The post-war economic boom in the west, which really took off in the 1980s onwards after relatively flat periods of growth in the 1950s, 1960s, and 1970s, has been based on the western development model of neoliberalism – an extension of the neoclassical development model of comparative advantage that allows free movement of international finance capital to flow wherever it wants. The neoliberal model advocates the elimination of trade barriers and financial deregulation and liberalisation to maximise the mobility of capital. For the western countries, this development paradigm also established a trend toward specialised technology and the service sector. The international deregulation and financial liberalisation of national economies across the globe was institutionalised in the policy dictate of those post-WW2 international regimes of governance – the International Monetary Fund, World Bank and more lately, the World Trade Organisation, who have instituted the liberalisation of trade policy involving less-developed countries, to ensure a shift from inward-orientated to outward orientated development strategies. This shift accompanied the end of the cold war and the breakdown of the state bureaucratic structure, which in many Soviet-aligned countries had to some extent cushioned the ferocity with which global capitalism could penetrate the periphery, but which had at the same time allowed great inefficiencies in the allocation of resources and price distortions to impede the growth of the agricultural sectors of these countries. The end of the cold war meant that the ruling classes of the periphery had little option but to allow themselves to become mere local agents of international capital – opening up their nations’ assets to the plunder of transnational corporations and predations of the western bankers in return for a share in the spoils.
Within the latter decades of the 20th century, technological leaps in computing and telecommunications facilitated the spread and growth of complex communication networks crucial to the speed of operations. Firstly and foremost, these developments underpinned the spread of complex cross-border integration of production and distribution systems across the globe. The global dispersal of labour-intensive production to certain selected sites in the Third World such as the so-called newly industrialising economies of South-East Asia and Brazil and Mexico in Latin America – where labour costs were cheaper – intensified the inevitable passage of de-industrialization in the West. The unevenness of industrial progress between “Third World” countries in the post-war period up to 1980 (and more so since then) was described succinctly in the UNCTAD annual report of 1982: “fewer than ten newly industrialised developing countries accounted in 1980 for nearly 30% of developing countries’ GDP and nearly half of their manufacturing output, even though their share of the population of the under-developed countries was no more than 10%.” – taken from UNCTAD, Trade and Development Report (1981) (source: Hoogvelt, p-102). Hoogvelt continues: “What was specific to the Latin American economies (at the turn of the 1980s) was a new dependency created by foreign penetration and control over the industrial producer-goods sector, which had to rely increasingly on an alliance with the state as a direct agent of production. The very expansion of industrial-dependant capitalism needed trade unions, as well as the bourgeoisie and the state bureaucratic class to pursue the objective of social democracy, to complement the formal democratisation that had begun with the defeat of the military oligarchies” (Hoogvelt, p-102).
The second major general change as a direct consequence of the telecommunication and technological revolution has been the facilitating since the mid-1980s of a huge economic growth spurt of international financial capitalism with the explosion in stock market trading and speculation across the world. World trade and capital flows, ever-expanding as more and more areas of the world have been configured into the global market, further intensified as international capital relations became more competitive and deepened with technological breakthrough, enabling much greater speed and efficiency in the operation of global financial markets and speculative capital, with a thickening network of economic exchanges within the core and the spreading (and deepening) of financial capitalism across the world. With the birth of information technology, the use of computer applications permitted virtually instantaneous data processing, with digitisation meaning money could be made out of gathering up infinitesimally fractional differences in the movement of prices. This has encouraged the phenomenal speed with which financial markets (eg currency speculation) exist, from country to country across the world, raising the rate of profit by speeding up the turnover of capital. Finance capital in the form of options, futures and derivatives markets capture future time in present transactions. However, the very process of marketing and monetising future developments affects these developments and becomes the source of increasing volatility, turbulence and economic crises which threaten the sustainability of the progression (expansion) of capital. (Hoogvelt, p-129). “Money is increasingly being made out of the circulation of money, regardless of traditional restrictions of space and time, as when money transforms into bricks and mortar. Capital is being disconnected from the social relationships in which money and wealth were previously embedded. It is because of this ‘disembedding’ that globalisation entails a process of intensification of linkages within the core of the global system, while its counterpart, ‘peripheralisation’ becomes a process of marginalisation and expulsion that cuts across territories and national boundaries, rendering areas within the traditional core subject to the same processes of expulsion as large swathes of territory in Africa, Latin America and Asia. So here too, as was the case with the global organisation of work, we see that the structure of core-periphery becomes a social division rather than a geographical one.” (Hoogvelt, p-140-141).
This intensification of international capital flow and financial speculation, due to changes in the spatial and functional mobility of capital, and the manifest in-built instability of financial markets, in whose trust is vested the faith of nations and investors and shareholders, is dictated by the constantly driven, shifting tide of collective will and opinion that is the collective consciousness of the global stock-market. It’s directional flow is navigated by the fortunes and expectations of the main monopoly capitalist interests in the world economy, passing as it does back and forth across the ebbs and flows of economic fortune. The monopoly capitalist interests – such as the largest international investment banks, multinationals, international banks and large institutional investors – react to events, generating market signals. As the melee of the financial markets react to these market signals, a sweeping tide of collective force is the result in one shape or form. When this happens abruptly, it rather takes the form of a “casino stampede”. It is more usually a colossal tide of fortune, on the continental drift of the spendthrift waters of economic progress. Sometimes, however, stormy waters may be apparent.
All national economies are left prey to the watchful glare of the global markets, as nations and investors hedge their bets on the casino gambling system that is that very global market. In the long-term, the tendency is towards each nation state embarking upon a competitive race-to-the-bottom, from lower corporation tax, to privatisation of state owned utilities to cutting social spending – ever threatened to ensure governments’ adherence only to policies they can be sure will not displease world markets. “There exists a unified global capitalist utopia, in which an increasingly transnational bourgeoisie is free to make a profit how and where it likes, assisted by compliant nation states eager to attract capital investment. At the same time, the nation state remains the principal centre for the political organisation of capital necessary for the mediation of class conflict and for the securing the social and economic conditions for capital accumulation.” (Aufheben 12).
In the present capitalist formation across the planet, all nations are dependent upon the continued growth of the American economy – because of the vast scale of it’s GDP in relation to the international economy. Whereas the total value of international trade in the entire world was $6.5 trillion in the year 2000 (OECD Monthly Statistics of International Trade, June 2003) the US GDP stood at $9.8 trillion (OECD Survey of USA 2003). In other words the US domestic market is nearly one and a half times bigger than the world market represented by international trade, with the export revenue streams of countries around the world dependent upon the US consumer market. With it’s sophisticated and well-connected financial system meaning good returns for the world’s investors and speculators, international capital formation interdepends upon American capital formation. “For the newly ‘unified bourgeoisie’ across the globe, the US was where the money was to be made. The control, if not the ownership, of the capital of the world was being increasingly concentrated in the USA and Wall Street.” (Aufheben 12). To emphasise this interconnectedness of international capital, in 1989, Kuwait earned more income from its vast overseas investment located in the capitalist metropoles than from its domestic oil production (US$8.8 billion, compared with US$7.7 billion). (Hoogvelt, p-210). The flow of dollars into the international economy bankrolls the financial markets, and so, it is the economic growth of the American empire that underpins the fortunes of investors and multinationals ..and all those with a stake in a rising market across the world. However, this flow of credit is based on bank reserves boosted by oil revenues from abroad, for instance, Kuwait. The highest estimate of Gulf countries’ investments in the USA alone amounts to US$1 trillion. (Hoogvelt, p-210).
Bearing in mind that the whole system requires the continued growth of the US economy, during the ill-fated drafting of the Multilateral Agreement on Investment in the late 1990s (an agreement which proposed the removal of barriers to multinational investment in any country’s domestic economy or state sector), the US determined that they reserved the right to special exemption – the logic being that it’s economy needed to be afforded protection for the good of continuing the upward ascent of international investment capital for which the global economy is continually dependent. The USA added over 600 pages of exceptions for itself in terms of its own federal, state and local laws, before the deal collapsed (this agreement was first partially resurrected within the continually-evolving General Agreement on Trade in Services and more recently in the proposed Transatlantic Trade and Investment Partnership (Ttip)).
It is also apparent that American foreign policy is driven to maintain this situation. American political scientist Samuel Huntingdon, in an article in 1999, catalogued a full page of US bullying tactics that were applied at the latter end of the 1990s, including the targeting of thirty-five countries with economic sanctions. (Hoogvelt, p-159). The United States military-industrial complex, as well as having originally been – like NASA – an initial source of state-financed research & development for the new wave of high-tech industry such as Silicon Valley, is effectively a global police force whose function is to marshal the passage of international capital, by confronting and subjugating crises in the peripheries (bearing in mind that international capital formation is intrinsically linked to US capital formation). Collusion between the imperialist state and multinational interests, is documented with the activities of the US Defence Intelligence Agency (DIA) and Special Forces’ involvement in the 1996 invasion of Congo/Zaire (documented here), and more recently in the activities of private security (mercenary) companies such as Zee (formerly known as Blackwater) alongside the activities of US troops in Iraq and Afghanistan since 2001.
Since the fall of the Soviet Union, at the end of the first Gulf War when President Bush Senior declared the beginning of the New World Order, US objectives were clearly exposed within a US Defence Department document commissioned by former US Vice-President Dick Cheney – then Secretary of Defence – entitled ‘Defence Planning Guidance’, where it stated categorically that “our first objective is to prevent the re-emergence of a new rival” – a significant statement from the last remaining global superpower clearly intent on consolidating it’s global hegemony. Mohammed Daud Miraki: “The positioning of the US military forces in different regions has two intertwined goals: to prevent the emergence of any global rival, and to secure global energy resources and raw materials”.
During the era of excess oil capacity, the US policy with respect to oil was to prevent a collapse in the oil price to protect her own high cost oil industry, with America backing Saudi Arabia’s efforts to police the strict OPEC quotas. When Saddam Hussein launched an attack to regain territory that had been lost earlier in the decade to the Shah of Iran, leading to the first Gulf War of 1981-88, the US took the opportunity of backing the ‘lesser evil’ of Saddam in a war that served to contain both Iran and Iraq. Saddam, who became Iraqi president in 1979, repudiated the 1975 Shatt-Al-Arab Agreement which conceded joint-sovereignty of Shatt-Al-Arab waterway in exchange for Iran ceasing military support to the Kurds in the north of Iraq, as Iraq sought to take advantage of exploiting oilfields in Zubar in southern Iraq by building a deep water terminal in the Persian Gulf. Failure in negotiating a revised demarcation resulted in Saddam launching an armoured assault against Iran’s vital oil bearing region, as a low-intensity skirmish escalated into all-out war. Aufheben: “Crucially it also served to reduce the supply of both Iraqi and Iranian oil onto the world market at a time when the oil shortage of the 1970s had given way to the oil glut of the 1980s, which threatened to lead to a collapse in the price that would wipe out the American high cost oil industry. Indeed, for the US it became advantageous to prolong the war, and as the Iran-Contra scandal revealed, the Americans were quite prepared to supply arms to both sides. However, after Iraq’s early successes, the war became bogged down. Opposition to the regime manifested itself in the form of mass desertions, particularly in those areas like Kurdistan that were distant from Baghdad. With falling army morale the tide of war began to turn against Iraq and Saddam Hussein became increasingly reliant on the support of the US. In order to repulse repeated offensives by the Iranian army, Saddam Hussein resorted to chemical and biological weapons, importing the necessary materials from the West, and the US had no objections, not only against Iranian forces but also against Iraq’s own deserters. In the face of mass desertions and mutinies within the Iraqi army it was clear that even with the use of chemical and biological weapons and US military intelligence, Iraq could not withstand Iranian assaults in the long term. In 1988 the US intervened by bringing warships into the Gulf in order to ‘protect international shipping’ and effectively destroyed the Iranian navy. This was sufficient to bring an exhausted Iran to the negotiating table”. (Aufheben 12).
With oil fields in the US having already reached peak capacity in the 1970s, the rapid rise of China from the late 1990s onwards has escalated world demand for oil, meaning that the era of excess of capacity in the world’s oil industry that had originated from the massive over-investment in the industry in response to the oil shocks of the 1970s was at an end. During the 1990s, the US strategy was to open up the oil fields of Iran and Iraq to American and Western capitalist investment, and to take advantage of the break-up of the USSR and the privatisation of the Russian oil industry, to gain access for US oil companies in Russia, the Caucuses and Central Asia. However, with the sharp rise in the demand for oil, the interventionist agenda of the neo-conservative came to the fore, as the powerbase propping up the new President George Bush Jnr. As critics of the multilateral foreign policies of the Clinton era, the neo-conservatives were concerned with the problem of a future oil shortage and America’s increasing reliance on the Gulf states. They pointed to the instability of Saudi Arabia, warning that the US may well wake up to find that all the states on the Gulf would have become anti-American and, with the onset of an oil shortage, that these states would be able to hold the US, and indeed the entire West, to ransom!
To instigate a push for war, the Neocons felt that only an event on the scale of Japan’s attack on Pearl Harbour in 1942 would be sufficient to mobilise the American bourgeoisie around the neo-conservative agenda. Aufheben again: “The events of September 11th 2001 came to the rescue. In the midst of the hysteria that was whipped up following the attack on the Twin Towers the analogy with Pearl Harbour was firmly established. The USA was at war with an enemy all the more fearsome by the fact of it being amorphous and invisible. Petty particular interests had now to put to one side, so that the nation, indeed all the ‘free world’, could unite in the ‘War on Terrorism’. With the US bourgeoisie, and indeed much of the population, shocked out of their complacency, the Bush administration was able to seize the political initiative by adopting the neo-conservative agenda.” (Aufheben 12).
“With the invasion of Afghanistan in 2002, the US was able to obtain a foothold in Central Asia, which up until then had been accepted as being within the Russian sphere of influence, not only by occupying Afghanistan but by the establishment of military bases in the Central Asian republics. Secondly, the invasion of Iraq not only allowed the US to occupy a country with the world’s second largest known oil reserves, but placed it in a position both to shore up, by military force if necessary, the pro-American Saudi regime – which of course presides over the world’s largest known oil reserves. American troops were withdrawn from Saudi Arabia but, with bases in Iraq, America could intervene there when ever necessary, whilst also keeping open the prospect of intervention to overthrow the anti-American Iranian regime” (Aufheben 14).
In Iraq, the case for intervention – Saddam’s possession of weapons of mass destruction – was based upon false intelligence from both MI6 and the CIA, and the excuse had been manipulated over a long period of time, after numerous delegations of UN weapons inspectors were sabotaged from continuing their search for weapons by the continued meddling and disruption by the US – searches that had consistently shown that Iraq had indeed destroyed all of it’s capability for producing weapons of mass destruction. (NB: Iraq’s original development of WMD was probably first provoked after Israel decided to launch a pre-emptive attack on Iraq – without UN sanction – when they bombed Iraq’s Osirak nuclear reactor in 1981).
Afghanistan – the recent history
After the invasion of Afghanistan by the Soviet Union in December 1979, the CIA and Pakistani intelligence Service along with China and other Arab states financially recruited and armed the Mujaheddin. The US spent around 4 billion dollars a year in order to keep the Russians out of Afghanistan. The surrounding Soviet and not so Soviet provinces namely Uzbekistan, Turkmenistan, Chechnya and Pakistan were found to be fertile ground for the recruitment of any Afghan nationalist, anti-Soviet or Muslim extremist. These fought it out with the Russians at a cost of 1.5 million Afghan lives. The Russians withdrew in 1989 and Afghanistan lay in ruins.
What followed was a great civil war between internal tribal groups, external incursionists, and various Islamic sects. Civilians were armed, bribal structures had been created and many were being kidnapped, sodomised and murdered. Complete chaos ensued as these warring factions developed in an attempt to take control of either cities or the whole of Afghanistan.
In the South among the Pashtun tribes were the emerging Taliban. (Talib means ‘seeker of truth’). The Taliban were comprised of young men who originated from the Madrassas (schools) within the refugee camps where they were taught the Quran, and where they were called upon by their own tribal elders to save the lives of the young at a time when Pashtun children had been kidnapped and raped. Gradually they grew in number and by today’s standards conducted a ‘just war’, capturing many of the cities. Their policies included disarming the public, creating peace, forcing the foreign warlords out and enforcing the strictest form of Islamic law “since the Prophet” (as in Saudi Arabia execution policy of criminals, akin also to America’s practice of capital punishment).
Since 1995, global oil corporations – Unical and Bridas – held a series of meetings with Afghan warlords and senior members of the Taliban. In 1992, two American foreign ministers went to dialogue with the Taliban leaders about the possibility of running both oil and natural gas pipelines from the Caspian Sea through to Pakistan. Jean-Charles Brisard and Guillaume Dasquie, authors of the book “Bin Laden, La Verite Interdite (Bin Laden, the Forbidden Truth)”, claimed in an interview that when the Afghans declined, the Americans told them that they could either have “carpets of gold or bombs”. According to the book, the Bush administration began to negotiate with the Taliban immediately after coming into power in February. US and Taliban diplomatic representatives met several times in Washington, Berlin and Islamabad. The book reveals that the meetings, referred to as 6 plus 2, because of the number of states (representatives of the 6 nations which border Afghanistan plus the US and Russian governments), where confirmed by Naif Naik, former Pakistani minister for foreign affairs. The last meeting is said to have taken place just 5 weeks before the attacks on New York and Washington on September 11th, 2001. Naik claimed in a French television programme that Tom Simons, the US representative at these meetings, openly threatened the Taliban and Pakistan saying that “either the Taliban behave as they ought to, or Pakistan convinces them to do so, or we will use another option”. The words Simons used were a ‘military option’, Naik claimed. (Source “Bushgate: What did the President know and when did he know it?”, by Julio Godoy – Asia Times, 19 Nov 2001).
There are now over 700 US military bases overseas. The occupation of Iraq, as is obvious to everyone, has been nothing more than the last-chance saloon for the American oil industry to give itself a last shot-in-the–arm as they seek to consolidate oil reserves to keep open the pathway for further economic growth. The prospect for global-US-led capitalism of the Middle East being effectively in control of the world oil economy was a pressure too great to bear for the one-upmanship of American imperialism. Within this drama, there remains the stark future prospect of a severe limit to growth of global capital and even deflation after a period of restricted supply-caused rising oil prices and inflation, since the world economy is completely based upon the sale of products that are either made from oil or need hydrocarbon energy (including natural gas), via internal combustion or via electricity demand. The vast transportation of goods across the world is dependent on it.
Whereas the timing of the policy of intervention was actually dictated by oil market projections and that market’s profit margin, the corporate colonisation by UK and US multinationals which has been apparent with the mopping up of post-conflict reconstruction contracts has been vast and sweeping. In Iraq, there had been a post-conflict endeavour to privatise the oil industry so that the big global oil multinationals would have full extraction rights and an agreement to leave only a smaller proportion of production for the Iraqi people after export (on account of the use of western-financed extraction equipment). This has been partly averted, though preferential terms for foreign oil companies has prevailed, buying this oil at discount.
Corporate colonisation in Latin America – US’ backyard:
In Colombia, President Uribe’s Right-Wing government historically supported by paramilitaries and relying on US military aid (Colombia is the US’ 3rd biggest recipient of foreign aid) is the US’s key partner in the Latin American region, and is a major export processing zone of agricultural primary commodities for the US and European markets. Large-scale land theft from indigenous peoples’ across Colombia through the involvement of paramilitary death squads has facilitated further enclosure for greater agricultural production for the export market. The clampdown on trade unions and social movements in Colombia has been conducted under the guise of the fight against drug-trafficking and guerrillas as part of the United States’ direction of US aid and troop deployment to support the Colombian military in their struggle against the Marxist guerrilla army (the FARC). The broader free-market strategy across the whole region has been the spread of multinational outsourcing (the growth of Maquiladora export processing zones) and the growth of US export markets through the liquidation of tariff barriers and the opening up of markets as a result of the NAFTA (North American Free-Trade Agreement) in 1994. Further “opening up” of the Latin American national economies to deeper liberalisation such as norms for foreign direct investment, trade in services and intellectual property within the mandate of the Free Trade Area of the Americas (FTAA) treaty have been frustrated by resistance from a growing number of Latin American countries, such as Venezuela and Argentina. US intentions regarding the FTAA were fully revealed in the following quote from former Secretary of State Colin Powell: “Our objective with the Free Trade Area of the Americas is to guarantee control for North American businesses over a territory which stretches from the Arctic to the Antarctic, free access over the entire hemisphere without any difficulty or obstacle for our products, services, technology and capital.”
The huge development project named the Plan Puebla-Panama indicates the intention of the US superpower, backed by the dollar empire, to underwrite further capitalist investment opportunities overseas for large corporations such as mining and logging multinationals. It is part the US’ global foreign policy plan known as “Vision 2020”. The $8 billion mega-project that is the PPP will create a “development corridor” from Mexico’s central state, Puebla, through six Central American countries down to Panama. The Plan includes the expansion and construction of motorways, ports, airports and railway systems. With production concentrated in the East Coast of the US, including up to half the world’s cars and grain, and a shift in the global economy from the Atlantic (Europe) to the Pacific (Asia), it is of primary importance to the US to be able to efficiently transport goods to the West Coast. With the Rocky Mountains presenting an overwhelming obstacle, Mexican and Central American territories gain strategic importance, providing a trampoline for the US to Asian markets. (S.Style, The Ecologist, 2001). The Panama Canal has been fulfilling this function for years, but has got increasingly saturated with cargo ships. The PPP’s emphasis, then, is on relaunching a long-standing American dream to link the Coatzacoalcos port on the Gulf of Mexico with the Salina Cruz port on the Pacific coast across the Isthmus of Tehuantepec – the shortest stretch of land between the two oceans in this whole region. The PPP document explicitly refers to infrastructure investments which “could convert the Isthmus into an exit channel to Europe for companies located in the Pacific, and to the East for those in the Gulf of Mexico”. (S.Style, The Ecologist, 2001).
The long-term structural effects of the peonage of “Third world debt” in poor countries across the world:
Poor countries have been relatively recently liberated from the straightjacket of bleeding debt peonage, which since the early 1980s saw countries of the south enduring greater outflows of money than inflows; it was not uncommon for countries to be borrowing at interest rates well above interest rates endured by countries in the north when their capacity to repay was less, sometimes as high as 18% (Ref: New Economics Foundation/Jubilee Research, “The US as an HIPC or ‘heavily indebted prosperous country’” April 2002).
Since the 1970’s, the ‘Third World’ debt crisis meant that in country after country across the developing world, the overbearing, unrelenting pressure to repay (since the level of spiralling debt in relation to national wealth was usually very high due to compound interest), became the driving force that forced these primary-good commodity suppliers to compete with one another, driving down the price of their goods.
In 1997, the United Nations Development Program (UNDP) stated that, in the absence of debt payments, severely indebted African countries could have saved the lives of 21 million people and given 90 million girls and women access to basic education by the year 2000. The All-African Conference of Churches called the debt “a new form of slavery, as vicious as the slave trade.” After 20 years of SAPs, 313 million Africans lived in absolute poverty in 2001 (out of a total population of 682 million), a 63% increase over the 200 million figure for 1994. It must not be forgotten that after the 2nd World War, Nazi Germany agreed to spend only 3.5% of its export income on debt payments. Germany argued that anything higher would be “unsustainable”. As stated in the previous chapter, up until the summer of 2005, the world’s creditor nations, including Germany, were still demanding (as they had been for years) that the world’s most under-developed nations spend up to 25% of their export incomes on debt payments. For instance, up until 1996, Mozambique has spent US$1O7 million every year servicing its so-called debt. In contrast, Mozambique was spending US$2 per person per year on health and US$4 on education.
After years of prevarication, the 2005 G8 summit in Scotland gave commitment to long overdue respite of 100% debt relief for Burkina Faso, Ethiopia, Ghana, Mali, Mauritania, Mozambique, Nicaragua, Niger, Rwanda, Senegal, Tanzania, Uganda and Zambia in-return for adhering to the ‘Heavily Indebted Poor Countries’ (HIPC) initiative of the World Bank and IMF (ultimately, the renegotiation/renewal of further debt entrapment). But many poor countries in Asia and Latin America (for example, Jamaica and El Salvador) did not have debts written off because their income per capita was too high to meet the IMF and World Bank criteria. Others, such as Bangladesh, did not qualify for cancellation because their debts were seen as sustainable.
The legacy of Third-World debt, the myth of trickledown & the maintenance of the status-quo:
It has been predominantly the US, alongside international banking interests, who have steered the agenda of the sophisticated global institutionalised arrangement of the Bretton Woods international financial institutions (World Bank and International Monetary Fund), who have operated in such a fashion as to confine the less developed countries under political and economic subjugation. They have done this – alongside creditor western countries – by maintaining the legally binding duty on debtor nations to pay off debts which spiralled upwards in value during the high-interest period of the mid 1970s, systematically using the carrot of debt re-schedule or further loans as a bargaining chip which they laid down as conditional on the implementation of neoliberal policy dictate (policies such as deregulation, financial liberalisation and removal of import controls – all policies which further ‘opened up’ these developing world economies to western capital). And yet, the background to this was that the original money loaned out, largely petrodollars accumulating in western banks after the oil price hikes of the early 1970s, was freely handed out without discriminatory checks or evaluations by lending officials up until the early 1980s, to the extent that in many nations, particularly in Africa, corrupt dictators and administrations collected this money, leaving behind this legacy of debt-bondage. It has been, effectively, an upward-spiralling debt on non-existent capital (for instance, Africa’s debt stock in 1970 was $11 billion, which with compound interest increased in 2002 to $295 billion). The long overdue multilateral debt relief initiative at the G8 summit in July 2005 offered 100% cancellation of outstanding debts to the World Bank, IMF and African Development Fund for 18 impoverished and highly-indebted countries, namely Benin, Bolivia, Burkina Faso, Ethiopia, Ghana, Guyana, Honduras, Madagascar, Mali, Mauritania, Mozambique, Nicaragua, Niger, Rwanda, Senegal, Tanzania, Uganda and Zambia, amounting to US$40 billion, in-return for adhering to the ‘Heavily Indebted Poor Countries’ (HIPC) initiative of the World Bank and IMF. However, this was only a mere fraction the total external debt of $523 billion belonging to all the low-income countries across the world at the time (July 2005) for, as already also stated in the previous chapter, many poor countries in Asia and Latin America (for example, Jamaica and El Salvador) did not have debts written off because their income per capita was too high to meet the IMF and World Bank criteria. Others, such as Bangladesh, did not qualify for cancellation because their debts were seen as sustainable.
The debt merry-go-round comes round again where as soon as the IMF/World Bank HIPC Initiative (Highly Indebted Poor Countries’ Initiative) debt-relief programme measures have begun to be implemented, countries are locked into new debt commitments, effectively the re-mortgaging of the original debt. This is because HIPC programmes lasting 40 years have been conditional on Poverty Reduction Strategies that focus merely on survival-level projects such as spending only on basic public services like water, health, basic literacy and waste management – significantly not investment in industrial and public infrastructure to increase employment, housing and productivity which ensures that genuine development and the eradication of poverty never take place, ruling out investment in the productive base of their economies. This is ensured through recipient nations under HIPC having to win Performance-Based Allocation points to recoup the deficits in International Development Assistance (IDA) financing (for every dollar of debt repayment waived, poor countries will have a dollar deducted from any new loans from the World Bank). Poor countries will have to “win back” these deductions on the basis of good policy performance (known as the Performance-Based Allocation (PBA) system) including policies which rule out investment in the productive base of their economies, plus neoliberal policies favoured by the political-economy of western nations such as privatisation, or they will have to raise taxes. For those countries with HIPC status, forced to raise the money they would have paid back to creditors and then spend it according to Western diktat dependent on this international loan capital, the World Bank and IMF are complicit in continually imposing neocolonial conditionality of these countries as a condition of accepting new loans.
Since the world financial crash of 2008, there has been a boom in lending to the most impoverished nations. Annual lending to low income country governments more than trebled from $6.1 billion in 2007 to $20.5 billion in 2014 [Source: World Bank, cited in:https://jubileedebt.org.uk/wp-content/uploads/2016/11/The-new-developing-world-debt-crisis_Final-version_11.16.pdf ].
By October 2014 between 25% and 60% of impoverished countries will have significant increases in debt payments as a proportion of government revenue over coming years, suggesting that loans are not creating enough revenue to enable their repayment because of falling export revenues (since the start of 2014 the IMF’s commodity price index has fallen by more than 40%, and the US dollar has risen in value by 20%). (Source: Jubilee Debt Campaign).
Countries in the North are increasingly reliant on investments abroad to sustain their own economies. This is particularly the case for the United States and UK, as the two leading countries in the world investing overseas, by virtue of the fact that the City of London, as the second largest financial centre of the world behind Wall Street, acts as a conduit channelling money-capital from across the world into the US financial system. Much of this investment is in multinational investments abroad, such as in mining, primary-commodity production, water and electricity utilities ..etc, to name a few. For ex-colonising nation states of the post-industrialised world whose citizens are no longer cheap-labour for the manufacturing industry, the ability to earn rates of return on investments abroad can balance their own trade-deficits which exist because goods are no longer produced and are instead being imported. For instance, Britain’s trade and current account deficit is growing to such an extent that without property income, interest and returns on investments from abroad, it’s deficit would be completely unsustainable – a woefully insecure state of affairs while the world economy is seriously vulnerable to external economic shocks (for example, Britain’s foreign investments abroad increased from £90.2 billion in 1997 to £228.7 billion in 2000). British capital’s ability to appropriate surplus-value from the huge capital flows that pass through London depends crucially on the continuation of the tendency for the free movement of capital and the implementation of neo-liberal economic policies across the world. This extent of investments around the world means British foreign and military policy is framed by the need to protect and promote these investments.
Trickledown of wealth as a dripping tap
The conclusion is that the assumption of the trickledown of wealth in modern development models is found seriously wanting. Capitalism reveals itself as development coexisting with not just exclusion, but with underdevelopment (for instance, the closure of smaller businesses and the associated “death of the high street” with the invasion of large supermarket development whereby profit margin seeps out of the local economy, a consistent feature within capitalism, which by way of another example also occurs to a limited extent in the practice of tourism developments abroad). M. Castells (taken from the book “End of Millenium”): “The ascent of informational capitalism is indeed characterised by simultaneous economic development and underdevelopment, social inclusion and exclusion, in a process very roughly reflected in comparative statistics. There is a polarisation in the distribution of wealth at the global level, differential evolution of intra-country income inequality, and substantial growth of poverty and misery in the world at large, and in most countries, both developed and developing” (p-82).
The poorer sections of society in the north and the south alike remain completely economically disenfranchised from the growth bubble, with tensions manifesting in conflict between ethnic groups, and as in Paris in 2005, between North African immigrant communities and the state. Around 800 million of the world’s 5 billion population is considered the world’s capitalist consumer class with access to bank credit – very much a phenomenon of the northern hemisphere. Vast swathes of the globe where the majority of the world’s population reside – the remaining 4.2 billion – are excluded from this economic bubble.
In short, imperialism, in both the colonial and neocolonial periods, has facilitated geographical expansion of the capitalist mode on a world scale. Infact, the world system is a ‘single division of labour, comprising multiple cultural systems, multiple political entities and even different modes of surplus appropriation’ (that is, feudal, slave mode and wage labour). (I. Wallerstein, p-5). The unequal exchange that exists between the North (ie the western world) and the South has remained as a result of unequal wage levels operating between different regions and nations, reinforced by political interference by strong nation states and the economic straightjacket enforced by the global financial institutions, otherwise referred to as imperialism. Ankie Hoogvelt: “Capitalism involves not only appropriation of surplus value by an owner from a labourer, but also appropriation of the whole economy by the ‘core’ areas. The core-periphery hierarchy and the exploitation of the periphery by the core are necessary to the reproduction of capitalism as a system”. (Hoogvelt, p-59)
World Capitalism – renewal and rebirth:
Capitalism entered a deep economic crisis in the early 1970s. Between 1945-73, the world capitalist system went through a boom unprecedented in all history. When the crisis hit and economic growth slowed down, profits came under threat. Now, capitalist firms – who were always in competition with each other – had to keep competing with eachother despite the crisis. The main way that they have done so has been to cut back on all drags on profitability. This means two things – a drive to cut back on labour costs and at the same time forcing workers to work harder and longer. This has taken place through work reorganisation, with the aim of cutting wages (for example, through casualisation and subcontracting), and increasing productivity while keeping wages at the same or lower level.
In these circumstances of capitalism in a constant state of self-flagellation to the point that it continually sheds and uses up human and physical resources in it’s continual fulfilment of profit margin, we witness with the forerunners of this world economic trend – the multinationals – as with the ‘expand or die’ logic of capitalist growth – that these main actors need constant growth just to survive. Multinationals’ pressure to achieve rates-of-return for their shareholders stems from the need to avoid being subject to predatory take-over from the aggressive machinations of the global marketplace. For, in the words of David Harvey: “Competition, as Marx long ago observed, always tends towards monopoly (or oligopoly) simply because the survival of the fittest in the war of all against all eliminates the weaker firms” (David Harvey). As a result, the aggressive, expansionist behaviour of MNCs, combined with outsourcing and the constant need to cut costs such as through downsizing, becomes the template of the modern corporation and it’s drive for growth. Growth generally is driven by shareholders of these MNCs and the need for constant growth to keep the financial business model in the black to maintain shareholder returns results in, for example, tax avoidance, the continued predation of state utilities by multinationals ..etc.
“A measure of the power exercised by MNCs over all nations, including the most wealthy, is found in the issue of transfer pricing. The avoidance of tax by transfer pricing may sound like a factor of only moderate significance, but it certainly is not. Since nations are desperate to attract MCNs, low corporate taxation is one of the principle concessions a country may offer. In other words, nations are competing down the amount of tax MNCs are expected to pay. Nations are openly inviting MNCs to operate transfer pricing, using their country as the ‘low tax haven’ and thereby seeking to divert and capture a smaller amount of tax from other nations where taxation is higher. Transfer pricing thus holds the potential for massive gains for the MNC, and equally massive losses for all host nations” (Rowbotham, p-157).
1). Socialist Fight! “The Hegemonic Domination of US Imperialism; 1/1/2018: “Ref: https://socialistfight.com/2017/12/30/the-hegemonic-domination-of-us-imperialism/?fb_action_ids=10215461924249208&fb_action_types=news.publishes”
2). Ankie Hoogvelt, (2001): “GLOBALISATION & THE POST-COLONIAL WORLD, The New Political Economy of Development”, (Palgrave, Hampshire, UK,)
3). Aufheben 12: “OIL WARS AND WORLD ORDERS – NEW AND OLD”, . HYPERLINK http://www.geocities.com/aufheben2/auf_12_oilwars.html
4). Aufheban 14: “Welcome to the Chinese century”
5). Julio Godoy: “BUSHGATE: WHAT DID THE PRESIDENT KNOW AND WHEN DID HE KNOW IT?”, Asia Times, 19 Nov 2001
6). Sophie Style: “PLAN PUEBLA-PANAMA: CORPORATE COLONISATION ROLLS ON”, taken from The Ecologist, June 2001
7). Jubilee Debt Campaign. https://jubileedebt.org.uk/wp-content/uploads/2016/11/The-new-developing-world-debt-crisis_Final-version_11.16.pdf
8). Jubilee Debt Campaign. (2014). “Don’t turn the clock back: Analysing the risks of the lending boom to impoverished countries”, Ref: http://jubileedebt.org.uk/wp-content/uploads/2014/10/Lending-boom-research_10.14.pdf
9). M. Castells: “END OF MILLENIUM”, (Basil Blackwell, 1998)
10). I. Wallerstein: “THE CAPITALIST WORLD ECONOMY”, (1980, Cambridge University Press) p-5.
11). David Harvey, (2002), “THE ART OF RENT: GLOBALISATION, MONOPOLY AND THE COMMODIFICATION OF CULTURE”;
12). Mike Rowbotham: “THE GRIP OF DEATH”, 1998 [Jon Carpenter] A study of modern money, debt slavery and destructive economics
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