Fight Racism! Fight Imperialism 224 December 2011/January 2012
Photo: US soldier harassing Iraqi workers in Fallujah, 2007
Nearly five years ago, in FRFI 195, we discussed an article by Charles Post about the labour aristocracy. FRFI has repeatedly argued that, in the imperialist countries, there is a ‘labour aristocracy’ – a privileged section of the working class, enjoying some of the spoils of imperialist exploitation and which behaves as the political agent of the ruling class. We have shown how this section has consistently betrayed the interests of the US, British and international working class by its actions. Post attempted to demonstrate that there is no such section, mainly by claiming that imperialist booty – the swag looted by the US imperialists from the exploited nations – is an insignificant part of the income of US workers. We argued that it is very significant and is quite sufficient to provide the privileges enjoyed by better-off US workers. Now Post has republished his article, with some minor modifications, in the academic journal Historical Materialism.1 Post’s absurd denial of the existence of a labour aristocracy undermines the struggle against racism and imperialism and covers up the betrayals of social democratic organisations like the Labour Party. We don’t have room to revisit our entire argument (see RCG website2), so we are going to bring the numbers up to date, correcting them and including all sources of booty. We believe FRFI readers will be interested in knowing the extent of US exploitation of oppressed nations. STEVE PALMER reports.
The first important mistake Post makes in counting imperialist booty is that he only includes ‘direct investment’. Yet, in 2010, total US direct investment abroad amounted to just $4.4 trillion, out of total US private assets abroad of $16.1 trillion3 – just 27% of total US private investment abroad! Why he does this is not explained.
What has he left out? US ‘portfolio investment’ abroad in 2010 included some $1.7 trillion in foreign bonds, $4.5 trillion of foreign corporate stocks, and $4.6 trillion of US banking and broking claims.4 In short, he has ignored huge and growing sections of finance capital, in particular recent developments in the financial sphere. This omission is really quite extraordinary, given the massive expansion of financial capital in the recent period and its responsibility for precipitating the 2007-2008 financial crisis. Post asserts that ‘95% of total capitalist investment took place within the boundaries of each industrialised country’ (pp18-19). This is fantastic – Post means direct investment, in an attempt to minimise the significance of imperialist investment, leaving out portfolio investment. In fact, international investment amounts to around 150% of global GDP, a cool $100 trillion.5
The second significant error Post makes is in counting imperialist booty: he includes only profits. In addition to profits, there is interest, and a whole variety of rents of various kinds, extracted under the rubric of ‘services’: insurance and legal costs, royalties, licence and patent fees. These are official ruling class labels – more accurate descriptions would be ‘booty’, ‘swag’ or ‘extortion’.
In addition to these official categories, there are what the ruling class delicately refers to as ‘illicit financial flows’. These include the proceeds of smuggling, corruption and money laundering. They also include the fruit of ‘transfer pricing’ or ‘trade mispricing’. Transfer pricing is the practice of over-invoicing a subsidiary or affiliate for components, finished items or services. Instead of paying at cost, the subsidiary pays an extra amount above the cost to the parent company. In this way, profits can be moved around within a multinational enterprise to minimise tax payments and take advantage of beneficial accounting rules. Using transfer pricing, companies can repatriate booty to the US, as the ruling class puts it, ‘illicitly’. With 60% of world trade taking place within multinational enterprises, this practice has reached enormous proportions, as we shall show below.
Finally, quite apart from the flows recognized by the ruling class, there is the phenomenon, recognised by Marxist economists, of what has been called ‘unequal exchange’. Marx remarks in the Grundrisse:
‘Nations too may continuously exchange with one another, and continuously repeat the exchange of an ever-growing scale, without gaining equally thereby. One nation may continuously appropriate part of the surplus labour of the other and give nothing in exchange for it.’6
As part of the normal process of capitalist production and circulation, apparently equal exchanges between nations may result in a transfer of surplus labour, the source of profit, from one nation to another. This is not the place for a full discussion of this phenomenon.7 Suffice it to say that the great international differences in productivity of labour enable this to come about under capitalism. According to the United Nations agency UNCTAD, the productivity differential between the most developed capitalist countries and the least developed is as much as 100 to 1, so the scope of this form of exploitation is obviously enormous.
So how much loot does this all add up to? Let’s total it up for 2010. Post uses only profits from the rest of the world. In 2010, these came to $569.6 billion. Post then arbitrarily halves this to arrive at the amount coming from the exploited nations – which would be $284.8 billion. However, profits are only a tiny part of the overall total looted. First, we need to add interest payments, royalties and licensing fees, and other private services (legal, accounting etc). Altogether, these ‘legal’ forms of booty total $1,013.9 billion8 – over a trillion dollars! Post claims that the data ‘do not distinguish between investments in the global North and global South’ (p19).9 However, data on loot is available broken down by geographical area. If we consider just the exploited nations, the total booty is $459.4 billion – nearly $200 billion more than Post’s figure. But we are not finished yet!
Next we have to consider ‘illicit’ payments. Post ignores these completely. These are obviously difficult to obtain, but there have been attempts by well-meaning bourgeois do-gooders to estimate these. Global Financial Integrity (GFI) has estimated that total ‘illicit’ payments in 2009 from developing countries came to $1.3 trillion.10 Unfortunately, the report does not provide a geographical breakdown of the countries receiving these flows. However, Christian Aid has estimated the flows of capital to the imperialist countries due to transfer pricing for the years 2005-2007.11 The total capital flow from non-EU countries to the US for these three years, due to transfer pricing, is $673.3 billion. Assuming that this source of booty is a constant proportion of ‘licit’ receipts, we have taken the average of these years, derived the proportion and applied it to other years. For 2010, we arrive at a sum of $231.7 billion. Since the GFI figures show that, on average, transfer pricing is half of ‘illicit’ financial flows, we will assume that total ‘illicit’ booty is twice transfer pricing – $463.5 billion for 2010 for the US.
What about ‘unequal exchange’? Post also ignores this apart from a brief dismissive footnote. Samir Amin has estimated the transfer from the Third World due to ‘unequal exchange’ amounted to 1.5% of the GDP of the imperialist countries in 1966.12 With the growing disparity in productivity over the past 45 years, this proportion has undoubtedly increased, but we will use it as a conservative basis for estimating ‘unequal exchange’. In 2010, 1.5% of US GDP was $217.9 billion.
When we add all three components of booty up for the US for 2010, we get a total of $1,140.8 billion from the exploited nations, four times Post’s total of $284.8 billion! A useful way of thinking about this booty is to understand that without its parasitic relationship to the exploited nations, the US would have to extort a further $1.1 trillion from its own working class to maintain its current level of profitability.
Once Post has his total, he tries to show that it is an insignificant proportion of the total annual wage bill. But there is a problem with this procedure, since the total annual wage bill includes the pay of workers on minimum pay – say $14,000 per year – and the pay of CEOs who may receive tens of millions of dollars – thousands of times as much. Clearly, including the CEOs and other capitalists grossly skews the numbers. A better alternative is to compare with the median. The median is the level midway between the two extremes – 50% receive more, and 50% receive less. In order to make our comparison more realistic, we will take the median of household income – half of all households receive more and half receive less. This will give us a good idea of the significance of this booty for working class household income.
Imperialist tribute from exploited nations to United States, 2000-2010, billions of current dollars13
Year ‘Official’ booty ‘Illicit’ booty ‘Unequal Exchange’ Total
2000 204.323 228.9 149.3 582.5
2001 180.571 203.1 154.3 538.0
2002 170.261 204.4 159.6 534.3
2003 192.006 227.8 167.1 587.0
2004 244.547 283.3 177.8 705.6
2005 316.761 305.2 189.3 811.3
2006 397.297 335.6 200.7 933.6
2007 491.119 705.2 210.4 1,406.7
2008 491.561 522.4 214.4 1,228.4
2009 401.050 423.5 209.1 1,033.6
2010 459.400 463.5 217.9 1,140.8
In 2010, the median household income was $49,445 and the total number of households was 118,682 thousand.14 If we divide total booty from the exploited nations by the number of households, the share of booty per household is $9,612, or 19.4% of median household income. This is about £6,000 per year – hardly insignificant to most working class households!
After first claiming that ‘profits earned from investment in the global South make up a tiny fraction of the total wages of workers in the global North’ (p19), Post then asserts that ‘imperialist investment in the global South benefits all workers in the global North’ (p23) – however high or low their pay. This simply isn’t true: in 2010, 46.2 million people in the US were living below the official poverty level.15 Some 38 million people in 17.2 million households were experiencing hunger.16 The poorest 20% of households had incomes of $20,000 or less. Quite how these people benefit from imperialist investment, Post nowhere explains: quite clearly, they do not. Yet other sections of the working class do enjoy the benefits from imperialist booty. In short, there is a material division within the working class, created by imperialism.
We have carefully estimated US imperialist loot from the Third World, where billions endure appalling poverty, disease and hunger, thanks to this process of exploitation at the hands of the US and other imperialist nations. This has enabled the US ruling class to corrupt a whole section of the US working class into supporting imperialism. That is why socialist struggle in the US must be an anti-imperialist struggle and must fight the influence of this section if there is to be a revolution in the United States.
1 Charles Post ‘Exploring Working-Class Consciousness: A Critique of the Theory of the “Labour-Aristocracy”’, Historical Materialism, 18 (2010), pp3-38.
3 Elena Nguyen, ‘The International Investment Position of the United States at Yearend 2010’, Survey of Current Business, July 2011, Table 1, lines 17, 18, p121.
5 For example, see Stephen Ceccetti, ‘Global Imbalances: Current Accounts and Financial Flows’, remarks prepared for the Myron Scholes Global Markets Forum, University of Chicago, 27 September 2011. Available at: www.bis.org. Cecchetti is Economic Advisor to the Bank of International Settlements.
6 Marx, Collected Works, 29, p244. See also Grundrisse (Penguin, London, 1993) p872.
7 See Henryk Grossman, The Accumulation and Breakdown of the Capitalist System, Pluto Press, London, 1992, pp169-172. For extensive reviews of the debate over ‘unequal exchange’, see Jan Otto Andersson, Studies in the Theory of Unequal Exchange between Nations (Abo Akademi, Helsinki, 1976) and Tamas Szentes, Theories of World Capitalist Economy (Akademiai Kiado, Budapest, 1985), pp83-293. These surveys have the merit of considering contributions of economists from the then socialist countries.
8 These figures are taken from the Bureau of Economic Analysis, NIPA tables 6.16D, International Transactions Table 1 and Table 12 regional tables.
9 We reject the description of imperialist countries as ‘global North’ and exploited nations as ‘global South’, since this suggests there is some kind of equality between the two groups, a merely geographical difference. This is an ideological concept and conceals the relationship of exploitation between the two groups of nations.
10 Dev Kar and Karly Curcio, Illicit Financial Flows from Developing Countries: 2000-2009, GFI, January 2011.
11 Christian Aid, False Profits, London, March 2009.
12 Unequal Development, Monthly Review Press, New York, 1976, p144.
13 Sources: Bureau of Economic Affairs tables cited above; Christian Aid, False Profits.
14 Income, Poverty and Health Insurance Coverage in the United States: 2010 (United States Census Bureau, Washington, 2011), Table 1, p6.
16 US Department of Agriculture, Household Food Security in the United States in 2010 (Washington DC, 2011).
