US To Keep Latin America In Check With War On Terror

See, here you simply dismiss just about every single market and the very idea of capital trade all at once. FDI = theft? What are you basing that on? Do you consider the hundreds of billions of net inflows of FDI into the US to be other countries stealing from the poor little US?

This is one of the sweeping generalizations that you guys seem to enjoy making that I am talking about. Chavez cripples FDI inflows into Venezuela so FDI must be bad! States are perfectly capable of negotiating the terms of FDI inflows into a country; If you honestly find it theft then you should equally blame the host country and yes, Venezuela did have FDI inflows so apparently Chavez must have supported the theft of his own people? That seems a little off to me.

 

I'm also curious if any of you guys have ever actually lived like the people who you are advocating for. Have any of you helped these people try to construct businesses? Have you farmed with them? I would be interested to know where you all come from. So far, I have been the most open and transparent poster in this conversation.

 

Dylith, I apologise for suggesting you had your head up your arse. That language was inappropriate and I'm sorry. In post 224 I wrote the following:

"Journalists are participants in this system. But mere willingness to cooperate says nothing about the motives of the individuals involved. Some are indeed cynically serving greed and power. But others are sincere, attempting to improve and even reform the system from within. One could also reasonably extend this argument to people like Dylith who sincerely but misguidedly believe that they are working for the common good. Although I don't agree with their strategy, I nevertheless accept that it is a reasonable position to take, one that may even offer the best hope of spreading progressive views to a mass audience."

That's my position.

The problem from my perspective is there seems to be a tendency among "experts", regardless of the field, to become so passionate about what they do that they often lose sight of the broader picture. Precision made the point that you are appear unable to see the wood from the trees. I think there is a lot of truth to that. The implication being that unless one works on the ground in the specific field in question, one is not qualified enough to pass judgement. Either that, or such viewpoints are someow less valid. For your information, I did a degree and masters degree in the area of social policy and globalization but I have no practical experience in the field.

 

Let me put it like this. I'm black and from the South. I owe Martin Luther King for being so courageous. Without his courage, who knows, I might still be sitting on the back of the bus. At that time, some blacks in the South thought that he was a troublemaker, someone who was dangerous. They were the kind of people that were content to let things be. MLK wasn't the problem, it was the system that was the problem. And in the case of Chavez, it appears to be something you simply cannot see.

 

That was compelling. Sometimes I think I am wasting my time doing this. However, reading such a piece, makes me feel that coming to this site was well worth it.

Thanks!

 

The "economic specifics" you refer to are based on models. These models have assumptions that are built into them. The models are supposed to be tools that facilitate a understanding of the phenomenon. They are not the phenomenon itself. Mathematically quantifiable objects are usually created as part of the model. Such objects have no intrinsic value. It is the interpretation of the quantitative value of the object and how the manipulation of that quantitative value can be used to achieve a particular outcome, that renders the model more or less useful.

You have a model that measures the amount of capital that is invested in a country. And that is fine. The problem is that you appear to assume that increasing the amount of capital invested in a country is ALWAYS what is best for a country, no matter what negative consequences may result from such investment. Furthermore because you assume that increasing the amount of capital that is invested in a country is ALWAYS in the best interests of a country, you have erroneously put forward the idea that Hugo Chavez was bad for Venezuela because the global financial powers were apprehensive about doing business with him. You want divorce the underlying motivations for this apprehension from your analysis, because it upsets your assumption that merely increasing foreign investment will ALWAYS result in a better outcome for the people of a country. The problem is that this is not necessarily the case. Frequently what happens is that a few people will be better off at the expense of a significant amount of the population. This problem was acute in Venezuela prior to Chavez. The beauty of Chavez is that he had the intelligence to see that this was happening and he had the courage to stand up and do something about it. Chavez said that it is not just that a few are enriching themselves by exploiting the vast natural resources of Venezuela while half of the people are hungry. Chavez said it is not just that a few are enriching themselves by exploiting the vast natural resources of Venezuela while half the people are uneducated and illiterate. Chavez said that is not just that a few are enriching themselves by exploiting the vast natural resources of Venezuela while half the people do not have health care. Chavez said that it is not just that a few are enriching themselves by exploiting the vast natural resources of Venezuela while half of the people do not have adequate housing. That's what Chavez was about.

You want to point to the quantitative value of a mathematical attribute of a model and say that this value indicates that Chavez was bad for Venezuela. You want to do this without a critical examination of the motivations behind the rich and powerful which influence what that value will be. Therefore your analysis is flawed.

What you need to remember when you go about your work, is that the model is not the reality. The model is a tool for helping understand the reality. And as such you always need to think about the assumptions behind interpretation of the data.

 

Brilliant post. I'll add to that in due course.

 

As Precision alluded to, globalization upon which FDI is premised and often used as an ideological justification for economic development within developing countries, is in truth illustrative of a modern form of imperialism. As Precision also correctly pointed out, Chavez was very much aware of this and as a consequence understood that in reality FDI effectively amounted to a transfer of wealth into the hands of the rich at the expense of the poor.

Foreign companies of the developed world invest in the developing world because they want a return on their investments, irrespective of the damage that occurs to the societies in which they invest. As previously discussed, it's the maximization of profit at any cost that's the problem. However, for capitalists, damaging externalities are of little or no consequence impacting on their ability to make these investments. If the end result, for example, is the total decimation of the public sector through privatization and asset stripping, then so be it.

For many, globalisation involves a “manic logic” as firms “race to the base” in search of cheap labour. Firms go “hopping and skipping and jumping” to wherever they can find competitive labour markets, laying waste to jobs in the rich countries. As John Holloway pointed out in an important article in 1995, “capital moves”. It is in its nature to move—across borders as well as within them. Unlike in earlier systems such as feudalism, economic activity is not tied to territory. Recent changes are often supposed to have brought a new dimension to this and to the problems it causes labour. In the extreme, the economy is reckoned “weightless”.

Physical goods are moved more easily as transport technologies improve and, crucially, the economy becomes less physical. Immaterial goods, most notably in finance, move effortlessly around the world. However, this grossly overstates the ease of moving physical goods and the decline of the material economy. More fundamentally, capitalism is a social relation not reducible to physical things, so changes to its mobility cannot be deduced from changes in the physical form of commodities. This is not to dismiss claims of transformation but to argue that they need to be carefully and critically evaluated.

Historically the extent of capital relocation has varied enormously. There was an earlier phase of internationalisation in the 19th and early 20th centuries. By 1914 outward FDI from Britain amounted to 53 percent of GDP, a level comparable to today’s. Levels from other rich countries were lower but still not exceeded until the 1980s or 1990s. Many familiar multinationals were already well established. There was much less FDI in the inter-war period. During the long post-war boom there was a still greater concentration of investment within rich countries’ domestic economies. What FDI there was also went primarily to other rich countries. So in 1914 half, and in 1938 two thirds, of the total had gone to poorer countries but that fell to just 20 percent by 1960. Capital does seek cheap labour, but there are many political and economic reasons why investment can profitably be concentrated and why relocation can prove difficult.

Of course, just its potential to move gives capital power. Even in the 1980s, before talk of globalisation became fashionable, managers in the US car industry successfully “whipsawed” plants in different places, demanding concessions on wages and conditions. However, employment in the car industry in rich countries actually increased between 1970 and 2001. Firms, and capital’s political supporters, talk up mobility to threaten workers or to extract bribes from governments.

For instance, the United Nations published a survey in 2005 showing that companies claimed China was their overwhelming favourite prospective overseas business location. India ranked second and four other poorer countries were in the top ten: Russia fourth, Brazil fifth, Mexico sixth and Thailand ninth. But in practice, the following year 66 percent of overseas investment went to established rich countries and only China (fifth) and Hong Kong (seventh) were among the top ten destinations. Russia was 11th, Mexico 18th, Brazil 19th, India 21st and Thailand 27th. Looking at the extent to which capital actually moves seems a necessary starting point for assessing claims to its mobility.

Real structural changes do give substance to recent claims of globalisation. World trade jumped from $519 billion to nearly $12 trillion between 1973 and 2007, and within this the share of what are classified as “developing countries” rose from 24 percent to 39 percent. Similarly, stocks of FDI increased from $560 billion to $12 trillion between 1980 and 2006, or from 5.3 percent to almost 25 percent of world GDP. The poorer country share went back over 30 percent. Along with, but not reducible to, foreign investment, the level of manufacturing in developing countries shot up. It rose by 75 percent and from 19 percent to 30 percent of the world total between 1990 and 2005. However, these aggregates have to be interpreted quite cautiously.

First, as of 2004, 71 percent of the world’s industrial production was performed in the 21 richest countries, with GDP per capita greater than $20,000 which between them had only 14 percent of the world’s population.

Second, changing patterns of production were hugely uneven. Just five countries, China and the “Asian tigers”, accounted for 62 percent of the poorer country growth from 1980 to 2005. FDI also went to a few favoured locations, mainly in Asia, which were seldom those with the lowest wages. By 2006 just five countries—Hong Kong, China, Mexico, Brazil and Singapore—accounted for well over half the developing world’s total FDI. Africa had received less than 1 percent. There was no “race to the base”. The rise of industry in poor countries (and its relative decline in many rich ones) also often reflected changes within these countries as they got richer, rather than simply a movement of production from the rich to the poor.

If productivity grows quicker in manufacturing than services (as it normally does), then even if consumption patterns stand still, manufacturing’s share of employment shrinks. Indeed, industrial employment was falling in China, even before the 2008 economic crisis hit. In terms of the origins of investments, firms from a few rich countries predominated. This seems important in relation to arguments of deindustrialisation. The UN’s figures, although almost certainly exaggerating the picture, indicate significant net outflows, amounting to $2 trillion, away from the richest countries during the 1990s, particularly from Britain, France and Germany, where they averaged 3.9, 2.4 and 1.6 percent of GDP respectively. These are significant sums, and plausibly contributed to slow growth and deindustrialisation. However, in the US where deindustrialisation was probably sharpest, net outflows amounted to only 0.3 percent of GDP per year during the 1990s. In the early years of the 21st century there was then a modest retrenchment and net inward investments across the rich countries.

Third, only about 30 percent of FDI was in manufacturing, and only 8 percent in poorer country manufacturing. Of this only a small proportion was wholly new investment. In 2006 67 percent of all FDI involved buying existing assets and 30 percent involved reinvesting the earnings of the already operating foreign plants. So less than 3 percent was new or “greenfield” investment. But even taking what are therefore vastly exaggerated aggregate figures, the largest poor country recipient, China, received net FDI inflows amounting to 9.2 percent of the level of fixed capital formation and 3.2 percent of GDP in 2006.

This highlights, fourth, that poorer country growth DOES NOT NECESSARILY DEPEND ON RICH COUNTRY INVESTMENTS. Among other things, multinationals also subcontract to local suppliers, notoriously in the case of sweatshops in the textile industry. This could have a similar effect on rich countries. The US and Britain both recorded big trade deficits, which have been interpreted as meaning a loss of jobs. However, most analyses suggest that trade, and trade deficits, account for at most a small proportion of unemployment in rich countries. In the US unemployment of just over 7 million in 2006 was nevertheless lower, in both relative and absolute terms, than in 1980 or 1990, when trade and trade deficits were a much smaller proportion of GDP. Elsewhere, notably in Germany and Japan, there were persistently big trade surpluses but workers experienced many similar problems.

Fifth and finally, there was huge unevenness between industries. In some sectors such as textiles, clothing and shoes, toys and consumer electronics something of a rush of manufacturing to poor countries did happen. Here claims of globalisation as a cause of labour’s problems may seem appropriate. The clothing industry provided the classic case for arguments of a new international division of labour and this has been confirmed in more recent examples of relocations and mass lay-offs in rich countries. Levi Strauss, for example, from a peak of 28,000 employees had, by 2003, ended all manufacturing in the US. Again this was hardly “global” and 45 percent of textile exports were accounted for by just seven Asian countries.

And even in clothing there were significant exceptions. Some firms, the Spanish company Zara is the best known example, retained concentrated production systems within their home country. Italy and Germany, concentrating on upmarket lines, remained second and third to China among textile exporters. A similar logic seemed to drive consumer electronics. So by 2006 Mexico and China accounted for 21 percent and 17 percent of the world’s exports of TVs, distantly followed by Turkey, Japan, Poland and the Netherlands (all selling around 4 percent of the total). But here too, rather than racing to the base, there was a rationale by which production was re-concentrated. Japanese firms invested in eastern China and stayed even as wages there rose. Therefore, even in these sectors there are important qualifications. Moreover, these are important, and particularly visible, sectors but not necessarily typical.

In my next post I will highlight how the insistence on deregulation and privatization by the rich nations is often used as the pretext for FDI in the developing world which disprortionately benefit the former at the expense of the latter. It was this aspect of 'bleeding Venezuela dry' that Chavez was aware of and which explained why he resisted the imperialists in this undertaking. It also exlains why he was so popular amongst the electorate.

Please PM me if you require sources to any of the above.

 

That's a pretty bad analogy as Martin Luther wasn't responsible for making state policy. Chavez was more than just a social leader, and outside of being a social leader he wasn't too good at it. I'm not saying that Chavez was a bad guy; I'm saying that he had a pretty poor economic policy.

 

well, no one else was willing or able to break the American stranglehold on the country's resources so his reign still comes out a plus for the venezuelans

 

Well here's a problem again. You are assuming that simply because you didn't care for the two econ classes that you at one point and time took, that all economics works that way. That's a faulty assumption. The premise of your entire criticism is wrong.

This is also blatantly wrong; quantifiable data when coupled with qualitative analysis has proven to be very effective. Just because you're not good at math doesn't mean that math is bad.

I'm not, nor have I ever done such a thing. But there is a difference between making an FDI system that works well with your country and killing the entire institution.

I have MANY more criticisms outside of simple FDI and capital flows. It is further faulty for you to think my economic dislike of Chavez to be so shallow.

I'm starting to wonder if you're capable of responding to one of my posts without simply making stuff up.Please point out to me where I say that all FDI everywhere is always good. Your strawmen as silly.

And that's why he presided over the least economically and politically transparent country on the entire continent then yeah? That's why he presided over a sharp decrease in GDP per capita, became isolationist, saw his private market sector plummet, did, nothing to diversify his economy and take them away from a heavy reliance on selling oil to the US.

And yet Venezuela doesn't rank significantly any higher on the inequality adjusted HDI scale than any other South America country aside from Bolivia and Suriname.

There are ways that Chavez could have addressed these problems that you are speaking of while at the same time presiding over a more politically and economically open and transparent government and while at the same time not presiding over a crumbling economy. Your "it either had to be this way, or severe poverty and slavery" argument is fallacious.

So far I've been the ONLY one to actually talk about any of the specifics of the actual Venezuelan economy.

- - - Updated - - -

Right, so it is a plus that he allowed Venezuela to remain the US's economic slave? I mean you do realize that the US was by far his largest and most important trading partner yeah? He depended on the US for his government revenue.

 

America is the slave when it comes to oil pal. if they don't want it, theres plenty of other folks that do. and he made sure the royalty structure was changed to benefit the owners of the oil instead of the American oil companies.. I know that grates on you vultures but thems the breaks

 

Well thank you for the sincere post. My problem has never been that you disagree with me, I enjoy debate and discussion, the disappointing thing about talking with you all so far has been that while you all disagree with me quite vehemently, and insist that I am absolutely 100% wrong and misguided; you can't tell me why. I have very specific criticisms that I have laid out multiple times and I get very general non-specific answers from you all (like Precisions above rant). I mean, here we are on page 24 and you STILL haven't been able to tell me why Chavez suspending term limits was a good policy. All you've simply said is "I disagree with you, you're wrong / misguided". That's nice, but it rather lacks substance, and that's really the criticism that I have of all of your arguments so far is that none of them really have any substance to them, or address the specifics of the Venezuelan situation.

 

And you don't find it hypocritical at all for Chavez to rely heavily on the US for his government revenues while at the same time telling everyone how evil the US was?

But hey, I agree, and you've actually unintentionally directly supported what I have been saying all along: Chavez doesn't need to be closed off to the world, the idea that he needs to be in order to protect Venezuela from extortion is a false argument. As you've just said, the Venezuelan government is perfectly capable of making economic deals that aren't "harmful" to Venezuelans. Even when it comes to the US. In fact, if you recall, it doesn't grate me at all; I advocated even more economic cooperation with Venezuela; I'm all for it. One is perfectly capable of engaging in economic activity with another state without becoming that states economic slave. That's what Precision and Trout seem to be having a hard time coming to terms with.

 

they have never seen America cooperate with latin America. they have traditionally bankrolled the despots, made sweetheart deals with kickbacks to obtain resources at cut rate royalties and sent the marines when the people complain. no one believes America wants to cooperate anymore. the evidence of their perfidy is too blatant. hell , the world just watched America kill 100,000 Iraqis because American oil companies were left out in the cold!

 

Aww how cute. You can't stand that you actually accidentally agreed with me and supported my argument. Says a lot about you that even when we agree you have to insist that I am wrong / attack me.

Cheers.

 

those goalposts getting heavy again pal?? lol

 

More deflection. You must hate yourself for supporting my argument. I hear a shower helps.

 

your argument fluctuates so badly that given enough time, it will agree with everyone here

 

Whatever you need to tell yourself to decrease that "dirty" feeling

You're always welcome to point out where my argument has fluctuated at all though.

 

be careful, pal

 

You're right; now that we're in this together we should cooperate more.

 

that's better.

 

You are way off mark here. What I'm saying is that if you cannot simply look at the quantitative value of a variable in a mathematical model without considering the wider context. For example, F = m * a is an equation that is part of the mathematical model in classical Newtonian physics. Let's suppose that you were presented some data that consisted of measurements of the maximum acceleration of three cars, a Ford Taurus, a Chevrolet Malibu, and a Porsche Cayenne, but you were not given the manufacturer or model of the cars. Now let's suppose that when the data was collected the Taurus and the Malibu had good, properly inflated tires, but the Cayenne had tires with no air. If you merely looked at the acceleration data, without examining the conditions under which the data had been collected, you might come to the conclusion that the Cayenne is an inferior car to the Taurus and Malibu. In a similar way, to merely point to FDI, without proper consideration as to why it is a certain value, is flawed. That's the problem.

You just don't get it Let's suppose I give a three year old a graph that depicts the line spectra of a sample of molecular nitrogen that has been heated in an electric arc. That spectra would be meaningless to him. Why? Because the data, without any understanding of the assumptions that went into the model that deals with why there are various intensities of light at various frequencies associated with the energy of a sample of molecular nitrogen, is meaningless. However if he touched the conductor of the arc while it was heated, that would mean something to him. If a physicist looked at that spectra, he would know that it represented the population of the various states of the molecules in the sample, and would be able to deduct things like rotational and vibrational temperatures from it. Similarly just presenting FDI as evidence that Chavez had bad economic policies, without a consideration of what was motivating the various players involved in influencing the value of FDI at that particular time, is shallow in the least, possibly just plain ignorant.

I hate to say this to you, but I really don't think you want to get into math with me. You don't impress me as being someone who would be very deep on that subject. Just to find out, suppose I have a finite, discreet bi-variate function. How could I get rid of the high frequency variation in that function without performing a Fourier transform?

Chavez did not kill the economy of Venezuela. However, big economists like Greenspan, Rubin, Summers and Paulson, nearly killed the US economy, despite their education and experience. And if it had not been for the fact that they had a mechanism to print an unlimited amount of money, they would have surely killed it. The process of cleaning up that mess is still on going.

I have been responding to your criticisms. You listed support of terrorism, foreign policy and FDI, so I'm talking about them. You do remember what you said, don't you?

You didn't say that all FDI everywhere is always good. However you want to point to FDI as evidence that Chavez did not have good economic policies, without considering what the motivations were of the rich and powerful who control the financial institutions that determine FDI. They simply did not like Chavez because he said that it was not right that half the people of Venezuela were hungry while only a few were benefiting from the oil wealth of Venezuela.

WOW! You are an economist and you said that. Just a quick Google search revealed that GDP per capita initially decreased and then INCREASED 50 PER CENT UNDER CHAVEZ from where it was when he took office. If you are in charge of economic development in Sub Saharan African, it's not wonder they are having problems.

 

Another great post trout mask replica. However, I was wondering if you would elaborate on the following:

You say that

You also say that

And

If the poorer country share of FDI was 30 per cent, and 8 per cent of FDI was for poorer country manufacturing, that would mean that 27 percent of the FDI that went to poorer countries was for manufacturing. Furthermore it appears that China was among the countries that got half of the developing nation FDI. It is also among the countries that was responsible for over 60 per cent of the growth in the developing world. This would appear to contradict the idea that poorer country growth does not necessarily depend on FDI.

Just throwing something out there for you to grapple with.