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.
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.
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.”
This page is intended to form part of Edition 4 of the Patterns of Power series of books. An archived copy of it is held at https://www.patternsofpower.org/edition04/6764.htm.