Modern Imperialism: Corporate Takeover of the World [View All]

[Time for change]

Imperialists, like everyone else, have always sought to justify their actions. In the latter 19th Century and the early decades of the 20th Century, imperialism was more direct than it is today, and it was called imperialism. The basic concept was rather simple. A militarily strong country from Europe would enter a militarily weak third world country and take control of it. The natural resources and human labor of the weaker country were put in the service of the stronger country.

The justification of this process has been captured by the phrase “white man’s burden”. Under this theme, imperialism was justified on the basis that the dominated countries were inhabited by culturally backwards savages who were in need of being “civilized”. Dominating them was not something that the imperialists did in order to enrich themselves, but rather it was a burden that they carried out for strictly altruistic purposes.

Numerous successful rebellions by the colonized countries in the first half of the 20th Century eventually discredited the concept, so that imperialism went out of favor. The new anti-imperialist world attitude towards imperialism is captured in the preamble to the United Nations Charter, which came into existence in 1945:

We the people of the United Nations determined:

To save succeeding generations from the scourge of war, which twice in our lifetime has brought untold sorrow to mankind, and

To reaffirm faith in fundamental human rights, in the dignity and worth of the human person, in the equal rights of men and women and of nations large and small, and

To establish conditions under which justice and respect for the obligations arising from treaties and other sources of international law can be maintained, and

To promote social progress and better standards of life in larger freedom…

But progress has never followed a straight line. Imperialism is alive and well in the world today, but it goes under different names, such as “free trade”, “foreign investment”, or “structural adjustment”. Naomi Klein, in her book, “The Shock Doctrine – The Rise of Disaster Capitalism”, uses another name for it: Shock therapy. As always has been the case, its practitioners and proponents provide justifications for the new imperialism, just as they did for the old imperialism. But of course they use different justifications than the old ones, in order to conform to the new ideologies.

The ideology at the root of all these policies is supplied by Milton Friedman’s economic theories, developed at the University of Chicago. These theories, when put into practice in several countries over more than three decades, have served primarily to increase the wealth and power of the wealthy, at the expense of everyone else.


The new imperialism

Under the new imperialism, various strict and related conditions are imposed upon a country in return for a loan, usually structured by international financial institutions that are largely under the control of the United States. In addition to a strict schedule for repaying of the loan, the conditions generally include: opening the country to private investment; the privatization of national resources, services, and industries; various favors towards those industries, like selling off state assets at bargain prices, tax breaks, subsidies, a paucity of regulation, and laws that greatly favor capital over labor; and drastic cuts in social services for the country’s inhabitants.

The primary result is that the foreign corporations and investors make vast profits while the country’s inhabitants become even more impoverished than they were. The process is something akin to loan sharking or indentured servitude.

The rationalization used to justify this process is that the privatized industries, through the process of the unfettered “free market”, will be far more efficient and productive than they were when they were under government ownership. This will result in improved goods and services for the country’s inhabitants, and will provide tons of jobs as well. However, it rarely works like that.


Critique of the rationale for the new imperialism

James Petras, in his book, “Rulers and Ruled in the U.S. Empire”, debunks the many rationalizations that proponents of the new imperialism use to justify their activities.

He points out that, far from making their products more available to a country’s inhabitants, the prices that multinational corporations (MNC) charge are usually so high that most inhabitants of third world countries are priced out of the market. Because of the many tax breaks and lack of oversight leading to illegal tax evasion, few tax revenues are received by the country. Few or no net jobs are created because the MNCs often don’t hire local workers for its activities. And when they do hire local workers they do so under government laws that greatly favor capital over labor, which are enacted to attract MNCs. The bottom line is that rather than serving as a financial asset to the country, profits accrue to the MNC and its investors while draining the country of its financial and other resources. Debt it piled up, necessitating new loans, and a vicious cycle of loans leading to further indebtedness.

With regard to the ideological claims that the process encourages “competition”, Petras has this to say:

The real effect is to convert public monopolies to foreign owned private monopolies. This usually results in an increase in charges, a decline in services for less profitable regions or low-income consumers, and an end to subsidized rates for emerging domestic industries and the impoverished urban and rural poor…

Foreign investors have successfully secured control over some of the most lucrative oil and gas fields from compliant rulers. The obvious result has been a huge transfer of wealth from the national economy to the MNCs under the assumption that the new investments … will provide compensatory benefits. The problem is that energy corporations are notorious for not fulfilling their investment obligations. They charge international prices to local consumers, pricing endogenous producers out of international markets and impoverishing low-income energy users. It deprives the revenue starved state of a source of public funding. It heightens inequalities between the foreign rich and their local associates and the rest of the population

Why do countries allow this to happen to them?

Persuasion
Persuasion is often the preferred initial method to convince countries to accept the conditions required by international lending institutions in return for loans. Persuasion of course is apt to be more effective when countries are desperate for money. And it can take many forms.

First there are the ideological arguments about the wonders of the “free market”. Such arguments may have held some sway with well meaning people in the past. However, by now the fallacy of these arguments has become well known, as least among those who have studied the effects on developing countries.

John Perkins, in “Confessions of an Economic Hit Man”, explains how persuasion is often used, from the perspective of an insider who formerly did the dirty work that he describes in his book. Perkins explains that economic hit men (EHM) are paid by U.S. corporations to develop economic projections for major development projects in third world countries. Their projections are supposed to predict substantial economic growth and thereby justify huge loans from international lending institutions. The money from the loan then is immediately funneled into U.S. oil, engineering or construction companies (which is a precondition of the loan) to develop their projects.

Sometimes there are darker aspects to persuasion, for which we will probably never know the full extent . Perkins describes these aspects in his second book, “The Secret History of the American Empire – Economic Hit Men, Jackals, and the Truth about Global Corruption”, quoting an anonymous source, who was a fellow EHM:

I walked into El Presidente’s office two days after he was elected and congratulated him… I said “Mr. President, in here I got a couple hundred million dollars for you and your family, if you play the game – you know, be kind to my friends who run the oil companies, treat your Uncle Sam good.” Then I stepped closer, reached my right hand into the other pocket, bent down next to his face, and whispered, “In here I got a gun and a bullet with your name on it – in case you decide to keep your campaign promises.” I stepped back, sat down, and recited a little list for him, of presidents who were assassinated or overthrown because they defied their Uncle Sam: from Diem to Torrijos – you know the routine. He got the message.

Financial manipulation or indifference
Naomi Klein explains in her book that countries are much more susceptible to requests to alter their laws and economic policies to benefit foreign corporations when they are in shock. The shock can result from war, assassination or overthrow of a head-of-state, natural disaster, or financial calamity. In any of these cases, the shock can provide great opportunities for opportunistic foreign scavengers.

The Southeast Asian financial crisis of 1997 – the economic collapse of the so-called Asian Tigers – provides a good example of how international financial institutions have used their financial powers to facilitate a financial crisis to benefit powerful corporations. Just prior to their collapse, the Asian Tigers were being held up as great success stories of globalization. Klein explains the role of international financial institutions in the crisis.

In the mid-nineties, under pressure from the IMF and the newly created World Trade Organization, Asian governments agreed to lift barriers to their financial sectors, allowing a surge of paper investing and currency trading…

As for the IMF, the world body created to prevent crashes like this one, it took the do-nothing approach that had become its trademark since Russia. It did, eventually, respond – but not with the sort of fast, emergency stabilization loan that a purely financial crisis demanded. Instead, it came up with a long list of demands, pumped up by the Chicago School certainty that Asia’s catastrophe was an opportunity in disguise…

Klein also explains in great detail the motivation for the financial elites wanting the Asian economies to fail. Here is part of that explanation:

If the crisis was left to worsen, all foreign currency would be drained from the region and Asian-owned companies would have either to close down or to sell themselves to Western firms…

The IMF was exclusively focused on how the crisis could be used as leverage. The meltdown had forced a group of strong-willed countries to beg for mercy; to fail to take advantage of that window of opportunity was, for the Chicago School economists running the IMF, tantamount to professional negligence.

To “take advantage of the opportunity” the IMF required the Asian countries to adopt a host of Milton Friedman’s Chicago School economic “reforms”, such as:

The IMF also demanded that the governments make deep budget cuts, leading to mass layoffs of public sector workers in countries where people were already taking their own lives in record numbers. They were now ready to be reborn, Chicago-style: privatized basic services, independent central banks, low social spending and, of course, total free trade… Indonesia would cut food subsidies…

Government overthrow
John Perkins explains that if the EHMs are unsuccessful in their efforts to convince a government to play ball, then the “jackals” are sent in to assassinate or overthrow the uncooperative government officials in question, as was done for example in Iran in 1953, Guatemala in 1954, in Chile in 1973, or in Indonesia in 1965.

Naomi Klein describes how Milton Freidman’s economic theories and policies worked in tandem with U.S. covert assistance to destroy the economic functioning of several South American countries in the 1970s, following the overthrow of Salvador Allende and his replacement by the brutal dictator Augusto Pinochet in 1973:

The Chicago School counterrevolution quickly spread. Brazil was already under the control of a U.S. supported junta… Friedman traveled to Brazil in 1973, at the height of that regime’s brutality, and declared the economic experiment a “miracle”. In Uruguay the military had staged a coup in 1973 and the following year decided to go the Chicago route…. The effect on Uruguay’s previously egalitarian society was immediate: real wages decreased by 28% and hordes of scavengers appeared on the streets… Next to join the experiment was Argentina in 1976, when a junta seized power from Isabel Peron. That meant that Argentina, Chile, Uruguay and Brazil – the countries that had been showcases of developmentalism – were now all run by U.S. backed military governments and were living laboratories of Chicago School economics.

Violence and war
Violence and war meld with government overthrow as a means of getting countries to go along with our wishes. Perkins explains that when other methods don’t work, then we send in our military, as we did in Panama in 1989 or in Iraq in 1991 and 2003.

Klein explains that the preferred economic policies are often so painful to a country’s population, that peaceful means are not enough to maintain them. She describes the role of systematic violence in persuading Chileans to accept new economic policies following the installation of Pinoche’s regime:

The generals knew that their hold on power depended on Chileans being truly terrified…The trail of blood left behind over those four days came to be known as the Caravan of Death. In short order the entire country had gotten the message: resistance is deadly… In all, more than 3,200 people were disappeared or executed, at least 80,000 were imprisoned, and 200,000 fled the country.

Antonia Juhasz, in her book, “http://www.google.com/search%3Fhl%3Den%26q%3Dthe%2Bbush%2Bagenda%2Bjuhasz%26btnG%3DSearch&sa=X&oi=print&ct=title&cad=one-book-with-thumbnail">The Bush Agenda – Invading the World One Economy at a Time”, describes how force and violence are used by third world governments to protect corporate interests:

Cochabamba is the 3rd largest city in Bolivia… In late 1999, the World Bank required that Bolivia privatize Cochabamba’s water in return for reduction of its debts. Bechtel – one of the top ten water privatization companies in the world – won the contract.

Immediately after Bechtel took over the Cochabamba water system, and before any of the promised investments in infrastructure were made to improve or expand services, the company raised the price of water… by 100%... Many were simply forced to do without running water… The same law that privatized the water system also privatized any collected water, including rainwater collected in barrels…

The majority of the people voted for the cancellation of the contract with Bechtel. When this demand was met with silence from government officials, the citizens went on a citywide strike… the Bolivian government defended Bechtel’s right to privatize by sending armed military troops into the streets to disperse the crowds. At least one 17-year-old boy was shot and killed and hundreds more were injured…

Petras describes the role of the U.S. military as the ultimate guarantee that our preferred policies will be realized:

The responsibility of the US for the growth of Latin American billionaires and mass poverty is several-fold and involves a very wide gamut of political institutions, business elites and academic and media moguls. First and foremost the US backed the military dictators and Neoliberal politicians who set up the billionaire economic models.

Examples of the consequences of the new imperialism

The books described above provide numerous examples of the consequences of the new imperialism in a wide range of countries. Here are just a few of them:

Russia 1991
Following the break-up of the Soviet Union, Russia was in dire financial straights as it attempted to convert to capitalism. Under pressure from the United States and international financial institutions, Boris Yeltsin decided to go the economic shock therapy route:

After only one year, shock therapy had taken a devastating toll: millions of middle-class Russians had lost their life savings when money lost its value, and abrupt cuts to subsidies meant millions of workers had not been paid in months. The average Russian consumed 40% less in 1992 than in 1991, and a third of the population fell below the poverty line. The middle class was forced to sell personal belongings from card tables on the streets.

Chile 1973
As described in Klein’s book, following the overthrow of Allende and his replacement by Pinochet:

In 1974, inflation reached 375 %. The cost of basics such as bread went through the roof. At the same time, Chileans were being thrown out of work because Pinochet’s experiment with “free trade” was flooding the country with cheap imports… Unemployment hit record levels and hunger became rampant… Chicago boys argued that the problem didn’t lie with their theory but with the fact that it wasn’t being applied with sufficient strictness.

Poland – 1988
Poland won its independence from the Soviet Union in 1988, and it was in dire financial straights at that time. It was made clear to them that they could expect little or no help unless they agreed to economic shock therapy. Klein describes how that worked out:

Shock therapy in Poland did not cause “momentary dislocations,” as predicted. It caused a full-blown depression: a 30% reduction in industrial production… unemployment skyrocketed, and in 1993 it reached 25% in some areas – a wrenching change in a country that, under Communism, for all its many abuses and hardships, had no open joblessness…

In 1989, 15% of Poland’s population was living below the poverty line; in 2003, 59% of Poles had fallen below the line. Shock therapy, which eroded job protection and made daily life far more expensive, was not the route to Poland’s becoming one of Europe’s “normal” countries…

The Asian Tigers – 1997
Klein describes what happened to the Asian people following the financial crisis described above:

24 million people lost their jobs in this period… What disappeared in these parts of Asia was what was so remarkable about the region’s “miracle” in the first place: its large and growing middle class… 20 million Asians were thrown into poverty in this period of what Rodolfo Walsh would have called “planned misery”… Women and children suffered the worst of the crisis. Many rural families in the Philippines and South Korea sold their daughters to human traffickers who took them to work in the sex trade… a 20 percent increase in child prostitution.

Iraq – 2003
Antonia Juhasz explains in her book that economic plunder was one of the chief reasons, and probably the chief reason, for the U.S. invasion and occupation of Iraq. In that sense, it was a great success, not the failure that it is often made out to be.

The Foreign Investment Order provided the legal framework for the invasion of U.S. corporations into Iraq. It provided for the privatization of Iraq’s state-owned enterprises, foreign ownership of Iraqi businesses, tax-free remittance of all profits, immunity of foreign businesses from Iraqi courts, and much else. As with everything else about the U.S. occupation, these provisions did great damage to the Iraqi people, for the benefit of U.S. corporations. Juhasz describes the effects of privatization of Iraqi industries:

In Bremer’s own words, “Restructuring inefficient state enterprises requires laying off workers.”… Even those workers who still had jobs in Iraq at the time only received… about half of what they made before the war. At the same time, prices skyrocketed.

And with respect to the lack of any constraints on foreign corporations:

U.S. corporations are therefore invited to enter the Iraqi economy, exploit a nation at its most vulnerable point, with no obligation to reinvest in the country at a time when rebuilding Iraq is professed to be the Bush administration’s most vital assignment. U.S. corporations have reaped staggering revenues from their Iraqi operations… Chevron, Bechtel, and Halliburton have each experienced skyrocketing returns to their Iraqi endeavors.

In the hands of U.S. corporations, the effort to rebuild Iraq was a miserable failure:

The Bush administration … failed in this mission because it did not focus its efforts on the immediate provision of needs, but rather on the opening of Iraq to private foreign corporations… Iraqis have continually pointed to the lack of electricity as a primary source of unrest… electricity has remained far below prewar levels and significantly below U.S. stated goals…

The result was frequent blackouts and the availability of electricity for only a few hours a day, with air conditioning unavailable much of the time in the face of outside temperatures of 130 degrees. Lack of potable water and sewage treatment has been another continuing and major problem:

The full failure of the reconstruction was revealed in a January 2006 U.S. government audit. Although more than 93% of the U.S. appropriation has been spent or committed to specific companies and projects, as much as 60% of all water and sewer projects will not be completed…

Conclusion – some words about world hunger

Since world hunger is one of the greatest scourges in our world today, it is fitting to end this post with some words on that subject. Contrary to popular beliefs, world hunger and starvation is not just an accidental result of the unpredictability of nature – rather it is largely a result of the policies described above.

World agriculture produces enough food to feed everyone in the world with at least 2,720 calories per day, as explained by the “World Hunger Education Service”, which notes that “The principal problem is that many people in the world do not have sufficient land to grow, or income to purchase, enough food.” Yet, the most recent (2006) estimate of the United Nations’ Food and Agriculture Organization is the 820 million people (12.5% of the world’s population) are malnourished.

A recent article in The Nation, titled “Manufacturing a Food Crisis”, by Walden Bello, explains much of the dynamics of world hunger in today’s world:

The apostles of the free market and the defenders of dumping… The policies they advocate are bringing about a globalized capitalist industrial agriculture. Developing countries are being integrated into a system where export-oriented production of meat and grain is dominated by large industrial farms… The elimination of tariff and nontariff barriers is facilitating a global agricultural supermarket of elite and middle-class consumers…

There is little room for the hundreds of millions of rural and urban poor in this integrated global market. They are confined to giant suburban favelas, where they contend with food prices that are often much higher than the supermarket prices, or to rural reservations, where they are trapped in marginal agricultural activities and increasingly vulnerable to hunger. Indeed, within the same country, famine in the marginalized sector sometimes coexists with prosperity in the globalized sector…

This transformation is a traumatic one for hundreds of millions of people, since peasant production is not simply an economic activity. It is an ancient way of life, a culture.

Such is, and has always been, the results of imperialism – war, misery, and the repression of the many, so that a small minority may live in luxury beyond the imagination of most normal people.