Economic Empire building
Source Ken Hanly
Date 06/11/25/11:59

Economic Empire building: The Centrality of Corruption

By James Petras

11/24/06 "Information Clearing House" -- -- Economic
Empire building (EEB) is the driving force of the US
economy and became more central over the past five
years. More than ever before in US economic history,
the principal US banks, oil companies, manufacturers,
investment houses, pension and mutual funds all depend
on exploiting overseas nations and peoples to secure
high rates of profit. Increasingly the majority of
banking and corporate profits accrue from overseas

As EEB becomes central to the viability of the entire
US economy, competition with Europe and Asia for
lucrative investment rates and economic resources
intensifies. Because of heightened competition, and
the crucial importance of overseas profits, corporate
corruption has become a decisive factor in determining
which imperial center’s MNCs and banks will capture
lucrative profit-generating enterprises, resources and
financial positions.

The centrality of corruption in imperial expansion and
in securing privileged positions in the world market
exemplifies the increasing importance of politics, in
particular relations with states in the imperial
re-division of the world. Globalization, so-called, is
a euphemism for the increasing importance of competing
empires intent on redividing the world. Corrupting
overseas rulers is central to securing privileged
access to lucrative resources, markets and

The Centrality of Economic Empire Building Today
everywhere you look, the central fact in the corporate
and banking annual reports is the essential need for a
strategy of overseas expansion in order to sustain
profits. Citicorp, the largest banking enterprise in
the world announced that a massive overseas expansion
program to increase profits by 75% “US institutional
and retail investors have headed offshore in search of
higher profits”, writes the Financial Times (October
11, 2006 p. 24). For the year ending October 4, 2006,
of the $124 Billion dollars entering all the US equity
mutual funds, $110 billion dollars went into funds
investing in overseas companies. For the first 8
months of 2006, 87% of total equity flows went

The drive for overseas profits is not a momentary
preference but a secular shift. It will continue over
the long term because of the higher rates of return
overseas and the belief that the dollar will weaken
because of high US fiscal and trade deficits. Oil and
energy companies report record high profits. Exon
Mobil recorded a 26% increase in 2006 over the
previous year, most resulting from exploiting overseas
sites. IBM has shifted a substantial part of its
research and design centers from New York to China,
while retaining financial control and strategic
decision-making in the US. Over 60% of China’s exports
are produced or subcontracted by US manufacturers.
Ford and GM overseas profits, especially in Latin
America and Asia compensate in small part for their
multi-billion dollar losses in the US.

The victory of the US imperial state in the Cold War
and the subsequent ascent of US client regimes in the
former Soviet Union, Eastern Europe, the Baltic and
Balkan states, as well as China and Indochina’s
conversion to capitalism have doubled the number of
workers in the capitalist world economy from 1.5
billion to 3 billion. The growth of a billion-member
reserve army of displaced peasants, factory workers
led to an unprecedented 40% decline in the capital -
labor ratio. The massive growth of world wageworkers
(especially in the ex-communist countries) has been
fully exploited by the MNCs both in increasing profits
overseas and as immigrants in the home market. Adam
Smith assumed that the labor surpluses in the poor,
newly capitalized countries would be absorbed and
competition for workers would drive living standards
up. The current tendency is for money wages to grow
while social wages decline in the so-called ‘emerging
countries’ and both money and social wages to decline
in the imperial centers. As the number of occupations
(even the highly skilled) are no longer safe from
world competition even better paid workers face
declining living standards.

The significant fact about the flow of US capital
abroad is that it takes place despite a ‘rebound’ in
the domestic economy. In other words, the improved
performance of the US stock market and domestic
economy has failed to reverse the overseas
profit-driven expansion of the US Empire.

The principal new targets of MNC, banks, pension funds
and institutional investors are the ‘BRIC’ countries –
Brazil, Russia, India and China. Russia is favored for
its massive oil and gas wealth, its market for
transport and luxury goods, all of which yield high
rates of profit. Brazil is an investor’s paradise for
its world record interest rates, raw materials and low
labor costs in manufacturing especially in the
automobile sector. China attracts investors to its
manufacturing sector and consumer market because of
low labor costs. China also serves as an intermediary
assembly and processing center for exports from other
Asian countries prior to exports (via US and EU MNCs)
to the West. India attracts capital to its centers for
low cost IT outsourcing, services and related

What is striking about the ‘BRIC’ countries and their
growing attraction for US and EU MNCs is their
extremely poor rating with regard to corruption. There
is a strong correlation between the ‘attractiveness’
of the ‘BRIC’ countries and the ease of doing business
and having access to highly lucrative economic
enterprises and sectors once the political leaders
have been paid off.

Empire building is going far beyond the traditional
conquest of raw material and cheap labor exploitation.
The empire builders are shoving their way into the
new, extremely lucrative finance, insurance and real
estate (FIRE) sectors. The hottest field of investment
in China and Russia is real estate, with prices
increasing by 40% a year in most high growth
metropolitan centers. Insurance and financial sectors
in China and banking and finance in Brazil have
returned billions of dollars over the past 4 years. US
banking and MNCs have subcontracted billions in IT and
service contracts to the new Indian business tycoons,
who in turn subcontract to local employers.

Today, over fifty percent of the top 500 US MNCs earn
over half their profits from overseas operations. A
substantial minority earn over 75% of their profits
from their overseas empires. This tendency will
accentuate as US MNCs relocate almost all their
operations, including manufacturing, design and
execution. They will employ low tech and high tech
employees in their pursuit for competitive advantages
and high rates of profits.

The Centrality of Corruption

While orthodox, free market economists emphasize the
role of innovation, managerial skills, leadership and
organization in securing competitive advantages and
increasing rates of profit (“market forces”), in real
life these factors are frequently secondary to
political factors, namely multiple forms of corruption
in securing economic advantage. According to a
six-country survey of 350 corporations published by
the law firm, Control Risks and Simmons and Simmons,
“a third of international companies think they failed
to win new business over the past year because of
bribery by their competitors” (Financial Times October
9, 2006 page 15). Moreover most MNC and banks engage
in corrupt practices through intermediaries. If we
include direct and indirect forms of corporate
corruption then it turns out that in some countries 9
out of 10 corporations engage in corruption. According
to the survey, “about three quarters of the companies,
including 94% in Germany and 90% in Britain think
businesses from their countries use agents to
circumvent anti-corruption laws” (Financial Times
October 9, 2006 page 15).

Market power is highly dependent on political
relations with the state through a series of complex
networks of ‘intermediaries’ who negotiate monetary
and other payoffs in exchange for a range of highly
profitable concessions. The MNCs are the basic unit of
trade and investment in the world economy. In greasing
the wheels of economic transactions through political
corruption, they make a mockery of what orthodox
economists tell us about global expansion.

Political corruption, not economic efficiency is the
driving force of economic empire building. Its success
is evident from the massive – trillion dollar –
transfers of wealth, enterprises and resources from
the state sector to US/EU MNCs which has taken place
in Russia, Eastern Europe, the Balkans, Baltic
countries and the Caucasus since the fall of
communism. The scale and scoope of Western pillage of
the East is unprecedented in recent world history. In
their European conquests, neither Stalin nor Hitler
took over and profited from so many enterprises as
have the Western MNCs over the past two decades. What
is worse, the initial pillage set in motion a
political system embedded with kleptocratic
‘pro-Western’ ‘free market’. The latter constructed
legislative frameworks, which facilitate high rates of
return. For example, legislation on reductions of
wages, pensions, job tenure, work place safety and
health regulations, land use policies in the
ex-communist countries were designed and enforced to
maximize profits – and ‘attract’ US and EU MNCs.
Pillage and political corruption has created a mass of
low paid, precarious, underemployed and unemployed
workers who are available for exploitation by overseas
US corporations and their partners, the overseas
institutional investors looking for high return.

Corruption is especially prevalent in several sectors
of MNC overseas operations. Arms sales, involving
billions annually, is rampant with corruption as the
military-industrial firms bribe state officials to
purchase US weaponry. Military purchases, most with no
real security value, deplete local treasuries of
funds, while raising profit margins for arms
industries and the institutional investors who engage
in overseas investments.

Oil and energy companies secured exploration rights
via corruption, by buying out entire ministries in
Russia, Nigeria, Angola, Bolivia and Venezuela in the

Securing a toehold in any economic sector of China to
exploit cheap labor requires the MNC to payoff a small
army of government officials. This is more than
compensated by the regime’s enforcement of a cheap
labor regime, repression of labor discontent and the
imposition of state-controlled pro-business ‘labor

MNC bribery takes many forms: direct monetary payoffs
to political officials, positions in the enterprise
for officials, family members, friends and/or cronies,
paid excursions, partnerships, invitations to
prestigious universities and scholarships for their
children, etc. What is important is that bribery works
for the MNCs, otherwise it would not be used so
extensively and repeatedly..

On the other hand, MNC corruption more often than not
has a prejudicial effect on the ‘host’ country. It
reduces the legitimacy and trust of the regime in the
eyes of its people. It transfers wealth from
national-public use into private foreign gain. It
weakens the public authorities’leverage over policy
and increases the decision-making power of the MNCs.
It transfers lucrative resources to foreign private
hands. It widens and deepens internal class
inequalities and undermines ‘good governance’. Finally
it creates a ‘culture’ of corruption which siphons
public resources from social services and productive
investment to personal wealth.

Pervasive MNC corruption cannot take place without the
knowledge of the imperial state. Despite
anti-corruption legislation, corruption is endemic and
becoming the norm in the expansion of competing MNCs
and empires. More and more, corruption is seen by the
corporate elite as the grease that keeps the wheels of
‘globalization’ rolling.

If the annexation of the former communist countries
opened new opportunities for the imperial re-division
of the world, and the pillage of post-communist
countries opened vast new sources of capital
accumulation, then on-going and deepening corruption
has become the mechanism through which rival capitals
compete for global dominance. Economic empire building
cannot be seen strictly through the operation of
‘market forces’ – because market transactions are
preceded by political corruption, are accompanied by
political influence and followed by political
realignments of power.

Whoever speaks today of the world economy,
by necessity must address the most salient aspect of
that reality – the growth of economic empire building.
The entire network of MNCs criss-crossing the globe
and forging political and economic compacts with
corrupt political leaders is the basis of contemporary
economic empires.

The entire process of empire building began with the
privatization of publicly owned property, resources,
banks and productive enterprises. It continues with
deregulation of financial markets. It is legitimized
by the election (and re-election) of pliable client
politicians. The result is the creation of vast labor
reserves of cheap labor and the elimination of
protective social and labor legislation. The entire
ensemble is based on political corruption at every
level, in each and every country, including the
imperial home states.

Electoral politics, moralizing anti-corruption
rhetoric, lectures on corporate ethics and
responsibility notwithstanding, corruption flows
across boundaries and up and down the social
structure, subordinating nations and workers to the
emerging economic empires.

English Laborites, German Christian Democrats, Chinese
Communists, Brazilian Worker Party officials, US
Republicans and Democrats – in appearance from
disparate ideological traditions – are all tightly
enmeshed with long-term, large-scale MNC expansion
through corruption. They encourage their MNCs to
secure markets and wealth through whatever means are
necessary, including systematic corruption.

Despite tight labor markets, high profits, rising
productivity and economic growth, living standards of
workers in the West continue to decline, contrary to
classical economic theory. This is in large part due
to political intervention based on corrupt relations
between corporate capital and the state, both in the
imperial countries and overseas. Supply and demand of
labor has had little effect on the price of labor
because it has been superseded by the corrupt
interventionist state, repressing labor, co-opting
trade union bosses and setting wage targets below what
a free labor movement would secure.

Corporate corruption is as integral a part of empire
building as overseas investments, buyouts and market
penetration. It is not an incidental, isolated factor
having to do with a lack of corporate ethical codes.
It is a systemic factor built into the very harsh
competitive conditions of contemporary empire
building. As markets are absorbed, as the surplus
labor pools decline, as energy resources pass their
peak, imperial competition will intensify and
corruption deepens.

Patchwork reforms have not and will not work. The
OECD’s anti-bribery convention came into force in 1999
and has had no impact. Over half of the MNCs claim to
be “totally ignorant of their countries’ laws on
foreign corruption, (Financial Times October 9, 2006
page 15). The other half simply “get round laws by
using agents and intermediaries” (ibid). Only by
overthrowing the empire building state and ending
imperial competition and the re-division of the world
can the foundation be created for a world without
corruption, pillage and exploitation.

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