Tuesday, October 11, 2005


Way back in the Paleolithic Era of the 1950's and early 60's, believe it or not, there were hamburger joints, drug stores, hardware merchants, motels and hotels. Janitors also cleaned buildings and kitchen staff cooked food in hospitals. Not one of the organizations performing these services was a multinational corporation. Some were owned by regional chains, but most were local businesses.

The whole point of foreign investment is to introduce capital into an area that is short of it. Capital that cannot be supplied at home. But in the last 35 years we have seen foreign companies come in and take over all of the aforementioned businesses. What possible gain is there to have foreign investment do what we were already doing rather well? But foreign takeover is worse than that. Every dollar made by a regional or local company stays in that region or locality. The money is recycled several times through other businesses and everyone gains. This is called the Local Multiplier Effect. Now with the multinationals, the profits go to the major shareholders who could live anywhere, causing a net drain out of the community.

The problem is even worse where government-provided services have been corporatized. (Falsely known as "privatization.") Here the losses to the community are huge, as workers lose their jobs, wages are slashed and vacation time cut. Consider a situation where 100 workers have their wages cut from $15 and hour to $10 an hour and 30 are fired. The loss in buying power to their town is two million dollars a year. With the Local Multiplier Effect the extra buying power would go a long way to bolstering the towns economy. Its damn well time that people realized that when us workers lose, everyone loses, except the major investors who probably live in New York or London.

During the 1990's we witnesed the foreign takeover of existing large Canadian companies. A US company would march in, buy out the Canadian company, close down plants, fire most of the workers, and asset strip to pay off the loan to buy the company. The takover investment would be classified as foreign investment, yet it would have added nothing to the Canadian economy, but rather would have detracted from it. What was the point of it all?

Then there is the foreign investments that at first sight do seem to add to our economic betterment. But when you look again, you find vast government subsidies have been poured into these projects. We are paying others to do what we could do ourselves, and if we couldn't do them, maybe we are better off not doing them at all. Often these projects are unworkable and after a few years pull up stakes. We, the tax payers, are left to pay for the mess. Think only of the Bromont Quebec Hyundai plant and New Brunswick's Delorian.

Does anyone out there know of a balance sheet made on foreign investment to show what our real gains and losses are? I have tried googling the subject but don't come up with anything but neo-liberal apologetics.


Blogger Kevin Carson said...

How about Wal-Mart buying out a Canadian retail chain (I forget the company... Woolco?) and taking only the non-union stores? Interestingly, the first Wal-Mart ever to unionize was in Windsor, Ontario. Probably the Detroit influence, since it's a suburb just across the river from Motor City.

7:13 PM  

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