8. The Various Forms of Imperialist Super-Exploitation of the Semi-Colonial Countries and their Development in the past Decades (Part 2)


We will deal now with the various forms of imperialist super-exploitation of the semi-colonial countries more in detail. Let us recall the four categories we identified as the forms in which the value appropriation by the imperialist monopolies from the semi-colonial world takes place:

i) Extra profits via capital export as productive investment

ii) Extra profits via capital export as money capital (loans, currency reserves, speculation etc.)

iii) Value transfer via unequal exchange

iv) Value transfer via migration, i.e. the import of relatively cheaper labor force to the imperialist metropolises from the semi-colonies

i) Extra Profits via Capital Export as Productive Investment

Monopoly capital in the era of globalization is increasingly dependent on its world-wide operations to increase profit. A study published by a foundation close to Big Business gives the following figures about the dramatic increase of US multinationals’ profit originated by its foreign affiliates: While foreign affiliates accounted for 17% in 1977 of the worldwide net income of U.S. multinationals., this figure rose to 27% in 1994 and a startling 48.6% in 2006 — i.e. nearly half! The study commented: “Indeed, U.S. multinationals across many industries have recently offset slowing U.S. sales and profits with stronger sales and profit growth outside America—especially in fast-growing countries such as China and India.” 1

As we already pointed out, the imperialist monopolies can expect a high rate of profit in the semi-colonial countries because of the lower organic composition of capital and the favorable conditions for exploitation. As a result monopolies can gain a huge extra profit by using their advanced machinery and patents in combination with employment of cheap labor forces from the semi-colonies.

The following Figure 37 shows the enormous differences between the wages in the North and the South.

Figure 37 (see PDF file): Geographical Differences between the Hourly Wages in Manufacturing, 2008 2

In Figure 38 we see the wages of industrial workers in various imperialist and semi-colonial countries compared with the mean wages of US industrial workers. In the year 2005 the mean wage of workers in India was about 3.1% of the US level. Workers in the Philippines get about 3.6% of the U.S. level and those in Sri Lanka only 2.3%. We can see also that Mexican workers only get about 1/10 of the wages of US workers. Similarly, the level of Eastern European workers wages is only about 18% of its colleagues in the Euro Area.

Figure 38 (see PDF file): Mean Total Hourly Compensation Costs of Manufacturing Employees, selected Countries and Regions, 2005 3

Let us a give a practical example of the huge advantages for the monopolies of the exploitation of the workers in the semi-colonial countries. The US socialist economist Doug Henwood showed in a study that in Mexico the US owned plants are 85% as productive as plants in the USA. But the capitalists have to pay the Mexican workers only 6% of the wages of their North American counterparts! 4

In the following we reproduce a number of figures on the time since the end of World War II, which demonstrates that in all periods, monopoly capital could appropriate higher rates of profits in the semi-colonial countries than in their imperialist home countries. They also show that a significant proportion of these profits are not reinvested or even consumed in the country where the profits are created (i.e. the semi-colonies) but are rather repatriated to the home countries of the multinational corporations.

A team of Soviet economists published a study in 1970 which showed the important differences in the profit rate of foreign investment for the imperialist monopolies. They presented figures for the mid-1960s which demonstrated that US monopolies derived a profit rate of 8.7% from foreign investment in other imperialist countries, but got a profit rate of 18.1% in the semi-colonial countries. British monopolies received a profit rate of 8.3% at home, but got a profit rate of 15% in its former colony India. At the same time Indian capital achieved only a profit rate of 10% at home. 5

The Syrian-born academic Bassam Tibi completed a study about the different profit rates of US corporations in the mining and petroleum industry between 1950 and 1970 in the imperialist and the semi-colonial countries. He showed that the profit rates were considerable higher in the semi-colonial countries. (See Table 35)

Table 35 (see PDF file): Profit rates of Direct Investment of US corporations in Imperialist and Semi-Colonial Countries, 1951-1970 (in %) 6

Pierre Jalée reported in his book on imperialism about a study which shows that the oil corporations had profit rates in the semi-colonial world between 61% and 114% while they were only about 7.2% in Western Europe. 7

Another figure was given by the Brazilian left-wing economist Theotonio Dos Santos. He calculated that between 1946 and 1968 the USA exported to Latin America 5.5 billion US Dollars while at the same time 15 billion were transferred from Latin America to the USA as dividends, interest made by these investments. 8

In a more general study Eastern German and Soviet economists calculated the different profit rates for US monopolies in the 1970s in the semi-colonial and imperialist world. According to them the monopolies profit rates were about double as high from investment in the semi-colonial countries than they were in the metropolises. (See Table 36)

Table 36 (see PDF file): Extra profits of US Monopolies in the Semi-Colonial World: Relation between Declared Profits and Nominal Value of US Investments Abroad (in %) 9

UNCTAD reported in 2003 that the rate of returns on Foreign Direct Investment “were consistently higher in developing countries (5.8%) than in developed (4.4%) and CEE countries (3.9%) since the beginning of the 1990s.“ 10

The Marxist economist Tony Norfield presents in an interesting article an international comparison of the rates of return on US direct investment overseas for the years 2006-2009. (See Table 37) His calculations prove our thesis that monopoly capital gets a higher profit rate by exploiting workers in the South than in the old imperialist countries. Norfiled shows that “in 2009 the global average rate of return calculated was 9.7%. But it was only 3 to 5% in Germany, France and the UK, and close to 20% or above in Chile, Venezuela, Nigeria, Indonesia, Malaysia and Thailand. The average rate of profit earned in the rich countries is far less than that earned in the poor ones, based on the much higher rate of exploitation of labour in poor countries. 11

Table 37: Rates of Return on US Direct Investment Overseas, 2006-2009 (in %) 12







Average for all countries **




















   United Kingdom





Latin America








































Middle East





   Saudi Arabia





   United Arab Emirates





Asia and Pacific






























   Korea, Republic of















Source: US Bureau of Economic Affairs and author’s calculations.

Notes: * The rate of return is measured in the standard way, by income in that year divided by the average of that year’s and the previous year’s stock of investment (historical cost basis).

         ** The data are based on a total of over 200 countries. The regional totals include all countries in the region, with some individual countries listed beneath.

In this context it is worth pointing out that extra-profits and repatriated earning of the imperialist monopolies do not only originate directly from their capital exports. A large share of their investment is financed by undistributed returns or by local credits which they get with favorable conditions. Theotonio Dos Santos calculated that the net North American investment in Latin America for the years 1957-64 reached 1.5 billion Dollars while actually only 180 million were exported from the USA. The rest arrived from undistributed returns, local credits etc. During the same time 630 million Dollars were transferred from Latin America to the USA. 13

We have argued against various centrists that super-exploitation of the semi-colonial world plays an enormous role for the most powerful sector of the capitalist class – the imperialist monopolies. We have said that the extra-profits which they derive from the semi-colonial countries represent a significant proportion of their total profits. In its World Investment Report 2011 UNCTAD gives a number of figures which underline this fact. As one can see in Figure 39 between 20% and 90% of the biggest monopolies profits – including Anglo American, Toyota, BASF and Nestlé – derive from their investments in the semi-colonies.

Figure 39 (see PDF file): Operating Profits derived from Operations in Developing and Transition Economies, selected top 100 TNCs, 2010 (Billions of dollars and share of total operating profits) 14

Capital export of imperialist monopolies towards the semi-colonial countries is foreign investment, investment which is made not by the domestic capitalist class but by another, foreign capitalist class, with origins in the dominating imperialist part of the world. It is the economic foundation of the still existing national oppression of these countries despite their formal independence. As a result the imperialist monopolies repatriate a significant proportion of the profits which they make in the semi-colonial countries back home to the “parent company”.

In the following calculation of the development of profits a group of Soviet economists compared the growth of foreign investment and repatriated profits between the imperialist and the semi-colonial countries. They showed that US monopolies were able to repatriate profits from the developing countries which were 4-6 times higher than the additional foreign investment. They also show that profit repatriation from foreign investment in the semi-colonial countries was substantially bigger than from foreign investment in other imperialist countries. (See Table 38)


Table 38 (see PDF file): Annually Repatriated Profits and Annual Growth of Foreign Investment by US Monopolies, 1950-1966 (in Million US-Dollars) 15

A Survey of ECLA in 1970 shows that the local subsidiaries of US corporations in Latin America in the manufacturing sector repatriated 57% of their profits to the parent company and this figures rose to 79% for all sectors between 1957 and 1965. 16

This dynamic of exploitation of the semi-colonial countries via profit repatriation continued in the last decades. Between 1980 and 1992 multinational corporations undertook a net repatriation of profits worth $122 billion. 17 According to official statistics US TNC’s received via their foreign direct investment in Latin America a rate of return between 22-34% in the 1990s. On this basis US multinationals repatriated profits of $157 billion from Latin America to the North.

However it is important to bear in mind that these are all official figures. We stress this point because a significant amount of the profits of the multinational corporations is declared as domestic profits. This is easy for the monopolies to arrange since they control 2/3 of world trade and 1/3 of world trade is intra-firm trade, i.e. trade of commodities inside the same multinational corporation. 18 Through price manipulations and other mechanisms the monopoly capitalists can easily distort the official accounting. The anti-imperialist writer James Petras noted in his book Globalization Unmasked: “the real rate of return and profit is much higher, because so much of it is unreported or disguised through transfer-pricing but also because it does not include reinvested profits and is calculated after deduction of taxes, liabilities held by parent corporations, insurance and license fees and royalty payments to the same, and ‘adjustments’ related to currency valuations.” 19

Repatriated profits continued to grow in the last years. Éric Toussaint, a well-known Belgian socialist and anti-imperialist activist and researcher, reported in 2007: “Capital flight and brain drain from the developing countries to the most industrialised countries have grown over the last few years. The amount of profits repatriated towards the ‘parent company’ has multiplied by a factor of 4.5 between 2000 and 2006 (from 28 billion in 2000 to 125 billion in 2006) 20

Even one of the major imperialist institutions – the World Bank – has to report about the huge dimensions of profit repatriation of the imperialist monopolies albeit it tries to downplay this factor. Nevertheless they have to admit that the imperialist monopolies could increase their profits – in relation to the economic output of the semi-colonies – by four times from 1990 to 2006. And they also report that the imperialist monopolies repatriate between 2/3 and 4/5 of their profits to their parent company:


The income earned by multinationals on FDI has risen in tandem with the surge in flows. The value of multinationals’ investments in developing countries reached an estimated $2.4 trillion in 2006. The income earned on that stock rose from $74 billion in 2002 to $210 billion in 2006. FDI income increased from less than 0.5 percent of GDP in developing countries in the early 1990s to almost 2 percent in 2006.


Not all of this income represents an outflow from developing countries’ balance of payments. The portion of FDI earnings that is repatriated each year has been relatively stable over the past 10 years, averaging 62 percent, down from more than 80 percent in the early 1990s. Repatriated earnings increased from $28 billion in 2000 to $125 billion in 2006, but they do not represent a significant burden on the balance of payments. Repatriated earnings have represented about 2 percent of developing countries’ export revenues since 2000. 21


This shows that between the past decades profit remittances on Foreign Direct Investment grew much faster than the national output in the semi-colonial countries. This also becomes evident from other World Bank statistics. According to the World Bank’s annual publication Global Development Finance, the Gross National Product of the “Developing Countries” grew between 1970 and 1980 from $1.124 billion to $2.901 billion, i.e. by +258%. At the same time profit remittances on FDI grew from $6.5 billion to $23.8 billion, i.e. by +366%. 22 However this discrepancy accelerated even more in the next decades. Between 1990 and 2010 the Gross National Income of the “Developing Countries” grew from $3.578 billion to $19.437 billion, i.e. by +543%. At the same time Profit remittances on FDI grew from $16 billion to $343 billion, i.e. by +2144%. 23


The World Bank described in a report in 2009 the volatile character of the profit repatriation dynamic:


During the first three quarters of 2008, multinational corporations repatriated growing shares of income from some large countries, leaving less for reinvestment. Repatriation as a percentage of income increased to as much as 70 percent during the second and third quarters of the year, compared with an average of 50 percent in previous quarters. Nevertheless, because of the significant rise in FDI income in 2008, the value of earnings reinvested in the same economies still increased by $5 billion (to $47 billion) during the first three quarters of the year compared with the same period a year earlier.


Several factors (such as stable payment of dividends, tax rates, and other regulations) affect corporate decisions to reinvest or repatriate equity earnings. During the previous crises centered in host economies, multinational companies repatriated earnings in excess of current income or called in intra-company loans to reduce their exposure to a country quickly without selling assets. Following the Asian crisis, for example, U.S. multinationals repatriated all their FDI income from the region. Over the last 10 years, by contrast, multinationals have reinvested 30 to 40 percent of their income from foreign operations back into the host country. Reinvested earnings and intra-company loans made up 20 percent and 15 percent of FDI flows to developing countries, respectively 24


Even the share of profits which is not repatriated is not fully used for re-investment. UNCTAD reports in its World Investment Report 2011: “However, not all reinvested earnings are actually reinvested in productive capacity. They may be put aside to await better investment opportunities in the future, or to finance other activities, including those that are speculative. About 40 per cent of FDI income was retained as reinvested earnings. 25


Underestimation of surplus value and extra-profits extracted from the South

A significant proportion of the surplus value and extra-profits extracted from the South does not appear in the official statistics as originated in the South but rather in the North. This is particularly the case concerning the multinational corporations. According to a recent OECD Working Paper, economists have come to the broad estimation that one third of world trade is intra-firm, i.e. takes place between the parent and affiliate parts of one and the same multinational corporations. 26 However, Peter Dicken, author of an important study on Globalization, believes that this figure is an underestimation. He refers to the calculation that “90 per cent of US exports and imports flow through a US TNC, with roughly 50 per cent of US trade flows occurring between affiliates of the same TNC. 27

There has also been a massive increase in the international production chains by the rise of the multinational corporations. This can be seen be the increasing share of imported inputs in manufacturing production. While this share was about 8% in 1970, it rose to 12% (1980), 18% (1990) and 27% in the year 2000. (See Figure 40) 28

Figure 40 (see PDF file): Share of Imported Inputs in Manufacturing Production, 1970-2000 29

There have been some studies which showed that in the official figures of the transnational monopoly corporations the production costs of a given commodity (including wages) in the South only represent a relatively small portion of the total costs. A much bigger proportion appears as costs generated in the North albeit this costs represent unproductive labor (retail, advertising etc.). By this these costs which appear as generated in the North are in reality financed by the surplus value generated in the South. This is even truer for the huge profits which appear again as generated in the North but are based on the surplus value generated in the South. (See Figure 41)

John Smith wrote on this commenting a study on Apple’s 30Gb iPod:


Thanks to research by Greg Linden, Jason Dedrick and Kenneth L. Kraemer, the Apple iPod can serve as a vivid illustration of these international wage differentials and of the broader argument developed in this paper. Linden et al decomposed the costs of production of the Apple iPod into the ‘value-added’ by managers, designers and retailers in the United States and the ‘value-added’ by workers employed in the overseas production of its components and their assembly into the finished good. At their time of writing, the 30Gb Apple iPod retailed at $299, while the total cost of production was $144.40. The other $154.60, 52% of the final sale price, represents what the authors call ‘gross profits’, i.e. revenues, to be divided between retailers, distributors and Apple itself—all of which, it should be noted, counts as ‘value-added’ generated within the USA and is counted towards US GDP, there is no sign of any cross-border value transfers affecting to the distribution of profits to Apple and its various suppliers. From the perspective of Marx’s law of value, most of these activities are non-productive and their revenues represent surplus value extracted from the actual producers of these commodities (more accurately, they are a fraction of the surplus-value generated across the global economy captured by capitalists involved in the production and sale of iPods).” 30

A recently published study by several liberal academics on Apple’s iPhone 3G which details the production costs and profits allows the same conclusion:


Fairly predictably, there is almost no political arithmetic on the social costs of the trans-Pacific chain for the US national economy. The honourable exception is the Asian Development Bank Institute article by Xing and Detert (2010) which presents single product calculations that show how the Apple business model increases the US trade deficit and decreases US employment. The product is the iPhone 3G which in 2009 sold 11.3 million units in the US market and 25.7 million units globally. Xing and Detert’s calculate that just one product, the iPhone 3 contributed $1.9 billion towards the US trade deficit with China; though, when they use assembly value added as the numerator (excluding German, Japanese and US components imported into the PRC for iPhone assembly), the magnitudes are smaller. Their most interesting finding is that Chinese workers add no more than US $6.5 to each iPhone 3 which is no more than 3.6% of the shipping price of an iPhone. The implication is that the high margin iPhone could be profitably assembled in the United States or any other high wage country and “it is the profit maximization behaviour of Apple rather than competition that pushes Apple to have all iPhones assembled in the PRC” (Xing and Detert, 2010, p.6)” 31

So we have Apple whose owners make a huge gross margin of 72% on each phone but this profit is mostly accounted as generated in the North. 32

Figure 41 (see PDF file): Share of Production Costs of an Apple 4G iPhone assembled in China 33

In Figure 42 we can see that the huge majority of workers which contribute to the production of Apple’s commodities are overseas workers, i.e. mostly workers in “developing” countries. The profit however is appropriated by the monopolies and accounted as created in the North.

Figure 42 (see PDF file): US and oversee Employees resp. Contractors in 1955 and in 2012 34

Apple’s iPhones are of course no exception. Herbert Jauch gives a number of examples which suggest a similar mechanism of profit-generating in the South which appears as profits and costs in the North:


The retail price for coffee is 7-10 times higher than the import price and about 20 times the price paid to the coffee farmer. Designer shirts produced in South East Asia are sold in Europe for 5-10 times their import price. Less than 2% of the total value of shirts produced in Bangladesh are received by the direct producers as wages. The profit by local companies is equivalent to about 1% of total value. About 70% of the total value in the clothing sector consists of firstly profits of distributors, wholesalers and retailers; secondly costs for transport and storage etc; and thirdly customs duties and indirect taxes imposed by the importing (industrialised) country. 35


ii) Extra profits via Capital Export as Money Capital (Loans, Currency Reserves, Speculation, etc.)

As we have shown in one of the previous chapters, after the end of the long boom in the late 1960s and early 1970s world capitalism entered a new period of stagnation. Faced with declining rates of profits it became more and more difficult to invest capital profitably in production. Structural over-accumulation of capital became a defining feature of capitalism since then again. This led to a huge mass of superfluous money capital. Therefore the big banks had a strong desire to put their money capital profitably in circulation. This is why they gave massive loans so willingly to the semi-colonial countries since the early 1970s. Internationally the total volume of loans grew between 1971 and 1979 from $10.2 billion to $123.4 billion, i.e. it grew about 36% a year. 36

The following Table 39 demonstrates the enormously increasing weight of the banking capital in relation to the world output, trade and investment in the period between 1964 and 1991. According to these figures net banking loans rose in this period – compared with the world’s GDP – from 0.7% to 16.3%. In relation to the world’s fixed domestic investment it grew from 6.2% to 131.4%, i.e. banking loans increased more than 20 times as much as productive investment!


Table 39: International Banking Capital in relation to World Output, Trade and Investment, 1964-1991 (in %) 37










As share of World Output






Net international bank loans






Gross size of international banking market






As share of World Trade






Net international bank loans






Gross size of international banking market