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Issue #1804      November 22, 2017

Imperialism – Part 4

Globalisation

In Part 1, I quoted the five characteristics of the economic side of imperialism that Lenin said must be included in any definition of imperialism. So far we have covered the concentration of production and the creation of monopolies and capital and the merger of bank and industrial capital to form financial capital, which forms the basis of a financial oligarchy.

A few of the common brands owned by Anheuser-Busch InBev NV.

In doing so, I have tested the validity of these characteristics 100 years on from when Lenin’s Imperialism, the Highest Stage of Capitalism was first published and looked at some of the ways in which finance capital exerts its power over the economy and governments.

To requote Lenin’s third, fourth and fifth characteristics:

(3) the export of capital as distinguished from the export of commodities acquires exceptional importance;

(4) the formation of international monopolist capitalist associations which share the world among themselves, and

(5) the territorial division of the whole world among the biggest capitalist powers is completed.

The export of commodities and of capital by such means as direct foreign investment have continued to increase since Lenin’s time but the rate of growth of the export of capital has overall been at a faster rate, accelerating in recent decades until the global economic crisis hit in 2007-08.

As the slump in 2007-08 illustrates these developments can be uneven depending on the path of economic cycles, financial crises, fluctuations in the supply and price of commodities, the fortunes of different economies and transnational corporations and so on.

Export of capital

“A central feature ... of globalisation is the rise of multinational corporations and the explosion of foreign direct investment (FDI),” the WTO says. By “the second age of globalisation” it is referring to post-1945.

The United Nations Conference for Trade and Development (UNCTAD) estimates that between 1983 and 1989 outward flows of foreign investment increased by 28.9 percent compared with exports by 9.4 percent and GDP by 7.8.

This rapid growth was during a recovery period following the early 1980s recession and the Uruguay Round of negotiations on trade in foreign direct investment in services.

Global foreign investment continued to grow rapidly from US $244 billion in 1990 to US$1.5 trillion in 2016. (Source: World Investment Report 2017, UNCTAD)

The trade in services has also grown rapidly in areas such as banking, insurance, accounting, law, education, tourism, communications and transportation. There is a new global division of labour facilitated by the most recent revolution in science, digital technology and communications. For example, the use of overseas call centres is made possible by the digital age. The import of labour has taken on new dimensions, unimaginable at the time of Lenin.

Where services cannot be traded but must be provided in situ, for example in construction, then TNCs have used foreign investment.

Global concentration of capital

UNCTAD has been publishing its World Investment Report annually since 1991. It illustrates the rapid growth of concentration of capital on a global scale and international division of labour. It publishes a listing of the top 100 non-financial TNCs ranked by foreign assets.

Their rapid expansion is achieved in part by mergers and takeovers. In 2016 there were over 200 international mergers or takeovers worth $1 billion or more. This can involve the raising of capital through the sale of bonds, sale of other assets, loans from financial institutions, issue of shares, reinvestment of profits and government subsidies.

The largest takeover in 2016 was by the Belgium-based global beer conglomerate Anheuser-Busch InBev NV which acquired SAB Miller for US$101.1 billion. This was followed by the Dutch-based Shell’s US$69.4 billion purchase of another petroleum outfit, the BG Group.

UNCTAD’s research reveals that the beneficial owners of these top 100 TNCs are predominantly financial institutions. (WIR2016)

“International production continues to grow, as transnational corporations (TNCs) expand their role in the globalising world economy,” the 2002 World Investment Report* stated.

Transnational corporations increasingly dominate international transactions. There seems to be no limit to their global domination. “Upwards of two-thirds of world trade now takes place within multinational companies or their suppliers – underlining the growing importance of global supply chains.” (WTO, 2013))

These TNCs – referred to as Multi-national Enterprises by UNCATAD (MNEs) – have complex ownership structures that serve amongst other things to blur the nationality of ownership and hence drafting of foreign ownership laws to facilitate tax avoidance.

“On average, the Top 100 have more than 500 affiliates, more than two thirds of which are overseas. The average hierarchical depth of the largest MNEs is 7 levels, with peaks for some MNEs up to 15 levels. This does not imply that all affiliates of the Top 100 MNEs are at such extreme hierarchical distances from their parents. The average hierarchical distance for affiliates is at three steps from the parent.

“The number of countries in which MNEs in the Top 100 are physically present ranges from fewer than 10 to more than 130, with an average of more than 50 countries; the Top 100 MNEs tend to be truly global MNEs. Among these, about 50 jurisdictions are OFCs, including tax havens and investment hubs [holding companies] that route FDI flows from their origin to a third destination country... On average, 70 of the more than 370 foreign affiliates of these MNEs (or about one fifth) are located in OFCs.” (WIR2016)

(Affiliates refer to wholly owned, a majority ownership or controlling ownership, directly or indirectly. OFCs are offshore financial centres.)

“Free trade agreements”

The World Trade Organisation (1995), the General Agreement on Tariffs and Trade, the General Agreement on Trade in Services, and other free trade agreements that followed facilitated both the rapid growth in trade and FDI. All of these agreements had the aim of removing what the TNCs see as barriers to their global ambitions – tariffs, quotas, regulations, foreign ownership rules, and so on.

If the Trans Pacific Partnership (TPP), Transatlantic Trade and Investment Partnership (TTIP) and Trade in Services Agreement (TISA) – the holy trinity – ever see the light of day, it will take the power of TNCs and destruction of democratic rights to a qualitatively new level.

The Investor State Dispute Settlement (ISDS) clauses in a number of so-called free trade agreements undermine the sovereignty of nation states. TNCs can sue governments that do anything that may be construed as harming future profits through the use of international arbitral bodies that can override domestic courts.

In 2015, 70 known ISDS cases were launched, As of January 1, 2016, the total number of publicly known ISDS claims had reached 696, with 70 launched in 2015. Some cases are kept confidential, so not even the public know their government is being sued.

ISDS clauses have been quietly slipped into free trade agreements and bilateral international treaties over the past 25 years. It was the ISDS clause in the TPP that raised considerable public awareness and opposition.

These agreements aim to restrict the capacity of governments to legislate for worker’s rights, food safety standards, regulate financial flows, provide affordable medical services, reverse privatisations or protect natural resources and the environment.

Twenty-three Members of the WTO are negotiating the Trade in Services Agreement in complete secrecy. They include the EU, US, Japan, Australia, New Zealand, other industrialised nations and a few less wealthy nations such as Mexico, Mauritius and Costa Rica.

TISA is the most pernicious of the agreements seen so far. It is only thanks to WikiLeaks that we know that TISA exists and some of the content of its highly secretive clauses. The chapters on different services are a recipe for privatisation, deregulation and the undermining of democratically elected governments.

It is believed to contain standstill and ratchet clauses which would prevent governments from reversing privatisations, strengthening health and safety and other regulations, or carrying out a range of other measures in the interests of its people or the environment.

Financial services would be completely deregulated denying governments what remaining controls they have. In aviation, the skies would be deregulated with potentially disastrous outcomes.

TISA is being drafted for – and in close consultation with – the global finance industry, whose greed and recklessness has contributed to successive crises. TISA targets what the financial services industry sees as obstacles to seamless global operations, including:

  • restrictions on activities (eg deposit taking banks that also trade on their own account)
  • requiring foreign investment through subsidiaries (regulated by the host) rather than branches (regulated from their parent 
state)
  • requiring that financial data is held onshore
  • limits on funds transfers for cross-border transactions (e-finance)
  • disclosure requirements on offshore operations in tax havens
  • conduct of certain transactions through public exchanges, rather than invisible over-the counter operations
  • regulation of credit rating agencies or financial advisers
  • controls on hot money inflows and outflows of capital
  • requirements that a majority of directors are locally domiciled
  • authorisation and regulation of hedge funds.

Marx wrote about the dictatorship of capital. What we are seeing is the development of the outright dictatorship of monopoly capital by more and more direct means. This is corporate dictatorship – in particular by the financial institutions with resources far larger than the majority of governments.

These agreements are a bid for the complete takeover by TNCs. They have capitalist governments in their pocket and are sitting around the table as these agreements are being negotiated.

* The statistics quoted on growth in trade and FDI are taken from various editions of UNCTAD’s World Investment Report, an annual publication by the United Nations Centre for Trade and Development, unctad.org.

Next week, in the final part of this series Anna Pha looks at the carving up of the world and some of the changes and challenges for the labour movement today.


TOP FIVE TNCS

1994

Company Foreign Assets* Total Assets Foreign sales* Foreign employment
1. Royal Dutch Shell 63.7 102.0 51.1 79,000
2. Ford 60.6 219.4 38.1 96,726
3. Exxon 56.2 87.9 72.3 55,000
4. General Motors n/a 198.6 44.0 177,730
5. IBM 43.9 81.1 39.9 115,555

2016

Company Foreign Assets* Total Assets Foreign sales* Foreign employment
1. Royal Dutch Shell 349.7 411.3 152.0 67,000
2. Toyota 303.7 436.0 254.8 148,941
3. BP 235.1 263.3 140.7 43,598
4. Total 233.2 243.5 110.3 70,496
5. Anheuser-Busch InBev NV 208.0 258.4 39.5 163,177

* Assets & sales in billions of US dollars

Next article – The Asian financial crisis – 20 years later

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