On Fri, 2 May 1997, Rosenberg, Bill wrote (excerpts only): > Sid Schniad's and Doug Henwood's figures on speculation > and foreign investment in the world economy, and Bill > Burgess's on Canada were interesting. I'd always had the > impression Canada was more neo-colonised than New > Zealand. However you might like to consider these figures > for New Zealand: > > ...However, the picture is considerably different in foreign > investment, to the extent it can be estimated. The last > official figures for foreign ownership of assets (a la > Bill Burgess) were in 1982-83, which indicated foreign > companies had 25.6% of the paid-up capital of the > companies in the survey (which was not complete). 36.8% > of tax-assessable income and 32.4% of dividends paid went > to these foreign companies. Just to clarify: the figures I quoted for Canada were for foreign **control** (ownership of more than one half of voting equity or its equivalent (or one-third if this voting block is more than the next two ownership block combined). These figures do **not** capture **portfolio** investment. e.g. there is large portfolio investment in Canadian hydroelectric companies, but control remains "Canadian resident". > > Since 1989 there have been official statistics on New > Zealand's International Investment Position, which shows > assets held in New Zealand by foreigners and overseas > assets held by New Zealand residents. Foreign investment > in New Zealand (including portfolio) has risen from NZ$51 > billion to NZ$97 billion from 1989 to 1995 and New > Zealand investment abroad from NZ$7.2 billion to NZ$23.4 > billion. The net position has gone from -NZ$44.1 billion > to -NZ$73.3 billion. By this measure, the ratio of inward > FDI to GDP was 14.4% in 1989 and 46.7% in 1995. Outward > FDI to GDP was 1.3% in 1989 and 13.4% in 1995, though one > wonders whether some of these increases are simply > because Statistics New Zealand have got better at > measuring. > The data in front of me, which does not include portfolio investment (it is taken from the UN World Investment Directory) yeilds an inward FDI/GDP ratio of about 7.8% and outward FDI/GDP of 5.6% in 1992 for New Zealand, i.e. considerably less than Canada's 19.5% and 14.1%. So by this standard, Canada is more foreign dominated than New Zealand. > Almost the entire New Zealand financial sector is foreign > owned. This is perhaps one important difference - the banks and near-banks in Canada are heavily Canadian controlled. > Some of the effects: > - when the economy "booms" to the extent that company > profits increase, the current account goes worse into > deficit because of the increasing dividend and interest > payments abroad. > - a dysfunctional exchange rate. It is set by interest > rates attracting foreign investors and foreign investor > "confidence" in the New Zealand government rather than > "real" transactions. > - hence New Zealand has a chronic, worsening, current > account deficit (currently 4.2% of GDP) and steadily > increasing foreign debt. Private foreign debt has risen > from 9.8% to 54.6% of GDP between 1983 and 1996, though > government foreign debt has fallen, offsetting the rise. > Total foreign debt has risen from 46.7% to 79.1% of GDP > in the same period. > - funnily enough, it wrecks the monetarist Reserve Bank's > attempts to control inflation using the exchange rate > (encouraging it to rise to reduce internal prices) and > interest rates. Higher interest rates increase the > exchange rate because they attract foreign investors, > threatening inflation targets and damaging exporters. > Importers of course don't reduce their prices when the > exchange rate rises. > - craven foreign-investor-friendly policies by New > Zealand governments, with which you'll be familiar. > > Why should we protect national capitalists via opposing > the MAI, etc, asked Bill Burgess. In New Zealand's case, > primarily to reduce dependence on foreign capital, which > is demonstrably leading government policy. I don't disagree with your analysis of the effects on the "national" economy, balance of payments, etc. But I don't think it is workers or socialists responsibility to solve the problems of capitalist economies. Isn't the point that we **can't** do this, that there **is no real solution** under capitalism? I don't mean this in an ultra-left sloganeering fashion, but as the analytical framework for our policy interventions, which I should focus on protecting working people today while aiming towards the socialist alternative. > But a few other figures I calculated from the Top 200 are > interesting: > - after-tax profit per employee was $20,000 for New > Zealand companies, and $29,800 for foreign companies > - though they took half the operating surplus, they > employed only 18% of the full-time workforce. > - turnover per employee was lower for foreign than New > Zealand companies in most industrial classifications. New > Zealand's overall rate of growth in labour productivity > has fallen since 1989. > - foreign companies had higher returns on assets but paid > lower rates of tax. > > That provides some evidence for the old arguments that > less dependence on foreign capital could be used to > improve employment, wages, and government services, and > with less risk of a current-account blow-out. > As I suggested in a previous post, most FDI occurs in fairly large scale and capital intensive forms, so naturally employs relatively less labour. How would changing the citizenship of its owners alter this? But I think the the main point is that there is a very real political cost in countries like Canada and New Zealand to nationalist ideology and protectionist measures. To put it in blunt terms, it is a **bigger** problem than foreign investment or control. Bill Burgess [EMAIL PROTECTED] home (604) 255-5957 fax c/o (604) 822-6150
