Empire building (EEB) is the driving force of the US economy and
became more central over the past five years. More than ever before
in US economic history, the principal US banks, oil companies,
manufacturers, investment houses, pension and mutual funds all
depend on exploiting overseas nations and peoples to secure high
rates of profit. Increasingly the majority of banking and corporate
profits accrue from overseas plunder.
As EEB becomes
central to the viability of the entire US economy, competition
with Europe and Asia for lucrative investment rates and economic
resources intensifies. Because of heightened competition, and
the crucial importance of overseas profits, corporate corruption
has become a decisive factor in determining which imperial center's
MNCs and banks will capture lucrative profit-generating enterprises,
resources and financial positions.
of corruption in imperial expansion and in securing privileged
positions in the world market exemplifies the increasing importance
of politics, in particular relations with states in the imperial
re-division of the world. Globalization, so-called, is a euphemism
for the increasing importance of competing empires intent on redividing
the world. Corrupting overseas rulers is central to securing privileged
access to lucrative resources, markets and enterprises.
of Economic Empire Building Today everywhere you look, the central
fact in the corporate and banking annual reports is the essential
need for a strategy of overseas expansion in order to sustain
profits. Citicorp, the largest banking enterprise in the world,
announced that a massive overseas expansion program to increase
profits by 75 per cent "US institutional and retail investors
have headed offshore in search of higher profits", writes the
Financial Times (October 11, 2006 p. 24). For the year ending
October 4, 2006, of the US$124 billion entering all the US equity
mutual funds, US$110 billion dollars went into funds investing
in overseas companies. For the first eight months of 2006, 87
per cent of total equity flows went offshore.
for overseas profits is not a momentary preference but a secular
shift. It will continue over the long term because of the higher
rates of return overseas and the belief that the dollar will weaken
because of high US fiscal and trade deficits. Oil and energy companies
report record high profits. Exon Mobil recorded a 26 per cent
increase in 2006 over the previous year, most resulting from exploiting
overseas sites. IBM has shifted a substantial part of its research
and design centers from New York to China, while retaining financial
control and strategic decision-making in the US. Over 60 per cent
of China's exports are produced or subcontracted by US manufacturers.
Ford and GM overseas profits, especially in Latin America and
Asia compensate in small part for their multi-billion dollar losses
in the US.
MNC and banks engage in
corrupt practices through
intermediaries. If we include direct
and indirect forms of corporate
corruption then it turns out that
in some countries nine out of 10
corporations engage in corruption.
According to the survey,
"about three quarters of
the companies, including 94 per cent
in Germany and 90 per cent in Britain
think businesses from their countries
use agents to circumvent
of the US imperial state in the Cold War and the subsequent ascent
of US client regimes in the former Soviet Union, Eastern Europe,
the Baltic and Balkan states, as well as China and Indochina's
conversion to capitalism have doubled the number of workers in
the capitalist world economy from 1.5 billion to 3 billion.
The growth of a billion-member reserve army of displaced peasants,
factory workers led to an unprecedented 40 per cent decline in
the capital-labor ratio. The massive growth of world wageworkers
(especially in the ex-communist countries) has been fully exploited
by the MNCs both in increasing profits overseas and as immigrants
in the home market.
Adam Smith assumed that the labor surpluses in the poor, newly
capitalized countries would be absorbed and competition for workers
would drive living standards up. The current tendency is for money
wages to grow while social wages decline in the so-called 'emerging
countries' and both money and social wages to decline in the imperial
centers. As the number of occupations (even the highly skilled)
are no longer safe from world competition even better paid workers
face declining living standards.
fact about the flow of US capital abroad is that it takes place
despite a 'rebound' in the domestic economy. In other words, the
improved performance of the US stock market and domestic economy
has failed to reverse the overseas profit-driven expansion of
the US Empire.
new targets of MNC, banks, pension funds and institutional investors
are the 'BRIC' countries - Brazil, Russia, India and China. Russia
is favored for its massive oil and gas wealth, its market for
transport and luxury goods, all of which yield high rates of profit.
Brazil is an investor's paradise for its world record interest
rates, raw materials and low labor costs in manufacturing especially
in the automobile sector. China attracts investors to its manufacturing
sector and consumer market because of low labor costs. China also
serves as an intermediary assembly and processing center for exports
from other Asian countries prior to exports (via US and EU MNCs)
to the West. India attracts capital to its centers for low cost
IT outsourcing, services and related activities.
What is striking
about the 'BRIC' countries and their growing attraction for US
and EU MNCs is their extremely poor rating with regard to corruption.
There is a strong correlation between the 'attractiveness' of
the 'BRIC' countries and the ease of doing business and having
access to highly lucrative economic enterprises and sectors once
the political leaders have been paid off.
over 50 per cent of the
top 500 US MNCs earn over
half their profits from overseas
operations. A substantial minority
earn over 75 per cent of their profits
from their overseas empires.
This tendency will accentuate as
US MNCs relocate almost all their
operations, including manufacturing,
design and execution.
is going far beyond the traditional conquest of raw material and
cheap labor exploitation. The empire builders are shoving their
way into the new, extremely lucrative finance, insurance and real
estate (FIRE) sectors. The hottest field of investment in China
and Russia is real estate, with prices increasing by 40 per cent
a year in most high growth metropolitan centers. Insurance and
financial sectors in China and banking and finance in Brazil have
returned billions of dollars over the past four years. US banking
and MNCs have subcontracted billions in IT and service contracts
to the new Indian business tycoons, who in turn subcontract to
50 per cent of the top 500 US MNCs earn over half their profits
from overseas operations. A substantial minority earn over 75
per cent of their profits from their overseas empires. This tendency
will accentuate as US MNCs relocate almost all their operations,
including manufacturing, design and execution. They will employ
low tech and high tech employees in their pursuit for competitive
advantages and high rates of profits.
free market economists emphasize the role of innovation, managerial
skills, leadership and organization in securing competitive advantages
and increasing rates of profit ("market forces"), in real life
these factors are frequently secondary to political factors, namely
multiple forms of corruption in securing economic advantage.
According to a six-country survey of 350 corporations published
by the law firm, Control Risks and Simmons and Simmons, "a third
of international companies think they failed to win new business
over the past year because of bribery by their competitors" (Financial
Times October 9, 2006 page 15). Moreover most MNC and banks engage
in corrupt practices through intermediaries. If we include direct
and indirect forms of corporate corruption then it turns out that
in some countries nine out of 10 corporations engage in corruption.
According to the survey, "about three quarters of the companies,
including 94 per cent in Germany and 90 per cent in Britain think
businesses from their countries use agents to circumvent anti-corruption
laws" (Financial Times October 9, 2006 page 15).
is highly dependent on political relations with the state through
a series of complex networks of 'intermediaries' who negotiate
monetary and other payoffs in exchange for a range of highly profitable
concessions. The MNCs are the basic unit of trade and investment
in the world economy. In greasing the wheels of economic transactions
through political corruption, they make a mockery of what orthodox
economists tell us about global expansion.
building is going far beyond
the traditional conquest of
raw material and cheap labor
exploitation. The empire builders are
shoving their way into the new,
extremely lucrative finance, insurance and real estate sectors.
field of investment in China and
Russia is real estate, with prices
increasing by 40 per cent a year
in most high growth metropolitan
centers. Insurance and financial
sectors in China and banking
and finance in Brazil have returned
billions of dollars over the
past four years.
corruption, not economic efficiency is the driving force of economic
empire building. Its success is evident from the massive - trillion
dollar - transfers of wealth, enterprises and resources from the
state sector to US/EU MNCs which has taken place in Russia, Eastern
Europe, the Balkans, Baltic countries and the Caucasus since the
fall of communism. The scale and scope of Western pillage of the
East is unprecedented in recent world history.
In their European conquests, neither Stalin nor Hitler took over
and profited from so many enterprises as have the Western MNCs
over the past two decades. What is worse, the initial pillage
set in motion a political system embedded with kleptocratic 'pro-Western'
'free market'. The latter constructed legislative frameworks,
which facilitate high rates of return. For example, legislation
on reductions of wages, pensions, job tenure, work place safety
and health regulations, land use policies in the ex-communist
countries were designed and enforced to maximize profits - and
'attract' US and EU MNCs.
Pillage and political corruption has created a mass of low paid,
precarious, underemployed and unemployed workers who are available
for exploitation by overseas US corporations and their partners,
the overseas institutional investors looking for high return.
is especially prevalent in several sectors of MNC overseas operations.
Arms sales, involving billions annually, is rampant with corruption
as the military-industrial firms bribe state officials to purchase
US weaponry. Military purchases, most with no real security value,
deplete local treasuries of funds, while raising profit margins
for arms industries and the institutional investors who engage
in overseas investments.
Oil and energy
companies secured exploration rights via corruption, by buying
out entire ministries in Russia, Nigeria, Angola, Bolivia and
Venezuela in the 1990s.
scale and scope of Western
pillage of the East is unprecedented
in recent world history. In their
European conquests, neither Stalin
nor Hitler took over and profited
from so many enterprises as have
the Western MNCs over the
past two decades. What is worse,
the initial pillage set in motion a
political system embedded
with kleptocratic 'pro-Western'
'free market'. The latter constructed
legislative frameworks, which facilitate
high rates of return.
a toehold in any economic sector of China to exploit cheap labor
requires the MNC to pay off a small army of government officials.
This is more than compensated by the regime's enforcement of a
cheap labor regime, repression of labor discontent and the imposition
of state-controlled pro-business 'labor unions'.
takes many forms: direct monetary payoffs to political officials,
positions in the enterprise for officials, family members, friends
and/or cronies, paid excursions, partnerships, invitations to
prestigious universities and scholarships for their children,
etc. What is important is that bribery works for the MNCs, otherwise
it would not be used so extensively and repeatedly..
On the other
hand, MNC corruption more often than not has a prejudicial effect
on the 'host' country. It reduces the legitimacy and trust of
the regime in the eyes of its people. It transfers wealth from
national-public use into private foreign gain. It weakens the
public authorities' leverage over policy and increases the decision-making
power of the MNCs. It transfers lucrative resources to foreign
private hands. It widens and deepens internal class inequalities
and undermines 'good governance'. Finally it creates a 'culture'
of corruption which siphons public resources from social services
and productive investment to personal wealth.
MNC corruption cannot take place without the knowledge of the
imperial state. Despite anti-corruption legislation, corruption
is endemic and becoming the norm in the expansion of competing
MNCs and empires. More and more, corruption is seen by the corporate
elite as the grease that keeps the wheels of 'globalization' rolling.
If the annexation
of the former communist countries opened new opportunities for
the imperial re-division of the world, and the pillage of post-communist
countries opened vast new sources of capital accumulation, then
on-going and deepening corruption has become the mechanism through
which rival capitals compete for global dominance. Economic empire
building cannot be seen strictly through the operation of 'market
forces' - because market transactions are preceded by political
corruption, are accompanied by political influence and followed
by political realignments of power.
today of the world economy, by necessity must address the most
salient aspect of that reality - the growth of economic empire
building. The entire network of MNCs criss-crossing the globe
and forging political and economic compacts with corrupt political
leaders is the basis of contemporary economic empires.
tight labor markets,
high profits, rising productivity and
economic growth, living standards
of workers in the West continue
to decline, contrary to classical
economic theory. This is in
large part due to political intervention
based on corrupt relations
between corporate capital
and the state, both in the
imperial countries and overseas.
process of empire building began with the privatization of publicly
owned property, resources, banks and productive enterprises. It
continues with deregulation of financial markets. It is legitimized
by the election (and re-election) of pliable client politicians.
The result is the creation of vast labor reserves of cheap labor
and the elimination of protective social and labor legislation.
The entire ensemble is based on political corruption at every
level, in each and every country, including the imperial home
politics, moralizing anti-corruption rhetoric, lectures on corporate
ethics and responsibility notwithstanding, corruption flows across
boundaries and up and down the social structure, subordinating
nations and workers to the emerging economic empires.
German Christian Democrats, Chinese Communists, Brazilian Worker
Party officials, US Republicans and Democrats - in appearance
from disparate ideological traditions - are all tightly enmeshed
with long-term, large-scale MNC expansion through corruption.
They encourage their MNCs to secure markets and wealth through
whatever means are necessary, including systematic corruption.
labor markets, high profits, rising productivity and economic
growth, living standards of workers in the West continue to decline,
contrary to classical economic theory. This is in large part due
to political intervention based on corrupt relations between corporate
capital and the state, both in the imperial countries and overseas.
Supply and demand of labor has had little effect on the price
of labor because it has been superseded by the corrupt interventionist
state, repressing labor, co-opting trade union bosses and setting
wage targets below what a free labor movement would secure.
corruption is as integral a part of empire building as overseas
investments, buyouts and market penetration. It is not an incidental,
isolated factor having to do with a lack of corporate ethical
codes. It is a systemic factor built into the very harsh competitive
conditions of contemporary empire building. As markets are absorbed,
as the surplus labor pools decline, as energy resources pass their
peak, imperial competition will intensify and corruption deepens.
reforms have not and will not work. The OECD's anti-bribery convention
came into force in 1999 and has had no impact. Over half of the
MNCs claim to be "totally ignorant of their countries' laws on
foreign corruption, (Financial Times October 9, 2006 page 15).
The other half simply "get round laws by using agents and intermediaries"
(ibid). Only by overthrowing the empire building state and ending
imperial competition and the re-division of the world can the
foundation be created for a world without corruption, pillage
James Petras, a former Professor of Sociology at Binghamton University,
New York, owns a 50-year membership in the class struggle, is
an adviser to the landless and jobless in Brazil and Argentina,
and is co-author of Globalization Unmasked (Zed Books). His latest
book is The Power of Israel in the United States (Clarity Press,
2006). He can be reached at: [email protected].
for other articles by James Petras:
The Liquid Bomb Hoax