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






As share of World Gross Fixed Domestic Investment






Net international bank loans






Gross size of international banking market







As a result the extra profits for the banks and financial institution rose dramatically since the 1970s. They managed to make a huge return on their loans to the Southern states. The Latin American states, for example, paid $40 billion a year in debt service in the 1980s. 38

A number of economists have already pointed out that the semi-colonial countries have already paid back their debts several times. But the imperialist regime, the power of the banks to raise the interest rates etc. all led to the situation that despite having paid back their loans several times, the semi-colonies are still higher indebted than they were in the 1970s. The progressive economists Paulo Nakatani and Rémy Herera report, that the so-called developing and emerging market economies together have already paid to their imperialist masters a cumulative $7.673 trillion in external debt service. But by raising interest rates etc. the Third World’s debt did not decrease but rather increased from $618 billion in 1980 to $3.150 trillion in 2006. As a result the semi-colonial countries have to pay a rising proportion of the annual national output as debt service to the imperialist financial institutions: “Total external debt service of these countries grew from 2.8 percent of GDP in 1980 to 4.0 percent in 1989 and 6.9 percent in 1999, before decreasing slowly to 5.2 percent in 2006, just above the 5.1 percent average for the period.” 39

According to the International Monetary Fund (IMF), who differentiates the semi-colonial countries in different income categories, the so-called “low-income countries” have to pay 6.5% of their export income for debt-service, the “lower middle income countries” 19% and the “upper middle income countries” even 35%. 40 (See also Figure 43)

Figure 43 (see PDF file): External Debt Service-to-Export Ratio, 2005-2010 41

The imperialist super-exploitation of the semi-colonial world becomes again obvious in the fact that the banks demand from these countries interest rates which are several times as high as loans to imperialist countries are. In this context one has to bear in mind that the loans, which the imperialist financial institutes gave to the semi-colonies in the 1970s, had variable interest rates. This means that while they had very low interest rates when the semi-colonies got the loans in the 1970s this quickly changed and they had to pay huge interest rates a few years later. 42

The UNDP reported about these major differences between rates in the North in the 1980s and those applied to loans in the South. "During the 1980s, while interest rates were 4% in the highly industrialised countries, the effective interest rate paid by developing countries was 17 %. On total debt worth more than 1,000 billion dollars, this meant a special interest premium of 120 billion dollars annually. This merely aggravated a situation in which net transfers to pay the debt totaled 50 billion dollars in 1989. 43

The following Tables 40 show the huge difference between the interest rates in the imperialist countries and the semi-colonial countries.

Table 40 (see PDF file): Long-Term Real Interest Rates in Imperialist and Semi-Colonial Countries (in %) 44

As a result debt service has become one of the most important forms of imperialist super-exploitation. To give an overview of this development we quote the progressive economists Éric Toussaint and Denise Comanne: “[T]he total foreign debt of developing countries grew from $567 billion in 1980; $1086 billion in 1986; and $1419 billion in 1992. The total debt thus went up 250 percent in twelve years. In the same period interest payment amounted to $771 billion, and principal repayment $891 billion. Total payments from Third-world countries over these twelve years amounted to §1662 billion: three times what they owned in 1980. After repaying what they owed three times over, at the cost of untold suffering, far from being less in debt, they owe far more than in 1980: 250 percent more. 45

The United Nations Commission for Human Rights reported that between 1984 and 1990, for example, the draconian policies of debt collection produced a staggering net transfer of financial resources - $155 billion - from the South to the North.” 46

Since then the super-exploitation of the semi-colonial world via financial robbery has continued. By 2002, i.e. 22 years later, the developing countries repaid their creditors a little over $4,600 billion. If one adds South Korea this figure grows to $4,900 billion. In other words between 1980 and 2002 the semi-colonial countries have repaid eight times what they owed in 1980! At the same time by 2002 their amount of still existing debts has increased to $2,400 billion, more than four times the amount of 1980! 47

This increase of debt took place in different regions in the following way as Table 41 shows:

Table 41 (see PDF file): Increase of Debts in Regions, 1980-2002 (in billion US-Dollars) 48

The external debt stock of the Developing Countries rose to $4.076 billion by 2010. 49 In 2005 the South paid $482 billion in debt service to the imperialist monopoles alone. 50 In 2008 it had to pay a total external debt service of $539 billion and in 2009 again $536 billion. 51

A particularly sickening example of the imperialist debt tyranny is Africa. The progressive African economist Demba Moussa Dembélé has pointed out that Africa’s debt service is even higher than foreign aid and this aid is partly used to pay for the debts:


These things – the cost of complying with conditions imposed by donors and lenders and subsidies on domestic produce by OECD countries – help explain, among other things, the worsening of the debt crisis, which in turn has meant greater dependency on foreign aid. In the 1980s and 1990s, the average debt service was roughly equal or even higher than foreign aid to African countries. Part of that aid was even used to pay back old debts, including multilateral debts. All this reinforced dependency on external sources, especially the World Bank, the IMF and the African Development Bank. 52

UNCTAD too points to the absurd fact that Africa has already paid back more than it got in loans but still is indebted with nearly $300 billion: “A cursory glance at Africa’s debt profile shows that the continent received some $540 billion in loans and paid back some $550 billion in principal and interest between 1970 and 2002. Yet Africa remained with a debt stock of $295 billion. For its part, SSA received $294 billion in disbursements and paid $268 billion in debt service, but remains with a debt stock of some $210 billion.” 53

If one takes Nigeria as an example one can see the absurd situation that this country is in. It borrowed $13.5 billion in loans from Paris Club creditors between 1965 and 2003. It has already paid back about $42 billion because of penalties and interest accrued. Nevertheless Nigeria still had $25 billion to pay in 2003. 54

We finish this chapter with a telling historical analogy which Éric Toussaint made to better understand the dimension of the imperialist debt trap. He compared this massive value transfer via the debt trap with the US-imperialist initiative after WWII to rebuild Western Europe and arrived to the conclusion: “Between 1980 and 2002, the populations of the Periphery countries have sent the equivalent of fifty Marshall Plans to the creditors in the North (with the capitalists and the governments of the Periphery skimming off their commissions on the way). 55


Losses from Currency Exchange

Another way by which the imperialist monopolies gain profits is their dominance in the currency market. US imperialism in the first line and European imperialism secondly dominate the world currency market. Hence if we look at the currencies in which the developing countries public and publicly guaranteed debt are held, the advantage for the imperialist monopolies becomes obvious. By 2010 69.4% of the semi-colonies public debt is held in U.S. Dollars, 12.7% in Euro, 10.4% in Japanese Yen, 0.5% in British Pound Sterling and 0.4% in Swiss Franc. 56 Therefore the semi-colonial countries are not only dependent on the currency changes but they are also forced to buy US Dollars or Euros to pay for their debts. This means an additional loss for these economies.

According to Eastern German economists the semi-colonial countries had to pay between $30 and $40 billion a year in the early 1980s to buy imperialist currencies (mainly US Dollars) to build up their currency reserves. 57

The World Bank showed in a recently published report the huge advantage that the imperialist powers gain from their dominant status in world currencies. According to this study, the US gained rent income from their currency position in average of $48 billion per year between 1990 and 2010 (in 2010 this sum was even $93 billion). European imperialism gained from its Euro currency status in average $13 billion per year between 2000 and 2009. 58

The advantage for the imperialist monopolies and states don’t need further explanation. It is also clear that the political and geo-strategic (and therefore also military) interests of the imperialist states go hand in hand with their economic considerations. Even a liberal writer has to admit this connection:


Ten years ago the Independent International Commission on Global Governance recognised the urgent need for international monetary reform in a globalised world economy. Since then there has been growing criticism of the present ‘dollar hegemony’ of the United States. For the privilege of using the dollar as the main global currency, the rest of the world is estimated to pay the US at least $400bn a year. A Pentagon analyst has justified this as payment to the US for keeping world order; others see it as a way for the richest country in the world to compel poorer ones to pay for its unsustainable consumption of global resources. To build up their reserves, poor countries have to borrow dollars from the US at interest rates as high as 18 per cent and then lend the money back to the US in the form of Treasury Bonds at 3 per cent. The dollar is a global monetary instrument that the US, and only the US, can produce; world trade is now .a game in which the US produces dollars and the rest of the world produces things that dollars can buy.” 59


Capital Flight

Let us now move to a special form the imperialists use to profit from their world domination: capital flights and other forms of illegal money transfers from the South to the North. Naturally those sending the money illegally from the South to the North – both the imperialist monopolies and the semi-colonial capitalists – are the immediate beneficiaries. However the obvious losers of this process are the semi-colonial countries which lose surplus value that could have be invested or used via taxes for public investment. On the other hand the banks and other financial institutions in the imperialist countries profit massively from the capital flight. This is why they welcome and encourage such capital flight. This creates the twisted situation that the semi-colonial countries can not pay their debts to the imperialist bank because of lack of money, while the capitalists illegally transfer their money out of the semi-colonial countries to the same imperialist bank. As a result the banks profit twice: on one hand they get the illegally transferred money capital and on the other hand they can impose penalties on the same countries for not paying their debts in time.

Capital flight from the South to the North is not a new phenomenon but is characteristic of imperialism. A recent study calculated the size of illicit financial outflows from India since 1948. Despite the fact that it did not include smuggling, certain forms of trade mispricing, and gaps in available statistics in its calculations it came to the conclusion that “it is entirely reasonable to estimate that more than a half-trillion dollars have drained from India since independence.” 60 (See Figure 44)

Figure 44 (see PDF file): Illicit Financial Flows from India, 1948-2008 61

In the 1970s and 1980s capital flight increased substantially. According to the US bank Morgan Guarantee Trust Bank capital flight from the Latin American countries to the imperialist metropolises was about $120-130 billion between 1976 and 1985. This was the equivalent of about 1/3 of the total foreign debt of the continent.

Another source shows figures for capital flight for other semi-colonial countries in the period between 1976 and 1982. In these years $5.1 billion were secretly transferred out of Indonesia (the equivalent of 34% of the foreign debt of the country), nearly $4 billion out of Egypt (more than 44% of its foreign debt), $2.7 billion out of Nigeria (more than 43% of its foreign debt), $2.1 billion out of India (1/3 of its foreign debt) and $1.9 billion out of Syria (96% of its foreign debt). 62 For the whole Third World the Morgan Guarantee Trust Bank gives the figure of around $200 billion for the same period, the equivalent of about 50% of the total foreign debt of the Third World. 63 For the year 1988 the IMF estimated that in the 13 most indebted countries capital flight was about $180 billion. 64

The huge amount of capital flight also becomes visible from the following Table 42. It shows how much money the capitalists from the semi-colonial countries deposited in the imperialist metropolises. It becomes clear that while the Third World had debts of about $1.921 billion, the capitalists from the South had $966 billion in deposits in the North, i.e. half of the total debt. It is known that a portion of the imperialist loans were directly transferred out of the country. In this grotesque way the imperialist banks profit in two ways at the same time. They gain interest as debt service for the loans and the gain fresh money capital from the South which they can then re-lend for a higher profit.

Table 42 (see PDF file): Gross Debt, Deposits and Net Debt, 1995 (in billion US-Dollars) 65

According to Éric Toussaint in 2000 alone, fresh deposits by capitalists of the Periphery in banks of the Centre came to 145 billion dollars. 66

Recently several studies have been published about the size of capital flight and illegal transfer of money from the South to the North. One of these studies dealt with illicit outflows from the Least Developed Countries. It reports:


The study’s indicative results find that illicit financial flows from the LDCs have increased from US$9.7 billion in 1990 to US$26.3 billion in 2008 implying an inflation-adjusted rate of increase of 6.2 percent per annum. Conservative (lower-bound) estimates indicate that illicit flows have increased from US$7.9 billion in 1990 to US$20.2 billion in 2008. The top ten exporters of illicit capital account for 63 percent of total outflows from the LDCs while the top 20 account for nearly 83 percent. Trade mispricing accounts for the bulk (65-70 percent) of illicit outflows from the LDCs, and the propensity for mispricing has increased along with increasing external trade. Empirical research on illicit flows indicates that there are three types of factors driving illicit flows—macroeconomic, structural, and governance-related. 67

The study calculates that the ratio of illicit outflows to Gross Domestic Product (GDP) from the Least Developed Countries averages about 4.8% per year.

Another report about all so-called Developing Countries calculates that in the late 2000s illicit flows out of these countries were above US$1 trillion annually! 68 In their own words the authors consider this an underestimation: We continue to regard these estimates as very conservative, since they do not include smuggling, the mispricing of cross-border services, or the mispricing of merchandise trade that occurs within the same invoice exchanged between exporters and importers

Detailing capital flight the authors report: “Asia accounted for 44.9 percent of total illicit flows from the developing world followed by MENA (18.6 percent), developing Europe (16.7 percent), the Western Hemisphere (15.3 percent), and Africa (4.5 percent). Many of the top ten countries with the largest transfers of illicit capital are located in the MENA region, while Asia’s dominant share is mainly driven by China and Malaysia.


The largest ten countries’ cumulative (normalized or conservative) illicit outflows during 2000-2009 in declining order of magnitude are China ($2.5 trillion), Mexico ($453 billion), Russia ($427 billon), Saudi Arabia ($366 billion), Malaysia ($338 billion), Kuwait ($269 billion), United Arab Emirates ($262 billion), Qatar ($170 billion over nine years as data for 2000 are not available), Venezuela ($171 billion), and Poland ($160 billion). On average, these ten countries account for 70 percent of the illicit outflows from all developing countries over the period 2000-2009. 69

Capital flight also plays a considerable role in Africa. A study which examined the 39-year period from 1970 through 2008 came to the conclusion: “Utilizing accepted economic models, namely the World Bank Residual Method and IMF Direction of Trade Statistics, we estimate that such flows have totaled $854 billion across the period examined. This estimate is regarded as conservative, since it addresses only one form of trade mispricing, does not include the mispricing of services, and does not encompass the proceeds of smuggling. Adjusting the $854 billion estimate to take into account some of the components of illicit flows not covered, it is not unreasonable to estimate total illicit outflows from the continent across the 39 years at some $1.8 trillion. 70

Another report on Africa estimates capital flight from Sub-Saharan Africa in the mid-1990s at about $274 billion (including interest earnings), which was equivalent to 145% of the total debt owed by these countries. It concluded: “In fact, recent estimates show that Africa is a net creditor to the rest of the world, with around 30% of sub-Saharan Africa's GDP being moved offshore.” 71

Let us finish this sub-chapter by drawing our readers’ attention to the huge capital flight and illegal financial transfers of the super-rich capitalists. These criminals, in the literal sense, transfer their money away from state authorities to tax havens which lose tax revenues amounting to $250 to $300 billion every year. Nearly a third of the super-rich’s wealth is managed in offshore financial centers. A recent study reports:


According to Professor Michael R. Krätke, it is estimated that some 30% of the assets of richest people in the world are managed in offshore financial centers. More than a fifth (23%) of all the world's bank deposits are hidden in tax havens, at least $ 3,000 billion on a cautious basis of reckoning. Nearly 50% of the world's transboundary financial transactions move through them. R. Krätke, concurring with the Tax Justice Network's prudent analysis, claims that the capital hidden in tax havens means lost tax revenues amounting to from $250 to $300 billion every year. This is a substantial part of the money needed to relaunch the economy, increase the purchasing power of the poorest and, in general, improve the situation of some 2.7 billion persons throughout the world living on less than two dollars a day.” 72

The Tax Justice Network estimates that about $11.5 trillion has been siphoned offshore by wealthy individuals alone! 73 One needs hardly explain why we Bolshevik-Communists consider the slogan “Expropriate the Superrich!” as highly important and timely.


iii) Value Transfer from the Semi-Colonial South to the Imperialist North: Unequal Exchange

Direct capital export from the North to the South is only partly the source for imperialist extra-profits. Another important form of super-exploitation is unequal exchange. As we have explained above, unequal exchange takes place on the world market where commodities are exchanged representing different socially necessary labor time. Commodities which embody less intense labor are exchanged against commodities which embody more intense labor.

To understand the full dimension of the unequal exchange we have to recognize the growing role of world trade. As the following Figures 45, 46, 47 and 48 show, world exports and imports have increased from about 10% of world output in 1965 to more than 25% in 2007. They also show the rising role of the so-called developing countries during this period whose imports and exports have increased from less than 3% to 9-10% of world output. However the Figures also make it possible to divide the period since WWII: while the “developing countries” share in world trade declined between 1948 and the early 1970, it rose since then. This is true in particular for semi-colonial Asia, while in Latin America and Africa this change took place later in the 1980s and was less dramatic. It is no accident that the increasing role of the semi-colonies started in the 1970s when world capitalism entered a phase of stagnation of its productive forces.

Figure 45 (see PDF file): World Imports as Share of World GDP, 1965-2007 74

Figure 46 (see PDF file): World Exports as Share of World GDP, 1965-200775

Figure 47 (see PDF file): Regions Share in World Exports, 1948-2007 76

Figure 48 (see PDF file): World Manufactured Exports, by Region and Income Group, Selected Years, 1995–2009 (US-Dollar billions) 77

While the role of trade is increasing, the imperialist economies profit much more from this than the semi-colonies. The reason for this is that the terms of trade are developing in a direction to the advantage of the imperialist countries and the disadvantage of the semi-colonial countries.

What is the “term of trades”? It means the relationship between the export prices of the semi-colonial countries and their import prices. To give one example: Between 1980 and 1992 the ratio between the export and import prices fell by 52%. 78 This means that if 100 units of commodities from the semi-colonial countries could be traded for 100 units from the imperialist countries in the year 1980, those 100 units could only be traded for 48 units from the imperialist countries in the year 1992.

This is not a specific, short-term development but a long-term, historic tendency of capitalism. As we show in Figure 49, reproduced by the UN’s ECLAC in 2002, it is a characteristic trend in the imperialist epoch where the monopolies dominate the world economy. This real commodity price index – a composite of 24 non-oil industrial commodities – shows that the terms of trade of these essential commodities for the semi-colonial countries has deteriorated significantly. In the year 2000 the index for these commodities was only 1/3 of its level before 1920. In the period between 1980 and 2000 alone, it declined by nearly 30%. 79

Figure 49 (see PDF file): Development of Terms of Trade 1880-2000: Real Commodity Price Index 80

These findings are also vindicated by another author. Arturo O’Connell showed in a study the deterioration of the terms of trade for the non-oil producing developing countries in the period 1957-2000. As Figure 50 demonstrates, the terms of trade for these countries declined in these years by more than a third. 81

Figure 50 (see PDF file): Development of Terms of Trade for Non-Oil Producing Developing Countries, 1957-2000 82


We remember the SWP/IST theoreticians who explained the declining share of the semi-colonial countries in world trade after the World War II simply by their “their declining importance”. In fact the main reason for this was the deteriorating terms of trade. Ernest Mandel pointed out that the falling share in world trade of the semi-colonial countries from 30% to 20.4% between 1950 and 1960 was mainly caused by declining prices for raw materials. In 1962 prices for raw materials were 38% lower than in 1954 which meant a loss of $11 billion for the semi-colonial countries. 83

To give another example: Between 1950 and 1986 the purchasing power of raw material exports declined by half in relation to the industrial commodities. In other words, the countries which mainly export raw material have to pay double as much for the same amount of industrial goods. 84

Various economists have tried to calculate the costs of this deterioration of the terms of trade for the semi-colonial countries. Samir Amin calculated that the semi-colonial countries lost about $ 22 billion a year in the mid-1960s as a result of unequal exchange. To give a sense of the proportion: This was much more than the monopolies invested at that time. Private capital export was about $12 billion in 1964. 85

Augustín Papic, a former member of the United Nation’s North-South Commission, calculated in the 1990s that the invisible transfer from the semi-colonial to the imperialist countries due to the negative development (for the South) of terms of trade is about 200 billion US-Dollars a year. 86

Control of world trade by the imperialist monopolies is another important source for extra profit. Most of the world’s merchant marine is in the hands of imperialist monopolies. This enables them to appropriate a substantial proportion of surplus value from the semi-colonies. Eastern German economists reported that the export price for commodities from the semi-colonies was only about 20-30% of the retail price in the imperialist metropolises. Of course the monopolies have to pay for transport and retail, nevertheless a huge extra profit remains for them. 87 Éric Toussaint reported that the monopoly have to pay only about 10-15% of the retail price to the semi-colonies. 88

The oil industry is also a striking example. The monopolies control of oil trade and processing allows them to appropriate a large share of the oil rent. While this changed to a certain degree in the 1970s, according to a United Nations report in 1982 the monopolies still appropriate 2/3 of the oil rent while the rest goes to the oil-producing countries (before the 1970s the monopolies even took 90% of the oil rent!). 89

Another form of value appropriation by the imperialist states is the tariff and non-tariff barriers which they impose for imported commodities from the South. The semi-colonial countries have to pay higher tariffs and non-tariff barriers for their exports to the North than the imperialist monopolies have to pay for their exports to the South. As a result the semi-colonies suffer additional losses. According to the UN the South lost about $40 billion a year in the 1990s because of the imperialist trade restrictions. 90

Finally we also have to mention the huge costs of the control which the imperialist monopolies have on modern technologies via patents. Since the imperialist economies have a higher level of productivity and bigger capital resources, most of the world’s Research and Development (R&D) capacities are owned by monopoly capital. Therefore, imperialist capital owns most of the world’s patents and the semi-colonial capital has to pay for the usage of their technologies. Eastern German economists calculated the total costs for the technological dependence of the semi-colonies in the late 1970s of about $30-50 billion a year. 91

Before we close this chapter we want to point out a relatively small fact which is highly symbolic of the imperialist hypocrisy. Official development aid is often declared as generous support from the rich countries for the poor. In fact this official aid is often used to buy commodities from the imperialist monopolies or is used to pay for “foreign experts” which are usually from the rich countries. According to a United Nations figure 90% of the UNDP assistance aid in the 1990s was spent on foreign experts! 92

We have now seen various forms of unequal exchange which enables the imperialist monopolies to appropriate a significant share of value produced in the semi-colonial world.


iv) Value Transfer from the Semi-Colonial South to the Imperialist North: Migration

We have explained before that another way monopoly capital extracts surplus profits is via super-exploitation of the migrants who often come from semi-colonial world. Imperialist capital gains profits by paying the migrant workers below the value of their labour force. Let us now try to get a concrete overview over the consequences of the migrants’ super-exploitation.

Giving the misery and wars in the semi-colonial world, it is not surprising that many people flee into neighboring countries. (In the bourgeois statistics refugees and labor migrants are put together. Hence one of the countries with the biggest “migrant” population is Gaza and the West Bank!) However, while in the countries of the South migrants represent only a relatively small proportion of the population (between 1,5% and 3% if one takes the continents as a whole), they represent between 10% and 14% of the population in Europe and Northern America. 93 More than half of the 214 million migrants worldwide are living in these two imperialist regions. 94 According to a Research Paper of the International Institute for Labour Studies, all in all in the year 2000 66% of all migrants worked in so-called High-income countries and another 14% in High-middle income countries – a share which is surely higher today. 95

This development is also shown in Figure 51 which we took from a recent OECD study. It demonstrates that migrat