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
I am a 72 year old, retired, progressive small businessman concerned about all the major national and world issues, committed to speak out and write about them.
