensable" vehicle of growth and way for developing
nations to integrate into the "new world economic order."
-
- Rather than aiding these nations, the authors call FDI
"a mechanism for empire-centred capital accumulation, a powerful lever
for political control and for reordering the world economy." They
offer an alternative approach in the final chapter, free from FDI imperial
bondage.
-
- Chapter 1 - Empire and Imperialism
-
- The oldest empires go back centuries before the better
known ones in ancient Rome, Persia and the one Alexander the Great built,
but the authors deal only with the modern post-WW II era dominated by the
US. Imperial Britain was shattered, colonialism was unraveling, Soviet
Russia was devastated, and America stood alone as the world's preeminent
economic, political and military superpower with every intention to keep
it that way.
-
- It did so going back to when US delegates dominated the
Bretton Woods, NH UN Monetary and Financial Conference to establish a postwar
international monetary system of convertible currencies, fixed exchange
rates, free trade, the US dollar as the world's reserve currency linked
to gold, and those of other nations fixed to the dollar. In addition, an
institutional framework was designed to establish a market-based capital
accumulation process that would ensure (post-war) that newly liberated
colonial nations would pursue capitalist economic development beneficial
to the victorious imperial powers that would soon include the Axis ones
as well.
-
- Post-war, the "US foreign policy establishment"
began an unending debate on how America could stay preeminent and solidify
its dominance. It began with NATO, OECD and other formal alliances with
our western European partners that were "built on the foundation of
the transnational corporation (as the) economic 'shock-troops' of the system."
Tactics varied along the way, but the goals remained unchanged - "to
enhance US hegemony and its domination of the new world order." This
requires having supportive allies and the US public willing to go along
with overseas adventurism like the Bush administration's foreign wars that
became overreach and "a major impediment to empire building."
-
- The authors state that wherever imperial power is projected
in any form it generates diverse resistance in "every 'popular' sector
of 'civil society.' " They also stress that its "omnipresence"
can be a weakness, not a strength, and may lead to its impotence. This
is the condition of America today under the Bush administration. Its plan
for imperial dominance is in tatters, or as the authors put it, "wishful
thinking or imperial hubris." It failed in the Middle East, Central
Asia, Venezuela and may be unraveling in Pakistan under Musharraf's dictatorship.
The country is a rogue nuclear state in unresolved turmoil that has a lot
to do with deep social unrest and a very unpopular US alliance in the "war
on terror."
-
- Nonetheless, the US remains strong and resilient, and
today's defeats don't spell its demise or even signal retrenchment. With
its power and resources, it can blunder often as it has in the past, then
rebound, and again go on the attack as its doing in Somalia, continues
against Cuba, and against Hugo Chavez in Venezuela as it seeks a way to
oust its Latin American nemesis despite past failed efforts.
-
- So despite setbacks, America's imperial agenda persists,
and here's how it functions:
-
- -- through "unequal" bilateral and multilateral
trade and other agreements;
-
- -- with lots of help from willing "outside collaborators
and subsidized clients;"
-
- -- through a "divide and conquer" strategy
that worked in Yugoslavia, did at first in Afghanistan (under tribal warlords)
and apparently is the scheme in Iraq with the Kurdish North already separate;
-
- -- - political destabilization, assassinations or coup
d'etats to remove opposition regimes and install compliant ones; and
-
- -- proxy or direct war as a last resort when others fail
to accomplish regime change; but even conquest doesn't guarantee success
as Iraq and Afghanistan prove; resistance builds, military costs mount,
public support wanes, allies withdraw support and the whole effort may
fail but not deter new ones at other times in other places.
-
- Chapter 2 - Imperialisms, Old and New
-
- The authors note that capital accumulation is the "fundamental
driving force of economic growth," has been for over 100 years, and
occurred in six phases:
-
- -- capitalist industrialization in the 19th century up
to around 1870;
-
- -- the fusion of industrial and finance capital and emergence
of monopolies and territorial divisions among imperial powers (the US,
Europe and Japan) up to 1914;
-
- -- imperial war, depression, Fordism-type mass production,
"taming of capitalism" social reform and defeat of fascism to
1945;
-
- -- the "golden age" of capitalist high growth,
decolonization, nation-building and state-led "international development
to 1973;"
-
- -- transitional crisis and restructuring in the 1970s;
and
-
- -- the age of Washington Consensus neoliberalism, globalized
trade, free market "reforms" and "neoimperialism" to
the present.
-
- The authors note that incomes across the world converged
somewhat during the "golden age of capitalism" post-WW II up
to 1970 after which things changed. Now after a generation under Washington
Consensus neoliberalism, no such convergence exists and the Global North-South
disparity keeps widening to the detriment of developing nations. North-based
corporate giants have grown so huge and dominant that the largest of them
represent half or more of the world's 100 largest economies. In addition,
multinational corporations (MNCs) "as a global entity" account
for over 90% of world trade with 30 - 40% of it being intra-firm. The authors
argue that these institutions operate as "functional units and an
agency of economic imperialism."
-
- Post-WW II, the US alone held the "commanding heights"
of the world economy. Compared to today, the authors cite statistics that
are staggering. With 6% of world population, the US had over 59% of its
developed reserves. It generated 46% of its electricity, 38% of its production,
and it held half or more of world gold and currency reserves. Twenty-five
years later all that changed, and by 1971 a dwindling supply of gold and
growing trade deficit got Richard Nixon to close the gold window, abandon
the Bretton Woods system, and let the US dollar float freely in world markets.
Ever since, the greenback has been faith-based with no intrinsic value
and no longer "good as gold." Since it's uncollateralized paper
or fiat currency, it's strong when it's in demand but weak, like today,
when it's out of favor.
-
- During the troubled 1970s, the US manipulated exchange
and interest rates to improve its export position, and in the Reagan era
began a generational assault on labor that ended the long-standing practice
of industry sharing productivity gains with its workers. Corporations also
began relocating labor-intensive production abroad to low wage countries
that in the 1980s "became a cornerstone of a new global economy."
With it came foreign direct investment (FDI) with the rest of the book
focusing on its harmful effects.
-
- The authors point out that in 1970 a "triadic structure"
(in the US, Europe and Japan) characterized the world economy. However,
after two decades of restructuring, a different picture emerged with China
and a group of newly industrialized countries in Southeast Asia becoming
the most dynamic center of world growth with the US struggling to hang
on to its economic dominance even while its major corporations continue
to prosper because they operate worldwide.
-
- A critical corporate issue is productivity growth and
how to overcome its pronounced sluggishness. Solutions used embrace "technological
conversion" that includes new production, communication and transportation
technologies. It also involves an assault on labor that caused a sharp
reduction in its share of national income (10% alone from 1974 - 1983).
It means loss of jobs as well because businesses downsize and shift operations
abroad to low wage markets where workers are usually unorganized and more
easily repressed.
-
- The authors point out that by the 1980s "a new international
division of labour and a global production system were in place" in
what emerged as a "new world order" of global capitalism. New
governance rules were established that were embodied in the 1994-formed
World Trade Organization (WTO). By 1990, Washington Consensus neoliberalism
became the "new imperialism" with big demands that developing
states privatize public assets, deregulate their markets and open them
to allow free trade and financial flows.
-
- Under this system, MNCs are the world capitalist system's
"basic operating unit" and "key agents of US imperialism"
that all too often involves the projection of military power in the form
of war. Their success and profitability are vital to a healthy economy
and a thriving imperial project. The authors explain that the "US
state identifies the interests of corporate capital with the 'national
interest,' " and it freely commits the state's resources on its behalf
for that dual benefit.
-
- Chapter 3 - Foreign Investment at Work
-
- Until the 1980s, MNCs were constrained under host country
rules. But the "new economic model" freed them to move almost
at will as developing nations began opening their markets, deregulating
them, and welcoming MNCs for the perceived benefits their capital and technological
expertise could provide. The authors explained the process and what happened
under it.
-
- They began by noting capital flows are public and private.
The former is between governments in the form of "foreign aid"
gifts or most often loans from the US-dominated IMF, World Bank and Inter-American
Development Bank that come with unpleasant strings. The private kind consists
of three main types: foreign bank lending from commercial banks or international
lending agencies, portfolio investment (PI) financial instrument purchases
like stocks and bonds, and foreign direct investment (FDI) that itself
comes in two forms.
-
- FDI involves the purchase of at least 10% of a foreign
business enterprise's assets. "Greenfield" FDI involves the creation
of a new facility like a factory while the "Brownfield" type
buys assets of existing firms through mergers or acquisitions. In Latin
America in the 1990s, over half of FDI was the latter kind.
-
- The subject of debt financing is then discussed with
the authors noting at reasonable levels it's vital for enhancing growth.
But not to excess that got developing countries in trouble for the past
three decades. Even in the 1980s, it became clear that debt levels were
so high in Latin America they made economic growth impossible. They also
caused a debt crisis by mid-decade that especially affected Argentina,
Brazil and Mexico.
-
- The Global North thus needed Plan B to reduce the debt
bomb to manageable proportions, avoid default and allow troubled countries
to maintain their payment obligations. One measure taken was the so-called
"Brady Plan," named for Ronald Reagan and GHW Bush's Treasury
Secretary, Nicholas Brady. The scheme was to forgive a small part of the
debt and convert the rest into Brady IOU Bonds repayable in the long term
to make the burden less onerous. It worked as no heavily indebted nation
defaulted, but they had to adopt fiscal discipline to do it: structural
adjustment privatizations, cuts in social spending, deregulation and more.
These nations also suffered zero economic growth, a sharp reduction of
living standards for its working people and producers, increased social
inequity and greater unemployment and poverty.
-
- Along with burdensome debt levels, FDI has also been
a repressive instrument, especially in Latin America with its investment-friendly
climate. The amount of it (as well as PI) was small until the 1990s but
then grew dramatically as part of a shift from debt to equity financing
with the largest portion of it going to large developing countries like
Brazil, Argentina and Mexico and to the eight largest ones in the world
overall getting 84% of it, according to World Bank figures. China got the
most attracting 22% of all FDI since 1989 while Sub-Saharan Africa got
nothing except for South Africa. Post-2004, manufacturing in China, India
and Mexico got the largest FDI amounts, but natural resources and especially
energy are also important, and a trend toward investing in services (especially
telecommunications) is growing as well.
-
- Latin America became the most favored destination for
FDI inflows in the 1990s that hit their peak in the 1997 - 2001 period
because friendly regimes like Cardoso's Brazil "bent over backwards"
to accomodate it, mostly through merger and acquisition privatizations.
The authors review facts they call "startling" and show how the
"imperial-centered neoliberal model has led to the long term, large-scale
pillage of every country in Latin America." In dollar terms, it amounted
to $585 billion in interest payments and profits remitted mostly to US-based
MNCs. More revenue was gotten from royalty payments, shipping, insurance,
other fees plus billions of illegal monetary transfers by Latin American
elites to offshore accounts.
-
- This explains the sluggish regional growth in the 1990s
- 3% a year, then 0.3% in 2001 and 0.9% in 2002. It's because of exploitive
resource transfers and capital flows large enough to have made Latin America
"one of the economic pillars of the US empire." Some of the transfers
are hidden, and the authors put them in two categories:
-
- -- one-way neoliberal structured international trade
with open Latin American markets for US exports and reciprocal controlled
ones in the US; the formula the authors describe is to export capital to
the region in the form of FDI and import raw materials in return.
-
- -- structured capital-labor relations with workers very
much on the short end; the authors note how the "organization and
export of labour" is used to pillage a country's resources and transfer
them north; they cite one 2003 study estimating the net gain for the US
and corresponding loss to Mexico of about $29 billion a year because of
migration - indirectly through repatriated maquillardora profits and directly
through exported farm labor and educated Mexicans who represent 40% of
the nation's migrants benefitting the US at Mexico's expense.
-
- Chapter 4 - The Social Dimension of Foreign Investment
-
- The authors cite the justification "development
economists" give for keeping labor's share of national income low.
They claim it's because economic growth depends on capital accumulation,
and households have a "low capacity to save and invest" since
they spend all they get. The rich, in contrast, have a high propensity
to save and invest so the more income they have the greater the economic
benefit. In the 1970s and 80s, this kind of reasoning led to a class war
between capital and labor with wages in the US losing 10% of their value
from 1974 to 1984 and in Latin America and Sub-Saharan Africa even more
- 40% in Chile and Mexico and 50% in many other countries.
-
- Then consider economic growth under the neoliberal economic
model centered around FDI. It promised prosperity but delivered failure.
After 20 years at the end of the 1990s, average per capita growth overall
was cut in half from the earlier period of "state-led development."
It was reduced to 1.5% from 3% in industrialized countries and in developing
ones (excluding China and India) to 1.2% from 3.5%. For the poorest countries,
it was even worse going from 1.9% to a negative 0.5% per year. The only
exceptions were a group of eight Asian "rapidly growing countries"
whose governments followed a policy of state intervention outside the neoliberal
model and proved their way works best.
-
- The authors cite data to show, aside from China and India,
that the "neoliberal era of globalizing capital and neoimperialism"
led to rising worldwide income inequality between richer and poorer countries
and between higher and lower income classes within countries. They explained
that "Of the countries with the highest indices of poverty, social
exclusion, and income inequality 41 are in Africa; 10 in Asia; and six
in the Americas," and per capital income in all developing regions
(except South and East Asia) declined compared to industrialized OECD states.
During the two decade neoliberal period, inequality between rich and poor
nations nearly doubled. It proves how false the notion is that unfettered
free market forces create a "trickle down" effect to the poor
that lets them benefit from economic growth. Just the opposite happened
and it continues.
-
- The authors show how the "magnitude of the global
income divide and associated problems is staggering" with the richest
population quintile consuming 86% of all products and services and the
poorest one only 1.3%. And the social inequality fallout is even worse
- high unemployment, desperate poverty, malnutrition, untreated illnesses
and low life expectancy with hundreds of thousands of needless daily children's
deaths. And yet economists at the IMF and World Bank continue to tout the
benefits of neoliberal "structural reforms" in spite of clear
evidence they fail. In the pre-neoliberal 1950s, 60s and 70s, income inequality
decreased overall but has increased in most countries since then. Again,
the culprits are privatization, financial "liberalization," deregulation
and downsizing with governments exploiting working people for capital.
-
- Take Mexico, for example. It has 11 billionaires with
combined incomes exceeding the total for the country's 40 million poorest.
But the same thing is true everywhere with developing nations faring the
worst. It affects 2.5 billion people in the world who are unable to meet
their basic needs of food, shelter, clothing and medical care let alone
education, clean water, adequate sanitation and other goods and services
people in the West consider essential and take for granted.
-
- Using Latin America as an example, the authors show how
capitalists in the region sustained their profits by exploiting ordinary
workers. During the neoliberal period, labor's share of national income
was cut from 40% to less than 20%. Even today in countries like Venezuela
(with all its social gains under Hugo Chavez since 1999) and Argentina,
worker wages are still below their 1970 levels. It's because of market
deregulation that give employers arbitrary power to fire workers, cut
wages and hire temporary and casual labor. It's gotten bad enough to hit
the middle class as well and cause a rising level of urban poor. A "new
urban poor" has emerged who aren't simply "rural migrants"
but include "socially excluded and downwardly mobile workers and the
lower middle class (who've been fired) and have found (other) employment
in the burgeoning (lower-paying, less secure) informal sector."
-
- These people, the unemployed and "rural-to-urban
migrants" constitute a reserve army of labor that keeps wages in the
formal sector down and workers' bargaining power weak. Then there's the
notion of "social exclusion" reflecting the condition of the
poor with the authors identifying its six "major pillars:"
-
- -- social production dispossession showing up in landlessness
and rural outmigration;
-
- -- no access to urban and rural markets or for wage employment;
-
- -- no access to "good quality" employment;
-
- -- reduced access to government social services;
-
- -- no access to adequate income; and
-
- -- no political power.
-
- In contrast, 15 - 20% of Latin Americans enjoy a "First
World" lifestyle with the authors citing their array of luxuries that
are unimaginable to the poor and most middle income earners. And whatever
the economic condition, they benefit from the imperial system regardless
because neoliberalism works by taking from the exploited many and giving
generously to the privileged few. Put another way, it's a hugely out of
balance give and take, and it was set up that way despite its proponents
denial.
-
- The authors review the period when the World Bank discovered
poverty and carried on its kind of three-decade war against it that was
the equivalent of fighting fire by throwing fuel on it. Readers know the
drill by now - governments getting out of the way and promoting unfettered
free market policies, pro-growth, structural adjustments and the rest of
the package favoring capital over people on the nonsensical claim they'll
benefit eventually. By now Latin Americans know "manana" never
comes, and even some World Bank economists like Joseph Stiglitz figured
it out.
-
- The authors sum up three decades of World Bank efforts
saying we're "where we were in the 1970s and in a number of ways further
back," especially with regard to greater poverty that's now hitting
the middle class. Based on incontrovertible evidence, social inequality
and poverty at the end of the 1990s stem from the "pro-growth, pro-poor"
World Bank "imperialist policies" and the FDI regime along with
deregulated, unfettered markets giving capital free reign to pillage for
profit. But there's hope in the form of resistance with the authors stating
"capitalist development in its neoliberal form is clearly on its last
legs." For the poor of the world, it can't come soon enough.
-
- Chapter 5 - Policy Dynamics of Foreign Investment
-
- Here the authors examine the record of FDI since 1980
when markets were deregulated and capital flows were "liberated from
control." Again they cite the notion that economic growth depends
on the accumulation of capital, developing countries are deficient in it,
and private multinational commercial and investment banks and MNCs will
ride to the rescue with FDI. And while capital fuels growth, international
trade is "one of its driving forces." Two models are considered.
One gives the state an active role, and it worked during the 1940 - 1970
"golden age of capitalism" period. That's when "international
development" meant per capita economic growth based on "industrialization,
modernization and capitalist development."
-
- That period came to an end in the troubled 1970s, and
a "counter-revolution in development thinking and practice" took
over. The scheme that became neoliberalism turned capital towards exports
and induced governments to cut social benefits to raise levels of savings,
productivity, profits and productive investments.
-
- World Bank economists were tasked to create the new model
that became its Structural Adjustment Program (SAP) with eight major components:
-
- -- devalued currencies for stability;
-
- -- privatizations;
-
- -- capital market and trade "liberalization"
meaning unfettered free market capitalism;
-
- -- deregulation;
-
- -- labor market "reform" meaning lower wages
and loss of worker rights;
-
- -- downsizing;
-
- -- decentralizing policy formulation and decision-making;
and
-
- -- a free market for capital, goods and services meaning
all benefits accrue to the Global North by pillaging developing nations.
-
- Former World Bank economist and neoliberal critic, Joseph
Stiglitz, called this package the "steps to hell" two years after
he resigned his position in 2000. All the evidence to date proves it with
the authors stating "the neoliberal model of capitalist development
(is) unsustainable, (it's) both dysfunctional and politically destabilizing."
Confirming data and examples are cited throughout the book, but in this
chapter Mexico is featured in great detail from 1980 - 2005. It's covered
under four presidents with each in his own way outdoing or at least matching
the excesses of his predecessor with the people of Mexico the poorer for
it.
-
- This review can only touch on that period briefly beginning
with Miguel De La Madrid (1982 - 1988) who was the first to begin reversing
a state-led approach to relieve the "debt crisis" stemming from
the 1976 - 1982 period of over-borrowing. It was IMF to the rescue with
its usual package of "reform" measures to "liberalize"
capital, encourage exports, deregulate markets, devalue the currency, and
demand fiscal discipline and privatizations. De La Madrid obliged.
-
- Next came Carlos Salinas de Gortari (1988 - 1994) who
introduced a second round of structural reforms. It included over 1000
more privatizations that sold off the most important state enterprises
like the banks and state telephone company, TELMEX. The international financial
community loved him, but his term ended in tatters when the economy crashed
in 1994.
-
- Ernesto Zedillo Ponce de Leon (1994 - 2000) inherited
the mess that broke out right after he took office. With help from a $52
billion US bailout, he responded with a "stabilization program"
that included deep social spending cuts and a 43% peso devaluation that
caused inflation to rise 52%, thousands of businesses to close, real wages
to drop 25%, and two million people to lose jobs. Zedillo was also Mexico's
first president under NAFTA that went into effect January 1, 1994. And
he continued neoliberal "reforms" and even exceeded his predecessor's
commitment to global capitalism.
-
- So did Vincente Fox Quesdad (2000 - 2006) in his zeal
to live up to his PAN party's rightest agenda compared to the more centrist
PRI during its continuous 72 year rule. The PAN under Fox practiced fiscal
conservatism and free market economics that maintained the neoliberal agenda
of his predecessors even in the face of widespread opposition that constrained
him from going further. The authors state that the Fox era "brought
an end to a cycle of neoliberal policies." His administration failed
to achieve sustainable growth and showed "the neoliberal model is
economically dysfuntional and has exhausted its economic limits."
-
- Chapter 6 - Foreign Investment and the State
-
- The authors' dominant theme is how harmful FDI is to
developing nations even as it pretends to be beneficial. Most of it is
also "subsidized and risk-free" to investors, and "relies
on securing monopoly profits (by buying) state enterprises (on favorable
terms) and control(ing)....strategic markets." Much or most of it
provides no new productive investment recipient countries need to grow,
prosper and help their people.
-
- The authors rightfully describe the process as pillage.
State-owned assets are transferred to private hands, and revenues that
once went to national treasuries now go to corporate coffers. Further,
deals are justified on the false claim they increase competition. False.
All they do is put existing enterprises under new management, and in the
case of "natural monopolies" like public utilities, it allows
private owners to hike prices substantially and price the country's poor
out of the market, but that's just for starters.
-
- Foreign investors make big demands, and host countries
oblige - tax deferrals and exemptions, direct subsidies, infrastructure
development, free or low cost land, deregulation, assumption of "transition"
costs of the inevitable downsizing that follows, legal security protection
through bilateral investment treaties (BITs), labor training, and more.
Other schemes are in the form of Trade Related Investment Measures (TRIMs)
and Trade Related Aspects of Intellectual Property Rights (TRIPs). And
when nations balk during WTO trade talks, like in the faltering Doha Round,
they're pressured to come around through bilateral deals with neighboring
states.
-
- With this kind of advantaging, local enterprises don't
stand a chance, especially small ones. They nearly always lose and end
up being bought, becoming a satellite supplier, or going bankrupt. Labor
also loses out. Wages are frozen or cut, benefits slashed or ended, job
protection ends, working conditions deteriorate, unions weakened, and inequality
grows as the wealth gap widens substantially. In short, FDI works one-way
- all for capital at the expense of developing economies and its workers.
An alternative development strategy is needed, and it's readily available
to states willing to buck the system, withstand the pressure to conform,
and go another way.
-
- Chapter 7 - Anti-Imperialism and Foreign Investment.
-
- Here, the authors first identify the myths about foreign
investment that are needed to sell this snake oil to developing states.
Seven of them are briefly listed below:
-
- -- Economic growth depends on FDI; false; in fact, FDI
is attracted by economic growth;
-
- -- FDI creates productive, competitive new enterprises;
false; it mostly buys existing ones, transfers little new technology, does
little or no new research, and crowds out local enterprises;
-
- -- FDI provides links and access to foreign markets;
false; it's often used to buy natural resources for export and to repatriate
profits and eliminate jobs;
-
- -- FDI provides tax revenues and hard currency earnings;
false; revenues are repatriated, tax fraud abounds, and the impact on the
balance of payments is negative;
-
- -- Good financial standing and integrity of the system
depends on maintaining debt payments; false; much past debt is odious and
servicing it harms local economies and in the case of Argentina led to
an economic collapse in 2001;
-
- -- Developing nations need FDI for development for lack
of local sources; false; most FDI is national savings borrowing to buy
local enterprises; it doesn't inject new capital into economies; and
-
- -- FDI provides an anchor for new investment; false again;
the opposite is true as investors freely relocate to lower-wage countries
creating a boom and bust environment when they arrive. Bottom line - FDI
is poison unless used moderately and is tightly controlled.
-
- The authors present arguments for and against FDI with
the latter only considered below:
-
- -- FDI strips states of their ability to control "investment
decisions, pricing, production and future growth;"
-
- -- FDI results in long-term capital outflows repatriated
to corporate coffers;
-
- -- FDI results in "unbalanced and overly specialized
production," especially in commodity areas;
-
- -- Tax, subsidy and other concessions to FDI deprive
developing states of needed revenues;
-
- -- FDI most often only puts existing enterprises under
new management; it seldom creates new ones;
-
- -- FDI creates "enterprise enclaves," imports
technology linked to "outside production and distribution networks,"
and doesn't help local economies;
-
- -- FDI often controls local banking that lets it "shape
state credit and interest policy" and decide what industry sectors
to favor and at what cost; and
-
- -- With investors attracted to extractive industries
and freed from regulatory constraints, environmental devastation results.
-
- In sum - FDI endangers "national independence, popular
sovereignty, and severely compromis(es)" developing states' ability
to control their destiny and represent all their people. It's a "risky,
costly and limiting (one-way) strategy." Developing nations need to
minimize it because of its harmful economic, social and political costs.
-
- Chapter 8 - Anti-Imperialist Regime Dynamics
-
- Contrary to Margaret Thatcher's TINA dictum (there is
no alternative), many others are better and the authors list them:
-
- -- Reinvestment of profits into local production to stimulate
a "multiplier" effect and increase local consumption;
-
- -- Control foreign trade to retain foreign exchange earnings;
-
- -- Invest pension funds in productive activities;
-
- -- Create development banks for overseas workers' remittances
home so funds can be used productively;
-
- -- Place a moratorium on debt payments to stop servicing
the odious portion of it:
-
- -- Recover stolen treasury funds and property;
-
- -- Recover unpaid taxes;
-
- -- Establish land taxes and expropriate or buy underutilized
land to be used for agrarian reform and greater agricultural productivity;
-
- -- Liquidate overseas investments and reinvest them locally;
and
-
- -- Maximize employment and reduce underemployment.
-
- In cases where a country's taxable resources and overseas
earnings are limited, FDI can help if used moderately and constrained.
Ways to do it include maximizing "strategic national ownership and
control" and relying on short-term deals that include training workers
and contracting with skilled advisers for whatever technical help is needed.
-
- One successful model reviewed is WEPC - Worker-Engineer
Public Control or worker-managed enterprises (WMEs). Salvador Allende used
them in over 100 factories in Chile while he was in office. They attained
greater productivity, higher worker motivation and achieved significant
social, health and working conditions improvements while they remained
in place. WEPCs aren't problem-free, however, and the main one is they're
targeted by imperial states for destruction because their policies aren't
corporate friendly. Nonetheless, their advantages greatly outweigh the
negatives. They include:
-
- -- Minimizing tax evasion to increase state revenues;
-
- -- Social investment in lieu of repatriated profits;
-
- -- Avoidance of capital flight;
-
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