GLOBALISATION: A REDIVISION OF THE WORLD BY IMPERIALISM


Globalisation is the latest fashionable term used to describe the all 
pervasive forces of a rampant capitalism. It suggests a new stage of 
capitalism in which multinational companies and financial institutions, 
attached to no particular  nation state, move their capital around the world 
in search of the highest returns, and in so doing create a truly global 
market and global capital. In fact, as DAVID YAFFE argues in this article, 
the degree of internationalisation of capital is only now approaching those 
levels existing before 1914. And far from being new, we are seeing a 
return to those unstable features of  capitalism which characterised 
imperialism before the first world war.


The strongest supporters of the globalisation standpoint are the neo-liberal 
right. A recent convert to their free market orthodoxy - it is said in order 
to save itself from the chop (The Guardian 20 May 1996) - has  been the 
United Nations Conference on Trade and Development (UNCTAD), an organisation 
set up 32 years ago to provide reports on trade and development from the 
perspective of developing countries. Its recent World Investment Report 1995 
(WIR 1995) reads like an eulogy on globalisation.

‘Enabled by increasingly liberal policy frameworks, made possible by 
technological advances, and driven by competition, globalisation more and 
more shapes today’s world economy. Foreign direct investment (FDI) by 
transnational corporations (TNCs) now plays a major role in linking many 
national economies, building an integrated international production system 
- the productive core of the globalizing world economy’ (WIR 1995 p 
xix).

However its own report produces a wealth of statistical material which 
shows a very different picture emerging.

Transnational or multinational?

Throughout its report UNCTAD uses the term transnational companies. In 
fact transnational companies  are relatively rare.  Most companies are 
nationally based, are controlled by national shareholders, and trade and 
invest multinationally with the large  majority of their sales and assets in 
their home country. 

A recent study of the world’s 100 largest companies taken from the 
Fortune Global list showed that in 1993 only 18 companies maintained the 
majority of assets abroad. The internationalisation of shares  was even 
more restricted. 2.1% of the board members of the top 500 US companies 
were foreign nationals with  only  5 of  the top 30 US companies listed 
having a foreigner on their boards. All the companies seemed to have 
benefited from industrial and trade policies of their own countries and at 
least 20 would not have survived if they had not been saved in some way 
by their governments ( Financial Times 5 January 1996, The Economist 24 
June 1995).

UNCTAD’s own index of transnationality based on shares of foreign 
assets, foreign sales and foreign employment shows 40 of top 100 
multinational companies in 1993 have more than half of their activities 
abroad, with the average for the whole group at 41 per cent, falling to 34 
per cent for US Multinationals, which comprise nearly one-third of the 
total.  Even these figures are misleading as Nestle, which tops the list with 
92 per cent, limits non-Swiss voting rights to 3 per cent of the total. In 
addition most research and development (R&D) takes place in the home 
country. For US multinationals, the share of R&D performed by majority 
owned foreign affiliates was only 12 per cent in 1992 (WIR 1995 pp xxvi 
- xxx, and Wade p19).

Finally  a recent study by  Hirst and Thompson (H&T), based on company 
data for 500 MNCs in 1987 and 5000 MNCs in 1992-3, assessed the 
relative importance for MNCs of home and foreign sales and assets of 
particular countries, mainly US, UK, Germany and Japan. They found 
that between  70 and  75 per cent of  MNC value added was produced in 
the home nation.  They conclude that international businesses remain 
heavily ‘nationally embedded’ and continue to be MNCs rather than TNCs 
(H&T pp 76 - 98). However, that  international companies are nationally 
based and trade and invest multinationally  tells us little about the overall 
strategic importance of the 25 - 30 per cent activity conducted abroad - a 
point that we shall return to below.

An integrated production system?

Foreign direct investment is linking many national economies but, but far 
from this leading to an ‘integrated production system’, it is reinforcing the 
economic domination of the vast majority of the world by a small number 
of imperialist countries.  Multinational companies have become the 
principle vehicle of imperialism’s drive to redivide the world according to 
economic power.

Since 1983 FDI  has grown five times faster than trade and ten times faster 
than world output (The Economist 24 June 1995). This process is being 
reinforced with recession and stagnation continuing to afflict the major 
imperialist economies. From 1991 to 1993,  worldwide FDI stocks grew 
about twice as fast as worldwide exports and  three times as fast as world 
GDP. MNCs FDI in 1995 was estimated at  $230bn, producing a 
worldwide FDI stock of $2,600bn (1995) with worldwide sales of foreign 
affiliates at $5,200bn (1992) and up to $7,000bn, if subcontracting, 
franchising and licensing are taken into account.

Investment stocks and flows, inwards and outwards, are concentrated in 
the imperialist countries and particularly  in the competing power blocs, 
the ‘Triad’ of the European Union, Japan and the  United States and their 
regional cluster of countries (see FRFI 111 p7). 70 per cent of the 
outflows from the imperialist countries (60 - 65 per cent of total world 
flows) comes from only five countries, France, Germany, Japan, UK and 
US. Continual repositioning has taken place among them and in the recent 
period the US has reasserted its lead accounting for one quarter of the 
world’s stock and one-fifth of world flows (see Tables 1 and 2).

The relative change in the balance of economic power since the end of  the 
post-war boom  is highlighted  by  US share of the world outward stock of 
FDI falling from 52.0 per cent in  1971 to 25.6 per cent in 1994, while 
Japan’s share rose from 2.7 per cent  to 11.7 per cent. The European 
Union is the dominant imperialist bloc and  Britain, a rapidly declining 
industrial power, still retains a formidable imperialist presence.


Table 1: Outflows of FDI from five major imperialist powers 1982-1994

               1989       1992        1994         1982-1986       1987-1991
Country              (outflows $ bn)                (Share in world total)

France          20         31          23              5%             11%
Germany         18         16          21             10%             10%
Japan           44         17          18             13%             18%
UK              35         19          25             18%             14%
USA             26         39          46             19%             13%


Table 2  Shares in total FDI stock  1971 - 1994 

Country        1971       1980        1990         1994

France          5.8%       4.6%        6.6%         7.7%
Germany         4.4%       8.4%        9.1%         8.6%
Japan           2.7%       3.8%       12.1%        11.7%              
UK             14.5%      15.6%       13.8%        11.8%
USA            52.0%      42.8%       26.1%        25.6% 

(Data from WIR 1995 and Multinational Corporations in World 
Development  United Nations NY 1973)


Over the last 10 years FDI outflows from Third World countries have 
more than doubled growing from 5 per cent of world FDI outflows  in 
1980-84 to 10 per cent in 1990-94, reaching 15 per cent in 1994. However 
this does not represent a significant step towards a more integrated system 
since most of the capital flow comes from a small number of the so-called 
newly industrialising countries (NICs), mainly in Asia, with Hong Kong 
alone contributing 64 per cent of the total. Hong Kong outflows seriously 
distort the overall figures. A lot of the other outward investment results 
from companies in NICs forced by  rising wages to move labour-intensive 
FDI to lower wage countries in the same region.  Of real significance is 
the fact that only 6 per cent of  FDI outward stock is accounted for by 
Third World countries.  It is a great deal lower than their share of  exports 
in world exports, and   GDP  in world GDP, at 23 per cent and  21 per 
cent respectively.

The recession which hit most imperialist countries in 1990-92 and the 
stagnant economic growth of the following years, while reducing overall 
FDI outflows from the imperialist nations, saw a much greater share of 
them go into the Third World, and, in particular, China. FDI inflows into 
Third World countries increased from $35bn (17 per cent of the total) in 
1990 to $84bn (37 per cent) in 1994, and is estimated to reach $90bn in 
1995, nearly 40 per cent of total FDI outflows (Table 3). 

The flows into the Third World were however very concentrated.  79 per 
cent of FDI inflows into Third World countries in 1993 went to only ten 
countries including China.  With nearly $28bn, China was the second 
largest recipient of FDI (after the United States) taking 37 per cent of the 
total going to Third World countries. FDI outward stock was likewise 
highly concentrated with 67 per cent of Third World stock in just ten 
countries in 1993. Asia accounted for 70 per cent of total flows into Third 
World countries in 1994. Latin America and the Caribbean  received 24 
per cent with two countries, Mexico and Venezuela, accounting for 71 per 
cent of the region FDI inflows. On the other hand FDI into Africa has 
declined from 11 per cent of Third World inflows in 1986-90 to 6 per cent 
in 1991-93 and to 4 per cent in 1994. Finally privatisation was the main 
reason for the $6.3bn flows into the ex-socialist countries of central and 
eastern Europe in 1994,  turning former domestic companies into foreign 
affiliates of multinational companies.    


Table 3: Inflows and Outflows of FDI 1982 - 1994

                        1990    1992    1994      1982-86    1987-91    1994    
Country group                ($ billion)               (share in total)

Imperialist: Inflows     176     111     135        70%        82%       60%    
             Outflows    226     171     189        94%        94%       85%

Third World: Inflows      35      55      84        30%        18%       37%
             Outflows     17      19      33         6%         6%       15%

(Discrepancies between outflows and inflows are due to data collection 
problems)

Our argument can be further substantiated by looking at FDI in terms of 
its distribution among the worlds population.  The Triad countries 
comprising 14 per cent of the world’s population attracted some 75 per 
cent of FDI flows. If we add to this the population of the ten highest 
recipients of FDI in the Third World, then 43 per cent of the world’s 
population received 91.5 per cent of FDI between 1981-91. This includes 
all of China with a population of 1.2bn. If we only include China’s 
population in the coastal regions where most FDI is concentrated then only 
28 per cent of the world’s population receive 91.5 per cent of  FDI. On 
this basis between 57 and 72 per cent of the world’s population receive 
only 8.5 per cent of total world FDI (H&T p67-68). This is hardly a 
picture of an integrated production system but one that is highly 
concentrated and very unequal.

Highly concentrated and very unequal

‘...a fall in the rate of profit connected with accumulation necessarily calls 
forth the competitive struggle. Compensation of a fall in the rate of profit 
by a rise in the mass of profits applies only to the total social capital and 
to the big, firmly placed capitalists.’ (K Marx)

UNCTAD’s support for countries opening up their economies to FDI 
shows quite brazenly its neo-liberal  sympathies: 

‘In today’s increasingly open and competitive global economic 
environment, the performance of countries - best measured in terms of per 
capita income (as a proxy measure for welfare) and growth - depends 
significantly on the links they establish with the world economy’. 
Unusually, we are provided with a definition of a competitiveness as the 
ability of firms ‘to survive and grow while obtaining their ultimate 
objective of maximising profits’ (WIR pxxvii,p150) - which helps to 
explain today’s increasingly unequal and monopolistic global environment. 
Growing competition for profits creates an inexorable tendency towards 
monopolisation as it is only the ‘big firmly placed’ companies which can 
survive in a world where capital accumulation is stagnating. Growing 
monopolisation of markets for goods, investment, technology and raw 
materials, through mergers, acquisitions and FDI, are the result of 
multinational companies relentless search for ever greater profits to 
compensate for a  general fall in the rate of profit. This creates a very 
different ‘global environment’ than that promoted by the UNCTAD 
report. 

 We have already showed how FDI by predominantly nationally based 
multinational companies is concentrated within a number of competing 
power blocs. It is also controlled by a small number of multinational 
companies within those blocs. There are in the region of 40,000 
multinational companies having some 250,000 foreign affiliates. However 
the largest 100 multinational corporations (excluding those in banking and 
finance) had an estimated $3.7 trillion worth of global assets with $1.3 
trillion outside their respective home countries. This accounted for a third 
of the combined FDI stock of their countries of origin. The world’s 500 
largest industrial corporations employ 0.05 per cent of the world’s 
population and control 25 per cent of the world’s economic output;  and a 
mere one per cent of all multinationals own half the global stock of FDI. 
Two-thirds of world trade is controlled by multinational companies with 
half of this trade, or $1.3 trillion exports, intra-firm trade between 
multinational companies and their affiliates. In the case of US 
multinationals, $4 out of $5 received for goods and services sold abroad 
by US multinationals are actually earned from goods and services 
produced by their foreign affiliates or sold to them.

The concentration for a certain range of products is even greater. In the 
case of consumer durables the top five firms control nearly 70 per cent of 
the world market in their industry. In automotive, airline, aerospace, 
electrical components, electrical and electronics and steel industries, five 
firms control more than 50 per cent of output. In oil, personal computer 
and media industries the top five firms have more than 40 per cent of sales 
(K p223). The total sales by foreign affiliates of 23 multinational 
companies accounted for 80 per cent of the total world sales in electronics. 
70 - 80 per cent of global R&D expenditure and 80 - 90 per cent of 
technology payments are within MNC systems. Far from this presenting a 
picture of an ‘open and competitive’ environment we have one that is 
increasingly controlled and increasingly monopolistic.    
 
The same principles which lead to the concentration of capital in the hands 
of a few large corporation determine the extent and direction of FDI. The 
forces of monopoly consolidate at a global level. Most FDI going into the 
imperialist nations is ‘ownership-switching’ - for mergers, acquisitions and 
privatisations as opposed to new establishment or ‘greenfield’ investment. 
In the case of FDI going into the United States in 1993, 90 per cent in 
value was for acquisitions of existing companies.  For US outward FDI 
the ratio of the number (data on values are not available) of new 
establishments to acquisitions  was 0.96  in other imperialist countries 
compared to  1.8  in Third World countries. 

In a classic piece of understatement UNCTAD informs us ‘FDI is not a 
panacea to break from the vicious circle of underdevelopment’ in the 
Third World. That is certainly true. For the strategic importance for 
MNCs lies in its ability to generate adequate profits through the access it 
provides  to essential markets and productive resources throughout the 
world. 

MNCs FDI inflows to Third World countries accounted for only 7 per 
cent of Third World domestic  investment in 1993. As we have discussed 
earlier, it is mainly is concentrated in only 10 countries. These countries 
have an average  GDP per capita of $6,610 and come into the top sector 
of middle income countries.  MNCs are looking for high, guaranteed 
profits, relatively large domestic markets or easy access  to such markets, 
good social and industrial infrastructure, a skilled workforce at low cost, 
political and economic stability, open economies and easy repatriation of 
profits. Africa, for example, is now of limited importance, in spite of high 
rates of return, because  of widespread poverty and political and economic 
instability. Not surprisingly, FDI in Africa is concentrated in countries 
with important raw materials, particularly oil.   

Official rates of return to US FDI in Third World countries in 1993 at 
16.8 per cent were nearly twice the level in imperialist countries at 8.7 per 
cent. The rate of return in the primary sector  in Africa  was a massive 
28.8 per cent. Actual rates in Third World countries are probably even 
higher once transfer pricing and other tax avoidance devices are taken into 
account. 

MNCs use Third World countries as a low cost, profitable location for 
export-oriented industries. In the late 1980s and early 1990s the share of 
foreign affiliates in exports were as high as 57 per cent in Malaysia (all 
industries), 91 per cent in Singapore (non-oil manufacturing). In 1990,  44 
per cent of  total manufactured exports  in Brazil and 58 per cent in 
Mexico were by foreign affiliates of MNCs.   

The trend is accelerating for many MNCs to move manufacturing and 
services industries  out of high labour cost countries to ever cheaper ones 
in the Third World as competition for markets and demands on profits 
from shareholders intensifies. Morgan Crucible, the UK speciality 
materials group, is typical. It is shifting production to low wage 
economies in  Eastern Europe and Asia.  Average labour costs are  $1.50 
an hour in eastern Europe compared to $26 an hour in Germany. At its 
new Shanghai plant  workers were paid $1 a day compared with $31 an 
hour in Japan. It was doing this despite a 20 per cent increase in profits. 
Similarly British Polythene industries (BPI), Europe’s largest polythene 
film producer, reported an increase of pre-tax profits from £8.61m to 
£11.5m. It closed its plant in the Midlands where workers were paid 
£15,000 a year, to move to China where workers are paid $1,000 (£670) a 
year. BPI chairman said that: ‘We had to go there or see our business 
disappear’ (Financial Times 12 September 1995).  Such trends will  
reinforce and extend existing inequalities in all countries concerned.


UNCTAD ignores such realities when in promoting FDI, it highlights the 
rapid increase  of inflows into India as a result of its governments recent 
neo-liberal economic policies. ‘By the turn of the century it is estimated 
that India’s middle class will include over 9.4m households earning over 
$9,000 per annum.’ This is in a country with a population of over 800m 
people,  the vast majority of whom live in dire poverty. Similarly Asia is 
seen as an area with a growing and potentially high spending middle class. 
If present day growth rates continue, ‘the middle class in Asia could top 
700m by the year 2010, having $9 trillion spending power - 50 per cent 
more than the size of the US economy today.’  This in an area where 
180m urban dwellers and 690m rural people lack safe drinking water and 
access to proper sanitation and overall 675m people live in absolute 
poverty.  

Finally, FDI inflows into  the Third World have been used by  imperialist 
countries to export  environmentally polluting industries and factories. 
Japan, in what UNCTAD refers to as ‘house-cleaning’ its domestic 
industrial structure, has financed and constructed a copper smelting plant 
run by PASAR in the Philippines. Gas and water emissions from the plant 
contain high concentrations of boron, arsenic, heavy metals, and sulphur 
compounds that have contaminated water supplies, reduced fishing  and 
rice yields, damaged forests and increased the occurrence of respiratory 
diseases among local residents (K p31). It is not just the low wages - 
$1.64 an hour  compared to an average $16.17 in the United States - 
which make the Mexican maquiladora zones attractive to MNCs but also 
their loose environmental regulations. Studies have shown evidence of 
massive toxic dumping polluting rivers, groundwater and soils and causing 
severe health problems among workers and deformities among babies born 
to young women working in the zone. The workers are housed in 
dwellings in shanty towns that stretch for miles with no sewer systems and 
mostly without running water (K p131-2).  

The spectre of 1914

The rapid internationalisation of capital since the mid-1970s has, to a 
significant extent, brought the capitalist system closer to  pre-first world 
war conditions. The openness of capitalist economies today is no greater 
than before 1914. The main players are the same but the balance of 
economic power between them has changed. Merchandise trade (exports 
plus imports) as a percentage of GDP is close to the levels of 1913 (Table 
4). FDI stock has  been estimated at 9 per cent of world output in 1913 
compared to  8.5 per cent in 1991.  But there are differences which in fact 
add to the growing instability of the capitalist system.

Table 4: Ratio of exports plus imports to GDP at current market 
prices (%)

Country           1913          1950           1973          1994

France            30.9          21.4           29.2          34.2
Germany           36.1          20.1           35.3          39.3
Japan             30.1          16.4           18.2          14.6 
UK                47.2          37.1           37.6          41.8
US                11.2           6.9           10.8          17.8
 (Taken from  Financial Times 18 September 1995)

$1,230bn a day flows through the foreign exchange system as financial 
institutions and multinational corporations hedge, gamble and speculate on 
the movement of national currencies. The financial system has now an 
unprecedented autonomy from real production and represents an ever-
present threat to economic stability as it rapidly redistributes ‘success and 
failure’ throughout the system.  Third World debt at a record $1,714bn in 
1994,  continues to grow despite massive debt repayments which bleed 
those  countries dry.  Labour migration is far more restricted than in 
before the first world war leaving whole populations imprisoned in 
untenable social conditions.  Inequalities between rich and poor countries 
and between the rich and poor in all countries have reached unprecedented 
levels and are still growing.

The fundamental shift in the international balance of economic power has 
removed the dollar as the anchor of the capitalist system. Nothing exists to 
replace it. Neither Japan nor an increasingly fractious European Union are 
in a position to take over the United  States global role. Inter-imperialist 
rivalries are growing and trade wars are being constantly threatened. Far 
from being a beacon of capitalist progress ‘globalisation’ is a sign of 
economic decay and increasing instability in a world of obscene and 
growing inequality. 
 
WIR 95: World Investment Report 1995: Transnational Corporations 
and Competitiveness, United Nations New York and Geneva 1995. Most 
of the statistics are taken from this and earlier reports unless otherwise 
indicated. 
H&T: Paul Hirst and Grahame Thompson Globalisation in Question, 
Polity Press 1996.
K: David C Korten When Corporations Rule the World, Earthscan 
Publications Ltd, London 1995.
Wade: Globalization and its Limits: The Continuing Economic 
Importance of Nations and Regions IDS Sussex University May 95.





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