Transnational corporations regard the host country as a beachhead for the global market (Lim Mah Hui, Globalization, Export-led growth and inequality: The East Asian Story, South Centre, November 2014), where the workforce, embedded in a global division of labour, is to generate capital accumulation for the foreign direct investment entities. Essentially, with significant wage differentials between states, countries and regions, this restructuring of global monopoly capital presents contemporary imperialism a new way of capitalism exploitative endeavour (Suwandi and Foster, 2016).
1] INTRODUCTION
Since the late twentieth century, industrial capitalism has evolved into globalized capitalism that increasingly adopted interlinked commodity chains controlled by transnational corporations, connecting diversified production zones, primarily in the Global South, with conspicuous consumption, financial flouting and capital accumulation mainly in the Global North. These commodity chains constitute the global circuits of capital that is generalized monopoly-finance capital regarded as late imperialism (John Bellamy Foster, Late Imperialism, Monthly Review 71, no. 3 (July–August 2019): 1–19; Samir Amin, Modern Imperialism, Monopoly Finance Capital, and Marx’s Law of Value).
2] GLOBAL COMMODITY CHAINS
Through a system of transborder connection of global commodity acquisition, storage and exchanges linking together, monopoly-capital determines and structure material determination and production finishing processes worldwide from and with different commodities and subcomponent parts. With flexibility in lean production connected to these global commodity chains, assembly plants and factory production are mainly sited in the Global South. These are the sites where the reserve army of labour is larger, unit labour costs are lower, and rates of exploitation are correspondingly higher. The result is considerable profit margins for the transnational corporations leading to the amassing of wealth in the Global North centre in a transactional unequal exchange process of profiting through and by sheer exploitation of resources.
When Dell set up its Bukit Mertajam assembly plant in peninsula Malaysia opposite Penang island in 1995, its key objective on inventory management is to minimize the inventory and optimize the production throughput. As a result, the company does not hold inventory for more than 6 days to avoid unnecessary carrying storage costs. The corporation has suppliers worldwide, including major companies such as Motorola, Samsung, Sony and other companies supplying components (via FedEx and DHL airfreights to Bayan Lepas airport ) like HDDs, cables, motherboards, visual display units, etc. according to a set of rules as designated by Dell Corporation.
Companies like Apple, on the other hand, are not the real manufacturers, but merely merchandisers, and creating innovative product-brand imaging they are able to absorb a huge share of the surplus value created by her subcontractors and component manufacturers.
The major component-suppliers and their unit price per iPhone for Apple China are presented in Figure 1 (as adapted from Rassweiler, 2009).
Apple China took over a farmland in Shenzhen where a Foxconn factory (a subsidiary of Taiwan-based Hon Hai Precision Industries) was built for 250,000 workers. Resting upon inflows of large foreign direct investment and a domestically well-funded and well-provided infrastructure, the Chinese manufacturing-factory industrial sector has since become a premier link in the global supply chain, (seeJenny Clegg, China’s Global Strategy – Towards a Multipolar World, Pluto Press, 2009).
It is of interest to note that Apple’s official list of its top 200 suppliers, accounting for 97 per cent of materials and manufacturing costs, includes just two companies, for instance, in Apple Brazil: Foxconn and fellow Taiwanese electronics company Lite-On Technology Corp. Foxconn currently have five facilities in the country that make products under contract for various technology companies, including just one unit producing Apple devices in Jundiai, about 30 miles east of Itu municipality in the state of São Paulo.
Fully 65% of the tripling of Chinese exports over the past decade US$121 billion in 1994 to US$365 billion in mid-2003 is traceable to outsourcing by Chinese subsidiaries of transnational corporations and joint ventures, (Stephen Roach).
Figure 1Major component-suppliers and unit price per iPhone, Apple China (Rassweiler, 2009)
ENTITIES
Parts
US$
Toshiba (Japan)
Flash Memory
24
Display Module
19.25
Touch Screen
16
Samsung (Korea)
Application Processor
14.46
SDRAM-Mobile DDR
8.50
Infineon Germany
Baseband
13
Camera Module
9.55
RF Transrec.
2.80
GPS Receiver
2.25
Power iC RF
1.25
Broadcom (USA)
Bluetooth / FM/ WLan
5.95
Numonyx (USA)
Memory MCP
3.65
Murata (Japan)
FEM
1.35
Dialog Semiconductor, Germany
Power IC Applocation Processor Function
1.30
Cirrus Logic (USA)
Audio Codec
1.15
Rest of Bill of Materials
48
Total Bill of Materials
172.46
Manufacturing costs
6.50
Grand Total
178.96
It can be seen that the manufacturing cost (labour effort and factory overheads) makes up a minuscule fraction of the finished product value.
3] GLOBAL LABOUR ARBITRAGE
Global capital (that is, the TNC transnational corporations) searches for low unit labor costs around the world to accrue higher profit margins and overall profits. Curated information on unit labour costs had shown that countries with the highest participation in labour-value chains are the top three countries China, India, and Indonesia having very low unit labour costs.
The global capital’s goal is to make sure that unit labour costs are stably low, even when wage costs are increasing say any increase in minimum wage through governmental promulgated policies. Control mechanisms in legislations – like gazetted laws on categories of union recognition permissible, regulated registration and membership formation – are instituted to allow global capital to maintain a low unit labour cost by making sure that productivity can be maintained and increased without much industrial strife nor slow-down otherwise union busting is encouraged to prevent labour unrest.
It is this global reserve army – mainly in the Global South, but also growing in the Global North – which monopoly-capitalism holds down the labour income in both center and periphery, keeping wages in the periphery well below the average value of labour power worldwide, as articulated by John Bellamy Foster, Robert W. McChesney and R.R.t Jamil Jonna in The Global Reserve Army of Labor and the New Imperialism, Monthly Review, November 01, 2011.
The global reserve army of labour not only serves to increase shorter-term profits; it serves as a divide-and-rule approach to labour on a global scale in the interest of long-term accumulation by transnationals corporations and the state structures like government-linked companies (GLCs) aligning, and colluding, with them. The consequent competition among industrial workers in the Global South is greatly intensified by increasing the relative surplus population. This divide-and-rule strategy serves to integrate disparate labour surpluses, ensuring a constant and growing supply of recruits to the global reserve army who are made less recalcitrant by insecure employment and the continual threat of unemployment as an approach in imperialist exploitation unleashed by the linkages in the global commodity chains, (Intan Suwandi, Value Chains: The New Economic Imperialism, Monthly Review, 2019).
Suwandi shows how transnational corporations use global labour arbitrage to create “global labour value chains” to protect their profit margins, so that supposedly decentralised global production is associated with the growing concentration of profits and economic power.
For instance, when the Apple’s California plant is compared with overseas factories, the fact is that the cost, excluding the materials, of building a $1,500 computer say in Elk Grove was US$22 a machine. In Singapore, it was US$6; in Taiwan, US$4.85. Another example: in Brazil, a worker testing iPhones earns about US$80 per week, just US$15 above the minimum wage. In Malaysia, during its industrialisation initiatives during the 1970s, implanted behind free-trade zones the industry electronic TNCs were employing female workers at US 40 cents per hour.
Apple – which has major outsourced units in Malaysia like Murata Manufacturing Co., Renesas Electronics Corp. and Ibiden Co., that make chips and circuit boards for the corporation – its surplus value on a particular product line is exemplified by it’s high profit margins versus its labour costs.
Figure 2 shows – from the Apple China’s production – the costs of production, capital accumulation and the surplus value extracted from the production of a typical iPad in the 2010s:
Continuing on the commodity value chain, for each iPhone 4 imported from China to the United States in 2010, retailing at $549, about $10 went to labour costs for production of components and assembly in China, amounting to 1.8 percent of the final sales price, (Jason Dedrick, Capturing Value in Global Networks: Apple’s iPad and iPhone, Paul Merage School of Business, University of California, Irvine, July 2011). According to a new study by Xing Yuqing, an economics professor at the National Graduate Institute for Policy Studies in Tokyo, China’s workers contribute only $6.50 to each iPhone, about 3.6% of the total production cost. Linden, Kraemer, and Dedrick (2007) estimated the China’s export value for a unit of a 30GB iPod model in 2006 was about $150, but the value added attributable to producers in China at only $4!
It is not the ordinary workers in the Global South, but the Gobal North executives and corporate capital who are benefiting from the structural power of the global commodity supply chains. While Apple’s iPod is made entirely overseas, but ‘52 percent of the final sale price is counted as value added in the United States and is added to U.S. GDP‘ (Suwandi, op. cit. p.158). The surplus value, the source of profit, entirely comes from in the production process, and therefore originates completely outside the USA. However, the finance and administrative procedures take place in the core centre of Global North. In a capitalist society, under a capitalistic accounting method, the ‘surplus-value’ is regarded as ‘value added’, while in Marxist terms, these activities add no value at all (Suwandi, ibid., p.160). With all this value accruing in the imperial centre, it is the middle-class professionals including the outsized “compensation” given to corporate executives – [who capture] more than two-thirds of the total wage bill associated with iPod production’, (Suwandi, ibid., p.158).
The most salient example of a factoryless manufacturer like Apple, which sold $51.94 billion in products in the Chinese market in 2018. However, if we were to refer to the official trade statistics, we would conclude that Apple did not even export $1 in products to China. According to the UN Comtrade, in 2018 China imported just $4.05 million from the US in laptops, tablets, and mobiles phones, as defined by Harmonized System (HS) 847130 and HS 851712, which cover all Apple products. The $51.94 billion in sales of Apple products is more than 12,000 times the reported Chinese imports from the US.
These stylised facts unambiguously indicate that current trade statistics do not count overseas sales of Apple (Nike and many others) as American exports at all.
(seeYuqing Xing, Factoryless manufacturers and international trade in the age of global value chains, Vixeu.org, 27 May 2021 and John Smith, The GDP Illusion – Value Added versus Value Capture, Monthly Review, July 2012).
4] SURPLUS VALUE EXPLOITATION
TNCs assembly plants throughout the world are in charge of production, while their Global North HQs take care of global marketing, distribution and retailing. The workers’ salaries paid by these factories are meagre compared to the retail prices paid by consumers for products made. Vietnam’s labour cost for a pair of US$149.50 basketball shoes was $1.50 – 1 percent of the final retail price in the United States.
Besides the relentless pursuit for competitive edge over rivals, TNCs definitely optimise performance towards profit maximisation. The gross profit margin of the iPhone was 62% when the phone was launched in 2007, then rose to 64% in 2009 due to reductions in manufacturing costs (seeTable 3). If the market were perfectly competitive, the expected profit margin would be much lower and close to its marginal cost. The surging sales and high profit margin suggest that the intensity of competition is fairly low and Apple maintains a relative monopoly position. Therefore, it is not the competition but profit maximisation that drives the iPhone’s assembly to China – and it is the gain in production experience as well as falling costs when the scale of their production increases (the “learning curve effect” and “economies of scale” factors, respectively).
Table 3. Profit margin of the iPhone
2007
2008
2009
Unit Price to carriers
$600
$500
$500
Unit manufacturing costs
$229
$174.33
$178.96
Profit margin
$371
$325.67
$321.4
Profit Margin (%)
62
65
64
Sources: iSupply, and Yuqing Xing calculations, 10 April 2011
China workers just put all these parts and components together and contributed only $6.50 to each iPhone, about 3.6% of the total manufacturing cost which was $178.96, that is, the shipping price, and at a 64% profit margin or $321.40 in 2009.
The high profit margin is due to the gain associated in the global value chain process.
5] GLOBAL VALUE CHAIN
With the proliferation of global value chain (GVCs), more and more transnationals specialise in promoting brand marketing and creating technological innovations, and outsourced their product manufacturing and assembling to foreign companies in foreign countries. They are no longer manufacturing any physical goods, but sell foreign consumers the value added of their design features and/or product facilities and operating functionalities as part of the intellectual property embedded in the products assembled or manufactured in different countries around the world.
Through soft elements in the ownership of patents, copyrights, brands and logistical systems – typically known as the Intellectual Property Rights –these are routed onto a refreshed monopoly-capital commodity supply chain pathway as in Figure 4:
There is an upward pressure on both left and right sides of the curve as a resultant outcome from dynamics arising from the growing role of intangible assets in the value chain processes, and also from tighter implementation and control of Intellectual Property Rights. What this means is that the market power of leading firms – the product/service initiators or front-runners – is often enhanced by intellectual monopoly endorsement which is fueled on one part by the dynamic advantages arising from global value chains network externalities, and on the other side, by the increasing returns on intangibles and legally-enforced proprietary control over standards, technologies and brands, as stated by (UNCTAD, The Digital Economy Report 2019: Value Creation and Capture: Implications for Developing Countries).
As such, the surplus value is highest at the R&D design and development phases and in the marketing and post-sales support stages that typically accrued as capital accumulation by Global North monopoly capital.
The export values of these intangibles (copyrighted brands or patented operating systems), as and especially in the case of Apple, is sizeable.
Figure 5: Estimated exports of services of intangibles by selected American factoryless manufacturers in 2018 (billions of US dollars)
Secondly, due to the soft elements encased within intangible products, the value of newer technologies embedded in a product is often higher. Though the production cost may have increased due to higher component prices, the premium value of the product retail price has also risen incrementally higher proportionately. This can be seen in the value-added of the iPhone X compared with that of the iPhone 3G. It is clearly demonstrated that the value-added (like innovative operating systems, functionality features and faster facilities) embedded in iPhones have dramatically increased substantially the retail sales value from the first iPhone 3G to the iPhone X, seeFigure 6 :
The final issue is that an adjustment is necessary for accurately assessing bilateral trade balances in the age of GVCs. For example, when Chinese consumers and firms purchase tangible products of American factoryless manufacturers, such as iPhones, Nike shoes, Qualcomm chipsets, and Tesla cars, they pay not only the cost of manufacturing those products, but also the value added attributed to the intangible assets embedded in those products, similar to purchasing US-made goods, but accomplished through sophisticated value chains. Ignoring the gains of American factoryless manufacturers from the Chinese market not only understates US exports to China but also exaggerates its trade deficit and undermining globalization by seeing China as a threat:
A) The proliferation of GVCs has seen trade in goods replaced by tasks where a number of enterprising firms located in various, and different, countries jointly deliver ready-to-use products to consumers in the global market.
B) However, when transnational corporations sell products manufactured in the Global South, there are not only physical goods crossing transborder to the Global North, they are also capturing the highest proportion of total value added of the products sold in the global market because these TNCs monopolise the brands and technologies attached with the products.
C) Further, the value added obtained by these transnational corporations is not included in the trade statistics of any countries. By right of equal exchange, in terms of income generating, the export of the value added of intellectual property has the same function as the exports of physical goods, such as rice and motorcycles.
D) Therefore, TNC stronghold in the Free Trade Zone (FTZ) or the Export Free Trade Zone (EFTZ) is that of monopoly-capitalism [place] that has aligned with the political elites and compradore capital of a developing country [positions] and by ownership and control of assembly workers [power] is able to extract the surplus value through their labouring tasks.
E) TNCs are in an excellent positioning, and exploitative opportunity posture, to take advantage of the enormous supply of cheap, but precarious, labour in transitional economies and the developing economies of Global South, to advance the neo-imperialism penetration of monopoly capital in continuance harvesting global labour arbitrage to gain global value chaining advantages.
In the Communist Manifesto (1848), Marx argued that with the development of capitalism, a growing proportion of the labor force would become proletarianized wage workers. As the size of the proletariat expanded, capitalist development would also provide favorable conditions for the workers to get organized. Urbanization and industrialization would result in greater physical concentration of the workers, and the progress of transportation and communication would make organization easier. The development of capitalism also requires providing the workers with general education and the workers would develop political consciousness as they got involved in the political struggle between different sections of the capitalist class. Marx believed that as the proletarianized working class organized to fight for its own economic and political interests
Adopted and Adapted from:
US Union Busting in Contemporary Malaysia: 1970-2000 by Mhinder Bhopal, University of North London.
1] INTRODUCTION
Prior to independence 1957, the Malayan economy depended.on her exports of rubber and tin that accounted for 85% of export earnings and 48% of GDP. The induustrialization initiatives in the 1970s and 1980s changed the Malaysian economy so that by 1995 manufacturing goods accounted for 76.7% of all Malaysia’s exports.
The manufactured exports of electrical and electronic goods and electrical machinery, appliances and parts accounting for 50.3%, 16.9% respectively (Department of Statistics 1996). In 1996, 18 US electronics companies accounted for almost ten per cent of Malaysia’s gross manufactured exports and employed 65,000 people (Malaysian American Electronics Industry, 1998).
Even in this much endowed electronic industry, implanted behind free-trade zones employing female workers at US 40 cents per hour, these TNCs created only 12,000 new jobs in 1973.
2] THE UNIONISATION STRUGGLE
Contemporary imperialism has a new face and direction (Suwandi, Jonna and Foster, 2019) with global monopolies capturing the value generated by labour in the periphery on an unequal exchange basis. Labour has to be organised to fight for its rights.
i) In-house union like the RCA Workers Union (RCAWU) applied for registration on 23 January 1989, and proceeded to get membership majority hoping to achieve automatic recognition. However, accusations of illegal harassment and intimidation led to the Labour Minister saying that “the workers will be free to form in house unions or retain the status quo” (Business Times 25/2/ 89) and that action would be taken against any party found interfering in the exercise of that choice (NewStraits Times 25/2/89) when it became clear that the Malaysia Association of Electronic Industry (MAEI) was opposing unionisation, including in-house unions.
Membership in MAEI include Advanced Micro Devices Export, Harris Semiconductor, HewlettPackard, Intel, Integrated Device Technology, Litronix, Monsanto Electronics, Motorola Semiconductor, National Semiconductor, Quality Technologies Ottoelectronics, RCA, Texas Instruments and Western Digital, (BusinessTimes, 9 March 1989).
That case was referred to the Director General of Trade Unions (DGTU) to determine if the union had majority membership. Two months later,while enquiries were being conducted, RCA was sold to Harris Semiconductor and the operations’ identity became Harris Solid State, which made its parent – The Harris Corporation – the then sixth largest electronics component group in the world (New Straits Times 23 Feb. 1989).
It was further reported that all three of Harris Corporation in Malaysian were in close geographical assembly plant sites, and were, in fact, run by the same management team. The registration application was only accepted by the DGTU after a secret ballot of the embership approved a name change to Harris Solid State Workers Union (HSSWU).
On 10 January 1990 the DGTU gave the company 14 days to recognise the union, to which the managing director replied that “the company is studying the matter… we will respond with a press statement when appropriate”. In the meantime, the Human Resources International Director and a legal advisor of the Harris Corporation had flown in from the USA. Twenty four hours before the expiry of the deadline set by the DGIR the company transferred the contracts, with better terms and conditions, of most of the 2,500 employees of Harris Solid State to Harris Advanced Technology (HAT), a sister company that employer 100 staff (Business Times 25/1/90). Five hundred employees signed a petition in protest against the heavy-handed tactics employed with some claiming they were forced to sign under threat of possible job loss.
ii) Often, in an an attempt to avoid unionisation, transnational corporations (TNCs) would try out the buffering tactic whereby management would often focused and directed their strategy simultaneously at employee sentiments hoping to influence their preferences and at union organisers. The South East Asia High Technology Review publication was circulated among employees with the aim of convincing the workforce from the negative effect of pro-unionisation. The day following the inaugural meeting of the union (21 January 1989) staff at and above supervisory level were warned about the need to remain loyal to the company and they were also monitored closely to unauthorized non-work activity.
Senior and middle management surveillance was extended to night shifts in order to buffer employees from the union activists.
iii) Intimidatory tactics were used to discourage workers from attending the unions’ inaugural Annual General Meeting where workers were informed that attendance would be ‘asking for trouble’; increments would be affected; they would suffer ‘a miserable life in the company’ and could lose their jobs. Employees were warned that secret attendance would be detected by company ‘spies’ in the union (one executive committee member was expelled for co-operating with management to undermine the union) while managers would take pictures. Supervisors, claiming to pass management messages, informed staff that ‘the union AGM was a private matter and as such employees attend at their own risk, the company would take no responsibility for insurance compensation and medical charges should anything happen’. Some employees were threatened with disciplinary action for mere attendance at the AGM (Business Times 3/4/89).
iv) In attempts to divide the union along ethnic and religious lines, Malay employees, including prominent Malay union activists, consisting of supervisory rank and above, were called to two unofficial meetings. These were organized by a recently recruited senior Malay staff manager and the political entity activists of the Pertubuhan Kebangsaan Melayu Bersatu – United Malays National Organisation (UMNO) – to discuss “Muslim welfare”, Muslim solidarity” and the formation of a Muslim committee to channel workforce grievances. Malay unionists were rebuked for having been “used by the Indians when the Malays had always taken the leadership role in [the] Country”. It was suggested that the Malays were being led by self-interested Indians who had little regard for company and that Malays ought to “be the guardians of themselves”. The group was informed that “Mat Salleh” (the whites) would possibly shelve expansion plans or could, at worst, consider to transfer operations resulting in unemployment.
When these tactics failed, a senior Malay union official was called to meetings with a departmental staff manager where pressure to leave the union was said to have brought to bear.
v) At the level of a non-supervisory staff the company organised a government ‘ustaz’ (religious teacher), to lecture on ‘work ethics’.
These company lectures occurred twice a day over two consecutive weeks and were delivered to groups of approximately 100 each. The audience was warned that ‘a certain group’, who were under ‘police surveillance’, were out to ‘create trouble’, and if they were allowed to succeed the outcome would be job loss and possible plant closure.
In contrast the company was praised for its facilities and the need to give management undivided loyalty.
vi) Then, countering Union Campaign Strategy, not infrequently, many union officials were barred from entering company premises for union activity after working hours. When the union gained an injunction restraining company interference with organising activities, managerial presence was imposed by playing, at full volume, newly installed, televisions during union organizing activities (Sunday Star 4/6/89).
vii) Activists refusing to give up membership were targeted for reprisal. This included transfer to less desirable duties or into areas where contact with the workforce was minimised and could be monitored.
viii) Tactics involving psychological, physical, procedural and economic intimidation, varied from case to case and was viewed by the activists as designed for maximum impact depending upon the economic and domestic circumstances facing the individual as well as their personal make up, and position.
a) For instance, the least confident were subject to individual pressure, high achievers to demotions or withdrawal of work, unskilled/semiskilled women activists were required to be accompanied by anti- unionists when using the toilet. They were forbidden to nod, smile, speak or socialise with friends while at work.
b) Often employed transferees were not provided training in conducting new duties and necessary operations instructions were withheld. Union activists who were highly qualified, experienced and skilled, were left idle, transferred or demoted to lower status, repetitive and monotonous jobs.
c) Those in supervisory positions had their responsibilities eroded, decisions overturned and were bypassed by subordinates and managers.
Some suffered extreme financial loss because of transfers to day work.
ix) For the first time in their work and company careers, most activists were subjected to regular disciplinary proceedings on matters of established custom and practice.
a) One popular and highly regarded Malay unskilled female activist with an impeccable record of commitment to, and performance in, work and other internal and external company was subject to eight disciplinary investigations within a 10-month period of joining and becoming active in the union.
b) Performance review gradings of all the activists plummeted from regular outstanding and above average ratings (the average length of service of the activists was eight years) to below average resulting in smaller increments and relative loss of salary.
c) Attempts were also made, via three ‘poison pen’ letters, to implicate two senior executive committee members by stating ‘they tried to molest two girls at the union office’.
In April 1990 the Minister of Human Resources ordered the company to recognise the HSSWU which because of the transfers, represented 24 employees all of which were union officials or activists (Star 21/4/90). The company complied within seven days.
Meanwhile the Minister, ignoring the intimidatory tactics deployed by the company, stated that HAT workers “have the right under law to form an in-house union [and he] will try [his] best to speed up its recognition”
x) Though, early in June 1990 the Harris Corporation publicly unveiled plans to relocate operationsfrom California, Taiwan and Singapore to Malaysia where it expected to invest M$60m the following year to bring the corporation’s investments in Malaysia to RM$7Bn while creating an addition 600 jobs (Business Times 7/6/90).
However, in late September, six days before a conciliation meeting over the first collective agreement covering the 24 employees of Harris Solid State, the Harris Corporation decided to close the operation.
The unionists were then made redundant, despite advertised company recruitment campaigns immediately before and after this event. The immediate response of the government, which had presented itself publicly as the champion of the in-house union, was to ask for an ‘amicable settlement’. Ministers stated that “employers should not have a negative attitude to wards trade unions but instead should take appropriate action in the interests of the company and nation” (Business Times 24/9/90).
It is not uncommon for TNCs to advocate alternative assembly sites or state departure from invested country as recently Apple had asked its major suppliers to evaluate the cost implications of shifting 15-30% of their production capacity from China to Southeast Asia as reported by Li, K, and T Cheng , “Apple weighs 15%-30% capacity shift out of China amid trade war”, Nikkei Asian Review, 19 June, 2019, and also due to the changing dynamics of global value chain analysis as illustrated by Yuqing Xing in Decoding China’s Export Miracle, April 2021.
The dismissed unionists in the 1990 era were advised by the then Minister of Human Resources to file reports of wrongful dismissal which would be investigated as a matter of ‘top Priority’ (Star 25/9/90).
The Minister, after a meeting with senior management, stated he ‘was not satisfied with the explanations given by the company’ regarding the dismissals (Business Times 27/9/90).
xi) Because of this case the ILRERF independently filed a petition to remove Malaysia from the Generalised System of Preferences (GSP) – eliminating duties on thousands of products when imported from one of 119 designated beneficiary countries – even though the main protagonist on this case was the American company itself.
The unionists’ cases relating to infringements of the right to organise and not be dismissed for undertaking union activity was repeatedly delayed and postponed in the courts. When eventually heard in 1996, the judges ruled that the company name change was a matter of form rather than substance, and the dismissal of the non-activists was due to their involvement in trade union activity rather than redundancy. This led to the reinstatement of all 21 of the sacked unionists, and compensation of six years back pay.
xii) As an indication of state interest the decision was, reputedly, discussed at cabinet with the Minister for International Trade and Industry, who acts as the voice for inward investors, raising concern over the fact of reinstatement rather than just compensation. This apparently resulted in a call from the Prime Ministers office to the courts seeking justification for the decision.
In contrast the reaction at workforce level was different as the current Secretary of the union described:
“soon as we came back .. the response … it was fantastic. We were there, all of us…. people were coming and going out and waving as if nothing had happened. Some of them came and hugged us… we demanded a plant tour before lunchtime because during lunch it would be quite packed to stop… we timed it for lunch break, at that time people are coming out and they saw us [and they were] crying and shouting and screaming … it was really quite emotional.”. (Interview: July 2000)
3] THE STATE COLLABORATION WITH MONOPOLY-CAPITALISM
With production dominated by a relatively few transnational corporations (TNC) exercising considerable monopoly power over states and labour, the migration towards the international concentration of capital clearly reflected on the work of Lenin (Imperialism, the Highest Stage of Capitalism, New York: International Publishers, 1939) and, on the other hand, confirms Amin’s imperialism of generalized-monopoly capitalism (The New Imperialist Structure, Monthly Review, July 2019), Emmanuel’s unequal exchange under Neo-Imperialism that Global North monopoly-capitalism sustained through sheer exploitation.
Throughout the researched period, it is inadvertently clear from the reported incidents that ruling cliques of the state would collaborate wholeheartedly with the Global North monopoly-capitalists to suppress union formation, and to deprive the shared values of labour effort.
i) To allay TNCs apprehension that labour strife might adversely affected monopoly-capitalism FDI, ruling regimes had stated that ‘unions will not be allowed to form in the [electronics] industry’ because electronics workers in Hong Kong’s Fairchild electronics had taken strike action in pursuit of a wage increase only the previous year that might spread to Penang.
While unions were not legally outlawed, a union free environment was to be achieved by giving ‘pioneer industries’ protection against demands from a trade union that were better than the legal minimum stipulated in law: ministerial powers to outlaw recognition disputes, restricting access to labour courts; introduction of service requirements before individuals could stand for union election and the removal of negotiation over hiring, firing and transfer.
Those mentioned restrictions were officially justified to “maintain a manageable labour force, attract new investments, create employment opportunities and to make possible a more rapid pace of industrialisation”.
However, through the years, ruling regimes had defended its restrictions on freedom of association, domestically and internationally to the ILO on grounds that the industry had an important socio-economic role in the New Economic Policy (NEP) objectives, and unionisation would create a disincentive for electronics foreign investors.
It is the underlying application of global labour arbitrage to create “global labour value chains” to protect their profit margins, so that decentralised global production is associated with the growing concentration of profits and economic power, (Intan Suwandi, Value Chains: The New Economic Imperialism, Monthly Review2019). Just like in the 1970-2000 era, TNCs presently has justified the coronavirus pandemic’s bull-whip disruptive effect impacted on the supply chain gridlock (Suwandi, 2021) to unfortunately spur the rollback of labour rights on issues from decent pay to safe workplaces ardently – thereby instigating incidents of union busting throughout Southeast Asia.
ii) The State had thwarted the early 1970’s Electrical Industry Workers Union (EIWU) recruitment drive in Monsanto, a member of the American electronics grouping (MTUC: General Council Report 1974-1976). This was justified by the state on grounds that electrical industries were not similar to electronics industries within the meaning of the Trade Union Act 1967.
iii) In response to late 1970’s international attention and a volatile domestic political climate with local unrest and inequity anomies arising from unequal development, the State retracted from its earlier accommodation of the transnational capital. In defiance of the EIWU, which it viewed as a relatively militant union, the labour minister advised the MTUC to submit an application for registration of a separate national electronics union (NUEW).
iv) While placating international pressure and domestic opinion electronics companies signalled “that……[they] are not interested in the idea of unionisation [with] some larger companies … indicating that they would phase out their operations if workers were allowed to form unions” (Business Times 9/3/85).
In this climate and given the legal right to unionization, this and subsequent applications for registration of a national electronics union in 1980 and 1986 were ignored by the Registrar of Trade Unions (RTU).
4] STATE AUTHORITARIANISM IN SUPPORT OF CLIENTEL CAPITALISM
In order to retain and sustain political power, and to continue impoverishing the poors in order for capitalism, specifically clientel ethnocratic capital – with political fabrication and economic entrenchment of the NEP construct (James Chin, 2016) which is clearly divisive to the nation’s unity and sense of belonging (Lim Teck Ghee) to exist and flourish at the same time immiserising countless rakyat2 land-settleless and industrial workers to international labour arbitrage. This unequal approach linked to the labour value commodity chains contribute to the enlarged capital accumulation by the transnational corporations, deepening the extracting surplus value from the labouring class.
The gouging of labour surplus value is assisted with the firm domination of assertiveness by state authoritarian apparatus.
i) Owing to the authoritarianism during the recession and the accompanying political crisis of the mid 80’s, trade unionists were imprisoned (1987), those oppositions in the ruling UNM0 purged (1987), and senior judges removed and dismissed (1988).
UMNO controlled media editorials has given high profiles to sentiments that argue “…. our union leaders should be imbued with a sense of patriotism. Loyalty and national pride are inherent in the love for one’s country especially when we are overseas. An act of betrayal of this trust tantamount to one being labelled a traitor…” (New Straits Times 27/7/92).
ii) The Malaysian Government seized these opportunities to attack the Malaysian labour movement, accusing it of being used as “mouthpieces” of US trade unions to reduce the attractiveness of overseas locations (Business Times 17/6/91) and “.. creating industrial unrest and political instability” (Deputy Prime Minister Ghafar Baba quoted in New Straits Times 15/1/93). The deputy Prime Minister publicly proclaimed that “destructive methods were being used by a small group of unionists who also happened to be opposition party leaders… who were not bothered about peace and harmony and who placed their own interest above the country’s interest….” (New Straits Times 29/9/92).
iii) In 1988, the AFL-CIO petitioned the US government to investigate worker and human rights in determining renewal of Malaysian GSP status, which provided favourable duties on imports to the US. The Malaysian government viewed the preferred nation status as a ‘locational advantage’ for assisting investments (Malaysian Business July 1-15 1991). While the petition, like two subsequent ones, proved to be unsuccessful, threat to GSP status was see00n to be particularly significant for the electronics sector, which exported 36% of its silicon chips to America.
In this context the Malaysian government, once again, accepted the idea of a national electronics union.
iv) To reinforce solidification of clientel capitalism, to benefit various divisional levels of the ruling regime, pro union sentiments were widely publicised and the Labour Minister stated `…. we believe an organisation that works as a unit will contribute to better employer-worker ties and ensure industrial harmony’ (Labour Minister Lee Kim Sai, 23/9/88) while the Deputy Prime Minister added that ‘unions should be used as a healthy negotiating tool’. In an apparent spirit of co-operation and tripartitism the government stated that unions in the electronics sector were to be organised with the help of the Malaysian Employers (MEF) and the Malaysia Trade Union Congress (MTUC).
v) The MTUC submitted an application for formation of the union in October 1988 supplemented with advocated changes.in unionisation policy and the release of some detainees in was publicised as being a ‘…timely and convincing demonstration that democracy is alive in Malaysia’ (Sunday Star 25/9/88).
v) However, within four days of the announcement, and under pressure from electronics companies, the MEF organised a day long, ‘closed door’ industry discussion of the unionisation issue. The resulting policy was that employees ought to be allowed to choose between no union, in-house union or industrial union rather than have one imposed (Business Times 28/9/88).
vi) Indications of employer acceptance of, and preparedness for, union recognition is demonstrated by the fact that Harris Semiconductor had hired consultants to conduct training sessions for managers and supervisors on union avoidance in September 1988. That within three days of the employers meeting, allegations of intimidation of workers who formed or joined unions and threats of plant closures, were being widely, prominently and negatively reported in the state controlled media indicates State-MNC conflict (Star and Business Times 29/9/88).
vii) In early October, and one day before a meeting between the Labour Minister and the Electronics companies to discuss the unionisation issue, AMD (Advanced Micro Devices) without warning or consultation and in breach of legislation announced 900 redundancies. On the 2nd of October, after the meeting with MAEI representatives, the Minister of Labour announced a volteface and a national union was no longer guaranteed.
viii) It is necessary to look at these administrative and political manoeuvrings as part of a class struggle. This is because class identities existing at each economic, political, and ideological (or cultural) level, and the understanding of such class relationship is to identify where the controlling power ensues. As an instance, the stronghold in the Free Trade Zone (FTZ) or the Export Free Trade Zone (EFTZ) is that of monopoly-capitalism [place] that has aligned with the political elites and compradore capital of a developing country [positions] and by ownership and control of assembly workers [power] is able to extract the surplus value through their labouring tasks.
It is not unsurprisingly that the application for the formation of a national union was ignored or to be neglected, and if possible, demised because the ruling class feels threatened.
5] UNION BUSTINGIS NEO-IMPERIALISM IN UNITY SPLITTING
Jason Hickel, Dylan Sullivan and Huzaifa Zoomkawala contended in the New Political Economy– published online: 30 Mar 2021 – that wealth drain from the Global South remains a significant feature of the world economy in the post-colonial era; rich countries continue to rely on imperial forms of appropriation to sustain their high levels of income and consumption. The Global North appropriated from the Global South commodities worth US$2.2 trillion in Northern prices that are enough to end extreme poverty 15 times over; and we are unfortunately one of the politico-economic victims in this neoliberalism niche – as reiterated by Cheng Enfu and Lu BaolinFive Characteristics of Neo-Imperialism in Monthly Review, May 2021, where the country’s unionization of labour is defanged and defunct to serve the new age of imperialism.
The continuance of neoliberal socio-economic policies since 1970s only reinforces the pace of Neo-Imperialism onto the country unionisation positioning.
i) The international business press, reinforced the anti-union position of the electronics multinationals perhaps predictably supporting the anti union message of neo-liberal economic orthodoxy. The Wall Street Journal (6/10/88) commented that the Malaysian government’s decision to allow unions in the electronics industry ‘runs counter to the government’s campaign to attract foreign electronics investment by shielding companies from unions. It went on that to report that “……..a western trade official [said] “further investment could be jeopardised by this move… the electronics guys have said that if unions come in they’ll leave”‘.
ii) Similarly, the then Far Eastern Economic Review (6/10/88), reported that, “electronics companies are stating that if labour costs rise significantly, announced new investment in wafer fabrication could be diverted elsewhere”.
iii) Even the editors commented in the South East Asia High Technology Review of December 1988, in an unequivocal summary of the employers position highlighted the problems of dependent export orientated industrialisation.
iv) The pressure was exerted by TNCs – specifically the American electronics firms – and those official of the US trade representatives to express that the formation of in-house unions might help Malaysia retain its privileges under GSP, and that The Malaysian government would required only to take ‘Positive steps’ towards improving human rights (Business Times 29/10/88).
v) In this manner, the Malaysian state was provided with a domestic and international defence against accusations of violating workers’ rights while completely conceding to monopoly capital, specifically the neo-imperial American capitalism. The consequential followups were, in contravention of Malaysian Law and contrary to previous commitments, anti national union tactics were resurrected by the ruling regime’s State.
When the MTUC accepted the Director General of Trade Unions stipulation that all electronics workers be covered in a national secret ballot (New Straits Times 19/2/89) the government, declared that irrespective of the result no national union would be allowed (New Straits Times 28/2/89). The MTUC has since come in for increasing government criticism for tarnishing the image of the country and potentially jeopardising foreign investments and thus employment levels and workers’ welfare (New Straits Times 8/5/92).
EPILOGUE
By November 1989, shortly after a meeting between Prime Minister Mahathir and Henry Kissinger (at that time, he was acting as an inward investment advisor to the Indonesian Government) and Jack Welsh of General Electric, the state position had crystallised as Malaysia secured its GSP status. Prime Minister Mahathir asserted that only in-house unions would be allowed since “an industry wide union, national or state based, will hamper efforts to develop the electronics industry further” (Business Times 28/11/89), thereon the country’s kleptocratic regime with an ethnocapital base becomes an accomplice in the monopoly-capital domain of Neo-Imperialism.
1% own 43% of global wealth, while billions have no wealth at all.
Adopted from Paulo Nakatani and Rémy Herrera, The South Has Already Repaid its External Debt to the North: But the North Denies its Debt to the South, Monthly Review, June 2007, with updated adaptations on selective case countries, basing on (UNCTAD 2020, Developing country external debt: From growing sustainability concerns to potential crisis in the time of COVID-19); Eric Toussaint and Milan Rivié, Evolution of the external debt of developing countries between 2000 and 2019, Part 1,(2020); Threats over the external debt of Developing Countries Part 2 (November 2020); Developing countries in the stranglehold of debt Part 3 (April 2021); Eric Toussaint and Milan Rivié, An unsustainable burden of debt afflicts the peoples of Sub-Saharan Africa, Part 5 (May 2020); World Bank, International Debt Statistics 2021; Bank Negara Malaysia 2019, Profile of Malaysia’s External Debt – Bank Negara Malaysia; International Monetary Fund, The Debt Pandemic 2021; UNICEF, Families on the Edge, May 2021; UNFPA 2020.
1]INTRODUCTION
Since the onset of the global debt crisis in 1979 the transition and developing Global South economies had paid cumulative US$7.673 trillion in external debt service, seePaulo Nakatani and Rémy Herrera.
At the outbreak of the COVID-19pandemic, external debt stocks of developing countries and economies in transition reached US$9.9 trillion, their highest level on record, more than twice their value of US$4.4 trillion registered in 2009, and more than four-fold their level of US$2.2 trillion in 2000, (UNCTAD 2020).
The external debts of developing and transition countries reached 29% of their GDP in 2019. The short-term debts rose to more than one-quarter of the total external debts.
Debt service on long-term external public debt (PPG) in developing and transition economies is debt sustainability (SDG) 17.4.1 where it measures “debt service as a proportion of exports of goods and services”. This indicator reflects a government’s ability to meet external creditor claims on the public sector through export revenues.
[Explanation under #13Debt Servicing ¿].
This is of concern since low-income developing countries still rely predominantly on public financing to mobilise resources for structural transformation, yet also struggle the most with limited fiscal space given their shallow domestic financial and banking systems and limited options to refinance maturing debt obligations in the international financial markets.
The COVID-19 has translated into an ecological-epidemiological-economic shock that has put light to an epidemiological phenomenon to spotlight on the rapidly deteriorating debt sustainability in many developing countries. It threatens to turn what was already a dire situation prior to the pandemic into a series of sovereign defaults, (Rob Wallace, Alex Liebman, Luis Fernando Chaves and Rodrick Wallace, Covid19 and Circuits of Capital, Monthly Review, May 2020; John Bellamy Foster and Intan Suwandi, COVID-19 and Catastrophe Capitalism, Monthly Review, June 2020; Eric Toussaint and Milan Rivié).
2] GLOBAL SOUTH DEBT
During the same period their debt has increased from US$618 billion in 1980 to US$3.150 trillion in 2006, according to figures published by the International Monetary Fund (IMF). The external debt of this group of countries, comprising 145 member states, will continue to grow throughout 2007, according to the IMF, to more than US$3.350 trillion. The debt of the Asian developing countries alone could rise to US$955 billion, even though they have already repaid, in interest and capital, far more than the original amount due in 1980!
Malaysia 2019 external debt was RM$231225.9 million, (Asia Development Bank, External Debt Outstanding in Asia and the Pacific, Asian Development Outlook, April 2020).
3]STIMULUS PACKAGES
Total external debt service of the Global South countries grew from 2.8 percent of GDP in 1980 to 4.0 percent in 1989 and 6.9 percent in 1999, before decreasing slowly to 5.2 percent in 2006, just above the 5.1 percent average for the period.
Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz said Malaysia’s statutory debt is expected to hit 58.5% of gross domestic product (GDP) in 2021 due to the implementation of an additional RM20 billion PEMERKASA stimulus package on 18th. March 2021 to safeguard the nation’s economic growth from the impact of the Covid-19 pandemic.
Whereas the previous Perlindungan Ekonomi & Rakyat Malaysia PERMAI Assistance Package introduced on 18th January 2021 – the fifth economic stimulus package to date worth RM15 billion spread over 22 initiatives aimed at combating the Covid-19 outbreak – was deemed to be inadequate.
The Finance Minister indicated that the government will exhaust and maximise the use of the RM65 billion ceiling for the Covid-19 fund approved by the Parliament under the Temporary Measures for Government Financing (Coronavirus Disease 2019 [Covid-19]) Act.
According to a report to the Asian Development Bank, in September 2020, by Donghyun Park, Arief Ramayandi, Shu Tian stating inter alia that borrowing heavily for fiscal stimulus packages to support growth and provide relief for vulnerable groups whilst at the same time, private companies and households may be forced to borrow more to survive the economic impact of COVID-19…..In addition, the economic downturn challenges their capacity to service their existing debts. Therefore, despite widespread concerns about the current escalation of public debt and its sustainability, we should not lose sight of the potential risk from possible surges of private debt…..
However, the national household debt-to-Gross Domestic Product (GDP) ratio had already surged to a new peak of 93.3% as at December 2020 from its previous record high of 87.5% in June 2020, according to Bank Negara Malaysia (BNM).
4] GLOBAL SOUTH WEALTH DISPARITY
that an increase in inequality is likely to mean more people in poverty, because at the bottom end of the income scale there will be more people further away from the average.
To the ever increasing concentration of wealth, at the national level in favour of the dominant classes of the countries of the Global South, and at an international level in favour of the countries of the Global North. It explains in large part, over the last few years, the dramatic increase in intra– and international inequalities, as well as the increase in relative and absolute poverty.
Income inequality has increased in most developed countries and in some middle-income countries, including China and India, since 1990, (United Nations, World Social Report 2020 – Inequality in a Rapid Changing World).
Countries where inequality has grown are home to more than two thirds (71 per cent) of the world population. Yet growing inequality is not a universal trend. The Gini coefficient of income inequality has declined in most countries of Latin America and the Caribbean and in several African and Asian countries over the last two decades. Despite progress in some countries, income and wealth are increasingly concentrated at the top. The share of income going to the richest 1 per cent of the global population increased in 46 out of 57 countries and areas with data from 1990 to 2015.
Malaysia case scenario by UNICEF 2020 showed that low income female-headed households are exceptionally vulnerable, with higher rates of unemployment at 32% compared to the total heads of households. Female headed households also registered lower rates of access to social protection, with 57% having no access compared to 52% of total heads of households.
Meanwhile, the bottom 40 per cent earned less than 25 per cent of income in all 92 countries with data (United Nations, 2019a). In the case of Malaysia, the bottom 40% of population – the B40 – only get 16.4% of the national income share of wealth as in 2020 – not much has the wealth disparity gap closed since two decades ago, but instead, more inequality has accentuated :
The undeniable fact as to why many bumiputera had not attained parity despite +60 years of neo-liberal-enforced economic development is the existence of a new class of compradore capitalist. According to the UNDP 1997 Human Development Report, and the 2004 United Nations Human Development Report, Malaysia has the highest income disparity between the rich and poor in Southeast Asia, greater than that of Philippines, Thailand, Singapore, Vietnam and Indonesia.
Underlining this trend, the developing countries and “emerging market” economies had transferred to their creditors an annual average of 3.68 percent of their GNP during the decade following the debt crisis (1980–89). In the past ten years (1997–2006), marked by a series of financial crises and a growing polarization of the capitalist world system, this transfer rose to 6.2 percent of GNP, (Notes: The figures are for 1980–2006. Calculation by the authors based on the data provided by the International Monetary Fund: IMF, 2006, World Economic Outlook Database, September, Washington D.C. It is the sum of annual values drawn from the line External Debt: Total Debt Service” from the group “Other Emerging Market and Developing Countries, http://www.imf.org.)
Whereas in 2012 low-income developing countries spent 3.3 per cent of their government revenues to meet external public debt obligations, this figure rose to 8.1 per cent in 2018, falling only slightly to an estimated 7.9 per cent in 2019. The squeeze on government revenues from service payments on external public (PPG) debt was particularly drastic in Sub-Saharan Africa, where this ratio jumped from a low point of 3.3 per cent in 2011 to an estimated 18.2 per cent in 2019, (monthlyreview online May 2021).
Of ever increasing market integration and deregulation of capital movements, there has been a general transformation of debts to bonds on financial markets and a conversion of external debts into internal debts. This gradual evolution, which is still ongoing, hides some perverse effects, in particular that interest rates are often higher on internal debt.
It is more difficult towards a precise calculation of the size of the drain associated with this category of debts. All the more so because this transfer of surpluses from South to North continues to operate through different channels.
The disproportion of developing country debt, like the history of the monetary and financial international system, provides no indication of a solution to the current debt crisis if it is only the efforts and resources of these countries that are mobilized.
Economic, commercial, monetary and financial relations between the countries of the centre (North) and those of the periphery (the South) of the world capitalist system must be profoundly reorganized, according to new principles.
The transfer of surplus from South to North continues to operate through a myriad of channels, such as the repatriation of profits on direct foreign investment, transfer pricing, price trading, profits on the revaluation of bonds recorded as portfolio investments in balance of payments, non-compliance currency transfer and other forms of unequal exchange.
These could be augmentedly completed from the operational processes of TNCs to seek low labour arbitrage and low-cost production processes (like lean to just-in-time and flexible production) and by competitive strategic advantages with product differentiation in varied products with many features and multi-functionalities at various price structures in different marketspace.
By 2008, the top one hundred global corporations which had shifted their production foreign affiliates or subsidiaries accounted for 60 percent of their total assets and employment and more than 60 percent of their total sales. The foreign direct investment (FDI) to developing economies was US$694 billion in 2018 making up 58% global FDI share. By engaging in contractual relationships with partner firms but without equity involvement, mostly in the Global South, TNCs were generating about US$2trillion in sales in 2010 (UNCTAD, World Investment Report: Non-Equity Modes of International Production and Development (Geneva: United Nations, 2011), 131).
8]DEBT SELF-PERPETUATING
It is an undeniable fact that national debt from loans do not contribute to financing economic development. Inevitable that the debt itself is increasingly to cover repayment of interests and capital. So it functions as a self-perpetuating mechanism of poverty aggravation, work overexploitation, and a block on development in the economies of the periphery of the capitalist world system, (seeJohn Bellamy Foster, The Imperialist World, Monthly Review, May 2007).
This is due to developing countries (DC) very dependent on their respective commodities output and global prices. One can discern a correlation between the evolution of commodity prices and DCs’ external indebtedness.
From 1998 to 2003, a period that saw backflow of DCs’ capital towards the countries of the Global North, commodity prices were relatively low. From 2003-2004 on, those prices began a steep increase culminating in 2008. This phenomenon attracted investors and lenders from the Global North who were looking for countries offering guarantees based on their resources in commodities and their export revenues.
Thus, starting from 2008, there was a period of inflowing capital from countries of the North towards the DC. The governments and big private companies of the South were incited to take on more debt taking advantage of the super-cycle of commodities. Nevertheless there was a fall in 2009 due to the global crisis triggered by the major financial crisis of 2008 in the United States and Western Europe. Commodity prices rose again in 2010. In 2014 the cycle suddenly collapsed :
The end of the ‘super cycle’ coincided with a steady drop in DCs’ foreign exchange reserves in months of import. Whereas countries dependent on commodities are advised to hold at least three months of import in foreign exchange reserve, low income countries are now well below this threshold. With the new fall in oil prices in 2020, the drop in export revenues, the higher amounts to be repaid from 2020 onward, a number of countries, particularly oil exporting countries, may not be able to repay their public external debt :
The encroached interests of the dominant capitalists of the countries in the Global North collude in close collaboration with the elites of peripheral countries. These alliances often produced complex situations, such as “odious” debts (illegitimate and/or illegal), the transformation of external debts into public debts – which can often be viewed as forms of “odious” debts – and “ecological debts.” Odious debts were contracted by local elites and used against the public interest, to finance sumptuous expenses, corruption, or repression of the working classesmore often than not also inciting mounting community massacres and torture as briefly documented by Milan Rivié in Illicit Flows: Africa is the world’s main creditor (November 2020).
Illicit financial flows or financial transfers can be through:
i) “Tax and commercial IFFs”, which mostly consists of fraudulent issuing of invoices for products to be imported or exported, amounting to approximately 40 billion US$ per year;
ii) “illegal markets”, which are principally human trafficking and toxic waste;
iii) “Theft-type activities and financing of crime and terrorism”; and finally,
iv) IFFs linked to “corruption”
The amount of such colossal losses, US$89 billion per year according to the lowest estimates. This amounts to 3.7% of the continent’s GDP, and 25% of Egypt’s GDP, which is one of the three largest African economies alongside South African and Nigeria. It is also, almost equivalent to the total Official Development Aid, US$48 billion, and Foreign Direct Investment, US$54 billion, received by African countries per year :
However, the substitution of private debt by public debt was a way for countries to manage the debt crisis in favour of the local bourgeoisie in the clientel capitalism system as part of the ethnocapital rentier capitalism . When the USA decided to increase interest rates – in the hope of resolving their own crisis – many government of the peripheral capitalist countries at the beginning of the 1980s, nationalised a large part of the private external debt of the local bourgeoisie imposing responsibility for the cost of the operation on the population.
An international law on debt needs to be enacted, supplemented, as necessary, by measures requiring TNCs and their local allies of ethnocapital to pay to the countries of the Global South reparations for their “ecological debts.”
Increasing misery is existing across wide population spectrum in countries of the Global South, particularly in Africa. Between 1980 and 2006, more than US$675billion have been extorted to finance the debt service from the African continent, even though it is the poorest in the world.
As a yearly average during this period, this corresponds to $25 billion. By way of comparison, hardly more than half of this sum would be enough, according to the estimates of the UN Food and Agriculture Organization (FAO), to eradicate hunger, thanks to the provision of food rations corresponding to nutritional levels considered to be satisfactory to each poor inhabitant of the South.
Remember that according to the World Bank, there are over four billion poor people in the world, more than 850 million people still suffer today from malnutrition, and five million children die of starvation each year in the world. The wealth accumulated in the countries of the North is in part produced by exploitation of workers and destruction of nature in the countries of the South, (John Bellamy Foster, The Ecology of Destruction, Monthly Review, February 2007; The Conversation, What Karl Marx has to say about today’s environmental problems, June 2018; The Guardian, 9th September 2020).
11] HOUSEHOLDS DEBTS
Household debt also rose in emerging economies from 26 per cent of GDP in 2009 to 43 per cent by 2019. The bulk of the overall increase in lending to private non-financial sectors was lending to non-financial corporations in these economies, increasing from around 60 per cent of GDP just before the global financial crisis to over 100 per cent by 2017, where it is UNCTAD calculations, based on conversion to US dollars at market exchange rates, from BIS (2020) data.
Malaysia’s household debt-to-Gross Domestic Product (GDP) ratio surged to a new peak of 93.3% as at December 2020 from its previous record high of 87.5% in June 2020, according to Bank Negara Malaysia (BNM). “A concern over high household debt is that it may lead to a rapid deleveraging by households in the aftermath of a crisis, thus dampening or derailing economic recovery,” BNM warned in its Financial Stability Review for Second Half 2020 Report as released.
In the short term, many economists believe this high level of household debt-to-GDP ratio is manageable and do not pose that significant a risk to the country’s financial stability.
“From a macro perspective, it should not have a big impact on financial stability. Broadly, the risk from the household sector to the entire banking system remains manageable.
“BNM has taken pre-emptive measures and has the capacity to introduce further macroprudential tools if the financial environment requires it to,” said World Bank senior economist Shakira Teh Sharifuddin.
UOB (M) Bhd economist Julia Goh concurred, saying the high ratio is due to weaker GDP owing to the pandemic. It is also a result of government incentives to spur purchase of cars and property ownership.
“In a way, that has aided the recovery by supporting consumption amid a low interest rate environment. Other household financial stability indicators do not suggest higher risks so far given stable household financial asset-to-debt ratios and high excess savings.”
However, Institute for Democracy and Economic Affairs (IDEAS) chief executive officer Tricia Yeoh is sceptical of the lower-income households’ capacity to service their loans, and called on the government to reassess its policies to ensure economic recovery may be achieved without overstraining households.
Similarly, Socio-Economic Research Centre (SERC) executive director Lee Heng Guie highlighted the disproportionate impact of the pandemic on different levels of household income. “Clearly, there are segments of the household that are currently facing financial distress. My concern is for those who are highly geared, [who] will eventually go through a de-gearing process to rebuild their savings. This will in turn reduce consumption and curtail economic growth later,” he said.
However, there are three lingering concerns that need to be acknowledged, and be addressed:
i) If such high household debt levels persist, they may result in an unhealthy financial system that is fragile to future economic disruptions. Over the long term, if there is another downturn, and if the high level of household debt is not addressed, then definitely there is less room for monetary policy to take effect because households are already indebted to a high level.
The case of Malaysia: the bottom 40% of population – the B40 – only get 16.4% of the national income share of wealth as in 2020.
ii) There is an underlying issue on economic inequality, which, if not addressed, may pose systemic risk to the whole financial system.
iii) Then, there is the specter of income instability amongst the B40 group. Any shift in income, especially for lower-income households, will put them at risk of defaulting on these loans.
Malaysian household incomes are projected to fall by 12 per cent, which is est upimated amounted to RM$95 billion; and job losses are estimated to be of 2.4 million positions, 67% of which is unskilled labour, on the details that MIER released in 2020. Indeed, household debt – at nearly 83 per cent to gross domestic product – is among the highest in Asia.
12] PRIVATE EXTERNAL DEBTS
Concurrentwith the above issues are the high levels of private external indebtedness that are of concern since they represent a large contingent liability on public sector finances, ultimately backed by international reserves held in the domestic economy. In the event of wide-spread private sector debt distress, governments will have little choice but to transfer the bulk of distressed private debt to public balance sheets.
The fragility of developing countries’ debt positions was further increased by accompanying changes to the ownership of long-term external public (PPG) debt. The share of PPG external debt of developing and transition governments owed to private creditors reached 62 per cent of the total in 2019, compared to around 20 per cent in the 1970s and 41 per cent in 2000. Its most volatile component, public bond finance, is clearly on the increase relative to financing through commercial bank loans and other private creditors. This reflects the growing reliance of developing country governments on refinancing their external debt obligations in international financial markets with strong speculative features rather than borrowing from official bilateral and multilateral creditors, which is generally more stable and in more favourable terms.
However, amid the pandemic most government revenues collapsed alongside economic activity, while private capital flows came to a sudden stop :
In addition to new loans from multilaterals, Group of Twenty (G20) creditors granted a debt moratorium to the world’s poorest countries. They have encouraged private lenders to follow suit—albeit with little success, IMFThe Debt Pandemic
13] DEBT SERVICING
As cursory mentioned before, the rising external debt burden along with increased risk profiles of such debt shall translate into rising servicing costs. Debt service ratios are considered important indicators of a country’s debt sustainability.
In this sense, SDG indicator 17.4.1 measures “debt service as a proportion of exports of goods and services”. This indicator reflects a government’s ability to meet external creditor claims on the public sector through export revenues. A fall (increase) in this ratio can result from increased (reduced) export earnings, a reduction (increase) in debt servicing costs, or a combination of both. A persistent deterioration of this ratio signals an inability to generate enough foreign exchange income to meet external creditor obligations on a country’s PPG debt, and thus potential debt distress in the absence of multilateral support or effective sovereign debt restructuring.
It has been indicative that only high-income developing countries have maintained a stable ratio of external long-term PPG debt to export revenues of around two to four per cent in the last decade. This is largely due to their greater capacity to issue domestic public debt, with a view to avoid currency mismatches.
However, while greater reliance on local-currency denominated public debt reduces the vulnerability to exchange rate volatility, it frequently creates maturity mismatches.
In contrast, a marked increase of debt service ratios has been registered since 2012 across all other income categories: in middle-income countries this ratio rose from 3.1 per cent in 2012 to 6.9 per cent in 2019 and in low-income countries from 2.5 to 7.0 per cent. SIDS saw this ratio rise from a low point of 4.9 per cent in 2013 to 8.2 per cent in 2019. As these economies increasingly tapped into international capital markets, this reflects rising external public debt stocks since 2012 in a context of commodity price volatility, sluggish global economic growth and rising debt service, (UNCTAD 2020, World Investment Report 2020).
The Malaysia FEDERAL government debt and liabilities rose to RM$1.2569 trillion, or 87.3% of GDP, as at end-September 2020— up 7.5% in the first nine months of the year compared with RM$1.1692 trillion as at end-2019. Indeed, country’s revenue is not rising as fast as the increase in operating expenditure that is more than 95% of revenue since 2008. Assuming the economy is set to expand by 7.5% in nominal terms during 2021 to RM$1,521.3bil, Malaysia’s official debt to GDP and total debt to GDP is expected to rise to 64.1% and 77.9%, respectively in 2021, (The Star, 20 Mar 2021).
The debt service charges made up 14% (RM32.9 billion) of federal government revenue in 2019 and is estimated to take up 15.4% or RM34.95 billion of the government’s income in 2020. The amount is expected to rise even further to RM39 billion, or 16.5% of the government’s revenue for 2021, according to data in the Fiscal Outlook 2021 Report.
Even governments in high-income developing countries are often unable to issue long-term government securities at a sustainable rate of interest, yet they need to be able to pay off or roll over maturing short-term obligations.
14] REDEMPTION SCHEDULES
As a consequence of their rising indebtedness, developing countries face a wall of debt service repayments throughout the 2020s.
The redemption schedules for 2020 and 2021 already accumulated external public debt obligations alone amount to an estimated US$2 to 2.3 trillion in high-income developing countries and between US$700 billion to $1.1 trillion in low-and middle-income countries.
The challenge posed by large debt overhangs must, however, be placed in the wider context of economic challenges arising from the COVID-19 crisis. While developed countries are putting together massive stabilisation packages to flatten both the pandemic curve and the curve of economic and financial crisis, this is not an option open to many developing economies, at least not at the required scale.
On one hand, developing countries cannot easily lock down their largely informal economies effectively without more people being affected by hunger rather than by illness. On the other, they face substantive limitations on their fiscal space to mount rescue packages comparable to those currently under way in developed economies.
Seriousness in case country Malaysia is that general government debt jumps to 76.0% of GDP in 2020 from 65.2% of GDP in 2019. The debt figures used by Fitch include officially reported “committed government guarantees” on loans, which are serviced by the government budget, and the 1MDB’s net debt, equivalent in September 2020 to 12.6% and 1.3% of GDP, respectively. On this basis, the debt burden is significantly higher than the medians of 59.2% and 52.7% for the ‘A’ and ‘BBB’ rating categories, respectively; we have been degraded to BBB by Fitch last year. Malaysia’s debt is close to 400% of revenue, around three times the peer median.
15] GOVERNMENT REVENUESSHARE
Moving beyond SDG indicator 17.4.1, the share of government revenues dedicated to servicing PPG debt rose sharply over recent years, particularly in the poorest developing economies.
Whereas in 2012 low-income developing countries spent 3.3 per cent of their government revenues to meet external public debt obligations, this figure rose to 8.1 per cent in 2018, falling only slightly to an estimated 7.9 per cent in 2019.
The squeeze on government revenues from service payments on external PPG debt was particularly drastic in Sub-Saharan Africa, where this ratio jumped from a low point of 3.3 per cent in 2011 to an estimated 18.2 per cent in 2019. In other words, governments in this region now spend, on average, almost one fifth of their revenues on servicing external public debt, seeEric Toussaint and Milan Rivié, An unsustainable burden of debt afflicts the peoples of Sub-Saharan Africa, Part 5 (May 2020).
This is of concern since low-income developing countries still rely predominantly on public financing to mobilise resources for structural transformation, yet also struggle the most with limited fiscal space given their shallow domestic financial and banking systems and limited options to refinance maturing debt obligations in the international financial markets.
To pay for imports and to meet external debt obligations, the vast majority of developing countries are heavily reliant on access to hard currencies, earned primarily through commodity and service exports, such as food, oil and tourism, or received through remittances, as well as access to further concessional and market-based borrowing.
Their central banks cannot act as lenders of last resort to their governments to the extent central banks in developed economies can without risking a large depreciation of their local currencies and its effects in terms of steep increases in the value of foreign-currency denominated debt.
This has the potential to unleash destructive inflationary pressures. But with volumes of international trade experiencing a sharp contraction, core commodity prices in free fall, tourism at a virtual standstill, remittances drying up and private capital outflows from developing countries reaching unprecedented levels in recent history, many developing economies are increasingly cut off from conventional sources of income when they need them most.
On the respondibilities of central banking post-Global Finance Crisis: READ former deputy governor of Bank Negara Malaysia
17] DECISIVE ACTIONSBY COUNTRIES
It is against this backdrop that already existing debt vulnerabilities and distress in developing countries require decisive action to avoid liquidity constraints turning into wide-spread insolvency crises.
Early multilateral initiatives to provide some breathing space to hard-hit developing countries include US$215 million in debt cancellation by the IMF of repayments due by the 25 poorest developing economies between May and October 2020, as well as the G20 “Debt service suspension initiative for poorest countries” between May and December 2020.
There are 73 primarily low-income developing countries are eligible under the above-stated initiative that could see the temporary suspension of up to around $18 billion in repayments on official bilateral debt. While these initiatives are welcome, they are unlikely to be sufficient in either scale or scope.
It has to be noted, however, new borrowing, for example in fast growing COVID-19 bond markets as well as through increased access to concessional multilateral lending, can help bridge immediate liquidity needs but it is bound to add to, rather than resolve, unsustainable external debt burdens. Well-designed debt relief – through a combination of temporary standstills with sovereign debt reprofiling and restructuring – will therefore be essential to address not only immediate liquidity pressures, but also to restore long-term external debt sustainability in many developing countries, not least with a post-COVID-19 view of achieving the 2030 Agenda for Sustainable Development, ( seeUNCTAD (2020b) for more detail ).
Refer to Point #3 above regarding Malaysia PERMAI and the PEMERKASA stimulus packages
18] CADTM
Contrary to the dominant discourse, it is actually the case that the 54 African states finance developed countries and not the other way round. Similarly to the CADTM, the UNCTAD report also supports this claim. With IFFs rising to 836 billion dollars from 2010 to 2015, and an external debt of 770 billion dollars in 2018, “the continent [is] being labelled a ‘net creditor to the world’”.
However, the countries at the centre of the world capitalist system and their multilateral monetary and financial institutions, above all the IMF, the World Bank, and the Paris Club – all have no interest in resolving the problem of external debt, because it represents a reliable means of keeping the countries of the South in perpetual dependence.
The structure of the external debt of developing countries from the point of view of creditors (rounded-off figures as provided by the World Bank on the indebtedness of developing countries in 2018) :
This comes about as an outcome of the Bretton Woods Agreement whose focus was to construct an international monetary order centered on the U.S. dollar. Other currencies were to be pegged to the US dollar, which was in turn pegged to gold, (seeCheng Enfu and Lu Baolin, Characteristics of Neoimperialism, Monthly Review, May 2021).
The U.S. dollar has played the prominent role in world currency, since replacing the British sterling pound, thus designating the U.S. a dominant global positioning. As such, the U.S. dollar makes up 70 percent of global currency reserves, accounting for 68 percent of international trade settlements, 80 percent of foreign exchange transactions, and 90 percent of international banking transactions. Owing to this financial dominance, the U.S. dollar has also become the internationally recognized reserve currency and trade settlement currency.
Often, serious financial hardship for a number of countries is dependent on revenues from oil, agriculture or minerals. This factor has been aggravated by the devaluation of currencies of countries from the South against the US dollar, seeEric Toussaint and Milan Rivié, Developing countries in the stranglehold of debt, Part 3 (April 2020).
The United States can also obtain international seigniorage by exporting U.S. dollars. She can reduce its foreign debt by depreciating the U.S. dollar or assets that are priced in U.S. dollars. The hegemony of the U.S. dollar has also caused the transfer of wealth from debtor countries to creditor countries. This would, in fact, mean that poor countries would subsidize the rich.
Neoimperialism is monopolistic financial capitalism established by large transborder multinationals whose production and capital are “concentrated into fewer and fewer hands.” (seeJohn Bellamy Foster, Robert W. McChesney, and R. Jamil Jonna, “Monopoly and Competition in Twenty-First Century Capitalism,” Monthly Review 62, no. 11, 2011 :1).
Neo-Imperialism monopolizes almost all sources of raw materials, scientific and technological talent, and skilled physical labour in all fields, controlling the transportation hubs and infrastructural platforms by various modes and means of production – and by owning, controlling and dominating capital, global financial functions and associated derivatives and information technologies through vast cultural and military shareholding systems, it has
Incorporating Lenin’s concepts of imperialism and international class conflict into the theory of economic growth and stagnation, the Global South, predominantly low developing countries (LDCs) were in the clutch of Global North Western economic and political domination, especially during the colonial period.
Capitalism arose not through the growth of small competitive firms at home-country but through the transfer from abroad of advanced monopolistic businesses with monopoly-capital attachment and or alignment. When capitalism took hold, the bourgeoisie (the corporate capital and compradore capitalists) in country, seeked allies among other classes, initially with monopoly-capitalism in Global North, and post-1957 increasingly adopted an economic nationalism construct to engender a cohort of ethnocratic kleptocrates, and subsequently tapped upon emerging rise of the ethnocapital clientel capitalism class.
2] FROM NEOLIBERAL POINTS
What often not stated that economic development in underdeveloped countries is profoundly goodness to the dominant interests in the advanced capitalist countries. The “backwardness” of the developing world is not infrequently hidden as the rich hinterland of the highly developed Global North capitalist West to be “developed”, but exploited.
Development discipline tends to frame within the bounds of national territorial boundaries of a nation-state. The primary theories then regard development based on stages of growth, diffusionism, and modernization-developmentalist with paradigm’s proponents from Rostow (1960), Pye (1962), Parsons (1964) to Hoselitz (1960), Lerner (1965), and McClelland (1967) contending that socio-economic progress (or the lack of it) was due to the presence (or absence) of resource, institutional or psychological-sociological cultural ingredients in each respective nation-state that were necessary for development to occur. Early development understanding posits an ideal developed society couched on a Western value framework.
We have the ‘Washington Consensus’, first articulated by World Bank economist John Williamson, focusing on a neo-liberalization thrust in trade, investment and the financial sector and the deregulation and privatization of nationalized industries. Often the conditionalities are attached without due regard for the borrower countries’ individual resulting in the loss of a state’s authority to govern its own economy as national economic policies are predetermined under The World Bank and its International Monetary Fund packages. These “packages” have negative social outcomes such as reduced investment in public health and education, but still have sufficient capital expenditure beneficial to local compradors, industrial-capitalists and later ruling regimes’ ethnocapital as well as definitely monopoly-capitalists globally.
We may also can have a premise where a country is poor because it was previously so poor that it could not save and invest as once justified by Jeffrey Sachs (2005) primarily ‘Poverty itself is the cause of economic stagnation.’
Sach’s premise followed closely to the vicious circle theory as presented by Ragnar Nurkse in his 1953 book- The Problems of Capital Formation in Underdeveloped Countries – where poverty perpetuates itself in mutually reinforcing vicious circles on both the supply and demand sides. In fact, low per capita income is both the cause and the effect of poverty whence, however, through settlement colonialism, and later within neo-colonialism, the wealth of nations had been expropriated many times again and again.
On the other had, Rosenstein-Rodan was of the opinion that a major indivisibility lies in infrastructure, such as power, transport and communications. This basic social capital should reduce costs to other industries. The IBRD (the former World Bank’s International Bank for Reconstruction and Development) encouraged a country like Malaysia to borrow large loans to construct these high-cost infrastructure, tied to “packages”, resulting to consequent indebtedness and a stagnant economy when the Asian Financial Crisis and Global Financial Crisis came visitings.
Then, we have Hischman’s view that low-income countries need a development strategy that spurs investment decisions. He suggests that since physical resources and managerial skills and abilities are scarce in LDCs, a big push is sensible only in strategically selected industries within the economy. Growth is then likely to spread from one sector to another (similar to Rostow’s concept of leading and lagging sectors); thus, Malaysia went for industrialization, but with poor labour employment by TNCs, labour alienation and union bustings and an under-developed and unsettled peasantry.
According to Hirschman, agriculture does not necessarily would stimulate linkage formation so directly as other industries. However, it is not that accurate to say that exertion in Malaysia where large agrobusiness Big Farms are benefitting Caterpillar and John Deere. In the process, envisaged in the midst of the Vietnam war, the FELDA (Federal Land Development Authority) schemes is a corridor sanitarian to corral rural Malay communities with modern built-in infrastructure – with clinics, schools, roads and bridges – ensuring subsistence dependence loyalty to the ruling class and a transnational corporation domain that is technological-based in FTZs and EFTZs to mop-up precarious labor (see PrecariousLabor in Industrialization Capitalismand Precarious Labour in a Digitalised Economy; refer to Hao Qi, (Sept 2019), “Semi-proletarianization in a Dual Economy: the Case of China”, Review of Radical Political Economics, to forestall possible Urban-Agrarian collaboration and cooperation for revolutionary changes towards a new political economy in Malaysia.
3] NEO-IMPERIALISM UNDER MONOPOLY-CAPITALISM
That what is widely referred to as neoliberal globalization in the twenty-first century is in fact a historical product of the shift to global monopoly-finance capital or what Samir Amin calls the imperialism of “generalized-monopoly capitalism.”
Since the 1974-1975 recession, there was a growth rate slowdown in advanced capitalist economies with hurtful economic effects on the poorest countries. Scouting for wider markets to sustain capitalism, a proliferation of corporations begins setting up assembly lines across borders in different nations, especially the developing countries – the Global South – where in 2010, more than half of all foreign direct investment (FDI) went to third world and transition economies. With this strategic positioning in place, and world production dominated by a relatively few transnational corporations (TNC) exercising considerable monopoly power over states and labour, the migration towards the international concentration of capital clearly reflected on the work of Lenin (Imperialism, the Highest Stage of Capitalism, New York: International Publishers, 1939) and, on the other hand, confirms Amin’s imperialism of generalized-monopoly capitalism and Emmanuel’s unequal exchange under Neo-Imperialism.
Jason Hickel, Dylan Sullivan and Huzaifa Zoomkawala contended in the New Political Economy– published online: 30 Mar 2021 – that wealth drain from the Global South remains a significant feature of the world economy in the post-colonial era; rich countries continue to rely on imperial forms of appropriation to sustain their high levels of income and consumption. The Global North appropriated from the Global South commodities worth US$2.2 trillion in Northern prices that are enough to end extreme poverty 15 times over. Over the 1960–2018 period studied, the value drain from the Global South totalled US$62 trillion (constant 2011 dollars), or US$152 trillion when accounting for the Global South countries’ lost growth. Indeed, it is found that the appropriation through unequal exchange represents up to 7% of Global North’s GDP and 9% of Global South GDP.
During this era in imperialism of generalized-monopoly capitalism, there is a shift of manufacturing industry from the Global North to the Global South. In 1980 the share of world industrial employment of developing countries had risen to 52 percent; by 2012 this had increased to 83 percent. By 2013, 61 percent of the total worldwide inward flow of foreign direct investment (FDI) was in developing and transitional economies, up from 33 percent in 2006 and 51 percent in 2010.
Thus, by the twenty-first century imperialism is thus taking on a new, more developed phase related to the globalization of production andfinance.
4] THE MARXISM PERSPECTIVE
The disparity in wealth-sharing can be perceived in another frame. A part of the imperialist rent remains in the peripheral country and is not transferred to the center, but constitutes rather a payment to local ruling classes for their roles in the globalization game. About $21 trillion of this global tribute, meanwhile, is currently parked abroad in tax-haven islands, “the fortified refuge of Big Finance”, seeInternational Consortium of Investigative Journalists on their Fin-Tech files, and the Guardian, “£13tn Hoard Hidden from Taxman by Global Elite” July 21, 2012, and Nicholas Shaxson, Treasure Islands (London: Palgrave Macmillan, 2011), 7.
Marx (1818-83) had professed that the capitalist system would – in the initial stage grow due to increased profit (surplus value which was the result of exploitation of labour) – but would also provide funds for accumulation. Owing to the fact that since wages were pegged at the subsistence level, due to the existence of a huge reserve army of unemployed, the capitalists would suffer from a realisation crisis. They would not be able to realise the profits embodied in already produced goods. And, according to Marx, the under consumption of the masses is the root cause of all crises.
Inevitably, Neo-Imperial domain of monopoly-capitalism in international concentration of capital would give birth to the introduction of international monopoly-finance capital that ensues the emergence of financialization capitalism (see John Bellamy Foster, The Financialization of Accumulation, Monthly Review vol:62, issue 05 October 2010). Financialization capitalism becomes prominent because the TNCs are unable to find sufficient investment outlets for their huge economic surpluses from production, increasingly turn to speculation within the global financial sphere, (see John Bellamy Foster and Fred Magdoff, The Great Financial Crisis (New York: Monthly Review Press, 2009).
This historical trend is basically following the trend in the capitalism route to a pathway from monopoly-capitalism to neo-imperialism:
Firstly, with a slowing down of the overall rate of growth among developed countries in Global North, followed by secondly, the internationalisation of monopolistic transnational corporations (TNCs) especially crossing borders to third world countries in the Global South, and then the introduction of, and emergence in, the “capital accumulation process” or financialization capitalism
5] TOWARDS A SOCIALISM HORIZON
If one were to take on the classical theory of David Ricardo (1772-1823), then a pessimistic view about the possibility of sustained economic growth would also surface. For Ricardo, who expressed that with little continuing technical progress, growth was limited by scarcity of land. The major tenet of Ricardo’s underlying understanding lies with the law of diminishing returns.
The central theme in the diminishing returns concept is that owing to population growth and a fixed supply of land would threaten economic growth. Ricardo believed that only technical change or improved production techniques (which might not likely to happen) to avert, possibly temporarily, the operation of the law of diminishing returns. Therefore, increasing capital was seen as the only way to offset this long-run threat.
However, any fall in the rate of capital accumulation would lead to eventual stagnation. Ricardian stagnation might result in a Marxian scenario, in which wages and investment would be maintained only if property were confiscated by society and payments to private capitalists and landlords stopped.
Marx, in fact, made certain predictions about the growth, maturity and stagnation of capitalism. He predicted that the capitalist system would ultimately collapse for want of markets and would yield place to socialism.
Unfortunately, history has not obliged Marx. The year 1989 saw the collapse of socialism (especially in erstwhile USSR and its satellite countries) and with it the abandonment of the centralised planning system and the emergence of newborn post-socialist countries.
All these countries have embraced the market system which is now thought to be a more efficient mechanism for solving society’s economic problems, promoting faster economic growth and improving the living standards of the people.
That is, until the financial crisis of 2007–2008, also known as the Global Financial Crisis (GFC 2007/8), that was of such a severe worldwide economic crisis until the present COVID-19 recession, that many economists considered this Ecological-Epidemiological-Economic crisis to be the most serious financial crisis since the Great Depression.
China, on the other hand, went the other way in 1989, when she went for market opening in terms of trade, but was much more cautious in terms of capital account liberalisation, adopting a strong developmental state and gradualism in policy implementation.
Between authoritarianism and the growing role of government under the post-war Keynesian philosophy, the neo-liberal ideology had idolised free markets, but ignored (politically) the growing negative effects of social inequality, climate change, human identity crisis in the face of insecurities from technological disruption, massive human migration and geopolitical rivalries as even Tan Sri Andrew Sheng, formerly of World Bank, Hong Kong Monetary Authority and Bank Negara Malaysia, now agreed.
The only way out of the impasse may be a proletariat and peasant revolution, say expropriating (FELDA) land and (ethnocractic) capital, and establishing a new regime based on collective effort, sharing of distributed wealth and the creed of the predominance of interests of society over the interests of a selected ethnocapital few.
Towards The Malaysia Narrative 
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