FRFI 150 August / September 1999

‘Accumulation of wealth at one pole the same time accumulation of misery, agony of toil, slavery, ignorance, brutality, mental degradation, at the opposite pole, ie, on the side of the class that produces its own product in the form of capital’

(Karl Marx, Capital, Vol 1)1

‘The challenge of globalisation in the new century is not to stop the expansion of global markets. The challenge is to find the rules and institutions for stronger governance – local, national and global – to preserve the advantages of global markets and competition, but also to provide enough space for human, community and environmental resources to ensure that globalisation works for people – not just for profits’

(Human Development Report, 1999)2

The frenetic international expansion of capital to every part of the world, the prising open of national borders to trade, capital and information flows and the increasing penetration of the market into all aspects of human life has had devastating consequences for the vast majority of humanity. Unprecedented wealth at one pole has indeed accompanied untold misery and toil at the other.

Over the last 10 years the United Nations Development Programme (UNDP) has charted year by year the impact of neo-liberalism and globalisation on human development. In their Human Development Reports they have presented a picture of capitalism’s global expansion which has shown increasing concentration of income, resources and wealth among people, corporations and countries, accompanying growing marginalisation, growing human insecurity and growing inequality in both rich and poor countries. Such ‘pernicious trends’ they believe can be reversed with ‘political will and commitment in the global community’ and the benefits of competitive markets can be preserved with globalisation offering great opportunities for human advance.3 But, as DAVID YAFFE argues below, these ‘pernicious trends’ are the inevitable consequence of the capitalist system of production whose driving force is the production of ever greater profits. People’s ‘needs’ will only be satisfied, if at all, and limited human advance can only occur, as a by-product of this profit-producing process.

A world of obscene and growing inequality

World gross domestic product (GDP) increased ninefold over the last 50 years to reach $30,000bn and average per capita incomes more than tripled, yet more than 80 countries still have per capita incomes lower than they were 10 years or more ago. From 1980 to 1996, only 33 underdeveloped4 countries achieved 3% annual growth of GNP per capita, the rate needed to lay the foundation for reducing poverty, while in 59 countries, mainly in Sub-Saharan Africa, Eastern Europe and the ex-Soviet Union, GNP per capita declined. It is of little surprise that the income gap between the fifth of the world’s people living in the richest countries and the fifth in the poorest has grown from 30 to 1 in 1960, to 60 to 1 in 1990 and 74 to 1 in 1997.

Towards the end of the 1990s the fifth of the world’s people living in the highest income countries had or consumed:

  • 86% of the world’s GDP – the bottom fifth just 1%.
  • 82% of the world’s export markets – the bottom fifth just 1%.
  • 68% of foreign direct investment – the bottom fifth just 1%.
  • 74% of the world’s telephone lines – the bottom fifth 1.5%.
  • 93.3% of internet users – the bottom fifth 0.2%.
  • 84% of the world’s paper – the bottom fifth 1.1%.
  • 87% of the world’s vehicles – the bottom fifth less than 1%.
  • 58% of total energy – the bottom fifth 4%.

That the world’s dominant consumers are overwhelmingly concentrated among the highest income countries is dramatically highlighted by the fact that one child born in the rich capitalist nations consumes more resources than 30-50 children born in underdeveloped countries.

The underdeveloped countries with some 80% of the world’s population have less than 20% of the world’s GDP. More than a quarter of the 4.5bn people living in underdeveloped countries do not have some of life’s most basic needs.

  • 1.3bn people live on incomes of less than $1 a day, almost 3bn on less than $2 a day.
  • 1.3bn people do not have access to clean water.
  • 2.5bn people lack basic sanitation
  • 2bn people lack access to electricity.
  • More than 850m people are illiterate.

At least 33m people in the world were living with HIV/AIDS at the end of 1998, with 95% of all HIV-infected people living in underdeveloped countries. AIDS causes 2.5m deaths a year. As a result nine countries in Africa are expected to see a loss of 17 years in life expectancy – down to 47 years, the level of the 1960s.

Inevitably, there are large income inequalities within the underdeveloped countries. In 29 of the 68 countries with data, the ratio of the incomes of the richest 20% to those of the poorest 20% exceed 10:1, in 17 countries 15:1 and in 9 countries 20:1. In Latin America and the Caribbean the gaps are huge with the richest 20% having an average income of more than $17,000 and the poorest 20%, $930. The overthrow of socialism in the ex-Soviet bloc led to the fastest changes in income inequality ever recorded. Of these countries, Russia has the greatest inequality with the richest 20% having 11 times the income of the poorest 20%.

Inequality is growing also within the rich imperialist countries themselves. Inequality has risen in 18 of the 19 countries in the rich countries’ organisation the OECD. Inequality grew most in Sweden, the UK and the USA. According to the HDR 1999, the number of families below the poverty line in the UK rose by 60% in the 1980s, and in the Netherlands by 40%. In fact, using the more familiar definitions of poverty – people living in households with income below one-half the average – the number of people in poverty in the UK increased 182%, or nearly threefold, between 1979 and 1995/1997 from 5m to 14.1m or 24% of the population. More than a third of children (4.6m) in the UK live in households below this poverty level.5

This growth in inequality throughout the world has its counterpart in the obscene concentration of wealth among the ultra-rich. In the four years between 1994 and 1998, the net wealth of the 200 richest people in the world, including 50 from underdeveloped countries, 16 from the Arab states and 3 from the ex-Soviet bloc, increased from $440bn to $1,042bn, more than the combined income of 41% of the world’s people (2.3bn). The assets of the richest three people were more than the combined GNP of the 48 least developed countries with more than 540m people.6

These developments are not accidental but are the necessary outcome of a crisis-ridden capitalist system.

The reality of globalisation

Globalisation is only the latest manifestation of the structural crisis of capitalism that has been continuous in one form or another since the mid-1970s. The stagnation in the capital accumulation process, with the rate of world economic growth falling over the last three decades, and the re-emergence of rivalries between the rich capitalist nations at the end of the 1970s, were the result of an overaccumulation of capital in the heartlands of capitalism and imperialism. There were insufficient profits to both secure the normal profitable expansion of productive capital and finance a growing state sector together with a rapidly expanding unproductive private service sector. The rate of profit on capital was falling. Globalisation has been capital’s response. Its key features are:

  • The huge increase in the export of capital.
  • The growing monopolisation of capital through mergers, acquisitions and privatisations.
  • The unprecedented autonomy of the financial system from real production.
  • Cuts in state welfare
  • A dramatic rise in the exploitation of labour and intensity of work.
  • Mass unemployment and rapidly growing inequality

The imperative is, by any means necessary, to increase the profitability of capital. Far from being a beacon of economic progress, the frenetic international expansion of capital to every part of the world is a sign of economic crisis and instability in a world of growing and obscene inequality.7

Economic domination by rich imperialist countries

Unlike the UNDP, its sister organisation the United Nations Conference on Trade and Development (UNCTAD), which publishes the World Investment Reports, has few scruples in promoting globalisation. It sees foreign direct investment (FDI) by multinational companies as ‘building an integrated production system – the productive core of the globalising world economy’. And it believes the ultimate objective of FDI liberalisation – removing barriers to entry of FDI – ‘is to enhance economic growth and welfare in countries’.8 However, this is far from being the case. UNCTAD reports contain a wealth of statistical material which show how multinational companies, in seeking out the most profitable outlets for FDI, reinforce the economic domination of the vast majority of the world by a small number of rich imperialist countries.

While world export of goods and services increased almost three times between the 1970s and 1997, FDI grew seven times over the same period.

This is a characteristic feature of imperialism.9 FDI links national economies, and multinational companies have become the principle vehicle in this process.

In 1997 export of capital in the form of FDI reached a new record level of $424bn.10 85% of these exports came from multinational companies in the rich imperialist countries with only five of these countries responsible for nearly 72% of this (60% of world total) – US ($114.5bn), UK ($58bn), Germany ($34bn), Japan ($26bn) and France ($24.5bn). The same five countries have been predominant for nearly three decades, only changing their relative positions. The accumulated stock of FDI in 1997, attributed to some 53,000 multinational companies and 450,000 foreign affiliates, was $3,500bn, with more than 90% of it belonging to multinational companies from the rich imperialist countries – 69% of that (62% of the world total) from the same five dominant countries.

and multinational companies

There is a concentration of FDI among a small number of multinational companies from the dominant imperialist countries. The top 100 multinational companies alone had foreign assets of $1,800bn and foreign sales of $2,149bn – more than 14% of the total assets of foreign affiliates of multinational companies and nearly 23% of their foreign sales. Their total foreign employment in 1996 amounted to barely 0.26% of the world’s workforce. Their overall global employment actually fell 3.5% between 1995 and 1996, so they are hardly job promoters. The same five rich imperialist countries provided the headquarters of 75% of these companies, with only two companies coming from underdeveloped countries. 25 multinational companies in the US alone are responsible for half of the US FDI stock. In six of the nine other imperialist countries for which there are data, 25 multinational companies account for more half of their respective countries’ outward FDI stock – 57% of the outward stock in the case of the UK. The share of world exports of foreign affiliates of multinational companies increased from a quarter in the late 1980s to a third in 1995. Two-thirds of all international transactions are associated with the international production of multinational corporations. The 350 largest corporations account for 40% of global trade.

The frantic drive to increase the mass of profits sufficiently to compensate for a fall in the rate of profit not only leads to the centralisation of capital in the hands of ever fewer and larger multinational corporations, but also determines the extent and direction of foreign direct investment. The forces of monopoly consolidate at a global level. The majority of FDI going into the imperialist nations increasingly takes the form of mergers and acquisitions, as opposed to new or ‘greenfield’ investment. A smaller number of huge corporations dominate the global market, limiting competition and reducing employment as capital is restructured and rationalised globally to reduce costs and increase profitability.

In 1997 total majority-owned cross-border mergers and acquisitions (M&A) reached a record level of $236bn (out of total cross-border M&A of $342bn) and accounted for nearly 60% of global FDI, up from 50% in 1996. Corporations from the imperialist countries accounted for 90% of these. Cross border M&As in 1997 were nearly a quarter of all M&As worldwide. Preliminary figures for 1998 suggest this process is accelerating. Worldwide FDI rose 59% last year to an estimated $644bn, fuelled by a surge in cross-border M&As by imperialist corporations. The value of majority-owned M&As at $411bn was almost double that for 1997 and triple the 1995 amount. New ‘greenfield’ investment accounted of only a fifth of last year’s FDI. It is this take-over mania that is fuelling stockmarkets and creating the obscene incomes of the new rich, as the value of their salaries and share options reach stratospheric levels.

and super-exploitation of underdeveloped countries

The amount of FDI invested in underdeveloped countries has grown significantly over the last five years. $149bn, 37% of FDI, went to these countries. This is more than double the level of inflows into underdeveloped countries from 1986 to 1991 and nearly 25% above that of the high levels recorded in the early 1980s. In 1997 the underdeveloped countries’ share of global FDI stock was more than 30% – showing the long-term importance of these countries for enhancing the profits of imperialist corporations.

This investment is, however, very concentrated. Multinational corporations require not only a high rate of return on their investments but also the ability to generate an adequate mass of profits through the access their investments provide to productive resources and essential markets globally. This means they concentrate on a small number of strategic countries and investments that serve their overall global profitability. In 1997, nearly 90% of investments in underdeveloped countries went to only 15 countries, with one country alone, China, receiving 30%. On the other hand, for 100 underdeveloped countries FDI has averaged less than $100m a year since 1990 and nine countries have experienced disinvestment or net outflows.

South, southeast and east Asia received 55%, and Latin America and the Caribbean 38% of the total FDI into underdeveloped countries. However, FDI into Africa (excluding South Africa) was $4.7bn in 1997, a mere 3% share of the total going into underdeveloped countries. It is comparable to the share going to a single Asian country such as Indonesia. Nearly two-thirds of investment in Africa went to just five countries – Nigeria, Egypt, Morocco, Tunisia and Angola. Nigeria received more than a third of FDI going to sub-Saharan Africa. Not surprisingly, the share of oil-exporting African economies in Africa’s total inflows was very high, about 73% in the period 1991 to 1996. Such investment is not concerned with enhancing the ‘economic growth and welfare’ of these countries but with the global profitability of the imperialist corporations.

So it is not surprising that the rate of return on investments in Africa by US multinationals has averaged 29% since 1990. It has been more than double that in any other region, including the rich capitalist countries as a group (8.7% in 1993), in many of those years. In 1997 it fell a little to 25.3%, still more than double the average for all countries, and much higher than the return in Asia (16.2%), Latin America (12.5%) and in underdeveloped countries as a whole (14.0%). Income from UK investment in Africa increased by 60% between 1989 and 1995. Japanese foreign affiliates had a higher return from Africa than any other region except for Latin America and the Caribbean and West Asia. FDI in Africa is low precisely because of its low level of economic development, and it is limited to those sectors with important natural resources and high profitability.

The overaccumulation of capital in the rich imperialist nations has led to a massive increase of flows of short-term capital in the form of portfolio investment, seeking high returns with little or no long-term commitment to the area of investment. These now total more than $2,000bn, almost three times the level of the 1980s. As a result there has been a large increase in portfolio investment in emerging market economies (underdeveloped countries that have sizeable markets opened up to free-ranging international capital flows). The flows have increased from $706m in 1986 to $34.6bn in 1995. This is reflected in the growing importance of stockmarkets in a small number of underdeveloped countries as a potential source of high returns for financial institutions from the rich imperialist countries. Stockmarket capitalisation of emerging markets expanded more than 10 times from $171bn to $1,900bn from 1986 to 1995, increasing their share of world stockmarket capitalisation from 4% to nearly 11% in the same period The concentration of these flows of portfolio investment to underdeveloped countries is even greater than for FDI inflows. In the case of flows from the US, 35% of the total flows to emerging markets, 89% went to only 11 countries.

Unpayable foreign debt

The recent demonstrations of Jubilee 2000 in the run up to the Cologne summit of the seven dominant imperialist powers (G7) and Russia in mid-June did much to highlight the devastating consequences of debt on the lives of the world’s poorest people. However, the debt relief of some $50bn offered by the summit to the world’s poorest nations – most of which was not being paid back anyway – far from ‘helping the world’s poorest nations achieve sustained growth and independence’ (Bill Clinton), will not fundamentally change anything. The debt relief will only become possible on acceptance of IMF structural adjustment programmes (for three years instead of the previous six). This means ‘economic reform’ to open up the economies of the poorest nations and subject them even more thoroughly to the trade and capital flows from the imperialist nations. In other words the economic order that caused the problems in the first place, will not only remain in place but will be strengthened. The poor countries will continue to spend more on debt payments than on basic health and education and their debt will still increase.

In fact the global dominance by the imperialist powers, with the inevitable perpetuation of inequality, poverty and debt, is far more structurally embedded in the system and far less open to debt reduction as a solution than many have maintained. The facts speak for themselves.

The debt of the underdeveloped countries is now a staggering $2,346bn. The overall debt has been growing despite massive debt repayment. From 1987 to 1997 the debt grew from $1,451bn to $2,346bn an increase of $895bn despite debt service payments of $2,198bn. 55% of this debt is owed to private capital and outside the remit of any official debt negotiations, involving governments and multilateral institutions such as the IMF and World Bank. It is only in the case of the poorest countries that the largest proportion of their debt comes from ‘official’ sources.

Sub-Saharan Africa owes $189bn and nearly 70% of this is from ‘official’ sources because private capital has barely invested in the area in the recent decade. Writing off most of this debt will hardly change anything, precisely because of sub-Saharan Africa’s dependent relation to the world economic system. Its exports, for example, amount to nearly 30% of GDP, far higher, than the 19% of GDP average of the rich imperialist countries in the OECD. And many of the prices of what it exports, primary commodities, have fallen as prices of its imports have risen. Primary commodity prices in the 1990s were 45% lower than those in the 1980s and 10% lower than the lowest level during the Great Depression in 1932. The terms of trade of poorest underdeveloped countries have declined a cumulative 50% in the past 25 years. Sub-Saharan Africa will never be able to produce enough or export enough to stop its debt growing and feed, clothe, give basic health care and education to its people.

It is precisely the unequal relationship that the underdeveloped world has with the world economy, which transforms the labour of the underdeveloped world’s people through trade, foreign direct investment and debt into capital and profits for the imperialist corporations.

and financial capital

International bank lending, dominated by the financial corporations from imperialist countries, grew from $265bn in 1975 to $4,200bn in 1994. The world’s top ten investment banks control 77% of the market. $1,500bn a day flows through the foreign exchange system as financial institutions and multinational corporations hedge, gamble and speculate on the movement of national currencies. The financial system has now an unprecedented autonomy from real production and represents an ever-present threat to the economic stability of even the most developed capitalist countries.

The so-called miracle Asian ‘Tiger’ economies could not escape the devastating impact of financial capital in its relentless drive to sustain profitability when, in 1997, their economies hit deep structural problems. International capital simply withdrew from the area. These countries spent some $100bn defending their currencies to no avail and around $86bn was withdrawn by financial capital from the area in less than a year. As the crisis spread to other emerging economies, overall flows to these economies from international banks fell from $120.4bn in 1996 to $36.9bn in 1997, with flows being reversed in 1998 and $29.1bn withdrawn from these markets. The turnaround in the current account of Korea which resulted was equivalent to 18% of Korea’s GDP and for Thailand, it was even greater, at 20% of GDP. 75% of the swing between 1996 and 1998 was by commercial banks alone withdrawing funds from the five most affected Asian economies. These countries, as a result, experienced recessions of a size not seen since the Great Depression. The social consequences have been devastating with the number of people in absolute poverty, on less than $1 a day, expected to double from 30m before the crisis to 60m by the year 2000. Having bankrupted thousand of businesses and banks, like vultures, the imperialist banks and financial institutions are now returning to east Asia and other emerging markets to reap their rewards. Capital is concerned with profitability not human development.

Globalisation can never work for all people under capitalism. As long as capitalism survives and determines economic relations between nations and people, capitalism’s global expansion will indeed concentrate income, resources and wealth among a small number of people, corporations and countries. Accumulation of wealth at one pole will always have as a precondition accumulation of misery and toil for the vast majority of humanity at the other.

  • K Marx and F Engels, Collected Works, Vol 35, Lawrence and Wishart, London 1996 p640.
  • Human Development Report 1999 (HDR 1999), New York Oxford OUP 1999 p2. (Available at
  • ibid, ‘Overview -- Globalisation with a human face’ pp1-15.
  • I say ‘underdeveloped’ rather than ‘developing’ used in all the reports because it more clearly reflects the limited development imposed on these countries through their relation to the dominant imperialist powers.
  • See my article ‘Poverty and Inequality in Blair’s Britain’, FRFI 147 February/March 1999. HDR 1999 uses a narrower definition of poverty, that below half the median income, which is significantly lower than the average. The figure for the 1980s increase in poverty on the broader definition is 2.4 times or 140%.
  • Most statistics in this section are taken from HDR 1999 or earlier reports.
  • For an explanation of the crisis of capitalism and the falling rate of profit see D Yaffe and P Bullock, ‘Inflation, the crisis and the post-war boom’ in Revolutionary Communist 3/4, Larkin Publications, 1975, reprinted 1979 £3.50 inc p&p. For a discussion of globalisation see my ‘Globalisation: a redivision of the world by imperialism’, FRFI 131 June/July 1996 and ‘The politics and economics of globalisation’, FRFI 137 June/July 1997, both available on our web site
  • World Investment Report 1997, United Nations, New York and Geneva 1997, pxxv. Most of the material in the following sections is taken from the World Investment Report 1998.
  • See Lenin, ‘Imperialism, The Highest Stage of Capitalism’, CW Vol 22, Moscow 1964, p185-304 and p266, for a list of the dominant characteristics of imperialism, much of which could apply to globalisation.
  • Inflows were just over $400bn and differ from outflows as a result of data collection problems. Both inflows and outflows are underestimated as they do not cover investment financed by funds raised in domestic or international markets. If these are included some $1,600bn would have been added to the capital base of international production.