6.7.6.4 Investments in Developing Countries
Governments and businesses may make investments in developing countries, helping them but perhaps exploiting or controlling them
Developing economies can only grow if businesses have suitable facilities and the country has adequate infrastructure, as described previously (3.2.8). And every country in the world needs to adapt to climate change and increase its production of green energy (3.5.7). These requirements are economic opportunities for businesses in wealthy countries to make profitable investments.
Accusations of exploitation
Concerns have been voiced about sweatshop conditions and exploitation of workers in poor countries. Such concerns may sound high-minded, but they reveal confused thinking. As reported by the New York Times, Everything We Knew About Sweatshops Was Wrong:
“In the 1990s, Americans learned more about the appalling conditions at the factories where our sneakers and T-shirts were made, and opposition to sweatshops surged. But some economists pushed back. For them, the wages and conditions in sweatshops might be appalling, but they are an improvement on people’s less visible rural poverty.”
The article highlighted that “the factory jobs carried dangerous risks”. This is unacceptable and a breach of human rights. What was not made clear, though, is that low-wage jobs are better than no jobs (or forcing children into prostitution, for example). The argument that the workers should be paid a higher proportion of the final selling price is invalid, but businesses have a clear responsibility to monitor conditions in their supply-chain.
And making investments in developing countries is preferable to colonising them, as happened in previous centuries. Colonialism is morally problematic (4.3.5.4) and it left governance problems in many developing countries (6.7.6.2). Making an investment in a country does not explicitly affect its government, unlike colonial practice, but it does present an opportunity to exert some political control. If international companies make large investments in a country, they can demand concessions from its government.
Chinese investments in developing countries
China’s Belt and Road initiative is a major series of investments:
“The sweeping infrastructure project aims to expand global trade links.
The initiative has funded trains, roads, and ports in many countries, but has left some saddled with debt.
Some see it as a bold bid for geopolitical influence, with the US particularly critical of China’s so-called “debt diplomacy”.”
Chinese officials tried to reassure doubters, but its political influence in developing countries is now very significant. “Sri Lanka has been particularly affected – it had to hand over control over of a port to China in 2017 to help repay foreign loans.”
United Arab Emirates (UAE)
U.A.E. Is Pouring Money Into Africa, Seeking Resources and Power:
“As the United States and, to a lesser extent, China reduce their investment, aid and presence on the African continent, the Emirates is using its enormous wealth and influence to fill the void.”
…Its efforts to become a world leader, particularly in finance and technology, are likely to be bolstered under President Trump, Ms. Jacobs said. The president, seeking to draw Emirati money to the United States, paved the way this week for the sale of American advanced artificial intelligence chips to the Emirates.
…Like other oil-producing nations in the Persian Gulf, the Emirates is looking to diversify its economy away from fossil fuels, and it sees Africa as an essential part of the plan. The continent has vast mineral resources, a growing population, agricultural potential and a strategically important location bordering the Red and Mediterranean Seas as well as the Indian and Atlantic Oceans.
…In 2022 and 2023, the Emirates announced a total of $97 billion in investments in Africa — three times China’s total, according to fDi Markets, a database of foreign investments. U.S. investment in 2023 was about $10 billion.”
These investments are exploiting the resources – gold for example – and strategic locations in Africa. Most African countries don’t have enough money to develop these resources for themselves, so the UAE is helping them. The question of whether its involvement is seen as exploitative depends upon how the profits are divided between It and the African countries involved.
The UAE, China, and other major donors inevitably become political actors in the recipient country.
This page is part of Edition 4 of the Patterns of Power series of books. An archived copy of it is held at https://www.patternsofpower.org/edition04/6764a.htm.