Newsgroups: soc.culture.african.american
From: (Ahmed Diwan)
Date: Mon, 16 Jan 1995 00:37:31 UTC
Subject: Foreign Investment & Sovereignty

Foreign Investment & Sovereignty

By Ahmed Diwan

January, 1995

Foreign Investment & poison-pill:

Foreigners, whether they come in the form of traders or investment, inject long-term consequences for nation. We do not have to look too far back into history to know that. British East India Company came to India as a trader who invested in India for eventual ownership of India and colonization. In those days, people had to travel with their investment and goods and hence they were in separable. But now-a-days, investment and people need not come together. Therefore, it can lull the locals even though they are no different in actual consequences for their homeland.

First thing that foreign investment does is to set up trade alliances with locals which are used as a stepping stones to incrementally break the hold of locals over their own economy. In a capitalist culture, it is the property rights that are supreme. Anybody who owns the economy acquires absolute rights including democratic rights, human-rights, political and cultural sovereignty. All other rights flow from property rights. That is why when East India Company rule in India was dismantled by violent revolt in 1857, the sovereignty of India fell into the hands of British crown and not Indians even though East India Company was practically run by Indians and India was totally habitated by Indians. India fell from East India Company rule to British rule. Because it was British crown that owned British East India Company and not Indians. Indians merely worked for them. Indians merely lived in India. Thus, sovereignty of a nation is held by the owners of the economy and not by those who are merely employed by the economy or those who merely habitat the nation in either debt-ridden property owned by foreigners or within a framework in which property rights are not claimed nor recognized.( i.e. Indians believed that everything belonged to god and god belonged to all. Use of resources was permitted but idea of legal ownership was totally alien. So all resources were used communally. Thus, the idea of claiming anything as personal, private, exclusive property was totally alien to India. British East Indian company and British crown took advantage of that vacuum to corner up claims to all the resources of India.) The goal of any economic policy should be to turn its citizens into the owners of the economy and not just wage-earners. Any economic policy that seeks to turn out its citizens to become hired-hands while encouraging foreign nationals to become owners of the economy has to be condemned as anti-national conspiracy. No matter how much foreign investment contribute to wage-growth or job-growth for locals, it is still a national conspiracy as it allows growth of foreign ownership while turning locals into dependent wage-earners.

Foreign investment, once allowed into the nation, create a head-I-win and Tail-you-lose dynamics. If nation allows the foreign investment to remit profits back to their home, it promotes wealth transfer out of the country and if nation does not allow wealth transfer, if forces foreign investment to reinvest and expand its ownership takeover of the economy. Either way, nation loses.

When Wealth-transfer is encouraged:

Economic activity is primarily meant to create wealth for the nation and not for other nations. Economic activity generated by foreign investment creates wealth but nations loses its benefits. It promotes a dangerous competition among stronger nations to exploit less stronger nations for maximizing prosperity at home. And since prosperity and economic security at home depends on maximizing exploitation and wealth-transfer from other nations, foreign nations begin to treat their subject economies as profit-centers, resource and labor pool and seek to manage them like a corporate entity dispassionately manages its bottom line. And like corporations fiercely guard their market share and classify everything as intellectual property to maintain their economic interests, nations also begin to guard their subject economies in similar fashion.

When foreign investment comes in for installing imported consumerism, it directly hits the saving pool, disposable incomes, capital-formation and wealth formation of the nation. Consumerism promotes savings-liquidation and wealth transfer in exchange for life-style. It hits the savings, disposable incomes and ancestral wealth as people liquidate them in exchange for insatiable life-styles. This way, savings and wealth are gradually sucked out of the nation while nation is left with life-styles and employments that become perpetually dependent on presence of foreign investment inside its borders. Presence of foreign investment for consumerism leads to liquidation of savings and disposable income which leads to liquidation of capital formation and wealth formation which leads to perpetual dependence of nation on foreign capital for maintaining even shrinking portion of economy owned by locals. Foreign investment builds such vicious cycle over nation and this trap becomes hard to break or reverse. Colonialism needs such conditions to advance its grip over nation.

Once a nation acquires insatiable and expensive lifestyles wile it is in the process of liquidating its wealth formation and capital formation, it does not take long before unsettling realities grip the nation. Wealth can be transferred to next generation or redistributed among people but life-styles can not be distributed among people not it can be transferred from one generation to another. Each generation and every individual has to bargain for it and earn it from an economy that is increasingly controlled by foreigners, where people are left with less and less wealth to bargain for the life-style, where each passing day brings less and less negotiating strength to the locals against foreign powers. Fortunes of individuals and generations might change year after year and generation after generation but aggregate wealth of a nation is perpetuated or even increased as long as nation remain self-contained. As soon as nation becomes an extension of foreign economy, fortunes of nation also begin to change year after year and decade after decade. Each generation would find itself impoverished and in politically weak negotiating position to acquire or sustain a lifestyle. Al though all work for the economy, economy is primarily controlled by foreigners and it works primarily for foreign interests. With each passage of year, nation and its token political process presides over irreversible loss of autonomy, sovereignty and nation's welfare. national affairs no longer remain internal private matters to be dealt by internal democratic political process. Every self-interest of nation becomes international affair as other nations have economic stakes in the internal and political affairs of the nation. As prosperity of foreign nations is directly affected by internal affairs of the host nation, it gradually gives them stakes in influencing, controlling and acquiring the political process, national affairs and the state of the host nation. Investment in foreign economy is always an extension of economic activity at home. Thus foreign investment links two economies, it adds foreign economy to the home economy. It makes foreign economy to be extension of home economy. Thus foreign investment for investor nations is a method of acquiring hegemony over foreign nations. Their economic security becomes national security and international concern. Full weight of their defence departments, military alliances, CIA type intelligence agencies, covert operations, UN and other agencies are brought to bear to ensure their economic security in the name of national and international security. Foreign investment is indeed an irreversible slippery slope for a nation.

When Wealth-transfer is restricted:

If foreign investment is not allowed to take wealth out of nation, it produces another evil. Gradual take over of whole market share. Gradual take over of whole industry. Gradual take over of whole economic sector. Gradual take over of whole corpocracy. Gradual take over of whole economy. Many small and poor nations have such a small economy that just handful of American companies can buy them lock stock and barrel. When not allowed to take back profit, foreign investors are forced to reinvest in the nation to expand their economic stake and ownership of the economy.

Increased investment activity can expand jobs, earning power and wealth. But what if they are meant to create and expand the market potential of other foreign industries? It means that whatever earning growth is achieved by jobs is given right back to the foreign investors to help them expand their ownership stake in the economy. And those who refuse to be swayed by consumerism save their money and put their savings in banks owned by foreigners. So foreign investors end up with nations labor, nation's earnings, nation's savings and nation's wealth too. All that nation is left with is jobs and lifestyle. At least people get something out of it but what is the gain for nation. nation is not made up of just current crop of people. Nation do not die with passing of one generation. Nation has to live on generation after generation. The illusion of prosperity that imported consumerism, foreign investment and few high-paying jobs create essentially comes at the expense of nation and future generations. Period.

In order to attract foreign investors, they demand level playing field so that they can penetrate the market, create and expand demand for their products, compete to capture largest possible market share and make a bundle. To create level playing field, they engineer politics of inflation, devaluation of currency, dropping price support and subsidies etc in order to escalate the cost of living structure to bring at par with their home country. How much market a Burger company can capture if it sells one Burger for 200 Rupees when low cost of living of a nation can feed a whole family for a week for 200 rupees? Naturally creating leveling field requires raising the cost of living such that even one square meal costs 300 Rupees and than burgers can sell like hot cakes even at $250 rupee a piece. Similar adjustments are demanded in national culture that inhibit growth of demand for their products. Foreign laws have to be either extended to the nation or existing laws of the nation has to be adjusted so that foreign investment feels right at home. They demand adjustment in labor practices, welfare laws, government procedures, budget priorities, national priorities. Welfare schemes, subsidies, protective labor laws etc are dismantled brining instant misery to masses while benefits of 'reforms' are only in government statistics and rhetorics of cheerleading business accomplices of foreign investors. Advantages if any trickle slowly to only tiny segment of elite who were better off anyway even before so-called reform. We know that increase in cost of living spare none across the population base while growth in income always spreads unevenly and confined to only few who are already well-off. No scheme of evening out incomes or redistribution of income have ever produced measurable positive results. So the primary goal of any economic policy should be to lower the cost of living so that everybody in spite of income differences can lead life of dignity. And only as a secondary goal, it can try to increase the living standard of everybody knowing fully well that growth of income is going to be uneven. Anybody who tries to sell a scheme of increasing standard of living by escalating cost of living is a con artist. It will deliver you a lifestyle in stead of standard of living or quality of life and rob your country dry.

Even though some local businesses who have formed alliance with foreign investors do most of the cheerleading, local business are the worst losers upon arrival of foreign capital. Local business have to compete with foreign investors in wages and corporate benefits. It brings in the clash of two different cost structures that benefits the foreign investors alone. Even if foreign investor pays 10% of the salaries it pays back at home, for local businesses to pay even half of it is suicide. To compete with foreign investor, local economy has to pay salaries through nose and escalate the price of its products and liquidate the market- share it had historically built by careful pricing policies. It helps create level playing field and even footing for foreigners and locals as far as market-share is concerned. Foreign industries bring savvy marketing skills, international prestige, vast experience, lots of political backing from back home.

Western capitalism is battle-tested. No emerging 'markets' can compete with them. There can never be level playing field between them. With such realities, forcing foreign investors to reinvest and not transfer wealth can only force them to expand their total ownership share in total economic pie of the nation even though it is a growing pie. Nations emerging from decades of socialist and communist hangover are least suited for competing with west on capitalism. It they want to compete with west, they should better find something on which west is weak and than they can have some hope.

Examining Japanese Experience:

Many advocates of free-trade and foreign investment show- case japan as a success story. But they do not fathom either economic policies or geo-political games or ideological rivalries within which much of the fall out of the economic policy/war takes place. First of all, political dynamics caused by foreign investment work in opposite manners between market-seeking nations and market-provider nations and among market-seeking nations. Most of the analysis presented here applies to market-provider nations - nations that have just emerged from socialist, communist chaos - many nations of Asia, Africa and Latin America. Many such nations are experiencing ideological vacuum that had given stability in the past. People have lost faith in political process and ruling parties in such nations. So all ideological parties are trying diabolical means to hold on to power, deliver quick miracles and redeem themselves. For misery that they have inflicted on nation and people for decades, they are now trying to attract foreign consumer culture and foreign capital to deliver quick economic paradise. They have no way of meeting the domestic needs on their own. Their ideologies have proven to be less than self-sufficient in economics even though they practiced absolute self-sufficiency and isolationism in politics. By the way, these are the nations who have historically met the expansionist needs of global capitalism. If any nations have suffered worst from global capitalism, it is these nations.

Japan has a strong capitalism for a small island nation. Capitalism is inherently market-seeing ideology. It can not be contained within nation-state constraints for too-long. On top of it, japan is a tiny nation. That means its capitalism can not be sustained by its own domestic population. It is a natural market-seeker nation. America is a huge country. It will take decades if not centuries for any country to take over American economy though economic war. Besides capitalism is the least method by which America can be taken over. America has battle tested capitalism too. Market-seeker nations behave among themselves. There is an unwritten truce among market-seeker nations to avoid economic take over of each other. Market-seeker nations tend to be homogeneous in ideology and hence political will can be created in very short time to ward off any threat to their sovereignty of prosperity. In stead of fighting among themselves for economic growth at the bloody expense of each other, they direct their expansionist needs towards relatively easy market-provider nations. So market-seeker nations do not have to fear each other as long as there are market-provider nations providing new economic frontiers to them.

In spite of economic might of japan and much touted trade surplus with America, japan has yet to capture total market share of any product let alone take over of whole industry or sector. All that japan has done is to penetrate low-end of consumer electronics, small market share in automotive industry. For all its success, it has yet to penetrate key and strategic sectors of American economy. Media, communication, publishing, entertainment, real estate, defence, power, energy, agriculture, banking, finance, insurance etc are off-limit to japan. By contrast, all market-provider nations are asked to open up these very sectors which America will not let japan even peek at it. Look at how America reacts when Japanese firm attempt to buy sear towers. America screamed as if japan was buying whole real estate industry. Look at how America reacted when Japanese firm bought one Hollywood studio. America cried as if that is the only studio in town and as if japan is leading a cultural invasion. For most part, Japanese operations in America are managed and staffed by Americans. Japan might own one Hollywood studio but you hardly see any Japanese bias or Japanese culture in its output. Every small move japan makes is magnified and symbolic of sinister large plot. With all its trade surplus, japan has been forced into investing its wealth into non-strategic and dead-end areas - like financing American deficit, welfare state. yes. That is where Japanese wealth/Japanese surplus end up. USA knows that japan can not take over mighty US state. So that is where fruits of Japanese success in America has been channelled. This is how America ensure that Japanese trade does not end up as economic invasion of USA. How many nations have the political will power and manipulative media to handle a trading partner in such manners? Japan has also insulated its market by fiercely isolationist and nationalistic culture. japan is so small, it can fall in no time if it opens its economy to America. So far, it has resisted all American pressures even if it meant periodic collapse of ruling government. How many nations have such political will? Can India or Mexico brag about such political will. Hell, their political process is so corrupt that even catching a criminal can become major political risk! Have any of them demonstrated any political strength against any nation in foreseeable past? Than why compare them to japan or china or USA? What works for china, japan and America will not work for India or Mexico. In risky trade adventures, it is all matter of political will. Some have it and some will not. Some will benefit from it and others will never.

In spite of japan being a economic giant, it still is a client state of USA. Japan depends on America to provide defence. The Japanese constitution isa constitution of a defeated nation. It was written and imposed by victorious America to punish japan. Thus, Japanese politics are engineered by constitution written by USA. Japan can not rebel against constitution or USA because Japanese security dog is USA itself. You need army with you and not against you to rebel. Thus, japan depends on American written constitution for democracy. Japan depends on American defence for finances. japan depends on American capitalism for economics for which it is geograhically and demographically least endowed. Japan depends on America to sustain the market-hunger of its capitalism. America has pretty much isolated japan from its natural Asian constituency for parking its capitalism. And by isolating japan from everywhere else, USA has forced japan to be totally dependent on USA for markets. And for this dependency, japan has been blackmailed at every turn either to channelize Japan's earned wealth to finance American statism and its defence policy or to foster American political objectives in japan, Asia and else where. Like America used Arab oil as well as earned oil wealth of Arabs to rip them off, America is forcing Japanese capitalism to serve American consumers and forcing wealth earned by American access to serve American tax-payers by financing deficit and government sector. America is making full use of japan and other American allies in Asia to pit them against each other in order to advance American political and economic interests in Asia on one hand and to isolate japan, china and India from each other and from rest of the Asia. Ant time japan tries to extend its capitalism in Asia, American allies in Asia cry Japanese war-crimes to push back japan into dependence on US market. And for this dependency and resulting trade deficit of US with japan, US blackmail japan into channeling the trade wealth where America wants it to go. If USA can deal with economically hardened nation like japan in this manner, what chance do economic novice like India and Mexico stand with USA?

Most third world nations are presided over by socialist/communist era parties who are trying to survive in post-socialist/communist era. They are desperate to show something for their near totalitarian, monopolistic hegemony over nation. They see end of their career as disillusionment simmer among masses. They are groping for miracle cure. USA has caught these nations in politically weakest moment. For a price for sustaining the old despots, USA is extracting all kinds of one-sided treaties and deals while ideologically depleted ruling parties are signing away the store in fond hope of staying one more term in power. In India, this is how British had extracted trade treaties from doomed princes and kings that eventually doomed them as well as India.

Sudden rush of capitalism and consumerism, flow of latest and greatest from west, flood of investment from every corner can create an illusion of progress and utopia to a shortage-ridden, poverty-striken economy hungry for any good news. Such tactic is nothing but populism and deceit. Because this illusion follows a bell curve. Bell curve has an up-swing and down-swing. A bribery phase and enslavement phase. During bribery phase, foreign investment tries to negotiate its entry and expansion. But as foreign capital establishes its foothold and need to bargain for its advancement fade, phase of exploitation begin. This phase represent the end of bribery phase. On a bell curve, it marks the end of up swing and beginning of down swing. finally when nation's wealth diminishes due to wealth transfer and as consumerism and commercialism get saturated, the final phase of enslavement begin. It uses its political and economic control to persecute and subdue nation's institutions, patriotic forces, cultural realities, national character and ethos who have traditionally opposed them and thrown hurdles and risks at them. These are the forces who can upset the apple-cart of foreign hegemony in any given economic down-turn. It is when foreign powers begin to persecute the nationhood and native forces that real inquisition and dehumanization really begin. The same life- styles that were previously seduced on all people by every manipulative means, all of a sudden, they become available only to those who are qualified to do competitive bidding of their masters. People previously earned them in exchange for wealth-transfer. Now they have to beg and plead for them in exchange for exploitation, in exchange for anything. When nationhood is lost and nation is made homeless, it has to stand in the corner with a sign: 'will do anything for food'.

A mark of banana republic or colony is that its economy, its polity, its defence policy, its domestic and foreign policy serve foreign nation. They all execute the interests of foreign nation while touting merely token but magnified as major domestic interests. People think that they have a say over national affairs but whole political/democratic machine is so engineered towards manipulating and extracting he mandate desired by alien interests. Political parties, their ideologies, media, issue-level politics, political debates and laws etc are geared towards creating bidding process and rivalries for bringing home the mandate of foreign masters.

What kind of reform is this that end up deforming the nation? What kind of investment is this that end in divestment and depletion of nation's wealth and prosperity and resources? What kind of empowerment and progress is this that disempower and limit the autonomy and choices of future generations? Let us understand this clearly. Domestic investment alone can bring reforms, prosperity and liberty. Foreign investment can bring nothing but deforms, destitution and death of freedom and nation. You may memorize this line. It might come in handy as politics of foreign investment and economic-wars unfold.

By Manmohan Sinha