Overvaluation of capital leads to inequality

There is a widely shared belief that foreign direct investment (FDI) will get poor countries out of their development crisis. All they have to do is to improve the conditions to attract investments. An interesting example of this strategy is the New Partnership for Africa’s Development (NEPAD), adopted by the African Union in 2001 (Nyong’o et al. 2002). It says: Political events in a number of African countries have for a long time discouraged foreign direct investors. [What is needed is] . . . improved environment, trade liberalization, strengthening of the rule of law, improved legal and support institutions, better governance, improved transparency. On their TV screens, company executives have seen civil unrest, starvation, epidemic diseases and economic disorder. Investment conditions until the early 1990s discouraged many companies from setting up shop in African States, especially as some companies found themselves subjected to expropriation when political winds changed. On similar lines, at the World Trade Organization (WTO), the developed countries of the West highlighted the promotion of investment and free flow of capital as one of the WTO objectives under the so-called ‘Singapore Issues’, introduced at the First Ministerial Conference in 1996. However, the case for FDI is not as simple as mainstream economic literature and much popular perception makes it out to be. Even a first-year basic university course in Economics treats investment capital as only one ‘factor of production’, the other two being land (a catchphrase to cover all natural resources) and labour. While capital is an important factor, the underlying cause of asymmetrical distribution of wealth and welfare is the undervaluation of labour and natural resources and the overvaluation (gigantic overvaluation) of money capital. This is true in both the North and the South. Rethinking Global Investment 33 (The ‘North’ and the ‘South’ refer here to the approximate division between the Western imperialist countries and the rest of the world.) Misconception about the Capitalist–Imperialist Dystopia There are misconceptions about capitalism as a world system even in mainstream Marxist literature. Marx’s analysis of the fundamental laws of motion of capitalism in Capital: Critique of Political Economy is impeccable. It has stood the test of time since it was first published in 1867. However, Marx, along with his peers, was caught up in his own Eurocentric worldview. He presented capitalism as a ‘progressive force’ in its times. Yes, but it was ‘progressive’ only in a technical sense. To be sure, under capitalism what Marx called ‘the productive forces’ did grow colossally; the industrial revolution beginning approximately in late eighteenth century was an epochal game changer. But before capitalism reached its industrial maturity, it passed through five centuries of pre-capitalist birth and gestation. Marx provided a vivid picture of ‘primitive accumulation’ that provided the basis of capitalism in England: the massive dispossession of the lands and property of the English and Irish peasantry (the so-called ‘Enclosure Movement’) and the appropriation of ‘the commons’ by a rising landed gentry. Well before that, however, the most colossal primitive accumulation took place during three interrelated historical developments: the Crusades, the slave trade, and colonialism. These fuelled the birth of capitalist–imperialist dystopia. The Eurocentric narrative of capitalist development glosses over this existential reality about our epoch. We must challenge this narrative