By Walter Daum
In Towards a Broader Theory of Imperialism Patrick Bond joins in the debate between John Smith and David Harvey on roape.net over the direction of imperialism today. He criticizes both debaters for overlooking the category of sub-imperialism, a concept that can indeed help clarify some issues. But in stressing this and other important matters like environmental destruction and gender oppression, Bond sidesteps the major issue over which Smith challenges Harvey: what is the reality of imperialism today? Is it so different from the system described and analyzed by Lenin, Luxemburg and other Marxists a century ago that the traditional imperialist powers no longer drain value from the resources and labor of most of the world?
Bond is more critical of Smith than of Harvey, since he disparages Smith’s ‘old fashioned binary of oppressed and oppressor nations,’ just as Harvey rejects Smith’s ‘fixed, rigid theory of imperialism.’ But in avoiding the key issue Bond is in effect covering for Harvey: focusing on the theory of sub-imperialism serves to obscure the untenability of Harvey’s position on imperialism itself.
Has the drain of wealth reversed?
Let’s begin at the beginning. Smith opened the debate by challenging an assertion by Harvey:
Those of us who think the old categories of imperialism do not work too well in these times do not deny at all the complex flows of value that expand the accumulation of wealth and power in one part of the world at the expense of another. We simply think the flows are more complicated and constantly changing direction. The historical draining of wealth from East to West for more than two centuries, for example, has largely been reversed over the last thirty years (Harvey, 2016: 169).
As Smith says, this is an astonishing claim. If the flows of wealth and power are changing direction and have even been reversed in recent years suggests that the centuries-long drain of value from African, Asian and Latin American countries to the imperialist centers of Western Europe and North America has ended: apparently now the historically oppressed countries of the South (or the ‘East’) are exploiting the imperialist powers!
But Harvey does not quite say this. He uses the designations West and East rather than the now common metaphors Global North and Global South, shorthand for the imperialist powers and those they exploit. Harvey’s East and West, in contrast, are purely geographical terms and therefore analytically not very useful. His East includes a wealthy imperialist country, Japan, along with many poor and oppressed countries like Vietnam and Bangladesh. It also includes China, a country that achieved its independence from imperialism through revolution and has in recent years set record rates of economic growth by making its huge labor force available for imperialist super-exploitation – but which remains poor on any per capita basis. So, Harvey’s ‘East’ is at best confusing.
Harvey responded to Smith by claiming that Smith had badly misinterpreted his intent: he did not mean his East/West opposition to stand for South/North. If so, what then is Harvey’s point? He appears to be criticizing ‘the old categories of imperialism,’ but then he backs off and says that’s not what East/West means. Indeed, he doubles down on his East category. Two Eastern countries, China and Japan, he points out, accurately enough, now have the second and third largest economies in the world; and ‘the Chinese and the Japanese now own large chunks of a spiraling US government debt.’
As Smith notes, his argument appeared previously in the book The Empire of Capital. There, after quoting a U.S. State Department document that observes that ‘the unprecedented shift in relative wealth and economic power roughly from west to east now underway, Harvey added:
This ‘unprecedented shift’ has reversed the long-standing drain of wealth from east, south-east and south Asia to Europe and North America that has been occurring since the eighteenth century. The rise of Japan in the 1960s, followed by South Korea, Taiwan, Singapore and Hong Kong in the 1970s, and then the rapid growth of China after 1980, later accompanied by industrialisation spurts in Indonesia, India, Vietnam, Thailand and Malaysia during the 1990s, has altered the centre of gravity of capitalist development, although it has not done so smoothly (2011: 35).
This makes the East/West opposition even more confusing. Japanese militarism and imperialism dominated and exploited parts of East Asia from the late 19th century through World War II, and Japan does so again today through its economic might. So, Japan cannot be part of any shift in the way value drains between East and West: it itself is in the East and it drains value from the East (now as in the past) as well as from many other countries around the world.
The role of China
China, of course, is the East’s heavyweight, and because of its economic heft the center of gravity of the global economy has indeed shifted eastward. Something like 80 percent of the world’s industrial workers are now in the South, most of those in China (an eye-opening fact brought to attention by Smith and an almost exact reversal of the ratio that obtained in the middle of the last century). China’s new role means that a lot of surplus-value is produced there; but it doesn’t by itself determine whose pockets the new value flows into.
Smith responded to Harvey by demonstrating, once again, that capitalist profits are still primarily collected in the imperialist countries of the ‘West’ (more properly the Global North, which includes Australia as well as Japan). The drain of wealth from South to North continues, and so (despite Japan’s imperialist presence in the East) does its distorted variant from East to West.
Nevertheless, a second important question arises: if the old categories of imperialism do not work, is that because China has crossed the divide and become transformed from one of the world’s most exploited countries into one of the exploiters? In particular, since China has accumulated a huge fund of capital which it invests all over the world, does this mean that surplus-value now flows into China? And if that is true, is China now imperialist in its own right?
Yes, some surplus-value does flow to China, mostly from the South. But China’s remarkable economic growth rests on the super-exploitation of its own proletariat, above all the hundreds of millions of displaced rural workers driven away from the land and into coastal cities where they work extra-long weeks, live often in cubicles or dormitories and are legally barred from the fundamental rights of health care and education for their children. That extreme super-exploitation (not just extracting an extraordinarily high rate of exploitation but even paying wages under what is necessary to reproduce the labor power of the working class) has created a great deal of surplus-value, much of which goes to imperialist investors. That flow still goes from East to West.
And yes, Chinese capital pockets some of the surplus-value produced there, and some of that is invested abroad, both in poor countries in Southeast Asia and Africa where workers can be paid even less than in China – and in enterprises, stocks and bonds in the West. But despite a net surplus in its foreign assets, ‘China remains a net interest payer to the world due to lower rates of return on its overseas assets.’ China owns nearly $2 trillion in U.S. Treasury bonds, which yield rates of interest of a few percent at best – close to zero, as Larry Summers has gloated. In contrast, imperialist investors in China currently earn twenty or thirty times that rate. How this looks from the imperialist side was pointed out by Tony Norfield: ‘A key point is that interest costs on US foreign borrowing have been far less than the returns on US foreign investments. This has enabled the US to maintain a positive net investment income, despite the persistent, large deficit on its foreign investment position’ (Norfield, 2016: 169). All this powerfully suggests that the surplus-value flow from the U.S. to China does not match that extracted from China by the West.
To sum up on Harvey’s claim, there is a difference between the shifting balance of wealth between East and West, on the one hand, and the flow or drain of wealth between those nebulously defined regions, on the other. There is no question that the ‘East’ has gained relatively in wealth, mainly because of energy production in the Middle East and Russia and manufacturing in Japan, the Tigers and China. But that does not mean that there has been an epochal shift in the flow of value; it is extremely dubious that the directional flows of centuries have reversed and that the East, including China, is draining value from the West. Of course, some countries in the East, including China are also draining value from the South. But that is not what Harvey said.
Now back to Bond. The purpose of bringing the theory of sub-imperialism into the argument is apparently to show that the South-to-North drain of value, Smith’s ‘unconvincing’ as well as old-fashioned binary, has to be supplemented by more complex and nuanced relations among states. It is certainly true that the Lenin’s ‘division of nations into oppressor and oppressed …[which] forms the essence of imperialism’ cannot simply be transferred from a century ago to the present; it has to be built on to account for the appearance of nations that exhibit aspects of both, that are both exploiters and exploited. Toward that end, Ruy Mauro Marini introduced the concept of sub-imperialism in the 1970s’s. Bond, quoting from a previous work by Smith, reminds us of Marini’s contribution:
Marini focused on the elaboration of sub-imperial power wielded by states that are incorporated into the Western system as regional agents of imperialism, in which, Smith agrees, ‘dependent economies like Brazil seek to compensate for the drain of wealth to the imperialist centres by developing their own exploitative relationships with even more underdeveloped and peripheral neighbouring economies.’
Marini spelled out his theory in many works. As I read him, Marini regards a state as sub-imperialist if is not imperialist overall (its economy is ‘dependent’) but it plays an imperialist-like role locally. Bond would seem to agree, since he refers to sub-imperial power as ‘wielded by states that are incorporated into the Western system as regional agents of imperialism,’ and he shares Marini’s interpretation that the sub-imperialist economies are dependent. Moreover, Bond has done valuable work in demonstrating that the BRICS states are not stalwart opponents of neo-liberal imperialism but rather accomplices with it; his studies of South Africa in particular extend the analysis beyond Marini’s original example of Brazil.
In responding to Smith, however, Bond undermines his own understanding of sub-imperialism by favorably referring to Alex Callinicos’s version of it, which (as he quotes) embraces ‘a broad category that includes Vietnam, Greece, Turkey, India, Pakistan, Iran, Iraq, and South Africa.’ Vietnam does not belong in this company: since it has near-bottom labor costs with wages one-third of those in coastal China, Chinese capital moves there rather than the other way around; nor is it militarily the regional power in a neighborhood that includes China. Callinicos is also off-target at the other end of his broad sub-imperialist spectrum: he includes Australia, as if it were a country fundamentally exploited by imperialism rather than a second-level but fully imperialist power itself (1994: 45, 51).
I also do not agree that the sub-imperialist category should include all the BRICS. Russia, for one, stands out as a full-fledged imperialist power in its own right, even though its economy cannot match those of the major Western powers. In that sense there are parallels between Putin’s Russia and Tsarist Russia a century ago; recall that the classical Marxist theorists all regarded Russia as imperialist, of a non-standard form, because of its military and political weight. As for China, since it remains more exploited than exploiting, in that respect it fits the sub-imperialist model. But it wields global rather than regional power and influence. If it is sub-imperialist it stretches beyond Marini’s (and Bond’s) definition: it would be a global sub-imperialist sui generis.
Putting aside the question of how to characterize China in theory, to see how it affects the Smith-Harvey debate it is useful to look more closely at its global economic status. Even if it eludes the ‘old-fashioned binary,’ does its role justify the claim that ‘the historical draining of wealth from East to West … has largely been reversed.’
Bond presents evidence that ‘BRICS firms became some of the most super-exploitative corporations engaged in accumulation not only on their home turf but also in Africa.’ This, he argues, buttresses Harvey’s recognition in general of ‘complex spatial, interterritorial and place-specific forms of production, realisation and distribution’ and in particular that in Africa ‘Chinese companies and wealth funds are way ahead of everyone else’s in their acquisitions.’ That suggests that China is draining more wealth from Africa than is the West, so that even if the East-to-West flow of wealth has not been reversed, at least the South-to-East flow has outpaced the South-to-West flow; in that case much of the West’s potential draining of Africa would have been superseded by China’s.
But even that reversal is not happening. While China engages in the traditional imperialist trade policy of obtaining raw materials from states in Africa and Latin America and selling back manufactured goods, in the process often undermining local industries, nevertheless ‘China is not the largest investor in any part of the world: it is the fourth largest investor in Africa, third in Latin America, and third even in its own backyard, Southeast Asia.’ The U.K. and France, followed by the U.S., are still the largest investors in Africa. In 2016, the Economic Commission for Latin America and the Caribbean (ECLAC) said that Chinese investment in the region constitutes a mere 1 percent of total inflows from all investor countries.  So, China is far from supplanting the traditional imperialist powers of the West in exploiting the resources and labor of Africa.
Bond criticizes Smith for not mentioning the role of the BRICS in exacerbating both super-exploitation and environmental devastation. But the plentiful evidence Bond supplies about the BRICS’ depredations does not address the issue that Smith raises against Harvey, namely that the East-to-West flow of wealth and value has not just been modified by the rise of China especially but has been reversed. Bond does not even mention the East-West issue in his response.
Bond is correct that Smith’s analysis of China is theoretically inadequate, but that was not Smith’s purpose here. I share Smith’s view that the rate of exploitation of China’s workers is far higher than that in the West, and that ‘there is a huge difference between an “emerging nation” whose leaders dream of becoming a new imperialist hegemon and the actually-existing imperialist powers who cannot tolerate such insubordination.’ Harvey, in contrast, seems to believe that China is already a rising imperialist power: he doesn’t say so explicitly, but that is a reasonable deduction from his disdain for the ‘crude and rigid theory of imperialism that John Smith espouses’ and his preference for a ‘more open and fluid analysis of shifting hegemonies within the world system.’
In any case, I agree with Patrick Bond that the analysis of sub-imperialism can enrich the debate. It helps disabuse readers of the notion that China and its fellow BRICS are an alternative to imperialism by showing that they too are exploiting the South. It also shows, however, that the BRICS are not exploiting the West – and so it counters Harvey’s contention, not Smith’s.
Walter Daum is the author of The Life and Death of Stalinism: a Resurrection of Marxist Theory (1990) and articles on Marxist economic analysis. He taught mathematics at the City College of New York for 35 years.
Featured Photograph: American cartoon of England as an Imperial beast controlling and occupying various regions (1888).
Alex Callinicos, ‘Imperialism Today,’ in Marxism and the New Imperialism (Bookmarks, 1994).
David Harvey, in Prabhat Patnaik and Utsa Patnaik, A Theory of Imperialism (Columbia University Press, 2016).
David Harvey, The Enigma of Capital (Profile Books, 2011).
Tony Norfield, The City: London and the Global Power of Finance (Verso, 2016).
 ‘According to the Conference Board, American multinationals’ average investment return in China was 33 percent in 2008. In the same time period, a World Bank team found that the average investment return for multinationals in general in China was 22 percent. In contrast, in 2008, the 10-year US Treasury yield returned less than 3 percent.’ (Yu Yongding, ‘Imbalances in China’s International Payments System,’ Institute for New Economic Thinking, July 13, 2017; www.ineteconomics.org/perspectives/blog/imbalances-in-chinas-international-payments-system.)
 United Nations Conference on Trade and Investment (UNCTAD) World Investment Report 2015 lists Chinese FDI to Africa (2013-2014) as 4.4% of total foreign investment.
 In 2015 China was the ninth largest investor in Africa, making up 3 percent of global investment inflows behind Italy (7.4 percent), the United States (6.8 percent), and France (5.7 percent). Center for Strategic and International Studies (CSIS), ‘Does China dominate global investment?’ (2018); https://chinapower.csis.org/china-foreign-direct-investment/.