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Tuesday, 2 April 2013

Do Multinationals Necessarily Make the Third World Poorer?


“Accumulation of wealth at one pole is, therefore, at the same time accumulation of misery, agony of toil, slavery, ignorance, brutality at the opposite pole.”  - Karl Marx

In the late 19th century, and often way beyond, Marxists generally told us, in all earnestness, that the richer the capitalists became the poorer and more exploited the workers would become. That, on the whole, didn’t happen.

Similarly in the late 20th century and today the same tune was heard again. Only this time it was said that the richer the “capitalist West” became, the poorer and more exploited the rest of the world would become. This too, on the whole, didn’t happen. However, at certain times and in certain places things did get worse in what came to be called the Third World. However, whether or not all this was due to Western capitalism, or to the (Western) “rich getting richer”, is of course another matter

The Marxist theory of Western imperialism was constructed to account for the exploitative relation between Western capitalists and third-world workers. In the very late 19th and early 20th centuries, this theory was produced and developed, by Lenin and other Marxists, as another “auxiliary hypothesis” (or deviation) of the basic Marxist analysis of Western capitalism.

Multinationals and the Third World

“… neo-liberal policies are in the interests of capitalists in the developed world. First, there is the area of free trade. It is clear that it will always be in the interest of the hegemon to promote free trade…” – Stephen Hobden & Richard Wyn Jones

The “capitalist imperialism” legend has it that Western multinationals gain most of their profits from the Third World and do most of their exploiting of - and exporting from - the countries which constitute this bloc. However, although the 100 largest companies controlled one-third of all foreign investment (as of the late 1990s), most of that control and investment occurred within the developed world – not in the “exploited Third World”.

To substantiate this intra-developed-world traffic, it was the case that, in 1999, most multinational activity occurs within Western Europe and America – that is, 64% of it.

More specifically, the world’s top ten trading nations, in 1996, provided 61% of all world imports and 63% of all world exports. However, here again it was the case that most of this exporting and importing occurred within the developed world. It was certainly not a case of Western companies exporting these large amounts to the Third World or Western multinationals exporting them from the Third World.

Despite all the talk about multinationals, from Leftists, left-liberals and Greens/environmentalists, the world is not run by a small group of massive multinationals. In actual fact there over 63,000 multinationals worldwide (as of 2006). Fair enough, some of that number may be huge and others small. However, that figure is huge regardless of the size and power of individual multinationals.  In addition, all these are independent so that number doesn’t include companies which are the subsidiaries and/or affiliates of others in that amount. If the foreign affiliates and subsidiaries of that 63,000 multinationals were added, then another few hundred thousand firms and institutions would need to be included.

These multinationals employ well over 73 million people. Surely that’s a good thing? Unless each and every one of these employees are exploited and would be better off if these multinationals didn’t employ them. In addition, many of those workers who are indeed often worked very hard - and not paid that much - have come from jobs, in non-multinational firms or in agriculture, in which they were worked even harder and paid even less. That’s the part of the equation you rarely hear about from the anti-capitalists who are often far more concerned with their pure anti-capitalist stance than with the blight of the poor in the Third World.

Yes, it is indeed the case that some multinationals have assets which are larger than the GDP of many poor or small states. So what? What must we conclude from that fact? Does it automatically mean that the wealth of the multinationals has been gained at the expense of these small and/or poor countries? That could be the case. But is it automatically the case? In fact, it’s often not the case.

For a start, many of these poor countries may have themselves to blame. Or, more accurately, their leaders and elites are to blame. It’s also the case, in many ways and for many poor countries, that the aid industry, sometimes the largest industry in such countries, along with aid-capitalists, make things worse for the vast majority in these poor countries. In addition, to most leftists and many Greens/environmentalists and left-liberals, it’s almost a definitional fact (or an article of faith), or even a logical truth, that if the Western multinationals are getting richer (by investing more in the third world), then things simply must be getting worse for the majority in the Third World. That simply doesn’t follow - either logically or factually.

Take the specific case of the respective GDPs of the USA and various sub-Saharan African states. In the latter cases, the per capita GDP in the late 1990s was less than $300, while per capita GDP in the USA was almost $27,000. Again: so what? What are we to conclude from these sharp differences? Does it automatically point the finger at the US’s culpability and global capitalism’s nefarious nature? Not at all. There are a whole host of things that can explain this situation which have nothing to do with Western imperialism, exploitation or any other leftist soundbites. For a start, to claim that these countries aren’t in any way to blame for their own poor status is a modern form of racism – positive or inverted racism. In the past it was a negative racism which blamed poverty on the “laziness of the natives” or whatnot. Now Leftists treat either the people in these states (or their equivalents), or their leaders, as children who can only ever be the victims of Western intrigues and are never culpable for anything. Treating the inhabitants of the Third World as children is no better that treating that as “lazy natives”. Inverted or positive racism is still racism.

Indeed if we stick to the examples of sub-Saharan states it can also be stated that Western aid often represents more than half of their respective total GDPs. Here you can see again that aid may in many respects be the problem and not the solution. Aid often prolongs the various problems and often works as a short-term palliative rather than a long-term cure. (However, yes; short-term palliatives may often be the humane answer… in the short term.)

Again, the fact that some multinationals are richer than some countries is not automatically a bad thing. It depends on all sorts of other factors. However, if you are a Leftist who believes in imperialism, even the “new Imperialism” (or “capitalist globalism”), then according to such theoretical biases the situation today is bound to replicate the 19th-century European situation of exploiting capitalists versus exploited workers.

Afterword: Trading Blocs

“Exchange is truly voluntary only when nearly equivalent alternatives exist. Monopoly implies the absence of alternatives and thereby inhibits effective freedom of exchange. In practice, monopoly frequently, if not generally, arises from government support or from collusive agreements among individuals.” –  Milton Friedman

Despite the ideology and rhetoric about the (global) free market, from both its critics and its adherents, the general commitment to the reestablishment of liberal trade after 1945 was not entirely followed by Western states and leaders.  The trend since the 1950s has been towards the formation of “free-trade blocs”. Indeed it is now the case that an increasing proportion of trade now takes place within these trading blocs.

The adherents of a pure or strong free market will note various factors which world against the current global market’s complete freedom. Many pro-free market theorists have previously argued against the distorting reality of monopolies within any given capitalist system or systems. What we have today are monopolies, or at least quasi-monopolies, which take the form of these various “trading blocs”; such as the European Union (EU), the North American Free Trade Association (NAFTA) and the Group of Eight (G8). These groups, it can and has been argued, are not manifestations of the free market but actually work against it. That partly explains why Western governments have more of an input into these trading blocs than the trading companies themselves. (Think here of the EU.)

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