"Just between you and me", wrote a man called Lawrence Summers, in a message that was supposed to go down the corridor to his mates, but no further, "shouldn't the World Bank be encouraging more migration of the dirty industries to the LDCs (least developed countries)? I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that.... I've always thought that underpopulated countries in Africa are vastly under polluted; their air quality is vastly inefficiently low compared to Los Angeles or Mexico City".

Summers, who has been both a World Bank economist and Deputy Secretary of the US Treasury and who is currently President of Harvard University, wrote this in a 1991 internal memorandum. A few years earlier, another pundit, a man called James Watt, who worked nearby, remarked, "We don’t have to protect the environment. The Second Coming is at hand". What was James Watt’s job? Verily, I say unto yea: the answer is at hand. President Ronald Reagan wanted to open up Alaska to the oil industry and Oregon to the lumber industry, so he put Watt in charge of environmental policy. A religious nut was the perfect choice to cancel regulatory restraints. Watt knew that birds and trees and all that stuff doesn’t matter because God’s had enough. He’s mad as hell with people and he’s going to smash the planet, so there. Watt’s God is a baby acting up to mum and dad. If I die, he bawls, you’ll be sorry.

So why fuss about oil spills or clear felling of redwoods? Why bother about Africa? This is where the two follies, Summers’ economic fundamentalism, all "logic", and Watt’s Christian fundamentalist illogic, coincide. Both say that Heaven and Earth, and all that therein resides, exist for the profit of American Big Business that they may have dominion over the beasts of the field and the birds of the air and the fishes of the sea. One stylistic difference is that Summers, who is not necessarily religious at all, is happy to enjoy his time down here below, while Watt is awaiting the Rapture.

Evangelicals of the Watt strain take it as gospel that there will come a moment, the Rapture, when God will do the Right thing and - immediately before the Apocalypse - whisk the few True Believers up into the blissful sky. There the elect will carry on with their earthly pursuits while the rest of Planet Earth will be smitten down. In this theology Heaven is a Fortune 500 board room. Or it’s a country club, where you can putt on the immaculate 14th green with a gallery of the angelic host, for ever undisturbed by the huddled masses of Africa - or America.

One "WTO" theme, in the version offered by "The Yes Men", is that Africa needs to return to slavery. Or, as the earnest actor puts it, the capitalist economy would benefit from an "involuntarily imported workforce". Of course the nice young man delivering the Powerpoint lecture has a Master of Business Administration (MBA) degree. In a further in-joke, he has borrowed the surname, Unruh, of a wellknown US Democrat Congressman. As the meeting is in Finland, this gag is unrecognised, as is the name of his obviously fake home town. Had his audience detected such clues, they might have been less credulous about a biography in which he claimed to be son of a Texas cattle rancher. Details like this - a comic book stereotype of the ugly American - wittily foreshadow the satire.

The audience listen intently, and why not. The Lawrence Summers memo is notable not for its sentiment but for its candour. In fundamentalist market terms Africa is vastly underpolluted, the WTO and the UN having frequently opined that the continent is unsuited to policies which might enhance living conditions. Africa’s peoples - better known perhaps as human resources (HR) - might once have been useful as a slave force, but they are not needed by global marketers, so doing anything to help people there would be chucking good money after bad. Africa’s more valuable resource is space (see Jeremy’s reviews of the World Investment Reports for 2001, 2002 and 2003, by the United Nations Conference on Trade and Development. For 2003, see Watchdog 104, December 2003. It can be read online at http://www.converge.org.nz/watchdog/04/14.htm. For 2002, see Watchdog 102, May 2003. It can be read online at http://www.converge.org.nz/watchdog/02/07.htm. For 2001, see Watchdog 101, December 2002. That can be read online at http://www.converge.org.nz/watchdog/01/08.htm. This theme was elaborated in all three Reports. Jeremy’s review of the 2004 WIR follows below. Ed).

The nice young man with the MBA points out the US Civil War, in which slavery was a factor, was "the least profitable war in our history". It was also unnecessary, he goes on, as "markets would have ended slavery" in due course. Again, the analysis is historically well founded. The essential difference between North and South was not moral or religious: it was the difference between an industrialised economy and a cheap-labour unmechanised agricultural economy.

The slavery gambit is fun, but most of the lecture targets its audience, First World workers who are wage slaves only metaphorically. If you want people to work for nothing, you have to get them to accept their servitude. Force does the trick. If you want Finnish or American paper pushers to accept a more subtle exploitation, you co-opt.

Another management gambit to tempt the Yes Men and Women is the tried-and-true appeal to irrationality. The nice young man suggests that they should not be "focused too much on reality, facts and figures". And, inevitably in an imperial America that produced James Watt, religious images sprout like Bushes on a Texas ranch. "God" is calling on the keyboard operators to join a "mission", a "crusade" to ... make fat profits for the boss.

There’s so much acute insight in this modest little satire. One throwaway line, to the effect that it is the transnational corporation "who has the power and is therefore correct", passes seemingly unnoticed by the Finnish workers. "The Yes Men" become dupes of power because they have accepted the ultimate co-option. They assume that the values and needs of the corporation are their values and needs. Summers’ assessment of Africa has been much quoted, but always as an example of Reaganite provincialism, as though Summers were a buffoon. In fact he’s voicing orthodox neoliberalism.

In early industrialising America robber barons dumped on the suckers on the wrong side of the tracks in their home town. In our world of traded carbon credits, monopolies are empowered to extract all they can from whoever and wherever. A globalised economy is an economy designed to erode all sovereignty so that corporations can lay waste to an otherwise useless Africa. It’s efficient cost benefit analysis. And anyway, as Dubya mused, "Africa is a nation (sic) with a lot of diseases".

Perhaps the doco’s best virtue is its modesty. Despite the set-up, the two nice young men never take cheap shots at their targets. We see them in Australia subverting their own subversion to enlist an audience. During the last lecture, delivered fittingly in home territory, the sustained parody of business morality achieves absurdity. The young American audience is about to get the joke. The laughing will start and so then will the thinking.

UNCTAD’s very thorough discussion of its "key issue", identified as "international investment agreements", starts with historical context. In the inevitably turgid codes of such bodies, UNCTAD refers to an "international investment agreement" as an IIA. An IIA sounds precise, but it’s not. Any business deal between governments is an IIA.

In the early days of the UN, after 1945, most of the world’s present nations were still colonies. Decolonisation, UNCTAD suggests, led to State control. To an extent, this is true. As whole areas of the globe - Asia, the Pacific, the Caribbean, Africa - won freedom, newly independent countries expressed themselves as nationalists. Typically the leaders of the independence struggle became leaders of these new states, so national governments had legitimacy. They tended to be regarded as the expression of popular aspiration. That was then, UNCTAD reckons. What the developing world now needs is a "highly standardised international legal framework".

Missing from this explanation is the economic context. In the second half of the 20^th Century national governments were prevalent in the colonisers’ part of the world as well, so other factors than colonial independence were at play. One explanation is that Keynesianism was ascendant. John Maynard Keynes, who has been described as an architect of the post-war world, thought that governments had room to run the economies for which they were responsible. In NZ we recall Keynesianism as marking the not-so-distant days when the Budget might make a difference to daily life or when the Labour Party and the National Party might differ in matters more fundamental than style and presentation.

That’s the threat. Nationalism could so easy morph into nationalisation. Governments could think that they have a responsibility to protect the interests of the voters who elected them. So UNCTAD would rather talk of "protection measures" for the "transfer of funds (profits, capital, royalties etc.) by the investor outside the host country". An IIA is a protection racket.

What this survey amounts to is the draft of world constitution for setting up IIA’s, the rules for what UNCTAD calls "global integration". Foreign direct investment exceeds $US8 trillion a year, "while global sales of foreign affiliates have reached $18 trillion, considerably above the level of world’s exports of goods and services ($9 trillion)". This is huge money. You can see why lots of VIPs think they need to act. "In terms of operational forms, the relatively isolated actors of the past have been replaced by increasingly integrated transnational corporations (TNCs). A new international actor has thus come to the fore" (p4).

This actor wants "fair and equitable treatment".The uninitiated might think that fair and equitable treatment was the principle behind our existing system of law, but that would be to adopt "the plain meaning approach". Apparently, like the Mad Hatter, the new actor wants nothing less than plain meaning. As UNCTAD notes, "capital importing and capital exporting" states differ as to what is meant by "fair and equitable treatment" and the new actor is performing a script written by and for the "capital-exporters".

Welcome to the final victory of postmodernism. Welcome to that level playing field we hear so much about. On the one hand the new constitution emphasises precise rules. It defines relationships as contracts. But, as UNCTAD points out, "in legal instruments, definitions are not neutral and objective’. They mean what the rich and powerful, the "capital exporting states", want them to mean. Relics from the old economy and the old law who cling to "the plain meaning approach" should know that, when it comes to the relationship betwen a capital exporter and a worker in a capital importing factory,"fair and equitable treatment" is "the international minimum standard".

The suspicion arises that, despite the insistence that we have progressed from "old" to "new", or from commodities to services, nothing has changed. Rich people in rich countries still rip off poor people. UNCTAD says that, whereas at the end of 19^th Century, capital exporting states wanted rules to "protect our nationals", capital-importing states wanted rules to "protect our sovereignty". This is not now the case. Now the one demand is for "equality of treatment for foreign investors".

The purpose served by all this talk is the right of capital to go where it likes. So a "standard of national treatment" insists not that just that foreigners get all the rights afforded to domestic interests. They might also be granted advantages. This is the bias that has earned globalisation its bad name. The stress is on "treaty-based rights and not rights based in customary international law. Indeed they operate as exceptions to the general customary law that recognises the rights of states to admit or exclude aliens" (p416).

Such treaties are embodied in being a "most favoured nation" (MFN), a status which overrides any existing laws which might have imposed restrictions. Past laws must be changed to allow for the new order. In a conflict between them, foreign interests trump national interests. Further, "investors are protected even if investment-related activities change or expand" (p192).

MFN status "potentially covers all industries and all possible investment activities, social and labour, taxation, environmental protection, agriculture, marine, air and road transportation" (p193). UNCTAD notes that there are said sometimes to be exceptions, aspects of domestic policy for which national governments may retain regulatory rights. These include policy to do with "public order, health and national security" (p196). The right, though, is unclear and it’s "hard to identify concrete cases".

This is because the benefit of the doubt goes to the IIA seekers. It doesn’t matter what is "intended" by governments; it’s what TNCs say is the "effect" on them. They might claim, for instance, that a national government has illegally imposed a "disguised restriction" (p255). In 1998, the Council of Canadians, a robust democratic lobby, confirmed that "under the MAI* it would be considered a form of expropriation if the federal government or a province moves to enact new laws to protect the environment, wilderness, species or natural resource production". *MAI. In the late 1990s, the proposed Multilateral Agreement on Investment, under the aegis of the Organisation for Economic Cooperation and Development (OECD) was an attempt to impose a global foreign investment agreement which would have cemented in the TNC agenda. It was defeated and never implemented, thanks to a massive international campaign, in which the New Zealand progressive movement played a leading role. Ed.

The new constitution is aimed at what it calls "direct and indirect takings". That’s whatever a TNC thinks is "tantamount to" a cost or constraint on it. It’s a constitution for corporate lawyers (p248). Once the US warned of "creeping Communism". Now UNCTAD warns of "creeping expropriation" and "State interferences".

In those old days, "there was no universal agreement as to what the economic and social effects of [TNCs] were.... More worryingly, some [national governments] began to see TNCs as a threat to local, social and political development". This remark is ambiguous. It could mean that it is a worry that TNCs were not behaving well. It is more likely to mean that it is a pity that governments then were so wrong. They don’t worry now, says UNCTAD, because they are "more informed and less partisan" (p9).

In a list of countries with "special foreign direct investment (FDI) regimes" there are some obvious omissions: there is no UK, US, Germany, Benelux (i.e. Belgium, Netherlands, Luxembourg. Ed.), Sweden, Norway, Denmark or Japan (p15).This must reflect the fact that they are the big boys. They’re the "capital exporters" who make the rules. At the other end of the scale is a treaty for Central Africa, where "undertakings whose capital derives from other countries shall be able to acquire rights of any kind deemed necessary for the exercise of their activities" (p174). TNCs can do whatever they like.

After all this it should not be necessary to point out that "legal symmetry may be accompanied by actual ‘economic assymetry’ .... National treatment may cause difficulties for host developing countries. In particular, there is a risk that economically strong foreign firms may impede or distort the development of domestic enterprises in a host country". Neither is it hard to agree that this could encourage "anti-competitive behaviour of TNCs. However, such regulations cannot deal with effects" (p183).

The World Investment Report, an annual compilation by the United Nations Conference on Trade and Development (UNCTAD), is full of lists and numbers to do with the world economy as it’s reflected in investments between countries. The subtitle indicates the main theme, that service industries are assuming greater relative importance than they used to have. Proportionately the biggest growth in attracting foreign capital, in 2002, the most recent year for complete statistics, has come from Ireland, India, Canada and Israel. This is interesting, but the casual reader should be cautious. The four countries do not necessarily have much else in common.

Another trend is that the volume of investment flowing into and out of the European Union, once much less, now matches the amount for the United States. Again, the raw numbers need context. They indicate new trading patterns within Europe, as it catches up with American practices. The US is not becoming less of a world player. As it could hardly be more dominant it has less room for impressive growth statistics.

What we call the old economy consists of primary industry (farm and other products extracted from the land) and secondary industry (manufacturing). The old economy spawned the old politics, in which the big countries invaded each other to get access to raw materials. By and large, they no longer feel the need to do this.

America, like the main European economies, doesn’t keep increasing its imports of iron ore, for instance. It makes things offshore, where labour is cheap. This, the genesis of "globalisation", has spawned the "new" service economy. When you look at the data for the decisive service industries, the activities created by the exercising of global power, the numbers which measure investment flows to and from the US are very big (see the above review for UNCTAD’s discussion of this process).

One statistic measures foreign profits as a percentage of total income. Since 1994, when UNCTAD’s table starts, US "depository institutions" - banks - have never made less than 73% of their total profits from overseas. In 1999, the proportion soared to 603%. That might even be an easier extraction than what’s involved in a classic old economy activity like mining in Papua New Guinea or growing bananas in Guatemala. "Information services" (IT) appeared on the chart for the first time only in 1999. By 2002 profits from foreign affiliates of US transnationals realised 596% of total income (p338).

New Zealand is on the receiving end. Its "outward FDI", expressed as a percentage of total fixed capital formation, is 1.2%. All other developed countries have a much higher proportion. And no other developed country has such an imbalance between this low outward number and a comparatively high inward number (12.5%). Amongst rich countries we are uniquely dependent on foreigners.

The closest to NZ’s ratio is not a country but a continent, and that’s Africa (2.1% out and 10% in). By comparison the US is 7.5% out and just 1.5% in, the low numbers reflecting the size of its domestic economy. Australia sends out twice as much as it brings in. UNCTAD likes the "inward" number to be high because that means you’re open for business, but in truth the higher the number, the more vulnerable you tend to be. And you’re certainly more colonised.

In themselves, numbers are a crude measure. What do Benelux, Brunei, Azerbaijan, Ireland and Angola have in common? Nothing, except that, when it comes to "inward performance of FDI", they top the charts. For trivia buffs at the UN this could make for a tricky quiz night question, but the lay person will puzzle to see a pattern. FDI lumps together a sophisticated, balanced, post-industrial economy integrated into a bourgeois Europe (Benelux) with a billionaire’s pre-industrial sultanate (Brunei). Benelux is complex, its population comfortably off; Brunei is little different from its neighbours Malaysia and Indonesia except for the Sultan’s oil patch. The other three countries range across this spectrum, with money pouring in to take advantage of possibly temporary and distorting investment incentives. Azerbaijan has oil; Angola has minerals (it’ll be interesting to watch how the ‘Irish miracle’ goes).

If that quintet is going gangbusters, the US and Australia are listed as performing "below potential". We’re used to NZ graduates heading for Oz or the States to pay off their student loans, but you don’t hear of them going to Angola. The heretical thought arises. Maybe it’s not so bad to perform below potential. Maybe NZ should try to join the under-achievers if that means that you’ve got enough resources of your own that you don’t have to whore yourself to rich foreigners.

Similarly, the top "outward FDI performance" countries are not just the obvious developed ones. Presumably because of its canal and its shipping registry, Panama is ranked second. But how do you ape Panama? UNCTAD urges it. They fret that "the larger developed economies - Germany, the US, Japan - have low values", suggesting that even these major outward investors (in absolute terms) have some way to go before they reach the levels of outward FDI that would be expected of them (p18). Does UNCTAD really mean to suggest that those under-performing Americans would rather be Panamanian or Angolan?

Despite this, most FDI outward services originate in the US, UK, Germany, France and Hong Kong and the main recipients of inward FDI are the US, Hong Kong, UK, China and France. We’re back in a recognisable world. Yet the question lingers. Does UNCTAD really think that we’d be all be better off if the US was a more dominant power than it is?

The service economy presents a difficulty to any researcher trying to establish patterns. Measured by their influence and by the sums they generate, some service activities - like banking, law and accountancy - are at the top end of the global economy. Others, like those related to tourism, are at the low end. So any collective numbers are of little use. Another difficulty with such broad categories is that within some sectors, like information technology, the extremes co-exist. Microsoft’s boss, the multi-billionaire Bill Gates, and a Third World assembly line chip worker are both in the computer industry.

If you don’t have any of your own banks, you might not control much of your own economy. If you have no bank of your own, your transnationality index reads 100%. UNCTAD notes that there are four such centurions: Botswana, Guinea Bissau, Lesotho and Tonga. Unsurprisingly, they are among the the most hapless places on Earth. UNCTAD comments, poker-faced, that you can guess which places will have foreigners owning their banks, as "in general, this ratio is higher in developing and transition economies than in developed countries" (p103).

Then we read an ominous addendum, that the rule which equates lack of control over finance with lack of finance holds "with the exception of New Zealand (99.1%) and UK (46%)". Here is an example of how numbers can mislead. To suggest that, when it comes to subservience to foreign capital, the UK is second, albeit a distant second, only to NZ reverses the actual situation. Britain is the dominant banking economy, and has been for some centuries, so big money flows in and out. It owes its ranking as half as "foreign-owned" as Godzone to its role as host to its fellow big bank head offices.

Between those countries designated "developed", like UK and NZ, and those designated "undeveloped", like Guinea Bissau and Tonga, is post-Communist Central and Eastern Europe, which gets its own grouping. Here the amount of foreign-controlled banking ranges high, culminating in the Czech Republic’s 90% and Estonia’s lofty 98.9%.

After the collapse of the Soviet Union, a process which coincided with Rogernomics and Ruthanasia in this country, the satellite economies were reinvented as free market paradises. In Eastern Europe, where there were no existing domestic banks, neoliberal purists could design on a blank page. There were - officially - no existing capitalists to defend their patch. Yet at the end of the Godzone "experiment", which was conducted in a long-established and stable democracy, the transformation was more complete even than Estonia’s.

UNCTAD speaks of an "accountants’ network", characterised as "a large and highly regulated industry dominated by the ‘Big Four’". As recently as 1990 there was a "Big Eight". Now the oligopoly rules: PricewaterhouseCoopers, Deloitte Touche Tohmatsu, Ernst & Young and KPMG. They have a familiar ring. You’d think it was a guide to the buildings of downtown Auckland or Christchurch.

UNCTAD tells us only that "the global expansion of the Big Four can present problems for local small and medium-sized accounting firms". They make it sound as if the bank in Capital City was foreclosing on honest old Farmer Ned. Mr Smith might have to go to Washington to give them a piece of his mind, but at the weekend Jimmy Stewart and the Senator will watch the kids’ ballgame together (this is referring to the classic 1939 Hollywood movie, "Mr Smith Goes To Washington", starring the late Jimmy Stewart. Ed.). An implication of nostalgic regret for some sort of lost innocence carries with it condescension. It’s saying that, yes of course, we’d all like life to be like a heartwarming Depression-era film, but you can’t stop progress.

In reality, the significance of the Big Four has almost nothing to do with local accountancy firms. It lies in the fact that foreign transnationals, whose mandate is to make money, are routinely given the responsibility of devising the world’s health policies or education budgets. Their first impulse is to reduce public investment. The case could be made that the big accountants are the new rulers of the world. Government itself is being privatised. Appropriately, the locations of big accountancy’s head offices reflect the trans-Atlantic nature of global influence. Six are American; four are European. In international culture a more purely economic powerhouse like Japan, whose wealth is domestically focused, isn’t listed in the top ten.

Another sign of the times is that all of the 20 largest legal TNCs, as ranked by the number of lawyers they employ, are in the US, with 12, the UK, with seven, and Australia, with one (p326). This statistic might be the one that best defines the so-called "Anglo-Saxon" economies. NZ’s close counterparts are named not for their cultural and linguistic makeup but for their dedication to neoliberal orthodoxy.

Underlying all the thousands of facts in the Report is an unquestioning assumption that foreign investment is in itself a good thing. From that it follows that you can’t have too much of a good thing. The more the better. UNCTAD compounds the error by supposing that the advocates of "free trade" want nothing more than the free exchange of goods and services. It all seems obvious, a meeting of willing sellers and willing buyers.

The most frequent reason for the occasional "market failure", UNCTAD suggests, occurs when privatisation creates a monopoly (the norm in Eastern Europe and New Zealand). As they argue, the rationale behind privatisation was said to have been the encouragement of competition. More systematic analysis might have helped. Why privatise a community resource when the profit motive is likely to erode standards? Why privatise an essential service? Why privatise a natural monopoly, when more than one major supplier will be unable to compete? Why is it a boon for the developing world for profits to leave poor countries in order to enrich the already rich? Just how do we benefit from a culture of litigation?

The Report