by Todd Gordon
The goal of FDI has never been development per se, nor improved standards of living for peoples of the Global South. The goal, rather, is profit. Investors look for opportunities in scenarios that will allow for the repatriation of as much profit as possible with as little interference from local governments and communities as possible. If there is excessive “regulation” or “red tape,” or if demands from local communities threaten to make serious inroads on profitability, investors will move elsewhere when possible. Leaving aside for the moment the matter of what kind of development is most desirable for social justice and the future of the world’s ecological systems and human population, a simple uptick in FDI does not constitute a formula for improved living standards or endogenous industrial growth. As economist Anwar Shaikh has demonstrated, FDI flows facilitate and intensify uneven development and poverty, while simultaneously generating profits for corporations in the Global North, as well as a thin layer of the population in the imperialized country (mainly capitalists and politicians).31 Any theory which suggests that FDI is the central driver for meaningful development, or which uncritically situates FDI as a solution to problems of poverty and inequality in the Global South, is dangerously simplistic and needs to be challenged.
NEOLIBERALISM
The phase of world capitalism that most interests us in this book is that of neoliberal globalization, which spans across roughly the last four decades. There is a significant amount of confusion and obscurity as to what precisely characterizes this latest phase of global capitalism, and it is therefore necessary to be quite specific in our use of the relevant terminology. Neoliberalism on a world-scale, in our view, ought to be understood as a political project of the ruling classes in the advanced capitalist countries—especially in the U.S.—to create or restore capitalist class power in all corners of the globe in response to the crisis of Keynesian and developmentalist economics in the late 1960s; the decline in profitability and the growth of stagflation by the 1970s; and the rise of leftist political threats to capital in the shape of radical popular struggles, labour movements, and peasant insurgencies across large parts of the world during that period.32
The purist theory of free market economic fundamentals which provides the bedrock for neoliberal ideology should be understood as a flexible toolkit for justifying the project for restoring capitalist class power, rather than as a guide to the actual policy practice of states during this period. The extent to which state policy has conformed to the precepts of the purist theory of neoliberalism has varied tremendously across different cases. Globally, neoliberalism has failed miserably in terms of its declared objectives of increasing economic efficiency and improving human well-being. However, seen as a political project for the formation or restoration of capitalist class power, neoliberalism has been hugely successful. Nonetheless, its implementation has created massive social contradictions, not least since the Great Recession began in 2007–2008, initiating in its wake a wave of ever more extreme experimentations in economic austerity throughout most of the world.33 In the twenty-first century, organized popular rejection of the neoliberal model has been most advanced in Latin America, although since 2011 the Arab uprisings and waves of movement across parts of southern Europe have added to the international fomentation of resistance.34
Financial Capital
The expansion of neoliberal capitalism in the last quarter of the twentieth century and the opening years of the twenty-first had a number of defining characteristics. To start, given the fact that its economic dominance in the realm of production was threatened by the late 1960s, the U.S. state placed its bets in finance. Financial capital in the U.S. increasingly played a central role in the renewed project of capitalist imperialism initiated through the neoliberalization of the globe.35 In order for this to be successful, the U.S. required the liberalization of markets, and in particular capital markets. Taking advantage of the leverage over countries of the Global South offered up by the debt crisis of the 1980s, both the U.S. state, and, to a lesser but important degree, other core imperialist powers, utilized their control of the most important international financial institutions—commercial banks, the multilateral lending institutions such as the International Monetary Fund (IMF) and the World Bank, and various regional banks—to push through structural adjustment programmes (SAPs) in a vast number of countries.36 SAPs, which were often imposed by IMF and World Bank conditionality, typically included demands for countries of the Global South to commit to fiscal austerity with minimal to zero deficits, cutbacks in spending for social services and subsidies for food and other basic necessities, reform of the tax system, liberalization of financial markets, unification of exchange rates, liberalization of trade, elimination of barriers to foreign direct investment (FDI), deregulation of industry, and strengthening of guarantees of private property rights.37
Trade and Foreign Direct Investment
In Global Shift, the geographer Peter Dickens offers an accounting of aggregate world economic trends over the decades in which such policies were the main framework governing state policy in most regions. In particular, he offers a measure of the various indicators of growing interconnectedness within the global economy, and particularly trends in the flows of trade and FDI.38 In terms of general trade flows, while they have been incredibly uneven across countries and regions in terms of integration, the evidence suggests an uptick in processes of interconnectedness in the world economy since the 1980s. An ever-increasing amount of what is produced, in other words, is moving across borders. However, if trade has grown intensively over the neoliberal period, FDI has still outpaced trade by some distance. We observe an incredible upturn in FDI since the mid-1980s, which quite radically exceeds the also-expanding export trends. FDI is important to our analysis of Canada, as it constitutes investment above the threshold (10 percent) considered to give the investor managerial control over the asset being purchased, whether it is a bank, a mine, or a sweatshop factory. While it is still true today that FDI continues to be concentrated in the triad of North America, Europe, and Japan, it is also evident that there are increasing FDI flows toward other select areas of the Global South, most importantly China, which has become a major new zone of capital accumulation. It is important to note that aggregate data on flows, trends, and volatility in the global economy are a necessary backdrop to understanding the neoliberal epoch, but also that they tell us little about the profound unevenness of these trends across different geographical zones—for example concentrations of production, trade, and FDI in some zones, and their relative absence in others. Nonetheless, what this all means, Dickens points out, is that the primary mechanism of interconnectedness within the global economy has shifted in the neoliberal era from trade to FDI.39
Multinational Corporations
And what are the new agents of FDI and trade in the global economy? The principal actor that has emerged as the vehicle to facilitate the soaring flows of FDI and trade is the multinational corporation (MNC). These enormous entities, although operating across borders, maintain headquarters in specific countries and continue to rely on their home states to defend their interests domestically and abroad. In this sense, the capitalist state remains a core feature of capitalist imperialism in the neoliberal epoch. The capitalist state—with its laws defending such things as the sanctity of private property and individual over collective rights, its administrative mechanisms (policing, labour laws, welfare systems) to manage class struggle, and its privileged role in printing money and influencing the financial system—emerged as a means of containing the social contradictions thrown up by capitalism, and thus of producing stable market relations. This has been done historically by ensuring that social struggles and any other threats to market relations are safely defused or, when necessary, repressed.40 Imperialist states today do their best to secure markets at home and pry open and consolidate new markets for their MNCs abroad. These characteristics of the neoliberal period together—FDI and t
rade increases, the emergence of MNCs, and the facilitation of all of these other factors by imperialist states—are part of the reason we pay so much attention in this book to the dynamics of Canadian FDI in Latin America, and the role of the Canadian state in supporting the advance of Canadian MNCs in the region.
Accumulation by Dispossession
Key to the analysis of global capitalism developed by Marxist geographer David Harvey over roughly the last decade is his concept of accumulation by dispossession. Accumulation by dispossession is an elaboration of Marx’s notion of “primitive accumulation.” Wood explains how primitive accumulation in Marx’s writings refers to “the expropriation of direct producers, in particular peasants” that “gave rise to specifically capitalist social property relations and the dynamic associated with them.”41 Marx writes of those epoch making “moments when great masses of men are suddenly and forcibly torn from their means of subsistence, and hurled onto the labour market as free, unprotected, and rightless proletarians. The expropriation of the agricultural producer, of the peasant, from the soil is the basis of the whole process. The history of this expropriation assumes different aspects in different countries, and runs through its various phases in different orders of succession, and at different historical epochs.”42
For Harvey, Marx rightly highlighted these processes of capital accumulation “based upon predation, fraud, and violence,” but incorrectly imagined them to be exclusively features of a “primitive” or “original” stage of capitalism. With the concept of accumulation by dispossession Harvey wants to point rather to the continuity of predatory practices that have risen dramatically to the surface once again in the era of neoliberalism.43 Since the mid-1970s, assets around the world previously held under collective ownership—either by the state or in common—have been forced on an unprecedented scale into the realm of the market, often through fraud, coercion, and innumerable forms of predation both by the state and powerful private actors. In other words, many forms of public property have been commodified, have entered into the market as commodities for buying and selling. The intensification of commodification has included the commodification of labour, or the proletarianization of peasantries and indigenous peoples, on a grand scale. Harvey, in a vivid if perhaps rather too all-encompassing fashion, includes all of these variegated processes into the singular—albeit uneven and complex—unfolding of accumulation by dispossession across the globe.44 “Considered on a historical level,” write Adolfo Gilly and Rhina Roux:
The expansion of the capital relation sustains itself in two concomitant and interconnected processes: exploitation (appropriation of surplus product under the form of surplus-value) and dispossession (violent appropriation, or concealed under legal forms, of natural goods and goods of communal or public property).…In our view this refers to a permanent process, which forms a part of, and always accompanies, the process of capital.45
Each of these traits of the neoliberal phase of capitalism on a world-scale has its specific Latin American variation. We will return to the regional specificities in a moment, but first let us examine the recent patterns of Canadian capital’s international expansion in light of our discussions of capitalism, imperialism, and neoliberalism above.
THE EXPANSION OF CANADIAN CAPITAL
As we have suggested, Canada is deeply implicated in contemporary dynamics of imperialism as they are playing out in Latin America. To start, the scale of the expansion of Canadian capital in Latin America in the form of FDI over the last quarter century has been phenomenal, following the liberalization of capital flows, the rewriting of natural resource and financial sector rules, the privatization of public assets, and so on. In 1990 it stood at only C$2.58 billion in stock (that is, cumulative FDI flows). It rose to C$25.3 billion in 2000, an increase of 880 percent, and to C$59.4 billion—amidst the deepest global economic recession since the 1930s—in 2013, an increase of 134 percent from the year 2000, and 2,198 percent from the year 1990. The figures for 2000 and 2013, moreover, are certainly an underrepresentation of the extent of Canadian capital’s penetration of the region, as Statistics Canada’s data, from which these figures are primarily drawn, do not include Canadian investment that is routed through the Caribbean Offshore Financial Centres (OFCs), which, if it did, would likely double-to-triple the figures for some countries given how strong Canadian financial capital’s presence is in the Caribbean OFC sector, as we note below.46
To put the growth of Canadian investment into Latin America into perspective, American FDI into the region over this same period, while not surprisingly much higher than that of Canada in absolute terms (at US$283.9 billion in 2012), increased at a slower pace: by 79 percent from 2000–2012 and by 555 percent from 1990–2012; and, notably, as a share of total FDI into Latin America and the Caribbean combined, U.S. FDI decreased from 46.8 percent in 1990 to 38.7 percent in 2012. From 2007 to 2012, Canada was the second largest external source of FDI to Latin America and the Caribbean combined behind the U.S.—it was the third largest source if Latin America as a whole is included as a source region—a jump from fifth during the period from 1995 to 2005. And while American investment is much greater than Canadian, the rate of the latter is much greater than that of the former. The Canadian economy is roughly one-tenth the size of its American counterpart, but Canadian foreign investment in Latin America and the Caribbean combined is one-fourth that of the U.S.47
Finance and Mining
Canadian investment is occurring across a range of sectors. As we discuss in the chapter on Honduras, one of the largest sock and t-shirt manufacturers in the world, and the largest private sector employer in the Central America country, is Montreal-based Gildan Activewear. Canadian oil and gas, pipeline, and construction companies also play prominent and controversial roles in the hemisphere. But it is clearly in the financial and mining sectors where Canadian companies are most prominent. Canadian financial companies have long-established historical roots in the region, going back to the nineteenth century, often connected to U.S.-backed dictatorships.48 But the neoliberal period has seen a sharp expansion of Canadian financial capital in the western hemisphere, growing from 15 percent of Canadian FDI in the early 1980s to close to half in the 2000s.49 Scotiabank, for instance, the Canadian bank most well-established outside of North America, generates more than one-fifth of its profits from its extensive international investments, the majority of which are in the Americas. It spent approximately C$6 billion on more than twenty acquisitions in the Americas from 2007 to 2012—part of a wave of Canadian takeovers of foreign financial assets following the 2008 global crisis.50 Canadian banks dominate the financial sector in the English Caribbean, controlling its three largest banks. Three Canadian banks—RBC, Scotiabank and CIBC—own over C$42 billion in assets there (61 percent of total Caribbean banking assets), forty times greater than what approximately forty-odd local banks own.51 The significance of this influence extends beyond the English Caribbean, of course. As the Economic Commission on Latin America and the Caribbean notes:
The share of [Canadian] FDI going through international financial centers has increased significantly and represents a very important distortion, because these flows of Canadian capital do not remain in OFCs, but go on to final destinations in third markets, mainly in Latin America and the Caribbean, Asia, the United States and Europe.52
Canada’s mining industry, meanwhile, is the largest in the world. Approximately two-thirds of the world’s mining companies are based in Canada, with its permissive tax and legal regime, long mining history that has nurtured an aggressive exploration and producing sector, and unflinching foreign policy support for companies with international ambitions.53 Those international ambitions, coupled with the Canadian state’s legal and diplomatic fealty, has led Canadian companies, big and small, to the four corners of the globe in pursuit of profit. But the Americas (Latin America plus the Caribbean) account for over half of Canadian mining assets held abroad—C$72.4 bi
llion.54 Whereas there were only two Canadian mines in operation (i.e., not simply exploration properties or mines under construction) in 1990, that jumped to eighty in 2012, with another forty-eight in the development or feasibility stage, according to the Canadian International Development Platform (whose numbers are drawn from industry database www.infomine.com). These operating mines generated combined revenue of C$19.3 billion in 2012 for Canadian companies.55 According to the Northern Miner (an industry web publication) database, in 2014, 62 percent of all producing mines in the region were owned by a company headquartered in Canada.56 The size and international leading role of the Canadian mining industry is no doubt the reason Toronto is the most important financial nodal point of the global mining industry. In 2013, for example, C$6.9 billion was raised in equity financing on the city’s two exchanges (the Toronto Stock Exchange and the Toronto Venture), representing 84 percent of the global total.57
Super-Profits
The dominance of Latin America’s natural resource markets has showered the owners of Canadian companies with super-profits. Looking only at the earnings from mines that were still operational in 2013 (fifteen gold mines in total), the three largest gold mining companies by revenue—Barrick, Yamana, and Goldcorp—earned a combined net profit of US$14.9 billion between 1998 and 2013.58 The rate of profit for these operating mines was an astounding 45 percent; with taxes and royalties factored in for Barrick, it was still an incredible 42.4 percent. The average rate of profit for the Canadian economy as a whole from 1998 to 2013 was 11.8 percent.59 Here, presented quite plainly, are the Canadian “interests” at stake in Latin America. As we discuss further below, the argument from Canadian governments of various stripes and the companies themselves, repeated ad nauseam, is that Canadian resource companies are not simply getting filthy rich off of the resources of impoverished and dispossessed communities. Canadian companies are, instead, improving the living standards of the communities where they are digging gold, silver, copper, and other toxic riches from the ground.