acquisitions of existing enterprises.”18
Third, and perhaps most important of all, much of what is counted as FDI flows between imperialist countries are investments in firms that have relocated some or all of their production processes to low-wage nations. To illustrate this, the 2005 restructuring of the world’s second-largest oil company, Royal Dutch Shell, increased the UK’s inward FDI by $100bn, causing it to leap above the United States to become that year’s prime destination for FDI. Yet, wherever they may book their sales and their profits, the great majority of the 98 countries hosting Shell affiliates (second only to Deutsche Post AG with majority-owned affiliates in 111 countries) are in Latin America, Africa, Central Asia, and the Middle East.19
The dangers of looking no further than headline figures on N-S FDI are highlighted by a cursory examination of the M&A data cited above. In conventional accounting, the merger or acquisition of one European, North American, or Japanese firm with or by another is regarded as an unambiguous instance of North-North FDI. A brief examination of the three largest M&A deals in 2007—which, like all but seven of the fifty largest M&A deals in that year, were between firms in imperialist nations—shows why such a reading of the data is simplistic and misleading. The largest cross-border M&A deal in 2007 was the illfated acquisition of the Dutch bank ABN-AMRO by the Royal Bank of Scotland for $98.2bn. Banks circulate titles to wealth, skimming off some of it for themselves, but produce none of it. In a multitude of ways—through their loans and investments, participation in hedge funds and futures markets, handling of flight capital, etc., and indirectly through the TNCs they finance—their tentacles are coiled around the Global South. Second on the list of the largest M&A deals in 2007 was the mining and packaging giant Alcan, purchased from its Canadian owners by the UK’s Rio Tinto. Alcan employs 65,000 workers in 61 countries, 28 percent of them outside of Europe and North America.20 Number three was the acquisition of the Spanish-owned utilities giant Endesa SA by a group of Italian investors for $26.4bn. In that year, Endesa operated affiliates in Spain, Portugal, Italy, and France, and also in Morocco, Chile, Argentina, Colombia, Peru, Brazil, Central America, and the Caribbean. In 2007, it earned 18 percent, or €471m, of its operating profits from its business in Latin America and the Caribbean.21 Continuing down the list the picture becomes ever clearer. Every time a company or group of investors acquires or merges with a TNC headquartered in another imperialist country, counted as North-North FDI by the UNCTAD statisticians, they are likely to be buying into an entity with assets and activities spread on both sides of the North-South divide. No such ambiguity exists in the case of North-South FDI, since FDI originating from Southern nations is not only a small fraction of the FDI, but the bulk of it is in other emerging economies—UNCTAD reports that “FDI from developing economies has grown significantly over the last decade and now constitutes over a third of global flows…. [However,] most developing-economy investment tends to occur within each economy’s immediate geographic region.”22 Despite this recent rise of FDI by Southern TNCs, in 2014 79 percent of the $25.9 trillion global stock of FDI was owned by TNCs headquartered in imperialist countries.23
The overwhelming weight of M&As in N-N FDI flows in the years before the onset of global economic crisis reflects a process of concentration and monopoly-formation among TNCs, in the financial sector and in all industrial sectors, proceeding in parallel to the shift of production processes to low-wage economies. These diverse phenomena are all lumped together as FDI. William Milberg is among those who have drawn attention to this dual process: “The global wave of merger and acquisition activity constituted a consolidation of the oligopoly position of lead firms who, in the process, focused their efforts on ‘core competence’ and outsourced other activities.”24 Gary Gereffi has also pointed to these “two dramatic changes in the structure of the global economy. The first is a historic shift in the location of production, particularly in manufacturing, from the developed to the developing world…. The second is a change in the organization of the international economy. The global economy is increasingly concentrated at the top and fragmented at the bottom, both in terms of countries and firms.”25
FDI statistics thus merge three very different trends: the concentration of imperialist banks and finance capital; a process of concentration among Northern industrial and commercial capitals, many of them lead firms in value chains in which the actual production is performed by workers for distant Southern suppliers; and a process of disintegration of production processes and their dispersal to Southern nations in the quest for super-exploitable labor.
TNC Employment, North and South
UNCTAD’s 2007 World Investment Report boasts a particular focus on the employment effects of foreign direct investment. Yet even here the amount of information is meager, providing data on total TNC employment in only a handful of developing countries. The most interesting and relevant part of this study was an analysis of the employment effects of foreign direct investment by U.S. TNCs. It reported that, in 2003, 9.8 workers were employed for each $1 million of FDI stock owned by U.S. TNCs in the manufacturing sector in developed countries, whereas the same stock of FDI in developing countries employed 23.8 workers, or 2.4 times as many.26 As a result, a stock of $281bn in U.S. manufacturing FDI in developed countries employed 2.76 million workers, while a stock of $88bn in developing countries employed 2.1 million workers. The same quantity of investment in extractive industries (mining, quarrying, and petroleum) employs a much smaller number: 1.3 workers in developed countries per $1 million of FDI, compared to 2.5 workers in developing countries. To complete the picture, each $1 million invested in services leads to the employment of 2.1 workers in developed countries and 2.3 workers in developing countries.
However, this data underestimates TNC employment, since UNCTAD does not count temporary, casual, and subcontracted workers as employees, yet U.S. TNCs have led the way in casualizing Southern labor, as in the case of Coca-Cola, considered below. Counting all of these employees, it is reasonable to conclude that TNCs headquartered in the United States employ more workers in low-wage countries than they do domestically, and, by extension, the same is true of TNCs headquartered in Europe and Japan.27
The Profits of FDI
Qualitative differences between N-N FDI and N-S FDI mean they cannot be simplistically compared. Flows of investment and repatriated profit between the United States, Europe, and Japan are symmetrical inasmuch as they invest in one another. In striking contrast, cross-border investments between the Global South and the Triad nations are extremely asymmetric: S-N FDI is negligible in comparison to N-S FDI. UNCTAD reported in 2008 that “the large gap between TNCs from the developed and developing groups remains. For instance, the total foreign assets of the top 50 TNCs from developing economies in 2005 amounted roughly to the amount of foreign assets of General Electric, the largest TNC in the world.”28 In consequence, direct investment and profits flow in both directions between the United States, Europe, and Japan, but between these nations and the Global South the flow has been and continues to be overwhelmingly one-way. As the accumulated stock of FDI in the South has increased, so the return flow of profits has grown into a mighty torrent, which, as Figure 3.1 shows, are now of a similar magnitude to new N-S FDI flows. A particularly striking feature of Figure 3.1 is the steepness of the increase of both FDI flows and profits in the early years of the millennium, consistent with evidence cited elsewhere on the acceleration of outsourcing following the bursting of the dot-com bubble at the beginning of the new millennium.
According to UNCTAD’s 2008 World Investment Report, the world’s TNCs earned $1,130bn in 2007 in profits from their foreign subsidiaries, 406,967 of which are located in developing economies and 259,942 in developed economies.29 The report provided no breakdown or detailed analysis of FDI profits by firm, sector or country, except for “Annex Table B.14,” which reports that in 2005, the most recent year for which data is available, U.S. TNCs earned $549bn in profits from what it elsewhere reports to be
