Neoliberal monopoly-dominated ‘free trade’ represented a more advanced form of domination and exploitation compared with earlier eras. Many of the most profitable corporations specialised in particular labour processes within an overall world division of labour. Almost all specialised in one type of labour: sophisticated labour. While the separation of capital into monopoly and non-monopoly groupings predates the neoliberal period, during it, production processes were more vigorously divided into two opposite labour types – what we might call ‘ordinary’ and ‘sophisticated’ labour. Independent firms were tasked with carrying out separate stages of the production process even for a single product, sometimes thousands of kilometres apart. The two types of labour stand in contrast to each other technically and, flowing from this, in terms of the income they can generate. Simple labour processes are more easily replicable, while sophisticated labour is far less so. Simple labour processes therefore cannot, by definition, be monopolised as such. Sophisticated labour, also by definition, always possesses a monopolistic characteristic, as such, to one degree or another. Non-monopoly firms are assigned, or left to compete for, simple and well-known labour processes. Through these they can gain only non-monopoly profits. The monopolies control high-end, specialised and scientific labour. On this basis they can gain the high, monopoly profits that investment in such labour processes also demands.
The existence of economic, political or military conflict between the United States and China is believed to indicate that China is a rising threat to US domination. However, the United States and other rich countries historically have engaged in the most belligerent conflicts and warmongering with many Third World societies, including those far weaker than contemporary China. The ‘trade war’, which is an economic attack on China by US imperialism, aims to secure and strengthen imperialist claims to value brought into the world economy by Chinese labour. The battle is not over which country will be dominant but the degree to which the United States and other rich countries can continue to exploit China. China’s rapid economic development over the last several decades has changed the conditions of this exploitation, and forced the rich, imperialist countries to adjust their posture. Chinese policies such as the Belt and Road Initiative or its military posture do not represent serious or credible threats to the dominance of the rich countries. Rather, the idea that they do originates as a justification for imperialist attacks on China.
Third World capital can sometimes win in competition with imperialist capital for the production of simple commodities. To the extent a commodity is labour intensive and can be produced using ordinary labour, it will be more competitive to produce it in the Third World where such labour is cheap and abundant. On this basis we can see the emergence of a small number of large Third World corporations that dominate specific segments of the production process. Yet such production cannot achieve a high, monopoly profit as it can be achieved by many competing Third World producers. Low Third World profits and wages become the determinant around which prices are set for commodities produced in this way. Analysis of the largest corporations in the world as listed on both the Fortune and Forbes databases shows that almost no large Third World corporations are competitive with imperialist-based corporations in the most lucrative areas of the world economy. An overwhelming majority of Third World corporations listed are national, not global monopolies. The far smaller number of Third World global corporations are almost all concentrated into low-end and low-margin economic sectors, or they exist within sectors that are dominated overall by First World companies. As a result, Third World corporations, on average, have far lower gross profits, return on assets and market capitalisation.
Polarisation of labour processes and profit rates in the ‘neoliberal period’ occurred between monopoly capitals (which dominate sophisticated labour processes) and non-monopoly capitals (which carry out ‘ordinary’ labour). It is only the sophisticated labour and production processes that can form a sustainable basis for high, monopoly profits. This division of labour also corresponds to the division between rich and poor societies. The rich, imperialist countries are the base of operations for the monopoly corporations while the poor countries produce corporations that are restricted to the ‘domination’ of only ordinary labour processes. Hence, they can and do increase their production without ever thereby catching up. This division of labour has meant that in the neoliberal period, Third World societies massively increased their share of the world’s work but suffered massive terms of trade losses and achieved only a very modest increase in their share of world income. By contrast, the period was highly lucrative for the rich, imperialist countries.
The rapid pace of technical change means that technical superiority in any given labour processes is an inadequate basis for long-term economic domination over competitors. Over time, every process becomes more commonplace and ceases to be advanced in relation to competing producers. Reproduction of dominance by any given section of capital requires constant involvement in innovation of new technology through the systematic organisation and acceleration of research and development. In this context, competition between capitalist firms tends to shift from the sphere of production to the sphere of research, development and other preparation of the conditions for production. The highest and most important of these conditions is the development of the labour force and especially of highly skilled labour of all types. In Late Capitalism, Mandel observed that, in the conditions of modern imperialism, competition between countries moves tendentially from the sphere of production to the sphere of social reproduction. However, Third World societies experienced colonial subjugation and continue to be excluded from the benefits of humanity’s common social development. Where a given society’s level of development is not equal to the rich, imperialist countries, that society is forced into a process of production and reproduction on a qualitatively lower level than the imperialist states and cannot compete with them. This inequality is reinforced because national development and the development of advanced science can never be adequately built upon a productive foundation specialising in the simple labour processes assigned to Third World countries within the contemporary global division of labour.
The starting point for Chinese technological development is essentially the same as for any other Third World society – relative scientific underdevelopment in most areas compared to the rich, imperialist countries. Lack of basic research and scientific knowledge (at least outside of the military sphere) is proving to be an insurmountable obstacle to Chinese attempts to upgrade the technological level of its production processes. Even designated priority areas, such as the Chinese-built midsize passenger airliner, the C919, demonstrate the extreme limitations and dependency of Chinese high-technology production. The so-called trade war has also shone a light on severe Chinese weakness in what is perhaps the key strategic technology today – microchips. While China produces some microchips domestically, these are not the high-end chips needed to manufacture advanced products, such as Huawei’s top-shelf phones or top-of-the-line 5G telecommunications infrastructure. The trade war has further uncovered China’s inability to respond to US aggression with any technology bans of its own – as might be expected if China were the rising technological power house that so many commentators appear to believe. The historical transition from British hegemony to German power and then US hegemony was associated with the independent development in those countries of revolutionary new technological advances. There appears to be no such technological leadership associated with contemporary China despite for several decades now being the largest producer of and market for many important goods and services.
The substantial posse of Marxist writers and academic specialists who have for decades declared Lenin’s Imperialism as wrong and antiquated could be expected to have unearthed and popularised countless errors and misjudgements from the book. Yet no such list appears to exist. In place of one, various caricatures of ideas that do not actually appear in Lenin’s book Imperialism: The Highest Stage of Capitalism keep getting repeated. Two common caricatures are that Lenin viewed colonialism as a necessary form of imperialist domination and that Imperialism is overly fixated on the ‘export of capital’ (that is, foreign investment). The first is supposed to show that Lenin’s work is irrelevant now that colonialism is over. The second was supposed to show the same. Even though foreign investment has now bounced back, the label still sticks. However, Lenin emphatically rejected the idea that export of capital is the central question in understanding imperialism. This is evident both from the text of Imperialism itself and also from arguments Lenin made in the Bolshevik party and elsewhere about how to understand imperialism. Similarly, Lenin explicitly argues both in Imperialism and elsewhere – such as against Bukharin – that colonialism is not a necessary feature of imperialist domination. On this question Lenin makes a whole series of insightful observations on national independence, national struggle and anti-colonialism that were later proven correct by the national liberation movements and political independence after the Second World War.
Since 2006, Egypt has shown the puzzling trend of being a country that imports energy yet does not benefit economically from lower international oil prices. Despite being a net energy importer, Egypt remains heavily dependent on crude energy for its foreign currency earnings, directly through exports and indirectly through foreign direct investment, external aid, and workers’ remittances from oil-rich countries. Egypt’s twisted dependency is explained by two predominant and largely interrelated factors: institutions and geo-economics. Sustained rent dependency weakens the state institutions necessary for regulating and extracting resources from the economy, as well as those required for state–business coordination of diversification or upgrading. These state institutions instead reproduce capacities that are allocative in essence and that involve rent. Institutions are sticky. They do not readily change in response to economic shocks or downturns, nor do they adjust automatically and functionally to changing economic conditions. Regionally, oil-rent recycling from the GCC to Egypt mitigated the overall impact of becoming a net energy importer. It kept the Egyptian economy and state dependent on higher oil prices through aid packages, cheap credit and investment, and the flow of workers’ remittances, even when the country itself was becoming a net importer.
How federalism encourages economic diversification in the United Arab Emirates
Karen E. Young
The goal of economic diversification away from oil revenue dependence is not new, but there is an urgency to find new policy responses since late 2014 when oil prices declined sharply. The United Arab Emirates (UAE) has been successful in part because of the federal structure of the government, which has encouraged policy differentiation, learning, and even competition between the seven emirates. Because resource endowment is not equal across the federation, nor are the proceeds of oil wealth evenly distributed, policy experimentation and change has flourished, furthering the pace of economic diversification. This policy learning and differentiation between emirates predates the 2014 oil price collapse, but it has set the stage for a pattern of policy flexibility now embraced and accelerated by the central government between 2015 and 2019. This chapter focuses on a series of policy choices and reforms, from labour market regulation to fiscal reform, to policies affecting the investor and business climate. In the UAE, while we have seen centralisation of state authority, especially in foreign policy, there remains a benefit to new economic policy formulation, experimentation, and competition between emirates. Breaking down the policy agenda post-2014 in the UAE, we can identify three core economic response policy areas: fiscal policy, social development policy, and diversification policies.
This chapter analyses the relationship between lower oil prices and the Lebanese economy since 2014. First, it discusses the different transmission channels through which oil price fluctuations affect economic activity. In his discussion, the author reviews how key macroeconomic variables have evolved during the recent oil price decline period, and he evaluates the relevance of each transmission channel. Overall, the author finds that the 2014–16 oil price decline was beneficial for the Lebanese economy. Second, he studies the 2015 deflation and investigates the different sources behind it. Despite the different negative aggregate demand shocks that hit the Lebanese economy during that year, GDP increased. This empirical evidence suggests that the 2015 deflation was primarily caused by the reduction in oil prices. Finally, the author explores the effect of lower oil prices on the oil and gas sector. He explains why lower oil prices have negatively affected the oil and gas sector at its current embryonic stage. He also presents the pre-resource curse concerns and provides arguments on why Lebanon is unlikely to fall into this trap. Moreover, the author discusses the Dutch disease and emphasises the importance of why Lebanon should adopt a long-term development strategy to avoid this economic anomaly.