The process of ‘neoliberal restructuring’ for the benefit of multinational invasion across the world, through South America, Asia and Africa, as well as post-cold war Eastern Europe, has been executed through the simultaneous fulfilment of a combination of inter-related factors.
An alternative, more accurate definition of “Free-Trade: ‘The sanctioning of market concentration for monopoly capitalist multinationals & finance capital’.
The template for the whole process of neoliberalism is the global so-called “free trade” architecture of GATT (General Agreement on Tariffs & Trade) and other area-specific trade agreements such as FTAA (the Free Trade Area of the Americas), which have broken down the barriers-to-entry to financial speculation and the free movement of goods and services across the world. Robert Griffiths, General Secretary of the Communist Party of Britain: “Globalisation is not being driven primarily by an abstract ideological commitment to ‘free markets’ or to the free movement of goods, capital or labour. The US, EU and Japan all operate trade barriers of one sort or another; none operate an open-door policy to migrants. Rather, so-called globalisation is driven by the economic necessity of TNCs and other capitalist monopolies to maximise profit through exporting goods, services and capital with as few barriers as possible – except ones which suit their competing interests. These necessities are not new, and have featured prominently in the evolution of imperialism over the past century and more.” (quotation from Robert Griffiths article entitled: “Globalisation: a new emerging phase of Imperialism”).
Powerful trading blocks such as the United States and the European Union make a nonsense of the assumption that “freetrade” is what constitutes the world trading system, as they have instilled a degree of protection in the face of rigorously applied world trade rules which are fully applied to nations in the South (such as the farming sectors in the US and EU through a widely-acknowledged ‘bending of the rules’ on agricultural subsidies which has led to the dumping of agricultural produce on world markets, driving down world prices to the detriment of farming sectors in the South, quite apart from the political use of food-aid by the USA). “Subsidies are basically a transfer of money from the pockets of taxpayers to large corporate farmers, so that they can stay in business despite low prices, and to the ones who benefit the most – the Cargills and ADMs of the world who have all this grain that they’re giving away at giveaway prices and using to capture markets around the world and drive small farmers out of business in Mexico, India , Africa, Asia and South America”, (quote by Peter Rosset, who was executive director of the Oakland, California-based Institute for Food and Development Policy). Transnational corporations such as Cargill – the largest grain transnational corporation in the world – hold structural control of the global food system in terms of integration up and down the food chain in that it has mill, storage and port facilities all over the world for it’s massive trading in grain supplies and processing (and so, holds the world-price of grain within it’s grasp).
World market distortions are also caused by high tariffs for processed products originating from countries of the south being exported into developed world markets/trade blocks.
Distortions caused by the subsidy regime can be observed to have negatively affected the agricultural trade of countries in the south, particularly in the sugar trade where EU farmers are paid 3 times the world price and the US support-regime valued at a similar extent, affecting developing country exporters who sell at prices which barely cover the variable costs of growing and processing. However, there also exist the market distortions caused by the high level of concentration in the input and distribution side of the agri-food system, with the domination of a few large firms both upstream and downstream of the farming sector. In the sugar trade, the 3 main companies who trade across the globe are: Cargill, Tate & Lyle and Louis Dreyfus.
Within the global food system, the gap between producer prices and retail prices has grown over time, with the price-index of commodities falling by 47% between 1982 and 2001. According to the UN Commission on Trade & Development (UNCTAD), annual export earnings of coffee-producing countries in the early 1990s were US$10-12 billion, whilst the value of global retail sales were £30 billion. However, by 2002, while retail sales exceeded £70 billion, coffee-producing countries received only £5.5 billion, as global oversupply reduced prices. Coffee producers are involved in a global market where 3 TNCs (Nestle, Kraft and Proctor & Gamble) account for 45% of roasting activities, whilst 4 companies account for 40% of cocoa grinding, while in soy and livestock, 3 of the same companies have the lion’s share of crushing and feed production in South America and Europe. (Vorley).
The global food system is crucial to the livelihoods of the majority of the world’s population, being as it is the case that half of the population of the developing world is rural, with 1.3 billion working in agriculture (2003 figures – Vorley). Family-scale producers worldwide face downward pressure on market prices for many agricultural products because of large suppliers with their own value-chains. While across the industrialised world, farm incomes have fallen over time, in the developing world, the rural peasantry have been further pushed into poverty, migration and loss of livelihood. With 90% of total cocoa production estimated to come from smallholdings of less than 5 hectares, the developing country contribution to the value-added element of the retail product cocoa fell to 28% in 1998-2000 from around 60% in 1970/72 (Vorley).
Liberalisation of commodity trading on world markets magnifies market volatility. For instance, the volume of the cocoa future’s trade was estimated to be 10 times greater than world cocoa production in 2003 (Food Inc. Corporate concentration from farm to consumer, by Bill Vorley, 2003). In 2000, for each bushel of wheat produced by US farmers, 16 bushels were traded on commodity exchanges. For soyabeans, 1 bushel was produced for every 31 traded (Vorley).
Long term downward trend in the price of agricultural commodities can also be observed to have been managed on a worldwide systematic basis as well. Over the course of several decades, the World Bank and IMF encouraged scores of nations in the south to gear their agricultural export sectors to the production of a narrow range of primary commodities, resulting in the long-term trend of a wide range reduction in prices of primary commodities over time. For instance, between 1980 and 2000, the price of raw sugar fell by 71%, coffee by 64% and cotton by 41%. (Corbyn).
Concentration of economic power by traders, processors and retailers through corporate concentration in the vertical integration of agrifood chains has occurred, with TNCs grabbing a large chunk of this concentration, such as the coffee market where 3 companies (Nestle, Kraft & Proctor & Gamble) account for 45% of the global market. This has negatively affected farming incomes across the world, flushing small farmers out of the market-driven system the world over in both the developed and developing world, with primary producers in the south being more numerous in number and affected disproportionately even worse, pushed into loss of livelihood, poverty and migration. Farmers are at the mercy of bulk-commodity supply TNCs who can source production from anywhere in the world.
The food system is characterised as one whereby production is buyer-driven, as the customer and producer components of the system are brought into a more direct relationship for the benefit of consumers in the north. For some products of large-supply to the global market, uniformity and high-quality standards are important factors for further processing and branding by the northern retail market (supermarkets). There has also been an increasing trend towards direct contracting between input suppliers (eg. of feed, seed), industrial-scale processors/suppliers and retailers, as production chains are shortened across the entire agri-food sector, driven by the need for traceability, product consistency and assurance of supply. So, whilst vertical integration characterises livestock in the north (farm to fork), for producers in the south, the situation is characterised as ‘vertical disintergration’, as farmers increasingly supply at lower cost, favouring large-scale producers at the expense of small farmers, with farmers locked into an ‘expand or die’ cycle. It is a precise continuation of colonial expropriation which swept through the African continent in the 19th century, albeit in a more subtle way, as the monopolising conduct of a few dominating TNCs hide behind the veil of ‘market forces’ – an abstract concept which justifies market trends in terms of what is accepted to be the competitive equilibrium state of the world market of a particular product.
In countries of the South, export-orientated farmers are increasingly engaged in contracts with the latter-day “colonial landlords”, while now, the US government bribes countries in Africa to have their farming sectors accept GM technology in return for aid for HIV, armlocking farmers into chemical dependency and facilitating market share for biotech companies as farmers pay corporate royalties.
Cross-sector mergers are an increasing phenomenon, with amalgamation creating larger concentrations of corporate power. For example, this has been particularly the case in the ‘holy trinity’ of the pharmaceutical, seed and agrochemical industry, a combination that has served the interests of seed companies in particular respect of controversial GM technology – a technology perceived as a new frontier in market development.
In the late 1990’s Monsanto spent over $8 billion buying up the worlds seed companies. In 1999 Du Pont chemicals paid $7.7 Billion to acquire the world’s largest seed company, Pioneer Hybrid. Not to be outdone Aventis bought the largest seed companies in the third world in India and Brazil. The corporate gene giants also control two thirds of the worlds pesticide/herbicide market (Their aim has been simple- to genetically engineer the worlds food crops to be resistant to their own brand herbicides. These seeds are then sold as a patented package – their use boosts herbicide sales).
The ‘Trade In-Related Intellectual Property Rights’ (TRIPs) – signed in 1995 which were extended to less developed countries in an attempt by the North create a uniform and global intellectual property regime – has inadvertently compromised domestic sovereignty issues such as the right of a country to protect health or food security. In terms of GM food and seed, the consolidation of the seed sector by multinationals such as Monsanto has meant that in many remote areas of the rural South where only one seed company supplies everyone, the result is a reduction in the range of seed diversity and the free choice of seed. In Argentina, for example, Monsanto controls over half of the maize seed market. Ratification of the Biodiversity Protocol in 2003 largely allayed the threat to sovereignty worldwide in regard to a domestic government’s right to refuse genetically-modified material. However, the immense market domination of these multinational seed and agrochemical conglomerates (for e.g. AgrEvo bought Cargill’s North American seed business for $650 million in 1998) with their huge marketing budgets which allow them to have a highly influential effect on small farmers, enabling them to persuade them of the supposed high-yield benefits of GM crops, ensures that the market consolidation of these big players will be sustained in the medium term at-least.
For TNCs in general, their power-base (involving exchange between them or between their subsidiaries) allows Multinationals to trade-off labour and environmental standards with the need for more profitability. They have the flexibility to move anywhere in the world, holding countries to ransom whose neoliberal economic-policy prescription relies upon foreign investment, as dictated by the imperialism of the IMF who in turn execute their will through conditionality of loan payments and the subsequent debt. Regional trade blocks such as the EU are also central to this process, since it is clear that trade agreements in the World Trade Organisation (geared in the interests of corporations by lobbying through groups such as the ‘European Roundtable of Industrialists’) are facilitating the supremacy of multinational capital over national sovereignty and the encroachment of financial capital.
Privatisation of state sectors
Whilst privatisation of national assets in the south is a process essential to ensuring that this process continues, privatisation is a process also underway in the North – an indication that a new era of corporate enclosure is well under way. The latest manifestation of the drive for greater and greater corporate enclosure is the proposed General Agreement on Trade in Services (GATS) which is being negotiated in the WTO – legislation which contains policy frameworks that will eliminate any government policy “interference” where liberalisation of a particular sector has gone ahead (for e.g. a multinational will have full discretion as to whether it enacts for instance, environmental legislation, or subsidy options for the poor as provider of water provision). A template of GATS in action was observed in the privatisation of the water industry in Bolivia in 1998, where those earning the minimum wage spent half of their income on water bills, while people were even charged for collecting rainwater! Re-connection costs in the country were said to be up to half a person’s annual salary, for lower income Bolivians. In Trinidad and Tobago where British company Severn-Trent have sought to privatise their water supply, the local newspaper – the Trinidad Guardian – described how, “like Christopher Columbus they came bearing small gifts and big promises. And like Columbus, their allegiance is not to the people of Trinidad & Tobago, but to their backers and shareholders” (Article in “WDM in Action”, World Development Movement, Dec 2000). The preparation of this agreement was lobbied with massive support by several US finance corporations such as American Express & Citicorp (WDM, December, 2000).
Old Empires/New Empires – the power of Trade Blocks like the EU
The European Union (EU) have been negotiating with 76 African, Caribbean and Pacific countries to bring in Economic Partnership Agreements (EPAs) – bilateral trade agreements seeking to replace longstanding preferential trade agreements between these countries for products such as sugar and bananas. “Interim EPAs” cover the liberalisation of goods (agricultural or manufactured products). “Full EPAs” include goods, services, and investment (anything from banking, water services and construction). Under EPAs, in return for wider market access, the EU is demanding these countries open up a range of their industries to international businesses (83% of their markets to European imports), which could prevent the development of domestic businesses. The European Union (EU) has recently signed new agreements with 6 countries within the Southern Africa Development Community (SADC) in regard to the liberalisation of goods (agricultural or manufactured products), services and investment (anything from banking, water services and construction). Under the new revised EPAs with these 6 countries (Botswana, Lesotho, Mozambique, Namibia, South Africa and Swaziland), in return for wider market access, the EU has committed these countries open up a range of their industries to international businesses, with exemptions for these 6 SADC countries for sensitive products from liberalisation so as to take account of their level of development. Kenya is among the countries that refused to sign. In response, the EU imposed import tariffs on multiple Kenyan products effective from 1 October 2014. For more info, read: https://furtherafrica.com/2016/11/10/why-african-states-are-refusing-to-sign-on-to-eu-trade-deals/
1). Robert Griffiths, General Secretary of the Communist-Party-of-Britain: “GLOBALISATION: A NEW EMERGING PHASE OF IMPERIALISM”, 2003
2). Bill Vorley: “FOOD, INC, CORPORATE CONCENTRATION FROM FARM TO CONSUMER”, published by the UK Food Group (2003)
3). Jeremy Corbyn, “Africa: a casualty of Empire-Building”, Morning Star, 23 March 2005
4). David Timms: Article taken from “WDM IN ACTION” by World Development Movement, Dec 2000, & Article in the ‘Morning Star’ by David Timms of the WDM, p-7, Thursday 28th December 2000
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