Development As Colonialism
The Western model of development and the so-called aid programmes are mere political weapons that suit Western commercial interests, destroy domestic economies, impoverish the vast majority and further push borrowing nations into the abyss of debt.
It is customary to trace the origin of the idea of development to a statement made by President Harry Truman in 1944. Truman may have formulated the idea in a new way – but it is an old idea and the path along which it is leading the countries of the Third World is a well-trodden one.
As François Partant, the French banker-turned-arch-critic of development, has put it in his book La Fin du Development: “The developing nations have discovered for themselves a new mission – to help the Third World advance along the road to development . . . which is nothing more than the road on which the West has guided the rest of humanity for several centuries”.
The argument put forward here is that Partant was right. Development is just a new word for what Marxists called imperialism and what we can loosely refer to as colonialism – a more familiar and less-loaded term. A quick look at the situation in the Third World today undoubtedly reveals the disquieting continuity between the colonial era and the era of development. There has been no attempt by the governments of the newly-independent countries (NICs) to redraw their frontiers. No attempt has been made to restore pre-colonial cultural patterns. With regard to the key issue of land use, the colonial pattern has also been maintained. As Randall Baker notes in, ‘Protecting the Environment against the Poor’ published in The Ecologist, Vol 14 No 2, 1984, “Essentially the story is one of continuity”. It is also about the peasants, who as Erich Jacoby writes, “identified the struggle for national independence with the fight for land” never recovered their land. “National independence simply led to its take-over by a new brand of colonialists”. (E H Jacoby, Agrarian Unrest in Southeast Asia, New York, 1961. Quoted by G L Beckford, Persistent Poverty, Zed Books, London, 1983).
If development and colonialism (at least, in its last phase from the 1870s onwards) are the same process under a different name, it is largely that they share the same goal. This goal was explicitly stated by its main promoters. Cecil Rhodes, for instance, declared that: “We must find new lands from which we can easily obtain raw materials and at the same time exploit the cheap slave labour that is available from the natives of the colonies. The colonies would also provide a dumping ground for the surplus goods produced in our factories”. Lord Lugard said much the same thing, as did Paul-Leroy Beaulieu, author of the influential book De la Colonisation Chez les Peuples Modernes in 1884, and as did Jules Ferry in a speech to the French House of Deputies in July 1885.
The trouble was that many countries in Asia and elsewhere were simply not willing to allow Western powers to have access to their markets or to the cheap labour and raw materials that they required. Nor were they willing to allow corporations to operate on their territory and undertake large-scale development projects, such as road-building and mining.
In Asia a small number of states were eventually bullied into complying with Western demands. Thus, in 1855 Siam (Thailand) signed a treaty with Britain as did Annam (part of Vietnam) with France in 1862. However, China was not interested, and two wars had to be fought before it could be persuaded to open its ports to British and French trade. Japan also refused, and only the threat of an American naval bombardment by a fleet under the command of the celebrated Commodore Perry persuaded its government to open its ports to Western trade.
By 1880, as Fieldhouse notes, European powers had obtained access to the markets of most of Asia’s coastal regions, having negotiated special conditions for expatriate residents, such as greater freedom of activity within the countries concerned and the right to build railways and set up enterprises inland. (D K Fieldhouse, Economics and Empire, 1830 to 1914, Macmillan, London, 1984).
The trouble was that just as is the case today, commercial interests continued to demand ever more comprehensive concessions, creating in this way, ever more favourable conditions for European corporations.
Throughout the non-industrial world, it was only if such conditions could no longer be enforced, (usually when a new nationalist or populist government came to power), that formal annexation was resorted to. As Fieldhouse puts it, “Colonialism was not a preference but a last resort”.
Another contemporary student of nineteenth century colonialism, D C Platt agrees with this view. For him colonialism was necessary “to establish a legal framework in which capitalist relations could operate”. If there was no formal colonialism in Latin America in the nineteenth century it is largely because a legal system “which was sufficiently stable for trade to continue was already in existence”. This was not so in Africa where the only way to create the requisite conditions was by establishing colonial control.
Slowly as traditional society disintegrated under the impact of colonialism and the spread of Western values, and as the subsistence economy was replaced by the market economy on which the exploding urban population grew increasingly dependent – the task of maintaining the optimum conditions for Western trade and penetration became correspondingly easier. As a result, by the middle of the twentieth century as Fieldhouse notes: “European merchants and investors could operate satisfactorily within the political framework provided by most reconstructed indigenous states as their predecessors would have preferred to operate a century earlier but without facing those problems which had once made formal empire a necessary expedient”.
In other words, formal colonialism came to an end not because the colonial powers decided to forego the economic advantages it provided, but because in the new conditions, these could now largely be obtained by more politically acceptable and, at the same time as we shall see, more effective methods.
This was probably clear to the foreign policy professionals and heads of large corporations that began meeting in Washington DC in 1939 under the aegis of the US Council on Foreign Relations to discuss how the post-war and post-colonialist world economy could best be shaped in order to satisfy American commercial interests when the Second World War was over – discussions that eventually led to the notorious Bretton Woods Conference of 1944 (see David Korten, in The Failures of Bretton Woods, Introduction).
Economic development was the means for achieving this goal and it was by promoting free trade that it could be maximised. Free trade is alleged to involve competition on ‘a level playing field’, and nothing could seem fairer. However, when the strong confront the weak on a level playing field the result is a foregone conclusion, as it was at Bretton Woods. At that time, the USA totally dominated the world politico-economic scene, the European industrial powers having been ruined by the war, their economies lying in tatters, and Japan having been conquered and humiliated.
We must not forget that a century earlier, it was Britain that was preaching free trade to the rest of the world and for the same reasons. At that time, she effectively dominated the world economy. Not only was a quarter of the world’s terrestrial surface under her direct imperial control, not only did her navy control the seas, but the city of London was the world’s financial centre and was capable of financing the industrial expansion that free trade would make possible. Besides, according to Eric Hobsbawm in Industry and Empire, Britain already produced about two-thirds of the world’s coal, perhaps about half its iron, five-sevenths of its steel, half of its factory-produced cotton cloth, 40 per cent (in value) of its hardware and a little less than one-third of its manufactured products. Labour in Britain was also cheap and in plenty, for the population had more than trebled since the beginning of the Industrial Revolution and had accumulated in the cities, while there was little social regulation to protect the rights of the workers.
In such unprecedented conditions, Britain was incomparably more ‘competitive’ than her rivals and free trade was clearly the right vehicle for achieving her commercial goals. As George Lichtheim puts it: “A country whose industries could undersell those of its competitors, was favourably placed to preach the universal adoption of free trade, and so it did – to the detriment of those among its rivals who lacked the wit or the power to set up protective barriers behind which they could themselves industrialise at a pace that suited them”.
As a result, Britain between 1860 and 1873, succeeded in creating something not too far removed from what Hobsbawm refers to as “an all embracing world system of virtually unrestricted flows of capital, labour and goods”, though clearly on nothing like the scale that is being achieved today with the signature of the GATT Uruguay Round Agreement. Only the US remained systematically protectionist, though it reduced its duties in 1832—60 and again in 1861—65 after the Civil War.
However, by the 1870s Britain was already losing her competitive edge over her rivals. Partly as a result, British exports declined considerably between 1873 and 1890, and again towards the end of the century. At the same time, between the 1870s and 1890s there were prolonged economic depressions, which also weakened the belief in the effectiveness of free trade. Tariffs were raised in most European countries, especially in the 1890s though not in Belgium, the Netherlands or Britain. Companies now found their existing markets reduced and started looking abroad towards the markets of Africa, Asia, Latin America and the Pacific, which with the development of faster and more capacious steamships, had become very much more accessible. If free trade did not work, the answer was to take over those countries where goods could be sold at a profit, without having to worry about competition from more efficient European countries. There followed a veritable scramble for colonies. In 1878, 67 per cent of the world’s terrestrial area had been colonised by Europeans, but by 1914 the figure had risen to 84.4 per cent.
Setting Up Indigenous Elites
The most effective means of opening up markets is undoubtedly to set up a westernised elite hooked on economic development which it is willing to promote regardless of adverse effects on the lives of the vast majority of its countrymen. This has now been very effectively achieved, and as a result, the interests of Third World governments today as François Partant notes are, “largely antagonistic to those of the bulk of their countrymen”. They are in fact our representatives in the countries they dominate, probably to the same extent as were the colonial administrators that they have supplanted.
The need to create such an elite was of course well-known to the Western powers during the colonial era. During the debate in British political circles after the 1857 Indian Mutiny, the main question at issue was whether an anglicised elite favourable to British commercial interests could be created in time to prevent further uprisings; if not, it was generally conceded, formal occupation would have to be maintained indefinitely.
Of course, the elite must be suitably armed if it is to impose economic development on its countrymen, since this must necessarily lead to the expropriation and impoverishment of most of them. Today, to do this is one of the main objects of our so-called aid programmes; some two-thirds of US aid takes the form of ‘security assistance.’ This includes military training, arms and cash transfers to governments that are regarded as defending American interests (Danaher, Kevin, Third World Network Feature, Institute for Food and Development Policy).
Even good aid provided by the USA is security related. It falls into two categories: Title 1 and Title 2. Most of it is in the former category and consists of low interest loan to Third World governments “which use their money to buy US food and then sell it in the open market keeping the proceeds”. Such food aid is thus “little more than another transfer of funds to governments considered strategically important”. Food aid falling in the category of Title 2 can also help make countries increasingly dependent on American aid for their very sustenance. US politicians have openly stated that food must be used as a political weapon, Vice-President Hubert Humphrey once declaring that “If you are looking for a way to get people to lean on you and to be dependent on you, in terms of their co-operation with you, it seems to me that food dependence would be terrific”. (‘Whose Common Future’ in a special issue of The Ecologist, Vol 23, No 6, Nov/Dec 1993).
Most of the governments that have received security aid are military dictatorships, such as those in Nicaragua, El Salvador, Chile, Argentina, Uruguay and Peru in the sixties and seventies; these faced no external threats. It was not to defend themselves against a potential foreign invader that all this security aid was required, but to impose economic development on people whom it had already impoverished and whom it could only still further impoverish.
Engineering Coups d’État
When a government unfavourable to Western commercial interests, somehow succeeds in coming to power, Western governments will go to any end to remove it from office. Thus in 1954, the United States organised the military overthrow of the government of Guatemala that had nationalised banana plantations owned by the United States, and it did the same to the government of José Goulart in Brazil in the 1960s. Goulart had sought to impose a profit remittance law reducing the amount of money foreign corporations could take out of the country. Worse still, he initiated a land reform programme which, among other things, meant taking back control of the country’s mineral resources from Western transnational corporations. He also gave workers a pay rise, thereby increasing the cost of labour to the transnationals in defiance of IMF instructions. Needless to say, aid was immediately cut off, and an alliance of the CIA, US investors and Brazil’s landowning elite engineered a coup d’état which brought a military junta to power which in effect ran the country until very recently. Again, needless to say, it immediately reversed Goulart’s reforms and reintroduced precisely those conditions that best satisfied US commercial interests.
During the colonial era, the colonial powers constantly sent in troops to protect compliant regimes against popular revolts. Both France and Britain, for instance, participated in the suppression of the populist Tai Ping rebellion in China, and later the xenophobic Boxer Rebellion, and Britain also sent troops to help Khedive Ismail put down a nationalist revolt in Egypt.
The Western powers do not hesitate to do this if there is no other way of achieving their goals. Thus, when President Mba, the dictator of Gabon, was threatened by a military coup, French paratroopers immediately flew in to restore him to power, while the coup leaders were imprisoned in spite of widespread popular demonstrations. Significantly, the paratroopers remained to protect his successor President Bongo whom Pierre Pean regards as “the choice of powerful group of Frenchmen whose influence in Gabon continued after Independence” against any further threats to him and hence to French commercial interests. Neither the UK nor the USA has been any less scrupulous in this respect. (Marcus Colchester, ‘Slave and Enclave: Towards a Political Ecology of Equatorial Africa’, The Ecologist, Vol 23, No 5, 1993).
Killing the Domestic Economy
If the role of the colonies was to provide a market for the produce of the colonial countries and a source of cheap labour and raw materials for their industries, then it could not, at the same time, provide a market for local produce and a source of labour and raw materials for its own productive enterprises.
This meant, in effect, that the colonial powers were committed to destroying the domestic economy of the countries they had colonised. This was explicitly admitted by a delegate to the French Association of Industry and Agriculture in March 1899. For him the aim of the colonial power must be: “To discourage in advance any signs of industrial development in our colonies, to oblige our overseas possessions to look exclusively to the mother country for manufactured products and to fulfil, by force if necessary, their natural function, that of a market reserved by right to the mother country’s industry” (Dumont 1962, quoted by Colchester, op.cit.). The favourite method was to tax whatever the colonials particularly liked to consume. In Vietnam, it was salt, opium and alcohol, and a minimum level of consumption was set for each region, village leaders being rewarded for exceeding their quotas. In Sudan, it was crops, animals, houses and households that were singled out for meeting their tax obligations save by agreeing to work in the mines and plantations, or growing cash crops for sale to the colonial masters. (‘Whose Common Future?’ in The Ecologist).
At the same time, every effort was made to destroy indigenous crafts, particularly the production of textiles. In this way, the British destroyed the textile industry in India, which had been the very life-blood of the village economy throughout the country. In 1905, in French West Africa, special levies on all goods which did not come from France or a region under French control were imposed, forcing up the price of local products and ruining local artisans and traders.
Economic development after the war, on the other hand, was supposed in theory to help the ex-colonial countries build up their own domestic economies, but by its very nature, however, this could not occur. At the very start the latter were forced to reorientate their production towards exports and what is more, towards an exceedingly small range of exports. A typical example is sugar. Under the World Bank influence, vast areas of land in the Third World were converted to the cultivation of sugarcane, without any consideration for whether or not a market for the sugar existed abroad. To make matters worse, the US has continued to apply very strict quotas on sugar imports, while continuing to subsidise the production of corn syrup, while at the same time countenancing the increasing production and use of artificial sweeteners. The European Union meanwhile has persisted in subsidising sugar beet production among its member states, thereby further reducing the market for Third World exporters. However, none of these considerations have prevented the World Bank from encouraging the production of more sugar for export. Cynics might maintain that this was the object of the operation in the first place, since after all, it was implicitly at least part of the World Bank’s original brief to encourage the production of cheap resources for the Western market.
At the same time, Third World countries that have sought to diversify their production have immediately been accused of practising ‘import substitution’ – a heinous crime in the eyes of today’s economists, in particular those who are influential within the Bretton Woods institutions. Indeed, import substitution is precisely what Third World countries must promise not to undertake if they hope to obtain a structural adjustment loan. Not surprisingly, as Walden Bello notes, when a country is subjected to a structural adjustment programme, its commodity exports tend to rise, but not necessarily its GNP, because of the inevitable contraction of its domestic economy (Walden Bello, Dark Victory, Pluto Press, London, 1994).
Whenever Third World countries have succeeded in developing a modest domestic economy, the World Bank and the IMF, in league with US government officials and transnational corporations, have set out systematically to destroy it – a process that could not be documented better than in the case of the Philippines by Walden Bello and his colleagues in their book, Development Debacle: The World Bank in the Philippines. This book, based on 800 leaked documents, shows how that institution in league with the CIA and other US agencies set out purposefully to destroy the domestic economy of the Philippines so as to create in that country those conditions that best favoured the interests of transnational corporations. To achieve this goal, as Bello and his colleagues show, it meant sacrificing the peasantry which had to be transformed into a rural proletariat. The standard of living of the working class had to be reduced, since as a Bank spokesman said at the time, ‘wage restraint’ is required to encourage “the growth of employment and investment”, while the local middle class that depended for its very existence on the domestic economy had to be annihilated to make way for a new cosmopolitan middle class dependent on the TNCs (transnational corporations) and the global economy.
Clearly such a drastic social and economic transformation of an already partly-developed country could not be achieved by a democratic government. This was clearly recognised by those who planned this operation, which explains why it was decided to provide Marcos with the funding required to build up an army capable of imposing such a programme by force. As Marcos put it at the time: “Only an authoritarian system will be able to carry forth the mass consent and to exercise the authority necessary to implement new values, measures and sacrifices”. (Walden Bello, David Kinly and Elaine Elision, Development Debacle: The World Bank in the Philippines, Institute for Food and Development Policy, Philippines Solidarity Network, San Francisco, 1982). In essence this is what he did: martial law was declared and the people were bludgeoned into accepting the transformation of their society, economy and, needless to say, their natural environment.
Lending large sums of money to the compliant elite of a non-industrial country is by far the most effective method of controlling it and thereby obtaining access to its market and natural resources. However, if the borrowing government is to be capable of repaying the money borrowed, or even paying interest on it for more than a short period of time, it must be invested not only in productive ‘enterprises’ but also in enterprises that are competitive in the international market, for interest payments must be paid in foreign exchange, usually dollars. Unfortunately, this is extremely unlikely to occur. To begin with, anything up to 20 per cent of the loan funds will be skimmed off in the form of kickbacks to various politicians and officials. Some of it will be spent on useless consumer products, mainly luxury goods for the elite, some on infrastructural projects which will not bring in a direct return for a very long time, if at all, and some on armaments to enable the government to put down uprisings by the victims of the development process. This means that the countries that borrow large sums of money must necessarily fall into debt. And, once they are in debt, rather than cut down on expenditure, it can be predicted in advance that they will do exactly the opposite and indeed be encouraged to do so, until such time as they become hooked on to further and further borrowing, and eventually fall under the power of the lending countries. At this point, the latter can institutionalise their control over the debtor country by subjecting it to the control of an institution (today, the IMF in particular – see Bello, Structural Adjustment Programs) that will in effect take over the running of its economy in order to ensure that interest payments are regularly met. When this occurs the borrowing country has in effect become an information colony.
This technique of informal colonialist control is by no means new. It was often resorted to during the colonial era in Tunisia and Egypt. In the case of Tunisia, a great deal of money was lent to the Bey of Tunis to build up an army so as to loosen its ties with Turkey, not a particularly profitable investment – and, of course it did not take long before the Bey was unable to pay interest on the loan. Much of the money borrowed was in the form of bonds and most of the bondholders were French. The latter viewed the situation with considerable alarm and appealed to the French Foreign Office for help – which was granted. The Bey’s economy was subjected to financial supervision, “a technique frequently used by the British and French governments in Latin America” – just as it is still today.
A joint Franco-Tunisian commission was set up in 1869 for this purpose and the conditions it imposed were draconian to say the least. It had the right to collect and distribute the state’s revenues so as to assure that the shareholders had precedence over any other debtors. Significantly, President Clinton imposed a similar deal on the Mexican government as a condition for lending it the billions of dollars required to bail out its Wall Street creditors.
From 1869 onwards, “Tunisian public finance and therefore effectively the government were now under alien control”. Tunisia had been reduced to the status of an informal colony. Increasing demands by foreign interests to pay interest on the loans forced the Bey to increase taxes which predictably gave rise to a popular movement, the government being seen as having sold out to foreigners. Formal annexation took place in 1881 (though it probably would not have occurred if France had not feared a pre-emptive move in this direction by the Italians).
The course of events in Egypt was similar. It is summed up very neatly by Harry Magdoff in ‘Imperialism: from a Colonial Age to the Present’, Monthly Review Press, New York, 1978. Egypt’s loss of sovereignty, he writes: “resembled somewhat the same process in Tunisia: easy credit extended by Europeans, bankruptcy, increasing control by foreign-debt commissioners, mulcting of the peasants to raise revenue for servicing the debt, growing independence movements, and finally military conquest by a foreign power”.
During the era of development we have of course perfected the technique of lending money to Third World countries as a means of controlling them. Much of it now goes euphemistically under the name of development ‘aid’. To justify aid, ‘poverty’ in the Third World is made out to be but a symptom of the latter’s ‘underdevelopment’; development, thereby offering an automatic cure. However, Third World countries are also seen to be seriously hampered in their development efforts because they lack the requisite capital and technical knowledge – precisely, as Cheryl Payer notes, “What the western corporative system is capable of providing”. As Galbraith puts it, “Having the vaccine, we have invented smallpox”. (Cheryl Payer, Lent and Lost: Foreign Credit and Third World Development, Zed Books, London 1911).
There is, of course, no reason to believe that borrowing money from abroad, even at concessionary rates, is a means of achieving economic success let alone of eliminating poverty, not that the money borrowed can then be paid off by increasing exports. The countries that are held up as a model for Third World countries to emulate are the newly-industrialised countries (NICs) which include South Korea, Taiwan, Singapore and Hong Kong. Neither Singapore nor Hong Kong, as Cheryl Payer notes, borrowed any significant amount of money for their development. Taiwan borrowed a little in the early days but managed to resist US pressure to overspend and borrow more money. South Korea is the only one of them to have borrowed fairly substantially. Cheryl Payer considers that the reason it succeeded in exporting its way out of what debts it had, where others failed, is largely that it resisted World Bank and IMF pressures to open up its markets. Imports and capital controls were maintained, as they previously had seen by Japan. Clearly some capital is required for development but as Payer notes, “The truly scarce commodity in the world today is not capital, it is markets”.
Aid is a particularly good instrument for opening up markets because much of it is officially tied to purchasing exports from donor countries. In the same way that colonies were once forced to buy their manufactured goods from the country that had colonised them, aid recipients must spend much of the money that is supposed to relieve their poverty and malnutrition on irrelevant manufactured goods that are produced by the donor countries. What is more, if they dare refuse to buy any of our manufactured goods they are immediately brought to heel by the simple expedient of threatening to cut off the aid on which they become increasingly dependent (though today, such behaviour would in any case be unacceptable to the World Trade Organisation as constituting a non-tariff barrier to trade).
Thus a few years ago, the British government threatened to cut off aid to the Government of India if it did not go ahead with its plan to buy 21 Westland 30 helicopters costing $60 million – an effort which it is encouraging to note was bitterly opposed by responsible elements within Britain’s Overseas Development Agency (ODA), now called the International Development Institute. This is but a more sophisticated method of achieving what Britain achieved in the last century when it went to war with China to force that country to buy opium from British merchants in India.
In general terms aid cannot be of use to the poor of the Third World for the critical reason that they necessarily depend on the local economy for their sustenance, and the local economy does not require the extensive highways, big dams, or for that matter hybrid seeds, fertilisers and pesticides of the Green Revolution, any more than it does the fleet of helicopters that the British government imposed on India. These are only of use to the global economy, which can only expand at the expense of the local economy, whose environment it degrades, whose communities it destroys and whose resources (land, forest, water and labour) it systematically appropriates for its own use.
The New Corporate Colonialism
After the debt crisis of the early eighties there was very little private investment into the Third World and the new money provided by the multinational development banks served above all to enable debtor countries to continue paying interest on loans contracted with the private banks.
In the early nineteen nineties all this changed. Private investment in the Third World increased by leaps and bounds and went up to something like $400 billion a year, about half of which represented long-term investments – the other half being short-term speculative funds. This dwarfed the World Bank’s until-now determinant contribution of about $29 billion per year, and has triggered off stock-exchange booms in the so-called ‘emergent markets’, though admittedly these have been interspersed with crashes, such as that which recently occurred in Mexico.
This massive increase in private investment has occurred partly because of the mismatch between the vast sums of money in the US and other industrial countries looking for investment outlets and the availability of such outlets in the industrialised world; also, because conditions have now been created world-wide that could not be more favourable to the interests of transnational corporations. Not only have they been provided throughout the world with an abundant unskilled labour force, but also with highly skilled technical and managerial staff at an insignificant fraction of what they would cost in the industrial world, but in addition they also now have access to whatever finance they require and to the latest computer-based technology and management methods.
Also, as a result of the GATT Agreement, Third World countries are under an obligation to: (i) accept all investments from abroad; (ii) give ‘national treatment’ to any foreign corporation that establishes itself within its borders, whether it is involved in agriculture, mining, manufacturing or the service industries; (iii) eliminate tariffs and import quotas on all goods, including agricultural produce; (iv) and abolish ‘non-tariff barriers’ to trade, such as regulations to protect labour, health or the environment, that might conceivably increase corporate costs.
Conditions more favourable to the immediate interests of TNCs could scarcely be imagined. Many of them were imposed during the GATT negotiations by the American delegation, and the delegations of other industrial powers, who presumably believed that the vast bulk of the TNCs were located in such countries, and always would be.
However, it seems more and more that this may change. Even strong governments are no longer able to exert any sort of control over transnational corporations. If a country passes a law that they regard as a hindrance to their further expansion, they merely threaten to leave and establish themselves elsewhere, which under the new conditions they can do at the drop of a hat. Indeed, they are now free to scour the globe and establish themselves wherever labour is the cheapest, environmental laws are the laxest, fiscal regimes are the least onerous and subsidies are the most generous. As a result, they need no longer identify with or allow their policies to be swayed by any sentimental attachment to any nation state.
Already Volvo, one of the leading Swedish corporations, is now Swedish in name only, having transferred nearly all of its operations abroad. What, we might ask, is to prevent General Motors or IBM from becoming German, Chinese, or merely from shifting their headquarters from one country to another as and when it becomes advantageous for them to do so? Also, as they become increasingly global, what is to prevent them from becoming even bigger, more powerful and even less controllable than they already are?
Consider that a monopoly is usually defined as a situation in which more than 40 per cent of the market for a particular commodity is controlled by less than four or five corporations. This is already the case for most of the commodities traded in the world market today – a state of affairs that can only become more pronounced as there is no way in which a national government can impose anti-trust legislation on stateless TNCs, nor can the World Trade Organisation, that they effectively control, be counted upon to do so.
As a few giant TNCs consolidate their respective monopolies in the world-wide sale of a particular commodity or set of commodities, so it is likely to become even less advantageous to them to compete with each other. Competition mainly reduces profit margins; cooperation, on the other hand, must enable them to increase their hold over governments, and to deal with the veritable opposition from populist and nationalist movements and others who might seek to restrict their power and influence.
Already, TNCs are resorting to more and more vertical integration and thereby coming to control virtually every step in the economic process in their respective fields; for instance, from the mining of minerals, to the construction of factories, to the production of goods, to their storage, their shipping to subsidiaries in other countries, and their wholeselling and retailing to local consumers. In this way they are effectively insulating themselves from market forces, and assuring that it is they themselves, rather than competition from their rivals, that determine, at each step, the prices that are to be charged.
Already, somewhere between 20 per cent and 30 per cent of world trade is between TNCs and their subsidiaries. Rather than being real trade, this is really but a facet of corporate central planning on a global scale. For Paul Ekins, the British ecological economist, TNCs are becoming “giant areas of bureaucratic planning in an otherwise market economy”. He sees “a fundamental similarity between giant corporations and state enterprises. Both use hierarchical command structures to allocate resources within their organisational boundaries rather than the competitive market” (Paul Ekins, ‘Trade and Self-Reliance’, The Ecologist).
What, we might ask, is to prevent 50 per cent, 60 per cent or even 80 per cent of world trade from eventually occurring within such ‘organisational boundaries’? At present, very little, and as we move relentlessly in this direction, so may we be entering a new era of global corporate central planning – one that will be geared to a new type of colonialism: global corporate colonialism.
The new colonial powers have no responsibility for, nor accountability to anybody but their shareholders. They are little more than machines geared to the single goal of increasing their immediate profitability. What is more they will now have the power to force national governments to defend their interests whenever these are in conflict with those of the people the governments have been elected to protect.
The new corporate colonialism is thus likely to be more cynical and more ruthless than anything we have seen so far. It is likely to dispossess, impoverish, and marginalise more people, destroy more cultures, and cause more environmental devastation than either the colonialism of old or the development of the last 50 years. The only question is how long can it last? In my opinion, for a few years perhaps – a decade at most, for an economy of a sort that creates misery on such a scale is both aberrant and necessarily short-lived.