Monday, April 02, 2007

Reverse Foreign Aid and Reverse Globalization

Related to my previous post on foreign debt payments, here's an article from the NY Times (via 3quarksdaily), on how the poorer countries subsidize their richer counterparts. It reports that "According to the United Nations, in 2006 the net transfer of capital from poorer countries to rich ones was $784 billion, up from $229 billion in 2002." The article goes on to explain that reverse foreign aid happens through the following:

1. Investment in US Treasury Bills
2. Honoring international intellectual property agreements.
3. Tax holidays for foreign investors
4. Brain drain (e.g. OFW doctors and nurses)
5. Subsidies to First World agriculture
6. Environmental damage due to global warming.

...and how above phenomenon is a burden to the third world countries like ours.

#1 above seems more relevant to China and the US Budget Deficit, and less relevant to us (unless this eventually leads to a dollar crisis). On #2, i mentioned over at mlq3 that:

"While the focus of the law has been on the pirates, the greater danger lies with the corporations (and their allies in government), who, as agents of Empire, seek to close off the intellectual frontier through strict interpretation and aggressive enforcement of intellectual property laws, in the name of profits. Among scientific and medical communities where open collaboration and information sharing is the key to new discoveries and innovation, restrictive intellectual property laws and practices are emerging as a real threat." (This led into further discussion in that comments section with DJB on this matter.)

On #3, i don't have the article on hand now so i may be mistaken, but i seem to remember that Mar Roxas saying something about giving too much tax holidays to foreign investors. #4 is a known, much discussed issue related to the OFW phenomenon. #5 is a key point of contention when it comes to WTO-related negotiations and #6 is an unfortunate reality that has a lot to do with geography.

A comment in that same post in 3quarksdaily also links to Brad Setser's web blog, who has an article on a more benign (to the third world), but related phenomena they call reverse globalization which is a situation where "Emerging markets will be buying companies – not just bonds – in the developed world.". The participants in this are the rapidly developing and relatively capital-rich developing countries like China and the Gulf States.


sparks said...

China is a special case. Its treading on really thin ground these days. It something of an anomaly in the developing world really. The Communist Party is doing its damn best to do the following in the next 20-30 years:

1. Capitalist economic development, with strong state intervention to temper polarising tendencies.

2. Development to maintain internal legitimacy.

3. Even out development all across the vast region. Tibet and Xinjiang still want to separate. Not to mention Taiwan.

4. Slowly, slowly open up democratic space. They don't want to implode like the Soviets did.

5. Do all this without incurring too much suspicion, especially from the US.

If China is able to survive the transition to a modern, capitalist and increasingly democratic nation without the US bombing it to smithereens, then we just might have us a new hegemon in 20-30 years. One that rose to power without imperial incursions. One that historically, has never done so.

It may bode well for the rest of the world. Because, seriously, this US sponsored world we have today? Sucks.

cvj said...

On your last sentence, i think the proponents of the Anglosphere would disagree with you :-)

In terms of US-China rivalry, what i fear is that the US will use us as a firewall versus a resurgent China. As i was telling JM over at mlq3, specifically, my worry is that the United States, when faced with a Philippine government unfriendly to forward military bases, will then encourage secession in Mindanao so a friendlier government over there will agree to establish a US Base in General Santos. That is partly the reason why i am allergic to all this talk of federalization as our disunity can easily be exploited by the big players.

Regarding your point #4 above, over at Crooked Timber, they had an interesting post and discussion on Chinese Democracy, i.e. on whether or not it will ever happen. If China does not democratize, i see a niche opportunity for us. I commented over at mlq3 sometime last year my hope that in the near future, when we become a stable democracy, we will be a destination of choice by the Chinese and other Asian nationals who would seek to escape the restrictions of the mainland. When that happens, maybe Corregidor can be like Ellis Island.

On the whole i agree with you on the challenges faced by China's leadership. IMHO, China is to this decade what Japan was in the 80's, bubble and all.

sparks said...

Seriously, DJB just loves America. If you've been completely brainwashed like he was, there's no arguing with him.

In any case, there has been an opening of democratic space in China lately. You have a rising bourgeoisie, the nouveau riche, you'll have people clamoring for more political clout.

Plus its commitments to the WTO actually require it to give actors, like emergent unions, more avenues to express dissent against the government. Of course this won't happen overnight, but it will happen sooner or later.