You are on page 1of 23

Reply to Decker/Dorn on ‘Russian Imperialism’

For a ‘Concrete Analysis of the Concrete Situation’


"…the concrete analysis of the concrete situation is not an opposite of 'pure' theory,
but – on the contrary – it is the culmination of genuine theory, its consummation – the
point where it breaks into practice."

—V.I. Lenin

Comrades Decker and Dorn’s 19 June response to my 3 June document takes up in some detail
to many of the arguments I set out for why Russia is not imperialist. I think that their response
is seriously flawed, as I will try to demonstrate below, but it is important that we are at last
seriously engaging on the programmatically significant issue of how Marxists categorize
contemporary Russia.

Some comrades may find it frustrating to read contributions from both sides of this dispute,
each of which seems plausible and apparently factually documented. But we cannot both be
right. So the only way to work through this problem is to really study the question and carefully
read and consider the arguments and expert testimony submiJed by each side (and perhaps do
some further investigation).

When I reviewed the articles cited by Decker/Dorn in their critique I found that, on balance,
they did not project a very different picture of the political/economic reality of present day
Russia than the assessments by the U.S. State Department and the Economist quoted in my
document. This has put me in the fortunate position of being able to rebut the core propositions
put forward by my critics largely with citations from documents they themselves introduced
into the discussion. I think the implications are fairly obvious, and hope that by reviewing this
material together we may find ourselves moving closer to a common understanding of the
present character of Russia and its position in the international world order.

A key sentence in the intro to the Decker and Dorn document sums up much of their
dissatisfaction with my contribution:

“Aside from dismissing major sectors of the economy and failing to fully consider the
role that Russia plays in global imperialist rivalries over markets and spheres of
influence, Tom’s document paints a misleading portrait of Russian finance capital and
its status in relation to capital export.”

1
The comrades generously allow that I am not deliberately aJempting to falsify things, but that
my views “likely stem from a tendency to 'read' the data on the basis of a pre-established view
of Russia.” I regard Decker, Dorn and their co-thinkers in exactly the same light—as good
comrades whose errors on this question stem from a tendency to aJempt to make reality fit
their pre-established construct. While they characterize my view of Russia as “a sort of basket
case” I would simply say that while Russia is a significant player in global politics and a
formidable military factor, it is, in terms of economic development, not qualitatively different
than Brazil, which is to say not an imperialist country.

Before looking at the substantive economic questions there are a couple of open-ended, but
undeveloped, propositions in the Decker and Dorn piece that I want to address. 


1) The first is a complaint that my document failed “to fully consider the role that Russia plays
in global imperialist rivalries over markets and spheres of influence.” It is unclear exactly what
this entails. On the basis of the IEC’s unanimous adoption of the text “On Imperialism,” I had
presumed:

“We are agreed that the imperialist world system operates to channel wealth from
relatively backward countries to the elites of the ‘developed’ capitalist countries.
Those countries that are active participants in what Trotsky referred to as ‘the
expansionist policy of finance capital’ (a policy at least partially mediated through a
complex web of international political and particularly economic institutions) can
properly be considered imperialist.”

—“Is Russia Imperialist?”, 3 June

I presume we are still agreed that if a country does not meet the “finance capital” criterion, it
does not maJer if it aJempts to enlarge its sphere of influence. As we noted in 1917 No, 29, Iran
is contesting dominance in the strategically vital Persian Gulf region with the US/NATO axis,
but no one concluded that it had somehow become imperialist.

The recent rivalry between Qatar and the Saudis for influence in Egypt provides another
example:

“The aid package [of $8 billion from the Saudis and UAE to the new government]
underscored a continuing regional contest for influence between Saudi Arabia and
Qatar, one that has accelerated since the Arab uprising upended the status quo and
brought Islamists to power.

2
‘Qatar, in alliance with Turkey, has given strong financial and diplomatic support to the
Muslim Brotherhood, but also to other Islamists operating on the battlefields of Syria
and, before that, Libya. Saudi Arabia and the Emirates, by comparison, have sought to
restore the old, authoritarian order, fearful that Islamist movements and calls for
democracy would destabilize their own nations.”

. .

“The Saudis and Emiratis were nearly buoyant at the military’s move to oust Mr. Morsi.
Both are deeply hostile to the Brotherhood’s Islamist-cum-democratic agenda, which
they see as a threat both to their own monarchical legitimacy and to regional stability.
Qatar, by contrast, provided about $8 billion in aid to Mr. Morsi’s government during his
yearlong tenure, and Turkey offered loans of $2 billion.”

—New York Times, 10 July

The scale of this aid has apparently been sufficient to (temporarily) free Egypt from dependence
on the IMF:

“The Qatari and Turkish financial aid to Mr. Morsi’s government last year helped him to
avert painful economic reforms being urged by the International Monetary Fund as the
price for its own $4.8 billion aid package.”

Of course Qatar, Saudi Arabia etc. are no more imperialist than Iran. So it is not clear exactly
what Decker/Dorn’s “sphere of influence” criticism entails. If it is only a suggestion that the
document would be improved by a few sentences indicating that the Russian bourgeoisie
pursues its own interests, e.g., seeks to resist NATO plans to dominate countries like Syria with
which it has a long term alliance, that of course is agreed. I hope that it does not represent a
gesture in the direction of a “multi-factoral” (rather than finance capital) model of imperialism.

2) The second Decker/Dorn proposition is the assertion that if we agree that Czarist Russia circa
WWI was imperialist while also “far more backward than modern-day Russia” it “is difficult to
see why Russia circa 2013 is not imperialist.” We treated the question of Czarist Russia as
imperialist in a separate document in which we noted that Trotsky and Lenin considered that
the massive investment by Russia's bourgeoisie in adjacent backward countries qualified Russia
as imperialist despite the fact that it remained a predominantly peasant-based society governed
by a feudalist autocracy that posed a major obstacle to domestic capitalist development. The
question we must seek to answer is whether Russian capitalists today have a similar
relationship to the countries of the CIS etc or whether they are more similar to countries like
Brazil, India or Greece whose bourgeoisies have investments in some more backward countries,
but not on a scale that would qualify them as imperialist. In today’s “globalized” capitalist

3
economy many relatively backward countries engage in foreign investments. For example the
“World Investment Report 2012,” cited by Decker and Dorn, reports that in 2011 in the CIS,
“The takeover of Polyus Gold (Russian Federation) for $6.3 billion by the KazakhGold Group
(Kazakhstan) was the largest.”

* * *

It does not seem to me that the comrades were entirely successful in rebuJing what they
describe as the “misunderstandings/misleading analysis” in my document, nor do I think they
succeeded in “placing the data in context and comparative perspective” as I will seek to
demonstrate. I think that in adding new information they seem to have been tempted to “cherry
pick” their sources and ignore aspects (ojen rather substantive ones) that did not support their
conclusion.

CIA & EU: Russia is Resource Dependent & Technologically Backward


Decker/Dorn first cite the CIA Factbook to demonstrate that the proportions between
agriculture, industry and services in the Russian economy “resembles the economies of the
most advanced imperialist powers.” True enough, but the CIA’s “Overview” also says:

“Russia's reliance on commodity exports makes it vulnerable to boom and


bust cycles that follow the volatile swings in global prices. The
government since 2007 has embarked on an ambitious program to reduce
this dependency and build up the country's high technology sectors, but
with few visible results so far. The economy had averaged 7% growth in
the decade following the 1998 Russian financial crisis, resulting in a
doubling of real disposable incomes and the emergence of a middle class.
The Russian economy, however, was one of the hardest hit by the 2008-09
global economic crisis as oil prices plummeted and the foreign credits
that Russian banks and firms relied on dried up.... The economic decline
bottomed out in mid-2009 and the economy began to grow again in the
third quarter of 2009..... Russia has had difficulty attracting foreign
direct investment and has experienced large capital outflows in the past
several years, leading to official programs to improve Russia's international
rankings for its investment climate.”

—emphasis added

This describes a country desperate to improve its status with the mavens of international
finance capital in order to aJract the foreign investment necessary to raise its technological
4
capacity to world standards and break free of the traditionally non-imperialist role of supplier
of raw materials to more advanced economies. As such it is not exactly congruent with what
comrades Dorn and Decker’s snippet was supposed to demonstrate.

Their next source, a June 2012 EU study on “The Economic Significance of Russia's Accession to
the WTO,” is also cited for what it says about the composition of GDP. The comrades admit that
the country remains backward in many ways and “and in some respects Russian capitalism lags
massively behind” but caution that it is “important to get a sense of perspective, and not to
accept on face value caricatures of Russia.” Perspective is good, and I would not dispute the EU
study’s observation that the size of the service sector in Russia is somewhat closer to the EU
than China or Indonesia. (Of course neither of those countries experienced the forcible
liquidation of peasant smallholders carried out during Stalin’s forced collectivization.) What is
far more significant in gauging a country’s relative position in the world economy than the size
of its service sector is whether or not its commodities are competitive internationally. By this
measure Russia does not fare so well, as the EU study observes:

“Russia's comparatively poor performance during the Great Recession led many in the
ruling elite to conclude that Russia's vulnerability was caused by its technologically
backward and natural resource oriented economic structure.” <p21>

The EU report contains an overall assessment that essentially tallies with what the comrades
colorfully referred to as a “basket case” when I cited similar comments:

“It is plausible that Putin’s new term may presage renewed efforts at economic reform
in Russia. However, even if this were to occur, there is still the important issue of
whether or not the Russian state possesses the administrative capacity to implement
either new economic reforms, or, at a more minimal level, the legal commitments
made as part of the accession agreement. Russia’s low ranking on indicators measuring
corruption and the rule of law all suggest that the low quality of public administration
might prevent Russia from doing either. Indeed, the role of the state in the Russian
economy is particularly pernicious, with officials and those close to them using
their positions to both extract kickbacks and expropriate assets from Russian
businesses on a frequent basis (see Table 1). The data presented in Table 1 are
further supported by a wide range of other international measures that illustrate that
the quality of public administration and legislation are comparatively poor (including
the World Bank’s Ease of Doing Business Index, the World Economic Forum’s Global
Competitiveness Report, and many more).

“Such corrupt practices as informal collusion between state officials and well-
connected businessmen permeate every level of Russian society, from the federal level
to regional and local levels. In all instances this collusion and the use of public office
and laws to benefit private interests is used to stack the economic rules of the
game in favour of well-connected incumbents.”
5
—“The Economic Significance of Russia’s Accession to the WTO,” p23, emphasis
added

The authors of the EU report anticipate that with integration into the WTO “foreign firms [will]
gain greater access to the Russian market,” competition will increase and prices for consumer
goods will fall:

“Product market competition is a driver of productivity growth by spurring innovation


either directly or indirectly, through what Joseph Schumpeter termed processes of
‘creative destruction.’. In Russia, the empirical evidence suggests that openness to
foreign competition boosts domestic productivity growth (Aghion and Bessonova, 2006;
OECD, 2009). The effect is considered strongest in firms that are closer to the
technological frontier. For less productive firms, the threat of entry tends to reduce
the incentive to innovate by reducing their ‘life expectancy’ and thus shortening their
time horizons. Sectors in which producers are far from the technological frontier, and
therefore less likely to adapt and more likely to suffer from import competition,
include light industry, mechanical engineering, machinery, food processing, textiles
and clothing, building materials, and agriculture (especially beef and pork
production). In business service sectors, such as telecommunications and financial
services, Russian firms that are not either part of joint ventures with foreign firms are
likely to suffer (e.g., Jensen et al., 2006).”
—Ibid., pp25-26

The “World Investment Report 2012,” (p57) also cited by Decker and Dorn makes a similar
projection that accession to the WTO will “boost foreign investors’ confidence and improve the
overall investment environment” although “in the manufacturing sector, domestic and foreign
investors will most likely consolidate as the landscape becomes more competitive.” The term
“consolidate” is of course a euphemism for what the EU report referred to as the process of
“creative destruction” of existing non-competitive Russian firms as integration proceeds.

The sunny projection in the EU report that integration into the WTO will involve the “creative
destruction” of much of actually-existing Russian capitalism derives from the authors’ view

that, “on the whole, Russia is not competitive, in both industrial and services exports” (p26).
Comrades Decker and Dorn take a different view, without providing supporting evidence:
“[D1] The Russian economy continues to combine considerable backwardness with important
elements of the most advanced capitalism based on high technology.” The authors of the EU
document offer a somewhat bleaker assessment:

“A number of recent studies show that Russia enjoys Revealed Comparative Advantage
(RCA) in only a few industrial activities (Cooper, 2006; Connolly, 2008, 2012b).17 Apart
from hydrocarbons and some other raw materials (such as precious metals and
timber), Russia only exhibits a comparative advantage in a few medium- and high-
6
technology products, such as military equipment, nuclear reactors and other power
generating machinery. These are traditional Soviet manufactured products,
presently exported by Russia to the markets that were developed in the Soviet era.
The only industrial activity in which Russia has managed to achieve RCA during the
post-Soviet period is in microscopes. Here, NT-MDT, a company that specialises in
scanning probe microscopes, is ranked second in terms of sales volumes on the world
market (Connolly, 2011b). Russia’s low levels of competitiveness in higher value-
added industrial activities compares unfavourably with many other large low- and
middle-income economies, including Brazil, China, India, and Turkey. Moreover,
with the exception of Information Technology (IT) and some financial sector activity in
the former Soviet states, Russia is not competitive in international services trade,
either (Figure 6).”
—“The Economic Significance of Russia’s Accession to the WTO,” p26, emphasis
added

It is hard to overstate the significance of this—the unfavorable comparison to Brazil, India and
Turkey is particularly striking. It raises the question of whether Decker and Dorn, who
introduced this document into our discussion, took the time to actually read it.

The authors of the EU report appear to agree that, “the inability to produce products that are
competitive internationally”(“Is Russia Imperialist?”) lies at the core of the difficulties of
Russian capitalism. They also seem to share the view that Moscow’s “ability to reduce the gap
separating it from its more advanced capitalist rivals” is blocked “by backwardness and
bureaucratic corruption”:

“Overall, the chances of Russia benefitting from increased market access abroad will
be determined by how successful the country is in effecting structural transformation
over the medium- to long-term.…Therefore, we come back to the issue of whether or
not the Russian elite is willing and able to commit to forging ahead with meaningful
and relatively far-reaching economic reform. It is this, along with sensibly designed
industrial policies, which will ultimately determine whether Russia will become a
successful exporter of higher value-added goods and services in the future.”
—Ibid., p27

If the Russian ruling class can manage to carry out such a transformation and raise its labor
productivity to world class levels it will indeed emerge as a genuine imperialist power in the
Marxist sense. But that is a big “if,” and one that seems increasingly improbable with the
passage of time. (The very fact that it is an ”if,” rather than an accomplished fact, of course
signifies that Russia is not yet a member of the imperialist club.) The EU report’s authors
caution that even ajer formally submiJing to the WTO, “considerable informal administrative
tools remain available to Russian elites, both at the federal and local levels, which may be used
to restrict access to some Russian markets.” Yet they speculate that ultimately Russia will have
to go along to get along which will provide lucrative opportunities for EU corporations:
7
“Notwithstanding some of the important issues outlined above, as a result of Russia’s
accession EU strengths in business services (especially financial services,
telecommunications, and IT and software services, areas where EU countries possess
RCA), light industry, mechanical engineering, machinery, food processing, textiles and
clothing, building materials, and agriculture (especially beef and pork production), are
all likely to see EU firms in these sectors benefit from improved access to the Russian
market.”
—Ibid., p36

None of the sources Decker/Dorn cite treat Russia as an “advanced capitalist” (i.e., the
bourgeois euphemism for imperialist) economy. Without exception Russia is referred to it as an
“emerging” or “developing” or “transitional” country precisely because of the gap which exists
—the same gap which the EU imperialists anticipate will set the stage for “creative destruction”
once they get into the tent.

To be fair, in their critique, the comrades do allow that Russia is far behind the “high income”
OECD countries (i.e., the imperialist countries) in terms of labor productivity, but insist, without
explanation, that it should be bracketed with economies 250 percent more productive (“other
imperialist countries”) rather than those which are at a comparable levels of overall
development (e.g., Brazil).

“Aggregate labor productivity in Russia is admittedly low compared to other


imperialist countries (just over 40% of ‘high-income’ OECD countries), and the
significant progress that was made in the 2000s has slowed since the onset of the
global economic crisis. On the whole, Russian manufacturing is not particularly
competitive, but there are sectors that can compete globally – most notably,
chemicals and metals, though other key industries (e.g., transport vehicles) lag behind
(Ye.Yasin et al., “Russian Manufacturing Revisited: Industrial Enterprises at the Start of
the 2008 Financial Crisis,” Bank of Finland).”
—Decker /Dorn, 19 June

The Bank of Finland article is slightly more optimistic than the EU report, noting:

“True, Russian manufacturing generally lacks international competitiveness and


still relies extensively on obsolete technologies. But there is also strong evidence
that some Russian manufacturers have made significant advances in recent
years.” [p4]

The most outstanding example of the laJer was that “Russian manufacturing saw labor
productivity soar 50% on average during 2005-2008” (p4). Yet despite this, “As a whole, Russian
manufacturing firms failed to substantially improve their global competitiveness in the
period” (p5). The authors, like every other serious analyst, take for granted that the appropriate

8
comparators for Russia are its fellow “developing” BRICs. In discussing “Government-business
relations,” they write:

“We can suppose that local and regional authorities in more advanced regions in Russia
worked to attract investment and encouraged firms to restructure their businesses.
This is similar to the experience of China, Brazil and many other developing
countries.” [p6]

The Bank of Finland report offers the familiar negative assessment of the dominant political
culture:

“An important obstacle to manufacturing competitiveness in this period was the lack
of progress in institutional development. As a result, respondent assessments of
business barriers in 2005 and 2009 are largely unchanged.” [p8]

One of the things in this report which may have come as a surprise to Decker and Dorn is the
information that Russia is falling behind other “transitional economies” (i.e., former deformed
workers states of the Soviet bloc):

“The absence of significant improvements in Russia’s business climate against a


background of positive developments in the institutional environment in other
transition economies is notable as Russian enterprises saw their competitiveness erode
vis-à-vis their peers in these economies. According to the BEEPS [Business Environment
and Enterprise Performance Survey] Russia in 2002 looked better on average than 26
other surveyed transition economies in three-fourths of business climate parameters.
By 2005, Russia led in only half of the surveyed parameters. In 2009, it lagged the
average in 16 of 18 parameters among the 29 surveyed countries.” [pp 9-10]

The authors describe Russian industry’s relative technological backwardness as a “vicious


circle”:

“Comparison of the 2005 and 2009 findings shows the sectors have not converged in
the area of technology absorption. The leaders have become stronger and the laggards
have slipped farther behind. Most manufacturing industries found themselves ensnared
in a catch-22 situation. According to V. Polterovich (2009), this vicious circle of
backwardness means innovation cannot drive economic growth as backward production
does not create demand for innovation and suppresses supply, while absent supply in
its way tends to be a drag on demand.” [p12]

9
The authors also observe:

“Probably the most important trend here, however, was toward wider equity
participation of foreign owners (investors) in Russian manufacturing firms. In the early
2000s, empirical studies found the share of foreign interest in manufacturing was only
1-2%. The above-mentioned 2005 survey found that foreign investors accounted for up
to 4% of equity in manufacturing overall, and the foreign equity participation in joint-
stock companies was just under 10%.”

The Bank of Finland finds that in terms of competitiveness, there is “an explicit positive
correlation with foreign co-ownership, similar to what has been earlier observed in other
advanced and transition economies.” They report that:

“Half of the firms classified as most innovative in our study were firms with foreign
participation. (At this point, we offer a caveat: this may be due to a positive selection
effect, i.e. foreign investors tend to cherry-pick among the most efficient enterprises
when targeting participation.)” [p15]

Once again the paJern is far more typical of the relationship between imperialist portfolio
investors and the indigenous bourgeoisie of a “developing” or “emerging” economy than
between capitalists in two “developed” economies.

On Recent Fluctuations in FDI figures for Brazil & Russia


The EU study discussed above sums up the relationship between Russia and the EU as one
“characterized by asymmetries in size and production profiles, with the role of EU energy
imports central to the economic relationship” (p5). In a footnote (p21) the authors speculate
that:

“it is likely that Russia's particularly poor performance [in the ‘Great Recession’ of
2008-09 can be explained by a combination of: exposure to the drop in commodity
prices; poor institutional characteristics; and an openness in its capital account that is
unusual for a country in its stage of development.”

This touches on the same weakness noted in the CIA overview—Russia needs massive
investment to bring its economy up to global standards but its “poor institutional
characteristics” (i.e., corruption and the arbitrary actions of state authorities) has resulted in a
low rating by international finance capital as an investment destination. This problem is far
more characteristic of neo-colonial or relatively backward capitalist countries than imperialist
ones. Several examples of (unsuccessful) aJempts by the Kremlin to find quick fixes for this

10
problem were cited in “Is Russia Imperialist?” The relative ease with which money can be
pulled out and sent to various offshore tax havens doubtless has a lot to do with the fact that
“Russia has been a relative exporter of FDI [foreign direct investment] flow” as comrades
Decker and Dorn put it. But the significance of this phenomenon cannot be presumed to be
identical to investment flows from countries like the UK, Germany or Sweden.

The comrades’ commentary (L1 – L8) puts considerable emphasis on discussing recent
developments in global FDI figures, without, in my view, paying sufficient aJention to some

key underlying fundamentals. Claiming that “The most recent figures demonstrate that Russia

has further entrenched itself as a finance capital power” (L1), Decker/Dorn note that “Russia
accounted for 3.6% of world FDI outflow in 2012” (L2) As we agree the majority of Russia’s FDI
outflow has tended to go tax havens, from whence a substantial portion returns to Russia, the
actual figure is almost certainly substantially lower than 3.6 percent. In a footnote the 2012 EU
Parliamentary report (p11) observes:

“It should be noted, however, that Russian companies invest far more than is normal
(by international standards) in tax havens, such as the British Virgin Islands, Bermuda,
Cyprus and Switzerland. Some of this OFDI is then repatriated in the form of IFDI, thus
inflating the ‘real’, non-Russian FDI flows, both inward and outward.”

Decker and Dorn point out that similar practices are common among established imperialist
countries and cite recent information that “In 2011, approximately 10% of the inward FDI stock
in the UK was from ‘UK offshore islands’ and the tiny ‘grand duchy’ of Luxembourg alone.”
While the amount of money involved is substantial, the proportion relative to the overall capital
stock is substantially less—ten percent for Britain, compared to estimates in recent years
ranging as high as two-thirds for both Brazil and Russia.

Decker and Dorn cite figures since 2007 contrasting Brazil’s falling outward FDI (ODFI) flow as
a percentage of global totals, with rising figures for Russia. They conclude: “Brazil’s profile is
more erratic, and it does not appear to play the same role as Russia” in terms of global finance
capital. They do not comment on the fact that tables they reproduce for ODFI stock—rather
than “flow”—in L1 and L3 show the opposite trend over the same period; Brazil’s climbed from
0.7 to 1.0 while Russia’s fell from 1.9 to 1.7. We should recall that as recently as 2006, (the year
that Vale, a Brazilian mining conglomerate, acquired Canadian mining giant INCO) Brazilian
11
FDI exceeded Russian. I would presume we all agree that there has been no qualitative change
in either country’s status since then.

The comrades comment that Russia “has, unlike Brazil, jumped onto the outward FDI flow
scene in a big way since 2000-2001, when the two countries were fairly similar in profile” (L4).
Russia’s “jump” of course corresponds to a steep rise in global oil prices, which produced a
bonanza for all oil-exporting countries. As might be expected there was a corresponding upturn
in outward directed investments from major Middle East oil producers during the same period
(see Appendix A). According to the Financial Times, between 2003-07 and 2008-12:

“The second highest increase in FDI outflows was recorded by the United Arab
Emirates. It was the 14th largest outbound investor in 2008 to 2012, moving up nine
places compared with the 2003 to 2007 period. It now ranks above larger countries
such as South Korea and Australia.
“Elsewhere in the Middle East, investments from Kuwait, Bahrain and Qatar have also
increased significantly between the two five-year periods, although they are still far
behind UAE levels. Comparing the two periods, the number of outward FDI projects
from Kuwait doubled, the number from Qatar increased threefold and the number
from Bahrain increased fivefold.”
—FDI Intelligence, 10 April 2013
When a similar upturn took place during the early 1970s OPEC oil crisis no one interpreted the
massive flow of petrodollars from OPEC countries back to imperialist financial centers as
evidence of the emergence of Kuwaiti or Saudi Arabian “finance capital.”

The steep decline in Brazilian ODFI flow (into negative territory) has aJracted aJention from
academics as well as financiers. A recent study from Columbia University sheds some light on
what appears to be a rather complicated phenomenon:

“Between 2000 and 2010, Russia and China had higher rates of growth of their OFDI
stocks than that of Brazil’s. On average, the growth rate in 2000-2010 of Brazil’s OFDI
was 14% below the average of the BRICs. In 2009, most likely in response to the world-
wide economic and financial crisis, OFDI outflows from Brazil were negative, with
Brazilian companies repatriating US $10 billion from their foreign affiliates through
intra-company loans. Annex table 2 shows a peak outflow in 2006 of US $28 billion
from Brazil.”
—“Outward FDI from Brazil and its policy context, 2012,” Milton de Abreau
Campanario et al, Vale Columbia Center, 10 May 2012, p2

The authors suggest that Brazilian OFDI fluctuations may, at least in part, have reflected a
deliberate strategic calculation:
12
“Outward M&As [mergers and acquisitions] by Brazilian firms plummeted sharply in
2009, although the effects of the crisis in Brazil were relatively limited. In 2010,
Brazil’s GDP growth was 7.5%. Equity investments made by Brazilian MNEs
[multinational enterprises] in foreign affiliates reached US $11.5 billion in 2010, 3.9%
of world of world outward equity investment flow, reaching the 5th position in the
world, behind the United States, China, Hong Kong (China), and Belgium.”
—Ibid., p6

If it had been Russia, rather than Brazil, that had risen so rapidly in global equity investment
tables the comrades might have been tempted to interpret it as evidence that “Russia has further
entrenched itself as a finance capital power.” I think it would a mistake to do so (for Brazil or
Russia) even if figures on equity investments (acquisition of actual corporate assets) presumably
need not be as steeply discounted as gross ODFI figures must be.

The Vale Center report also suggests:


“FDI can be indirectly financed through trans-shipment investment by using foreign
affiliates in third countries or institutions such as SPEs [‘special purpose entities’ that
conceal ownership], which are constructed in hubs, such as Luxembourg, Austria and
Hungary, in that order. In 2009 and 2010, the stock of Brazilian ODFI in the Cayman
Islands and other tax havens was considerably lower than in any year during
2000-2008. Also in 2009 and 2010, the stock of Brazilian ODFI in Europe rose
considerably….
“At the same time, FDI from Brazil in the primary and secondary sectors increased,
while that in the tertiary sector, and in financial services in particular, decreased.
Further research could throw light on the relationship, if any, between these sector
and geographic changes and their possible links to MNEs’ risk-mitigating strategies
during and immediately following the financial crisis of 2008-2009”
—Ibid., p6
The FDI Intelligence item cited above (and aJached as Appendix A) reported liJle change in the
relative position of Brazil and Russia in terms of outward investment. I would presume that this
is because the figures are discounted for round-tripping, tax avoidance, money laundering, etc.:

“A comparative analysis of investment outflows before the financial crisis—between


2003 and 2007—and during the crisis—between 2008 and 2012—reveals that, while
China performed very strongly, the rate of outward investment from Brazil, Russia and
India did not increase significantly between the two five-year periods. ....
“According to greenfield investment monitor fDi Markets, China increased its outward
investment by 152% between the two five-year periods, the biggest increase of any
country in the world. This made it the 12th largest outward investor in the world
between 2008 and 2012, moving up from its ranking as the 17th largest investor in the
2003 to 2007 period.”
. . .

13
“India moved only two spots up the ranking, from the 13th largest outward
investor to the 11th, while Russia and Brazil remained in the same positions at
20th and 31st, respectively.
"Outward greenfield FDI from the BRICs was impacted by the debt crisis in Europe, and
by stuttering growth in Brazil and much slower growth in China,” says Dr Henry
Loewendahl, a senior adviser for fDiIntelligence, the FDI analytics unit of the Financial
Times to which fDi Magazine also belongs.”
—FDI Intelligence, 10 April 2013, emphasis added

As regards investment in Africa, the comrades acknowledge (O6) that Russia “is still a relatively
minor player (even compared to some non-imperialist countries, particularly China).” They cite
a 25 March 2013 UNCTAD report that states “The expansion of Russian TNCs in Africa is fairly
recent but rapid, reaching US$1 billion in 2011.” The report includes a table (p7) listing the top
20 investors in Africa for 2011 which does not include Russia for “FDI flows” (while China is
listed in 4th place and India in fijh). Russia is listed in 15th place for “FDI stock” for 2011 with
South Africa, China and India occupying the 5th to 7th slots.

Brazil & Russia — Shifting From Regional to Global FDI


A feature of Brazilian ODFI which parallels that of Russia is that, as it has grown in scope, the
proportion going to its own hinterland (the rest of Latin America and the CIS respectively) has

fallen as investment is increasingly directed at more “developed” economies. The pithy and

informative 2008 Deutsche Bank report that comrade Decker originally introduced into the

discussion in 2011 noted that “the percentage of Russian investment going to CIS declines

sharply as total Russian ODI grows—from 59% of the total in 1997-99 to 12% in 2004-06.” In the
case of Brazil:

“The distribution of Brazil’s ODFI and its concentration in the Americas has changed
somewhat over time. Data from BACEN suggest that, between 2001 and 2010, there
has been a systematic decrease in the participation of Latin America and the
Caribbean, coupled with an expansion in Europe and the United States….”
—“Outward FDI from Brazil and its policy context, 2012,” Milton de Abreau
Campanario et al, Vale Columbia Center, 10 May 2012, p3
The comrades have not commented on what would seem to be a critical factor in evaluating the
significance of investment in the CIS. According to the Columbia FDI Profiles’ “Russian
outward FDI and its policy context” (aJached to “Is Russia Imperialist?”): “Russian investment

14
in CIS grew from $.13B in 2000 to $10B in 2008. (But the majority of this went to Belarus, see
Table 4 page 14).” I observed:

“Russian investment in CIS countries in 2007 and 2008 was overwhelmingly


concentrated in Belarus, which at that time was a close ally. This implies that
political, rather than economic, calculations were dominant. See Appendix C
‘Belarus Bailout Hinges on Russia’ in which the author quotes an analyst’s observation
that ‘Financially, Belarus is becoming another South Ossetia.’”
Not only does most Russian ODFI flow to the “developed” countries, but what goes to the CIS
was, for a lengthy period, “overwhelmingly concentrated” in one small country for political
reasons—i.e., “another South Ossetia.” This is not finance capital pursuing superprofits, but a
state subsidy to a dependent regime for geopolitical reasons. I suspect that comrades who view
Russia as imperialist may wish to ignore this because of the importance of the “exploitation” of
CIS counties by Russian capitalists in their scenario. But Marxists have a responsibility to
aJempt to account for facts that do not fit a pre-conceived model, and sometimes, if the gap
between the model and reality becomes too great, be prepared to rethink the position.

Brazil’s Oil Sector Compared to Russia’s


Brazil’s oil industry is apparently fairly technologically advanced:
“Petrobas, the largest Brazilian company, ranks fifth in the list by foreign assets in
annex table 5 [Brazil: major MNEs headquartered in the country, ranked by foreign
assets in 2009 and 2010]; it is a leading technology player in the sector, including in
bio-fuels. The Government controls 56% of the voting shares in Petrobas. The
company has drilled the world’s deepest exploration well: the Tupi offshore oil
field (7,000 meters below sea level). It has the potential to turn Brazil into a global
oil producer. Today, Brazil has reserves of 26.9 billion barrels of oil.”
—“Outward FDI from Brazil and its policy context, 2012,” Milton de Abreau
Campanario et al, Vale Columbia Center, 10 May 2012, p5, emphasis added
This technological capacity contrasts with Russia’s oil magnates who had to rely on U.S. firms
when they won the right to access Iraqi oilfields, (see “In Rebuilding Iraq’s Oil Industry, U.S.
Subcontractors Hold Sway,” Appendix A of “Is Russia Imperialist?”) Decker and Dorn only
address this obliquely, acknowledging that Russian energy firms are relatively backward, while
arguing that the “partnerships” they form based on technological dependence are more
analogous to alliances between imperialist corporations, rather than the exploitation of more
backward countries by more advanced ones:

“[F1] Although many imperialist countries are home to powerful corporations


specializing in fossil fuels (e.g., BP, ExxonMobil), the suggestion here is that oil and gas
capital in Russia don’t really count as finance capital due to the relative technological
backwardness of Russian natural resources industries. While it is true that Gazprom

15
and other Russian energy companies have partnered with other companies to borrow
their technology, this does not render the Russians dependent on Britain, for example.
Such partnerships are normal across imperialist countries. Nor does Russia’s relative
technological backwardness in these strategic sectors mean that it is working with
shovels. The fact that large Russian energy corporations in many respects lag behind
their U.S. competitors is hardly a reason to disqualify them as examples of imperialist
finance capital.”
Do the comrades consider the sizeable, but relatively technologically backward, national oil
companies of Saudi Arabia, Kuwait, Venezuela, etc. (all of which form similar “partnerships”
with the oil majors) to be similarly qualified as “examples of imperialist finance capital”? If not,
why not?

We explained why Russia’s energy oligarchs were more successful on the world market than
most of their contemporaries during the early Yeltsin years:

“The privatization drive was supposed to create a new generation of dynamic


entrepreneurs 

who, by shrewdly forging strategic partnerships with foreign investors, would obtain
the 

investment and technical inputs necessary to make Russian industry competitive 

internationally. But the chaotic looting of the planned economy produced an entirely 

different result:
" ‘Before long most Russian businessmen, including the oligarchs, would realise that the 

surest way to build fortunes was not to waste time and energy on the back-breakingly 

difficult job of changing the way factories were run. The real money-spinner was to
grab 

a piece of Russia's vast mineral wealth....’

—Freeland, op cit

“The biggest winners in the privatization sweepstakes were the oil and gas executives
of 

the Soviet era (the neftyankiki and gazoviki). Unlike the industrial managers, who 

had to worry not only about production but also marketing, shipping and raw
materials, 

the former bureaucrats who grabbed chunks of the Soviet oil and natural gas industry
had 

ready-made markets and established transportation networks. Their control of Russia's 

fuel supplies, and the profits they made in export markets, gave them substantial 

domestic political clout.”

—“Russia: A Capitalist Dystopia,” 1917 No24


As long as 1970s Soviet infrastructure continues to pump oil and gas out of the ground there
will be money to be made, but with very liJle investment, Russia’s hydrocarbon industry has
been gradually losing ground to its competitors:

“Gustafson observes that the Russian oil industry relies, to a degree that is unusual in
international terms, on its ‘brownfields’ – fields that entered production decades ago.
16
The boom of the 2000s had less to do with the energies of new entrepreneurs than
with the accumulated inheritance of the Soviet era: fields, pipelines, geological
knowledge and drilling techniques remain largely the same. The surge in production
since the late 1990s seems impressive only because of the slump that immediately
preceded it; Russian oil output has not matched its 1987 peak even today. In
Gustafson’s view, ‘the Soviet legacy assets have acted as an anaesthetic, delaying the
adaptation of the Russian oil industry to modern management and technology, allowing
it to remain relatively isolated and poorly equipped to compete globally.’ Post-Soviet
oil companies have done relatively little exploration of their own: most of the fields
brought online since 1991 were found by Soviet geologists, and only one major new
field discovered since 1988 has entered production – Vankor, in the far north of
the Krasnoyarsk region, operated by Rosneft since 2009.

“The combination of high oil prices and a massive expansion of production that proved
so beneficial to Putin is ‘not simply unlikely to happen again – it is
impossible.’ Russia’s geological luck is running out: West Siberia’s fields, which today
account for almost two-thirds of total production, began to decline in 2007, and new
sources of petroleum have yet to be found in sufficient quantities to make up the
shortfall…. The hopes of the Russian oil industry are increasingly focused on the
offshore ‘bluefields’ of the Arctic and Sakhalin, but these require huge levels of
capital investment as well as forms of expertise the Russian companies generally lack.
Hence the series of partnerships Rosneft has recently formed with international oil
companies: with ExxonMobil and Eni last April, with Norway’s Statoil in August and
with BP in October, all of them geared to joint explorations of the Arctic shelf in the
Barents and Kara Seas.”

—London Review of Books, 6 June

Russian companies’ “partnerships” with imperialist oil corporations are analogous to those
formed in other countries where the national oil corporations lack the technology to exploit
their own resources. The fact that “Such partnerships are normal across imperialist countries” is
irrelevant—joint ventures between imperialist oil majors with world class technology (BP, Exxon
and Shell etc,) are hardly equivalent to arrangements they may work out with Kuwait, Saudi
Arabia, Venezuela or other countries which cannot access their own resources without paying a
surcharge for foreign assistance. These sorts of relationships were described in 1922 in a
document adopted by the Fourth Congress of the Comintern:

“The progress of indigenous productive forces in the colonies thus comes into sharp
contradiction with the interests of world imperialism, since the essence of
imperialism is its exploitation of the different levels of development of the
productive forces in the different sectors of the world economy, in order to extract
monopoly super-profits.”

—“Theses on the Eastern Question,” emphasis added

Brazilian Tech Successes & Putin’s Aspirations


17
Brazil’s energy industry is apparently not the only area in which Rio de Janeiro is at least
quantitatively ahead of Moscow. Brazilian aerospace companies have been able to compete
successfully with imperialist ones in some sectors:

“Embraer is the largest Brazilian MNE in the high-technology aerospace industry.


Founded in 1969 as a state-owned enterprise, this firm became the world’s third
largest manufacturer of commercial aircraft and a leading producer of regional jets
with up to 120 seats….In 2002, it opened a factory in China (Harbin Embraer Aircraft
Industry—HEAI), in association with China’s state-owned company AVIC in which its
holds a 51% stake, for assembly, sale and post-sale support.”
—“Outward FDI from Brazil and its policy context, 2012,” Milton de Abreau
Campanario et al, Vale Columbia Center, 10 May 2012, p6

The authors also discuss how the Brazilian government’s policy “indirectly encouraged FDI”:

“First, a steady reduction in tax barriers to imports, mainly in the capital goods and
final consumer goods industries, has opened the country to higher levels of
international trade, particularly imports of capital goods. This process has directly
increased industrial productivity and strengthened the competitiveness of Brazilian
enterprises. Second, the privatization of industries such as steel, energy, mining,
chemical products, and telecommunications in other economies has stimulated FDI
from Brazil in those industries. Incentives for mergers of domestic firms offered by
BNDES [government supported development bank] have also indirectly helped to
promote the internationalization of Brazilian firms by facilitating the creation of large
MNEs, most notably in the past five years.”

This is roughly what Putin et al aspire to but as yet have made liJle progress toward achieving:

“Diversifying the economy away from oil and gas remains an obligatory rhetorical goal
for the Russian elite as a whole. In September 2009, Medvedev – he was then president
– described the country’s dependence on hydrocarbons as ‘humiliating’; in his most
recent state of the nation address to the Duma, Putin insisted that ‘we cannot put up
with the Russian budget and social sector being kept hostage by financial and resource
markets.’”

—London Review of Books, 6 June

Reviewing the evidence, it does not seem reasonable to conclude that Russian capitalism is
more advanced than Brazilian. Of course this is a bit of an awkward fact for those who believe
that Russia is imperialist and Brazil is not.

‘Global Challengers’ — Brazil Compared to Russia


I found the comrades’ response to the Deutsche Bank footnote on “global challengers” to be
unsatisfactory:

“P 2 Note that Russia has only 6 companies rated as “global challengers” compared
to 20 for India and 13 for Brazil (footnote #4). [”Is Russia Imperialist?”]

18
“[K1] Actually, the Deutsche Bank report was citing a Boston Consulting Group
paper with a measure of “global challengers” that was more restrictive than
what DB itself included in Chart 1 – DB said that the global reach of the Russian
corporations was “not clear-cut” from its own perspective. DB did note,
however, that “Russia’s ODI stock became the second largest among emerging
markets in 2006” (Hong Kong [China] was the largest).
“[K2] Nonetheless, Brazil’s foreign investment has reached impressive levels –
while there are good reasons to view Brazil as playing a qualitatively different
role in the global economic system, there is no reason to deny that on certain
important measures it is quantitatively close to Russia.”
As noted above, it was comrade Decker who originally introduced the Deutsch Bank survey in
his 2011 document in which he sought to prove that Russia was imperialist. In response to why
it reports that there are far fewer Russian companies on a list of “global challengers” than
Brazilian (which would undercut the notion that Russia is in fact in a higher—i.e., imperialist—
league) the comrades take a two-pronged approach: 1) raising the irrelevant issue that Deutsch
Bank was using some other company’s research—they obviously considered it legitimate or
would not have cited it); and 2) shijing the topic from global challengers to relative size of
ODFI. In an implicit acknowledgement that perhaps they had failed to prove their point, they
conclude with an assurance that while Brazil and Russia may have much in common there are
(unspecified) “good reasons” to see Russia as qualitatively different than Brazil. This is of
course the nub of our difference, and it is necessary to spell out what these “good reasons”
might be, and particularly to provide evidence to substantiate them.

If we are to have a serious discussion it necessary for both sides to address the substantial
arguments put forward by the other, not to ignore or sidestep them. For example, it is clear that
neither Russia nor Brazil is currently a globally significant center of finance capital. In this case
of Russia this is highlighted by a recent NYTimes report that Warsaw, not Moscow, is emerging
as the regional stock exchange for the countries of the former Soviet Bloc (see Appendix “G” of
“Is Russia Imperialist?”). FiJing this within the framework of “Russian Finance Capital” would
seem to present a formidable challenge. Perhaps this is why comrades Decker and Dorn offered
no comment. In the absence of any evidence to the contrary this simple fact would seem, on its
face, to be a “good reason” to think that Russia is not imperialist in the finance capital sense.

—Riley, 15 July 2013

19
*

Appendix A

Outward bound: emerging sources of FDI


Michal Kaczmarski | 10/04/2013 9:00 am | Comment on this article
• !
• !
• !
50954 Outward bound: e http://www.fdiinte
• Recommend ! ! !
• !

It is often cited that the BRIC economies – Brazil, Russia, India and China – offer the best opportunities for growth. It
would therefore follow that outward FDI flows from these countries are also expanding but only one of the so-called
'big four' appears in the top five countries in terms of outward FDI growth.

Talk to any official tasked with attracting inward investment and they will probably say that Brazil, Russia, India and
China (the BRICs) are a panacea to all FDI-related woes. These emerging economies are thought of as the new
engines of economic growth, replacing the lacklustre developed economies of the West. But do these economies
really represent the most promising growth prospects and, more importantly for those looking to attract investment,
are they the leading sources of outward investment?

A comparative analysis of investment outflows before the financial crisis – between 2003 and 2007 – and
during the crisis – between 2008 and 2012 – reveals that, while China performed very strongly, the rate of
outward investment from Brazil, Russia and India did not increase significantly between the two five-year
periods. And none of the BRIC economies were among the top 10 outward investors.

BRIC wall?
According to greenfield investment monitor fDi Markets, China increased its outward investment by 152%
between the two five-year periods, the biggest increase of any country in the world. This made it the 12th
largest outward investor in the world between 2008 and 2012, moving up from its ranking as the 17th largest
investor in the 2003 to 2007 period.

Germany, the US, India and Australia were the main beneficiaries of the increased investment coming out of China,
accounting for one-third of all Chinese investment between 2008 and 2012. But, according to Arvind Ramakrishnan,
principal Asia analyst at global risk and strategic consulting firm Maplecroft, the geographical preferences of Chinese
companies are about to change.

20
"Due to continuing political opposition [to China] in Western countries, exacerbated by recent accusations of Chinese
state-sponsored cyber warfare, China is likely to intensify its investments in Africa, Latin America and central Asia,” he
says.

India moved only two spots up the ranking, from the 13th largest outward investor to the 11th, while Russia
and Brazil remained in the same positions at 20th and 31st, respectively.

"Outward greenfield FDI from the BRICs was impacted by the debt crisis in Europe, and by stuttering growth
in Brazil and much slower growth in China,” says Dr Henry Loewendahl, a senior adviser for fDiIntelligence,
the FDI analytics unit of the Financial Times to which fDi Magazine also belongs.

Oiling the FDI wheels


The second highest increase in FDI outflows was recorded by the United Arab Emirates. It was the 14th
largest outbound investor in 2008 to 2012, moving up nine places compared with the 2003 to 2007 period. It
now ranks above larger countries such as South Korea and Australia.

Elsewhere in the Middle East, investments from Kuwait, Bahrain and Qatar have also increased significantly
between the two five-year periods, although they are still far behind UAE levels. Comparing the two periods,
the number of outward FDI projects from Kuwait doubled, the number from Qatar increased threefold and the
number from Bahrain increased fivefold.

"These countries have benefited from stronger attempts by the authorities to diversify the economy away from
hydrocarbons between 2008 and 2012,” says Torbjorn Soltvedt, senior Middle East and north Africa analyst at
Maplecroft.
Between 2008 and 2012, Middle Eastern companies, many cash-rich from high oil prices, invested heavily in real
estate and financial services, two traditional areas of activity for investors from the region. In terms of geography,
Middle Eastern investors largely avoided the struggling economies of Europe and North America, and instead opted
for investments in the Middle East and India.
Mr Loewendahl estimates that as much as 80% of the growth in outward FDI from the Middle East between 2010 and
2012 came from intraregional investments and new projects in India.

African awakening
South Africa witnessed the third largest increase in outward FDI between the two five-year periods. The number of
FDI projects coming from the country increased by 119%. The growing internationalisation of South African
companies can be attributed to the recent spurt of economic growth in many other African countries.
"As established markets are flat-lining, the real growth can be seen in completely new markets, such as Africa,” says
Tim Carnegie, national director at the London office of real estate services company Jones Lang LaSalle.
The cultural differences inherent to African markets, combined with the risk of entering newly emerging markets,
deters many investors outside Africa from investing in these countries. But South Africa is well positioned to take
advantage of the opportunities in these growing economies. "South Africans understand the risks in the continent
better and some of the elements of the cultural mindset,” says Mr Carnegie.
Thor Valdmanis, managing director of the Johannesburg office of FTI Consulting, an international business advisory
firm, says that South African companies are increasingly interested in investing in Africa. "Many of our South African
clients are putting substantial bets on continued rapid-fire economic growth on the continent,” he says. He adds that
sectors such as financial services, energy and infrastructure are proving the most popular.
Among the top 10 countries receiving FDI from South Africa, only two – the UK and the US – were not African and
more than half of all investment from the country between 2008 and 2012 stayed on the continent.

Surprise entries
Surprisingly, given the economic troubles that have gripped both countries in recent years, Spain and Ireland
recorded the fourth and fifth largest increases in outbound FDI between the two five-year periods of 106% and 93%,
21
respectively. According to Mr Loewendahl, the increases are accounted for by exceptionally large expansions by a
small number of companies rather than a general expansionist trend among Spanish and Irish companies.
In Spain, for instance, clothing manufacturer Inditex and bank Santander Group account for a significant proportion of
outbound FDI from the country. One-tenth of all outbound Spanish FDI projects between 2008 and 2012 were
accounted for by Inditex, while Santander accounted for the same proportion of all Spanish overseas hires in the
same period.
In Ireland, the rise in outward FDI is connected to the growth of Rynanair, an Irish low-cost airline operator, but also to
the government's pro-FDI policies that have attracted companies, such as public relations and advertising behemoth
WPP Group, to establish head offices in the country.
Switzerland also recorded a healthy increase in outward FDI of 82% between the two five-year periods. The main
sectors for Swiss outward FDI are financial services, food and tobacco, and consumer products, which is driven by
the expansion of a number of multinationals, such as food company Nestlé.
The destination of Swiss investment has changed between the two five-year periods, no doubt as a result of the
financial crisis. Before the crisis, between 2003 and 2007, a significant amount of Swiss investment went to emerging
economies, but in the 2008 to 2012 period Swiss companies invested more heavily in developed markets.
The main explanation for this change is the growing strength of the country’s currency. "Investing in Switzerland
became a bit more expensive and at the same time the purchasing power of the Swiss franc has been higher,” says
Daniel Loeffler, director at the economic development office in the canton of Geneva. As a result, Swiss investors,
who have historically viewed internationalisation as a means to overcome the limited size of their home country,
gained yet another reason to venture abroad and look for assets, especially in cash-strapped American and
European companies.

Ones to watch?
Two other countries that recorded surges in outbound FDI between the two five-year periods were Chile and
Thailand, which experienced increases of 97% and 80%, respectively.
Expansion among Chilean companies was fuelled by two factors, according to Cristian Lopez, director of the London
office of ProChile, the country’s international trade development agency. One was the growth of other emerging Latin
American countries and the second was the growing strength of the Chilean peso.
"As much as 83% of global investments out of Chile was concentrated in Latin American countries. Chilean
companies investing outwardly during the 2008 to 2012 period were making the most of the opportunities created by
the international financial crisis,” says Mr Lopez.
Thai investors were also buoyed by the strengthening of the baht and the growth of neighbouring countries. "The
emerging markets of neighbouring countries, such as Indonesia and Myanmar, have grown exponentially and
overseas investment has helped lessen the baht’s appreciation,” says Supisara Chomparn, director of the New York
branch of the Thailand Board of Investment.
Putting rupees to work
The flow of FDI in the Indian business process outsourcing (BPO) sector has witnessed something of a reversal in
the past five years. After a decade-long surge in investments in BPO projects in India, now the country's largest
companies, including Infosys, Crisil and Mindtree, are making significant outward investments.
According to data from fDi Markets, in 2012 Indian companies created an estimated 10,800 jobs through crossborder
greenfield BPO projects, a threefold increase from 2004. Given the low price of labour in India – traditionally the main
factor influencing the decision to outsource – why is the sector expanding out of the country?
"The need for local support and a talent pool that can serve the higher end of operations,” says Scott Staples,
president of US operations at Mindtree, a Bangalore-based IT consulting company that launched a development
centre in Gainesville, Florida, in 2012.
Sanjeev Sinha, president of the research and analytics arm of Crisil, a Mumbai-headquartered risk and policy
advisory, says that by venturing overseas, Indian companies manage to gain a local footprint.
"In an increasingly competitive landscape, clients welcome value-added services such as analytical support in local
languages. Our research centre in Hangzhou, China, offers reports in Mandarin, while the Buenos Aires centre
provides support in Spanish,” says Mr Sinha.
This article is sourced from fDi Magazine

*
22
Appendix B
Of ‘Gattling Guns and Spears’
One minor misunderstanding that I would like to put to rest involves the phrase “GaJling guns
vs. spears.” In their 19 June comments Decker and Dorn assert that earlier in the debate
“Russia’s military apparatus was once compared to ‘spears’ in the face of America’s ‘GaJling
guns’.” Decker made a similar complaint in his 6 April 2011 document:

“…Russian technology is not as advanced as American technology. But the difference is


hardly one of ‘Gattling guns vs. spears,’ as was earlier suggested by comrades.”
In my 12 April 2011 response to Decker I cited the passage where the phrase was originally used
which clearly did not involve Russia vs. the U.S.:

“We never intended to suggest that Russian vs U.S. military technology was a case of
spears vs. Gatling guns. That was a metaphor aimed at illustrating a more general
point, as noted in our response to Gary B.:
“’The material basis for imperial/colonial domination of weaker and more
backward peoples has always been relative technological-productive
superiority. The European colonialists were able to conquer Australia, the
Americas, Africa and much of Asia because a very few people with Gatling guns
are more than a match for a great many armed with spears.’”

23