Multinationals on Trial

Foreign Investment Matters

James Petras, Henry Veltmeyer

• Publisher: Routledge
• Year: 2016
• ISBN:
  9781317093305
• Edition: 1
• Topic: Politics & International Relations
• Subtopic: Politics
• Index: Politics & International Relations

The role and economic power of corporations that dominate the world economy has generated considerable controversy. The most heated debate and the most critical questions surrounding the role of multinational corporations relate to foreign direct investment (FDI). This key volume offers an entirely fresh perspective of the role of multinationals and the development impact of FDI. Contrary to prevailing opinion, it examines whether imperialism is a much more useful concept for describing and explaining the dynamics of world development than globalization. FDI is a mechanism for empire-centred capital accumulation, a powerful lever for political control and for re-ordering the world economy. This is a much needed analysis of global capitalism and its impact around the world, resulting in an excellent resource for students, academics and activists.

Chapter 1

Empire and Imperialism

The 1980s ushered in a series of sweeping, even revolutionary, changes in the forms of economic and social organization that have been conceptualized as a ‘new era’, that of ‘globalization’, in which economies across the world are integrated by one means or the other (mostly by way of ‘structural reforms’ in macroeconomic policy) into a ‘new world economic order’. A more accurate description of these changes and their dynamics would be the travails of ‘the American Empire’. The various efforts of the regime that has captured the apparatus of the US state to launch the ‘US Century’ of world domination and to build an empire provides a historic context for understanding the role and contemporary dynamics of foreign investment – the central object of analysis in this book. In this chapter we briefly review the state of conditions associated with these dynamics.

Building an Empire

The end of the Second World War brought about a radical realignment in global power relations. The sun had definitely set on the British empire and the system of European colonialism was in disarray, rift by the economic devastation of war-torn Europe and growing movements for national liberation across the system. The predominant position of the US is reflected in its domination of the Bretton Woods negotiations leading to the construction of a capitalist world order, the emergence of the US dollar as the reserve currency for the world economy and its economic pre-eminence, accounting as it did for about 50 per cent of the world’s productive and financial resources, its wealth (Kennan, 1968). In this context, notwithstanding the institution of a system of multilateral international relations (the United Nations) designed to prevent any one country acting on a possible dream of world domination, the US foreign policy establishment initiated a longstanding and still ongoing debate about how the US might maintain its economic pre-eminence and establish its hegemony. The dynamics of this policy debate can be traced out from some influential musings, in 1948, by George Kennan, a US state policy analyst, about the burden of a US-led empire to a series of policy briefs prepared in the 1990s by a host of neoconservative think-tanks and reactionary foundations such as the Heritage Foundation.1 These policy debates about the need for the US, with the threat of the spread of international communism and the institution of the Soviet empire, for the US to assume the burden and mantle of empire are also reflected in a process of empire building. Like the policy debates, this process can also be traced back to the end of the Second World War if not earlier.

The resulting empire was centred on the US, constructed with a series of formal alliances with a grouping of west European partner states – the Organization for Economic cooperation and Development (OECD) and NATO – as well as a more global network of working agreements with allied satellite states and their elites, was built on the foundation of the transnational corporation, the economic ‘shock-troops’ of the system and its major operating units of the system. By 1970, after two decades of unprecedented rapid growth (the ‘Golden Age of capitalism’) the Euromerican empire was well established, although not without internal tensions. In fact, the system as a whole was in crisis, subject to conditions of economic stagnation, sluggish productivity growth, a profit crunch on capital, and a destabilizing level of inter-imperialist rivalry and competition for the world market (Brenner, 2000). One manifestation of this crisis was a large and growing, and quite unsustainable, deficit in the US trade account vis-à-vis, in particular and ironically, Germany and the Japan, two erstwhile enemies of the US state that in its own economic and political interest it as nevertheless compelled to help reconstruct and develop. Concerted action and a trilateralist strategy designed to stabilize the system as a whole ensured that this rivalry and competition was kept within system-preserving limits. The next chapter elaborates on the dynamics involved in this process.

State of the Empire

Imperial policymakers do not pursue a single strategy in pursuit of empire building. Even a cursory view of recent and contemporary policy-making reveals a multiplicity of strategies based on various contingencies in different times and locations (Ikenberry, Lake and Mastanduno, 1988; Kagan, 2003). To the extent that the current regime in Washington has attempted to foist a single strategy – an aggressive unilateralist and militarist approach – regardless of specific contingencies, it has led to severe setbacks and what many analysts view as an ‘erosion’ of empire (Johnson, 2000, 2004; Eland, 2002; Mann, 2003; Pollin, 2003; Todd, 2003). However, while tactics are flexible and vary enormously, the strategic goals of US foreign policy remains constant: to enhance US hegemony and its domination of the new world order.

The pursuit of strategic imperial goals is not a linear process of advance or decline. It evolves in response to diverse contingencies, some within the reach of imperial policymakers and others beyond the immediate control of the architects and administrators of US foreign policy.

Any study of imperialism, or more specifically of empire building, should recognize that imperial policies are not simple products of vague abstractions such as the ‘logic of capital accumulation’ or projections of political ideologues or the ‘political will’ of key policy elites. While some contemporary leading policymakers may believe that ‘willing’ a policy will result in its realization, actual practice and results point to gross underestimates of the obstacles and forces of resistance, leading to a weakening of imperial power and disastrous outcomes such as a war that is going nowhere and the occupation of a country (Iraq) that is spinning out of control.

Imperial Power: Contingencies that Count

While the structures of the imperial state and the scope and depth of its private economic institutions are expressions of the global power of the empire, the exercise of power in concrete instances is dependent on specific contingencies.

One of these ‘contingencies’ is past or present military defeats or victories in prolonged warfare. The outcomes of imperial warfare have a strong impact on inhibiting or multiplying the exercise of military power. For example, the US defeat in Vietnam weakened the military’s willingness to engage in subsequent invasions in Iran, Nicaragua and Angola, despite their strategic importance. Similarly, the enormous costs of prosecuting the Iraq War have made it difficult, if not impossible, for the US to attend to other issues of imperial rule, be they related to Iran, Latin America or other redoubts of the empire. On the other hand, successful US military intervention in the first Gulf War, the invasion of Yugoslavia and Afghanistan convinced Washington of its ‘unlimited power to engage in several wars throughout the world.’ But the prolonged, ongoing and growing resistance in the aftermath of the Iraq invasion and occupation certainly has at least temporarily set back the US war plans for further conquests of neighbouring Iran and Syria.

Related to the outcomes of imperial war, the level of domestic political support (passive or active) is another contingency effecting imperial strategy. Prolonged wars with high military casualties and economic costs inevitably result in loss of citizen support, which, as with Iraq today, may eventually result in institutional and political opposition. However, more crucial than the isolated congressional critic, even perhaps than the loss of control over legislative power and political support, growing citizen discontent can manifest itself in large-scale desertions, sharp falls in military recruitment and re-enlistment and decline in morale, especially of ‘reserve forces.’

The third contingency, which affects imperial military strategy, is the composition, strength or weakness of collaborators and adversaries in the locus of warfare. Weak, discredited collaborator regimes with little or no domestic support, a weak intelligence system and a vulnerability to constant, bloody direct attacks require a prolonged, deep involvement of imperial forces. Strong, organized, deeply entrenched and highly motivated anticolonial resistance movements, with extended intelligence networks, can effectively limit the apparent ‘structural advantages’ (armaments, numbers, technology, military budgets and so on) of the imperial occupation forces.

Successful or failed imperial strategies are contingent on securing large-scale, long-term commitments and support from allies – other imperial powers – supplying soldiers and financial, diplomatic, political and propaganda support. The US’s ‘successful’ wars – Yugoslavia (Bosnia, Kosovo), Afghanistan and Haiti were based on Euro-Latin American alliance with the US imperial regime. The relative lack of imperial alliances in the Iraq invasion, and the withdrawal of limited allied support have weakened the capacity of the US to consolidate its colonial occupation in Iraq.

While the imperial state has a vast global network of military bases (at least 120 identified), a $500 billion plus budget, and a dozen espionage and paramilitary organizations operating worldwide, these and other structural underpinnings of empire depend on the internal cohesion of the policy elites. While there are always bureaucratic frictions, jurisdictional conflicts, and competition over budgeting allocations among imperial agencies, they usually converge on the goal of enhancing US imperial power. US imperial interests are normally the central and dominant concern of the policy elite, whatever its internal factional or ideological disputes.

However, political contingencies that challenge the norm of US ‘empire first’ can emerge and in fact have done so in the context of the Iraq war: US policy in the Middle East was definitively shaped and defined by a section of the policy elite whose primary concern was to promote Israeli power in the Middle East and to use US war powers to destroy Israel’s real and potential Middle East adversaries. On the complex political dynamics of this issue (the power and virtual stranglehold of the Israeli lobby over US foreign policy in recent years) see Petras (2006).

This unanticipated contingency seriously divided the imperial state, setting off a conflict between the Israel ‘Firsters’ in The Pentagon, the Executive and Congress and the US military, intelligence agencies, diplomatic corps and sectors of public opinion.2 These profound divisions led to the ‘Israel Firsters’ setting up parallel intelligence and propaganda agencies, the preparation and dissemination of a mass deceitful pro-war propaganda campaign, the distortion and fabrication of intelligence reports, blatant espionage for the Israeli state, including the turning over of highly classified war documents. The result was a war, which was a disaster from the perspective of the US empire builders, and a major success for the Israel boosters – in Iraq, quite apart from the unsettled debate as to the geopolitics of oil involved, they destroyed the one Arab country in the Middle East with a solid secular state, a scientific elite and modern economy and military structures.

The Zioncon-civilian-militarist (ZCCM) policy of colonial invasions and military occupation in pursuit of destroying Israel’s adversaries and enhancing its dominance of the Middle East has weakened US efforts to sustain its global dominance. The vast absorption of military resources, troops, reserves and logistical support systems in pursuit of a prolonged guerrilla war without end, has severely weakened Washington’s capacity to apply military force to intimidate and enforce or intervene in other strategic regions or countries of conflict. Military losses in Iraq have undermined domestic public support for present and future overseas military interventions in support of empire building. The sustained military and political resistance to the vast US military occupation army has lowered the intimidation factor so necessary in sustaining imperial diplomacy. In a word, the Iraq war has become a major impediment to empire building, its defence and its domestic economic and political support, a principal motivating factor in the set up of the Baker Commission.

The ‘resources’ of the US imperial state are formidable, both in quantity and quality: a military budget bigger than the next 20 other countries, a highly trained officer corps, with a high-tech infrastructure and weapon systems. However, this ‘structure’ and its resources operate in and confront a series of contingencies, which can reduce or neutralize the effective exercise of these ‘resources’. Clearly, imperial structures depend on contingencies which can escape the control of imperial policy elites, creating a degree of uncertainty in the outcome of imperial induced conflicts, especially in the context of policymakers with dual loyalties and infected by a high degree of ideological voluntarism.

Imperialism: Omnipotence, Impotence and Class

Some writers and many pundits confuse the omnipresence of the imperial state and the multinational corporations with omnipotence (Brightman, 2004). This is the case, for example, with Hardt and Negri’s Empire, a book purportedly on the Left that captured the political imaginary of the liberal and conservative intellectual establishment and the International Business press.3 A similar conflation of omnipresence and omnipotence is characteristic of the stream of studies and briefs written by the foreign policy analysts connected to the White House. Even in discussing the omnipresence of imperialism, the term has to be stretched to include an indirect presence via collaborator regimes and client political, cultural and social organizations. Describing the presence of imperialism does not tell us about its power to successfully realize policy outcomes in specific circumstances and time frames. There are numerous cases where there is a substantial military and economic presence of imperial force but where imperial policies are setback and US interests are adversely affected (Todd, 2003; Wallerstein, 2003). Iraq is a notable case, but on a different level Venezuela is another example.

The source of the confusion between the presence of imperialism and its power is a result of thinking of power merely in terms of ‘global structural attributes’ (the overall size and scope of US military – economic institutions) and of believing that ‘power’ is a structural fact, an attribute embedded in hierarchical structures in which power is concentrated at the top. ‘Power’, according to this view, is always and everywhere associated with the dominant classes, and the wealthiest and most militarist state.

This approach fails to see that power is a relationship between classes and states, contingent on the direction and outcome of class and national struggles. The location or position in the international system; and ownership of the means of production, media, consumption, military force and cultural outlets are extremely powerful levers in any equation of political power. But they are not the only source or ‘resources’ of power. Mass organizations of class conscious workers and direct producers, their degree of combat readiness, the capacity of their leaders and quality of their programs, the strength of their tactics and strategy are also power sources: in fact, policy outcomes often are the result of a confrontation between the structural power of imperialism and the alternative power of the exploited and the oppressed. On this point we need but point towards the effectiveness in certain conjunctures of the ‘antiglobalization’ movement and the forces of anti-imperialism, which in Latin America have joined with the antisystemic social movements of the rural landless workers, indigenous communities and peasant farmers to halt in its tracks the ‘structural reform’ agenda of globalizing capital, in some contexts bring about a reversal of major neoliberal polices and in others a serious challenge to imperial rule (Petras and Veltmeyer, 2005b).4 The key factors in the equation of economic and military power are not only the quantitative sum of structural resources of the empire, or the number of organized poor and exploited, but how effectively potential power is applied in specific conflictual situations. The conversion by imperialism of its quantitative resources (for example big economic firms, military backing) into favourable policy outcomes is not automatic; far from it. It depends on the resources available to, and relative effectiveness of, its adversaries.

On this point, Lenin’s thesis that imperialism, as he defined it,5 is the most advanced stage of capitalism, and Marx’s dictum that capitalism cannot help but create its own gravediggers, seem to hold up. Wherever found today imperialism in its diverse forms appears to be the bearer of capitalism (economic liberalism) and the gospel of its virtuous marriage with democracy (political liberalism); and everywhere where imperial power is projected in one form or the other the end result is an accumulation of diverse forces of resistance and opposition. Although these forces are fragmented and divided, and thus difficult to mobilize, they are found in virtually every ‘popular’ sector of ‘civil society’, particularly in the organizations of the urban and rural poor, the rural landless workers and ‘peasants’, many of which are both proletarianized and impoverished.6 In diverse contexts and conjunctures, these forces have been successfully mobilized against imperial policies and imperialist rule. In fact, the 1980s and 1990s saw a series of setbacks in the capacity of the US state to project both its economic and military power.

The reason why ‘globalists’ on the left and right overstate the power (or omnipotence) of imperial institutions (or the irresistible force of ‘globalization’) is that they look only at ‘structural’ or institutional attributes of power and ignore its political and social subjective conditions.

Moreover, the omnipresence of imperialist institutions requires the spreading out of forces, the multiplication of points of conflict and the increasing vulnerability to global disruption at particular strategic points in the production and consumption chain. This suggests that omnipresence can lead to relative imperial impotence. In other words omnipresence can be a weakness rather than a strength.

As noted earlier, imperial pundits, publicists and propagandists often pretend that being everywhere signals omniscience. Unfortunately, many leftist writers take the imperial propaganda images of ‘omnipresence equals omnipotence’ at face value, as a point of departure for their ‘harsher’ critique of empire building. This is a great disservice since it obscures the limits of imperial power, its vulnerability and, worst of all it discourages mass opposition by putting premature closure on direct action.

Imperial Projections of Power: Rationality, Coherence and Realization

Some writers, journalists and academics from both the right and the left assume that the projections of power, or claims, plans and ideological pronouncements are the same as the realization of the same. In fact, many of the empire’s projections and proposals are not successful and failures are not uncommon. At the same time, some writers go to the opposite extreme, automatically assuming that failures spell the ‘erosion’ if not demise, of the empire (Todd, 2003; Wallerstein, 2003).

Under the Bush regime, the ideologues of imperial power laid out a schem...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Contents
• List of Tables and Figures
• Author Notes
• Introduction
• 1 Empire and Imperialism
• 2 Imperialisms, Old and New
• 3 Foreign Investment at Work
• 4 The Social Dimension of Foreign Investment
• 5 Policy Dynamics of Foreign Investment
• 6 Foreign Investment and the State
• 7 Anti-Imperialism and Foreign Investment
• 8 Anti-Imperialist Regime Dynamics
• Bibliography
• Index