Clandestine Capitalism

DISCLAIMER:

This is my Masters dissertation from 2023, another “legacy essay” I am adding to the site. Considering the breadth of my chosen topic and the circumstances of the author at the time, I’m surprised it came out as well as it did. For those already into the parapolitical, there is not much here that you would not already know – the aim of this essay is to introduce people to the analytical framework and connect it to Marxism.

I am happy with how it turned out, but as always, there is plenty that would add in a future REDUX edition:

– I relied too heavily on FDI to measure foreign economic involvement.

– I should have referenced Walter Rodney and used more contemporary circumstances in the Underdevelopment section.

– Much more can be said about the history and role of comprador governments in the “Clandestine Collaboration” section.

– The section on finance should have more detail on the BCCI.

– I should have mentioned Operation Phoenix as well as GLADIO for the violence section. Due to word count, I cut out references to Shamima Begum’s trafficking by a Canadian intelligence agent, as well as testimony from Barcelona’s Chief of Police that the 2017 terror attacks were orchestrated by CID. These can be still found in the bibliography.

Regardless of these deficiencies, I hope you enjoy this essay.

Clandestine Capitalism:

Neo-Imperialist Secrecy and Parapolitical Marxism

Introduction

“The world is too public. These things can only be secured in privacy. You talk of kings and presidents. How much power do they possess? As much as their people will allow them… And how do I possess that power, that sovereignty?

Through privacy.

Through the fact that nobody knows.

Through the fact that I have to account to no one.”

– Ian Fleming, Dr. No

“Deception is a state of mind,

and the mind of the State.”

– James Jesus Angleton

Head of CIA Counterintelligence 1954-1974

In this essay, I will show how secrecy is utilised in politics, economic exploitation and military intelligence operations to maintain capitalist ownership of production, with each part of the essay analysing the utilisation of secrecy through a different aspect. Using a Marxist analysis, I will demonstrate how secrecy is an essential component of capitalism, and how this has changed historically as imperialism shifted into neo-imperialism. This necessitates a two-pronged approach that analyses “first world” nations in the neo-imperial core, as well as exploited “third world” nations at the periphery: modern capitalism necessitates a managed democracy in the West and a controlled economy in the South. This will expose another dual theme, which is how there is a secret relationship between economic exploitation and “extra-economic” force (I.e. violence), with each relying on each other. When one is sceptical of alleged motives and legitimisation narratives, statements of intent are not enough; they necessitate an analysis of the consistent patterns that occur in history, revealing motives that can only be inferred from action rather than rhetoric. Thus, as well as a Marxist hermeneutic, I will use parapolitical analysis: the investigation of the deep ways democracy is subverted to achieve politico-economic ends. Through these investigations, I will show how focusing on secrecy is not a symptom of paranoiac conspiracy theory; it is an essential concept in political philosophy that deeply informs concrete action.

In the first part, I will examine secrecy as a philosophical concept, and explain the justification for taking a Marxist approach, which will also discuss the importance of the “parapolitical” as a method of historical and political analysis. In the second part, I will analyse how labour, production and its private ownership is hidden from consumers in the first world, and how hidden financial mechanisms ensure control of cheap labour in the third world. In the third part, I will analyse how this wealth is hidden in offshore accounts and trusts through secretive practises and banking mechanisms. The fourth part will analyse the clandestine “extra-economic” force used across the world to maintain this financial system, which includes violence perpetrated both in the third and first world. This will be shown through analysis of the pattern of coups initiated by western powers in developing countries, and of Operation GLADIO, a secret network used by post-WW2 NATO to subvert democracy in Europe.

Part 1 – Secrecy: A Philosophical & Marxist Analysis

The Problem of Secrecy

The concept of secrecy has been analysed by philosopher Sissela Bok in her book “Secrets: On the Ethics of Concealment and Revelation” (1989), with her defining secrecy as “intentional concealment”. This notion of the intentional is essential, as to separate and hide information is a purposeful act, and takes continued effort to “keep secret”. This definition is general, as there are many different kinds of secrets, some less nefarious than others. Bok lists other concepts that contain an aspect of secrecy: “sacredness, intimacy, privacy, silence, prohibition, furtiveness and deception[…]” (p.5-6) This essay will mainly focus on the way secrecy acts in deception, with “intentional concealment” being an active and misdirecting concealing of information. An example of the distinction would be the response to someone asking your name: if you reply that you would rather not say, this is withholding information, concealing but not deceiving. If you give a different name than your own, this is deceiving, as the person does not know there is something being concealed. Thus, deception is a specific form of the more general concept of secrecy. Bok’s original definition captures the two essential aspects of secrecy, but I would add that it can also be reversed into the formula: “concealed intent”.

This addresses the duplicitous aspect of the secrecy I wish to examine, which is the form of secrecy where the target of deception is misled as to the motivations of the secret-keeper. In her book, Bok views secrecy as an ethical dilemma, a philosophical problem to be considered in various possible circumstances. What should be kept secret and what should be revealed? Bok gives a compelling examination of the moral complexities that can occur, and she analyses a wide range of different forms of secrecy. These range from interpersonal situations such as self-deception, gossip and confession; but she also examines more political predicaments such as military secrecy, undercover police work, secret societies and the act of whistleblowing. While this makes for a large and compelling overview of the concept, I would rather examine the question of secrecy as a specific practical matter, a methodology or tool that is utilised economically and politically. There are two directions to examine:

– How is secrecy used in political economy? (Analytical question)

– When is secrecy warranted? (Normative/Ethical question)

This essay sees the normative question as being informed by the analytical: it is important to stress that the question of when secrecy is warranted, should not just be a question of ethical judgement, but rather based on an analysis of what motivations are driving the secrecy; hence, motivations for secrecy should be analysed by class position and political/economic motives, i.e. materially and historically. Though some may see this as a Marxist reduction, I will demonstrate that this will provide clarity to various problems of secrecy, and provides insightful analysis for a wide range of historical and contemporary problems. I argue that without this angle, Bok’s analysis of secrecy is naive; a passage from her discussion of trade secrecy illustrates this:

“If Marx could witness this development, he might take it to be yet one more symptom of the ravages of the “wolfish hunger” for profit in capitalist society. And yet secrecy about industry and invention is often most coercively imposed in the societies farthest from capitalism; and neither socialism nor any other social structure seems to pose obstacles to participation in the international battles over industrial espionage and trade secrecy.”

– (Bok, p.138)

There are two problems here: I agree that Marx would view trade secrecy as symptom of capitalism, but this does not preclude secrecy from occurring in other societies; he is not claiming that it is solely a capitalist tool. In this chapter and the rest of the book, she offers no examples of these “societies farthest from capitalism” that are used by her as a counterfactual. Additionally, the idea that socialism is not exempt from battles over trade secrecy is true: a socialist economy would have to defend itself from international industrial espionage, but this use of secrecy is not “independent of their political leanings” as she says. (p.139) It is better viewed as a tool of political action rather than a trans-historical phenomenon. If we wish to make ethical judgements while considering political reality, a Marxist analysis of the class struggle is a simple guide as to what secrets can be justified: if certain secrets are serving to create and protect capitalist and imperialist crimes, then they are justified in being investigated and exposed. If there are secrets that serve the emancipation of the proletariat, such as the movements of Vietnamese revolutionary soldiers through Laos or the identities of Algerian anti-colonial cells, then these are justifiably hidden when viewed through this lens. Only in this larger perspective can we make a true ethical judgement on forms of secrecy.

Thus, I argue that we should analyse this question of secrecy materially: what are the historical, economic and social forces that motivate the hiding of information? What are the purposes of conspiracies, hidden plots and clandestine operations? Why would the owning classes, who bear more economic control over production and profit, need to keep secrets? These will be answered through a thorough examination of how secrecy is utilised in modern capitalism.

The Secret of Value

Secrecy is not just an ethical and normative question: it is also a conceptual consideration for Marxist theory. The question of value, and what it represents, is intimately connected with secrecy. Price is the capitalist representation of the value of a commodity, but this obscures the real source of a commodity’s value, which is the socially-necessary labour-time needed to produce it.

“Value […] does not stalk about with a label describing what it is.” (1867, p.49)

Marx sees the obfuscation of labour-value into exchange-value as a function of capital that creates a seemingly independent value distinct from labour, giving life to what is “dead labour” (p.342) and thus creating commodity fetishism. Exchange-value “converts every product into a social hieroglyphic. Later on, we try to decipher the hieroglyphic, to get behind the secret of our own social products; for to stamp an object of utility as a value, is just as much a social product as language.” (p.49)

“[…] The determination of the magnitude of value by labour time is therefore a secret, hidden under the apparent fluctuations in the relative values of commodities. […] It is […] just this ultimate money form of the world of commodities that actually conceals, instead of disclosing, the social character of private labour, and the social relations between the individual producers.” – (p.49-50)

When a commodity no longer represents the social connections that produced it, and becomes a thing with a life and power of its own, it has become fetishised. This can only be done through the obfuscation of labelling a price on the commodity, representing it as having monetary value, thus lending it an illusory independence. Capital itself, has been fetishised as having productive power, which both allows it to be stored as a commodity offshore and creates an illusion of intrinsic power. This capital relies on a social system that allows it to be exchanged for labour-power: the person who hoards gold in their basement has forgotten that gold is only truly valuable when there is a State to recognise that value as a way to command labour-power. Marx’s insight reveals that capital maintains its value because of the fetishisation of its power to produce things, which is in reality its ability to command labour. When procuring this labour, the medium of money is a necessary obfuscation to reproduce the social order of capitalism: this is why in periods of primitive accumulation (i.e. colonialism), there is a necessity for subterfuge when attempting to capture or deceive workers into providing labour for an economic system not suited for their interests. In imperialism, an empire can only forcibly extract labour for so long, as slavery and direct force are both politically hazardous and expensive. What colonialists learned to use instead, were the tools of debt and currency. Instead of directly controlling a population, it is more efficient to impose a tax only payable in your currency: this forces the population into working for a wage, thus indirectly dominating labour and strengthening the colonialist’s currency. When colonialism “ended”, this system of wage labour was left behind; but even behind this mechanism is the implicit threat that not paying your taxes will incur retributive violence, thus exposing the interplay between economic and violent force that lies at the core of exploitation.

“In England at the end of the 17th century, they arrive at a systematical combination, embracing the colonies, the national debt, the modern mode of taxation, and the protectionist system. These methods depend in part on brute force, e.g., the colonial system. But, they all employ the power of the state, the concentrated and organized force of society, to hasten, hot-house fashion, the process of transformation of the feudal mode of production into the capitalist mode, and to shorten the transition. Force is the midwife of every old society pregnant with a new one. It is itself an economic power.” – (1867, p.534)

This relation between force and economic power will be thoroughly explored in this essay as two sides of the same coin, both relying on secrecy as a core strategy, the covert together with the overt. Ideologically, the cover of “liberal democracy” and “economic development” are the overt messages: what needs to be analysed are the covert mechanisms underlying the justifications, I.e capitalist neo-imperialist dynamics. Instead of viewing western nations as happening to stumble into economic domination through unconscious decision making, we need to use a theory of intentional deception and conscious intent.

Political Intent and the Question of Deceit

Empires are sometimes portrayed by historians as unintentional conglomerates. In the 19th century, British historian John Seeley infamously wrote that: “We seem, as it were, to have conquered half the world in a fit of absence of mind” (1950, p.12); another egregious example is the book “America’s Inadvertent Empire”, by William E. Odom (former head of the U.S National Security Agency) and Robert Dujarric, who say that “the United States finds itself at the centre of a historically unparalleled empire, one that is wealth-generating and voluntary rather than imperialistic”. (2004, p.4) This passive language implies that the U.S happened to stumble into its power, as if it was sleepwalking into constructing upwards of 750 military bases outside of its borders or into creating dollar hegemony in global trade. (Hadad, 2021) Often in the media, wars (such as the interventions into Iraq and Afghanistan) are either seen as necessary evils or tragic missteps based on faulty intel. This is not an accurate political or historical reality, and should not inform our perspective on the motivations of those in power. As Marxist historian Michael Parenti says:

“Some writers stress the ‘irrational’ features of fascism. By doing so, they overlook the rational politico-economic functions that fascism performed. Much of politics is the rational manipulation of irrational symbols. […] Capitalism is a rational system, the well-calculated systematic maximisation of power and profits, a process of accumulation anchored in material obsession that has the ultimately irrational consequence of devouring the system itself – and everything else with it.”

– (1997, p.11)

To truly understand the way economic power is created, we need to view actors as actually having conscious purposeful intent. The intent of a political actor can only be inferred by the analyst though, as no politician will outright state that they are going to war with a nation to extract resources for the top 1%. As empire uses republican ideals at home to wage its foreign wars, legitimisation narratives are used, with phrases such as “opposing tyranny”, “defending democracy”, “restoring security”, “fighting terrorism” and many others. As Parenti says: “Bush Sr. can’t deny he invaded Panama, but he can profess certain motives.” (2020, Speech on Empire, 36:01) The truth of one’s intent is non-empirical and often difficult to discern; it cannot be pointed to in a definitive way, especially if the true intent is being actively concealed. Some may argue that to question people’s intentions to this extent is too cynical, and that people believe what they say. Admittedly, it is the case that many politicians, CEOs and bankers are not lying about their intent when they use these legitimisation narratives, as many do believe in the ideology that purportedly guides policy. In my view though, the policies are not entirely informed by ideological commitment – the ideology justifies the policy, but the policies are decided by those with material interests to enact them. While one cannot prove that the proponents of these ideals are intentionally lying, one can show inconsistencies in the narratives they present and the realities of their policies, which gives insight into the real dynamics at play; dissonance between rhetoric and reality will be a recurring theme in this essay.

The Study of Secrecy: Parapolitics

To decode what is occurring underneath the rhetoric, I argue for the importance of the field of study called “parapolitics”, or “deep politics”. In political theory, parapolitics distinguishes itself through the centrality placed on “clandestiny”, or the idea that “clandestine activity by state institutions and by institutions linked to the ruling elite play[…] a major role in sustaining illiberal and anti-democratic features of the system.” (Wilson, 2009, p.1) The historian Peter Dale Scott, who coined the term “deep politics”, describes the field as studying “decision-making and enforcement procedures outside as well as inside those sanctioned by law and society. What makes these supplementary procedures ‘deep’ is the fact that they are covert or suppressed, outside public awareness as well as outside sanctioned political processes.” (2004, p.3)

Secrecy and deception, understood in a materialist and parapolitical perspective, form an integral part of the world’s politics and economy. What should be emphasised is the empirical nature of this study; what is often termed “conspiracy theory” should be distinguished from the parapolitical, in that it relies on non-existent or flimsy evidence to construct “grand narratives” that override all specificity. Parapolitics on the other hand, uses available evidence to outline the contours of what is hidden. Elements involved in conspiracy theories however, such as intelligence services, secret societies and elite power groups, should not be excluded from our research. Conspiracies are simply coordinated and clandestine collaboration between powerful individuals or entities, which through a Marxist lens of mutual class interest, is perfectly compatible with serious political analysis. Secret societies such as Italy’s Opus Dei and P2 Masonic Lodge, or establishment groups such as the UK’s Le Cercle and the US’ Bilderberg Group, are well documented even if the details of their meetings are obscure. Instead of blaming rogue individuals, evil masterminds or political incompetence, parapolitics examines the structures that persist through history and separate administrations, and the covert criminal activities therein. It is important to emphasise that control and power is not just maintained by direct means, through secret meetings in smoke-filled rooms or by direct commands given to agents (though both indeed occur); it can be through indirect means. Intelligence networks often enact activities in piecemeal, with a single aim spread over unwitting agents who do not know the larger picture. In institutions, selective hiring practises and ideological control of popular narratives ensure that control is indirect; the media class is a good example – most liberal journalists are not directly paid to spread lies or misleading headlines. They are simply incentivised to believe in certain things, be it for the next promotion or the invitation to the next insider party. This occurs through deep-rooted educational and cultural forces that guide people’s opinions in line with their employment – as Noam Chomsky famously retorted to a sceptical journalist:

“I’m not saying your self-censoring. I’m sure you believe everything you’re saying. But what I’m saying is that if you believe something different, you wouldn’t be sitting where you’re sitting.”

(Chomsky, 2013, 09:17)

The concept of political secrecy is deeply connected with the view that economic motives are the main driver for political decisions. Economic activities in capitalism usually have a winner and a loser, be it the capitalist stealing a worker’s surplus labour or a capitalist buying out a competitor. The drive to make more money is not a moral one, and due to economic competition, illicit activities are often deemed necessary to survive. These illicit or immoral activities are best kept hidden, and thus there is a large shadow economy that secretly extracts and hides wealth. The influence of capital over state institutions means that illicit markets such as the drug trade are not always combated by the state, but often encouraged and facilitated, even if it contradicts overt rhetoric; economic rationality also means that for capital investments to have ease of access to resources and labour, regimes that seek to nationalise industry or limit markets need to be removed. This has led the U.S to bolster the drug trade in many countries such as Nicaragua, Afghanistan and the Philippines, and to prop up US-friendly dictatorships in Chile, the Dominican Republic, Cuba and Iraq, among many others. (Blum, 2003) While some would balk at the accusation that the country leading the War on Drugs would have secret motives for maintaining the drug trade, or that countries espousing “democracy” would be encouraging corrupt regimes, we should always consider the material motives for such duplicity. Take the drug trade for example:

“Narcotics are estimated to be worth between $500 billion and $1 trillion a year, an amount, according to UN Secretary General Kofi Annan […] that is greater than the global oil and gas industry, and twice as large as the overall automobile industry.”

(Scott, 2005)

The size, profitability and complexity of the drug trade means that it is highly integrated, meaning that different nodes of the trade (producers, suppliers, distributors etc.) and different factions have the economic motives to collaborate in many ways. This also means that the drug industry encounters government, military and intelligence organisations on a routine basis. Peter Dale Scott has written numerous books on the collaboration between the drug trade and governments: “After twenty-five years of research, I have come to believe […] that ‘governments themselves, and the links they develop with major traffickers, are the key both to the drug-trafficking problem and to its solution.’ (Scott, 1997) As documented by Alfred W. McCoy in The Politics of Heroin: CIA Complicity in the Global Drug Trade (2003), governments and their institutions with global reach routinely use the resources of drug traffic for their own financial and political gains, with the book tracing a worldwide pattern practised in secrecy across Southeast Asia, Central and South America.

A specific case that exemplifies the confluence of secrecy, drugs and politics is the Iran-Contra scandal. In the 1980s, the US sought to depose the government of the Marxist Sandinista Junta of National Reconstruction (known as “the Sandinistas”) that came to power after the Nicaraguan Revolution. Many private companies that were exploiting the labour and resources of Nicaragua were afraid that the project of nationalisation would not only affect their profits in this country, but would inspire others in South America to do the same. To achieve the political and economic objective of securing future profits, the US government gave “extra-governmental support” to right-wing rebel groups from 1979 to 1990 (known as the “Counter-revolutionaries” or the “Contras”) to combat the revolutionaries. US intelligence covertly used drug trafficking as well as arms sales to Iran to finance the Nicaraguan death-squads and the corrupt politicians they planned to install:

“These arrangements led to documented U.S. government involvement with, and even support to, top-level drug-traffickers in Mexico, Honduras, El Salvador, Costa Rica, and Panama, as well as with domestic traffickers in the states of Florida, Arkansas, Louisiana, Kentucky, Michigan, and California. This recurring pattern of involvement with those who dominated the drug traffic cannot be dismissed as accidental or coincidental aberration.”

(Scott, 1997)

The case of Nicaragua is only a small part of the history of the US’ involvement with the drug trade in Central and South America, but they exemplify how the overt and the covert work together in government to enforce economic dominance. This pattern of encouraging the drug trade for financial benefit was repeated in the US war on Afghanistan: opium production and exports were the highest they ever have been during the War in Afghanistan, fuelling the heroin epidemic at home, and was only curbed when the US evacuated the area and returned control to the Taliban. The profits from Afghanistan were intimately connected to CIA involvement in Islamic terrorism. (Ahmed, 2016, p.73-74) In Mexico, the activity of “drug cartels” also have clandestine links with US involvement, as documented in the 2022 work Drug Cartels Do Not Exist: Narcotrafficking in US and Mexican Culture by Oswaldo Zavala.

All this highlights the importance of parapolitical research to understanding global politics and economics; we shall return to the history of covert action in Part 4, but let us return to the philosophical question of political intent and capitalist ideology.

Political Philosophy: Is the Problem of Capitalism an Ideological One?

There is a major tendency within political philosophy for critiquing capitalism as a system that maintains its control through ideological control and mystification. The previously discussed role of liberal ideology is undeniably a vital function of the system, but I argue that focusing on this misses the true factors “in control”. The role of capitalist ideology and the media is analysed in philosophy by works such as Adorno and Horkheimer’s “the Culture Industry: Enlightenment as Mass Deception” (Adorno, 1944), which posits that mass produced media manipulates the population into passivity, replacing authentic psychological wants and needs with consumerism. Despite its theoretical value, I argue that this focus on desire, consumer society and the media is too preoccupied with how westerners are made passive. Although the notion of “deception” may have resonance with this essay, I see capitalist deception as being more to do with the concealed intent of those in power, the obfuscation of class warfare and the value-form, instead of a reduction to mass psychological deceit. While I understand that this text is not the whole of their work, it nevertheless seems to have contributed to Adorno and Horkheimer’s famous pessimism inherent to their anti-positivist works such as Negative Dialectics (2015) and Dialectic of Enlightenment (1944). For Adorno, the working class’ “self-imposed subservience […] was, for him, irrevocable” due to the “weight of capitalism’s culture industry”. (Lanning, 2013, p.10)

Another text that I feel is guilty of psychological focus is Wilhelm Reich’s The Mass Psychology of Fascism (2018), which sees fascism as an outgrowth of mass sexual repression. Both these works seem to view capitalism and fascism as pathologies that spread through the masses, instead of material political forces. Fascism, like that seen in Mussolini’s Italy and Hitler’s Germany, was in collaboration with heavy industrialists and private capital. Even though the Nazis called themselves “national socialists”, this ideological cover was to mask the mass selling off of national industry to private ownership, an increased exploitation of workers and the banning of trade unions. Fascism was imposed from the top-down with the support of the wealthy, a rational system of self-interest for the few that utilised irrational symbols as a tool to distract the masses. My view is that the influence of Freudian theory on these thinkers shifted their focus onto Marx’s early ideology critique (concepts of false consciousness and alienation), while largely discarding with Marx’s later materialist and scientific focus. In the modern world, instead of the masses wilfully and democratically voting themselves into oblivion (which is the view of most political liberals), I argue that the factors creating passivity are due to the overwhelming power of capital over public institutions and Western prosperity obscuring the realities of capitalist exploitation. Thus, for analysing passivity, it is largely the wealth the West enjoys that ensures its relative complacency rather than “the subject” being brainwashed through mass media.

When analysing the masses, there is a qualitative difference between those in the imperial core and the periphery. The population of the Global South, while subject to ideology, advertising and media, face much different material circumstances; exploitation, poverty and the extraction of natural resources is much more evident in everyday life, while the imperial core receive the benefits and (for the most part) do not even realise it.

This is not to say that populations in the West are not exploited or are unable to recognise it, but I argue that exploitation of the scale seen in the South impinges far less on the average person in the West, due to the increased societal benefits they enjoy. The Frankfurt School as a whole is guilty of ignoring the site of productive power in favour of lamenting the loss of revolutionary consciousness in the West, as is also present in Marcuse’ work; out of the continental school, only Althusser addressed these concerns in a material way. In my view, at the time of their writing in the mid-twentieth century, this sadness at a loss of class consciousness has missed that it did not exist (as they saw it) in the first place. The lack of any inclination for positive thinking leads them to only critique, a problem inherent to the school of “Critical Theory”, which has a predilection for downplaying any successes in overturning economic oppression; as philosopher Zoltan Tar says:

“Critical Theory dissociated itself from the basic tenet of Marxism: the unity of theory, empirical research, and revolutionary praxis”, which only produced a “a social philosophy of despair”. (Tar, 2017, p.79, p.202)

Focusing on the deceit of a given ideology prevents us from truly reckoning with the material deceit of capitalist control, which is control of production. By analysing where production is situated and who is in control of it, we can move from critique to a positive view of what socialism entails; this is Marx’s great insight. I argue that in the current situation, this necessitates a shift of focus to the history of the Global South and ways the Western world has interfered there – rather than a departure from philosophical thinking, I see the empirical research in this essay as the highest fulfilment of my philosophical outlook. Marx’ method of historical materialism seems absent in the Frankfurt School’s method, with an egregious example of this academic blindness for recognising economic history present in Adorno and Horkheimer’s “Towards a New Manifesto” (2019), where Horkheimer says:

“I believe that Europe and America are probably the best civilizations that history has produced up to now as far as prosperity and justice are concerned. The key point now is to ensure the preservation of these gains.” (p.41)

The prosperity and justice that they want to preserve were the result of the massive injustices of colonialism, which does not seem to merit a single mention in their “New Manifesto”; this was also said in 1956, well after the US waged imperialist war in Korea, was maintaining racial segregation and was overthrowing progressive governments in Guatemala and Iran. In the same text the pair also describe socialist China as “choosing slavery” and the Soviet “Russians” as “fascists” (p.49). Regardless of what you think of the socialist experiments of the PRC and the USSR, the eurocentrism of the Frankfurt School thinkers exposes their blindness to the potential of revolutionary change in the Global South and to the imperialist activities of their home countries.

Thus, instead of focusing critique on the obvious rot inherent to Western ideology, I argue that a Marxist analysis should be materialist and focus on the object of Marx’s original study: labour. To follow the river to its source, I will analyse and critique how labour itself is wrapped in secrecy.

Part 2 – Hidden Labour: How Neo-Imperialism Obscures Production

“In short, the invisibility of imperialism today means that it has become far more powerful, not that it has disappeared.”

– Utsa Patnaik

“There can be no development if there is no peace –

nor can there be peace, if there is no development

for the vast majority of the people of the Earth.”

– Fidel Castro

In this part, I will analyse how outsourcing the exploitation of labour to the Global South ensures greater sustained profits, and how these profits are hidden by unreliable financial reports. My central argument is that the very act of outsourcing itself is a way of hiding exploitation from consumers in the Global North, and that these profits are officially hidden through bad reporting. As the 20th century saw profit rates fall in the developed Global North, free-trade agreements were reached with countries in the Global South to use their cheap labour, ensured by low standards and non-union workplaces. Production began to move to these countries, creating what is termed “globalisation” or “deindustrialisation”. This served to keep wages low and maintain higher returns on investment, at the cost of domestic manufacturing jobs in the Global North. To keep production cheap indefinitely, the Global South needed to be kept in economic stasis; this is why after analysing labour exploitation, I will analyse the financial exploitation that keeps countries in the Global South underdeveloped.

Why the North needs the South for Productive Labour

A “post-industrial society” is one where a transition has occurred from an “economy of goods” to an “economy of services.” In the Global North, this produced what is termed “consumer culture”, but it should not be forgotten that producers still exist; the wealth of the Northern Hemisphere is predicated on the displacement of the labour required to create commodities. Most of profit is made from “adding value” in the North to goods manufactured in the South: this can be done through marketing, distribution, administration and other non-industry services. As shown in John Smith’s book “Imperialism in the Twenty-First Century” (2016), most commodities exemplify the unfair relationship at the heart of “added-value”. For instance, take a T-shirt made in Bangladesh, that is sold in Germany by the Swedish retailer H&M:

“H&M pays the Bangladeshi manufacturer €1.35 for each T-shirt, 28 percent of the final sale price, 40¢ of which covers the cost of 400g of cotton raw material imported from the United States; shipping to Hamburg adds another 6¢ per shirt. Thus €0.95 of the final sale price remains in Bangladesh, to be shared between the factory owner, the workers, the suppliers of inputs and services and the Bangladeshi government, expanding Bangladesh’s GDP by this amount. The remaining €3.54 counts toward the GDP of Germany, the country where the T-shirt is consumed, and is broken down as follows: €2.05 provides for the costs and profits of German transporters, wholesalers, retailers, advertisers, etc. (some of which will revert to the state through various taxes); H&M makes 60¢ profit per shirt; the German state captures 79¢ of the sale price through VAT at 19 percent; 16¢ covers sundry ‘other items.’”

– Smith, p.13 (emphasis mine)

Smith shows how this clear disparity can also be seen in other global commodities such as coffee and an iPhone; nearly every common commodity relies on this relationship of exploitation between North and South. Behind this screen of “added-value after production” is a hidden network of labour and logistics from across the world which is the true source of value. Neo-imperialism differs from imperialism in that it does not have direct control over states it wishes to use, but indirect control through corporate ownership of sites of production and financial debt.

To illustrate the way capitalism derives its value and profits from these sources of industrial production, Marx emphasised the difference between the behaviour of pre-capitalist mercantilism, and the behaviour of the capitalist. Merchants operate in the circuit M-C-M’. Money is used to buy commodities, which are then sold elsewhere for more money, producing profit. This method of business has the merchant sell in order to buy, and buy in order to sell. The merchant does not alter the commodity or produce it, they simply act as a method of circulation; this is why merchant capitalism is a primitive form of capitalism, as they have yet to take control of the production process, leaving it to small commodity producers (this is also known as “arbitrage”). Capitalists instead buy to make; the circuit becomes M-C-C’-M’. Capitalists do not purchase commodities, they purchase “factors of production” which includes labour-power (variable capital), raw materials and means of production (both constant capital). The production of surplus value is done through the use of labour-time, also known as “surplus labour”, which is the source of capital’s value. Accumulated surplus labour, or value, is thus produced in the C-C’ stage, with the before and after merely being the circulation of this value. This is how Marx distinguishes between productive labour and non-productive labour in his theory of value; economic activities that are contingent to the production process such as finance, commerce, policing and administration make no net addition to social wealth and are thus non-productive. This is not to say that they do not have their place, but they do not create the value of commodities prior to these other processes – only labour can create value. Capital may incentivise production and “create value” through investment, but this can only be done through fielding labour.

“Commercial capital’s relationship to surplus-value is different from that of industrial capital. The latter produces surplus-value by directly appropriating the unpaid labor of others. The former appropriates a portion of surplus-value by getting it transferred from industrial capital to itself.”

(Marx, 1992, p.406-7)

Mainstream economists make no distinction between the creation of value and added value, collapsing productive and non-productive labour, thereby ignoring where exploitation occurs. Every form of price in this view is a value, and any activity that results in a sale is defined as production; thus, all distinctions are hidden by the criterion of profitability. This means that activities such as speculative traders, private armies and bureaucracy are all “productive” for mainstream economists because someone is paying for their services. By understanding the distinction that they ignore, we can see the clear advantages to the stratified world of neo-imperialism. Firstly, by spreading productive labour over various countries with more reserves of labour and harsher trade union laws (due to IMF impositions, as we will later discuss), this prevents opportunities for labour to collectively organise. On the reverse side of the equation, even if workers in the Global North get organised (which is arguably just as difficult), they will, for the most part, only affect non-productive labour in circulation and service jobs. Efforts to unionise Starbucks baristas and Amazon warehouse workers, while commendable, do not strike at the heart of production which is in the Global South.

Through this lens, we can see how the replacement of productive with non-productive labour in the Global North drives outsourcing to other countries. Firstly, there is the obvious relationship that Northern service economies spring up due to these countries outsourcing productive labour at home for cheaper productive labour in the South. However, outsourcing is also further caused by service economies: one of the reasons the rate of profit has fallen steadily in the Global North is because nonproductive service workers consume part of the value produced by surplus value extracted in production; this decreases what is available (resources, commodities, wages etc.) for realisation as profit. Service workers in the Global North are paid more and consume more luxury goods, which puts pressure on capitalists to temporarily increase surplus value by holding down wages in the North. This is not enough though: the more that social labour is employed non-productively, the more downward pressure is placed on profits, necessitating more exploitation in production. Thus, the outsourcing of industrial production to the Global South is partly caused by service economies’ effect on profits, as well as service economies being a consequence of outsourcing.

Due to the way productivity is recorded by ownership, Northern companies seem more productive than Southern companies, even if the productivity is occurring in the Global South. One aspect to highlight is how the perception of increased Northern productivity is not just due to outsourced labour in industry, but also in services. Services are inherently labour-intensive and are not as easily automated as industrial jobs, and this means that labour productivity in the service sector appears to stagnate over time. U.S manufacturing increased in the mid-1990s, accounting for most of the productivity growth in the US economy. (Smith, p.64) This more efficient industry led to labour being redeployed in services or unemployment, thus leading to a decline in manufacturing employment and a relative decline in manufacturing’s contribution to GDP. The more that labour productivity increases in industry, the more important it becomes in sustaining the economy and society, but this diminishes industry’s share of GDP and increases unemployment. To make an industrial firm appear more productive, companies externalise their services work such as cleaning, catering and administration. Even if nothing about the industry’s work has changed, a smaller workforce appears to be making the same output, increasing their measure of productivity. This hides how industry’s reported share of the total workforce is not actually declining, but is instead being outsourced to another country with much cheaper labour. This boosts the appearance of how much value the firm is adding while greatly reducing the costs, only at the moral price of exploiting foreign workers. These are just some of the contradictory dynamics driving outsourcing; this also occurs in the outsourcing of production tasks, and in the next section I will explain these and how the ownership of this outsourced production is kept hidden. Though this seems like an unintended consequence of simple economic factors, I will show how there is a deliberate intent in keeping these markets cheap and at “arms-length.”

Methods of Outsourcing Production

There are two methods used by transnational corporations (TNC’s) to obscure their outsourcing of production:

– Foreign Direct Investments (FDI’s):

production is moved overseas but ownership is kept within the company.

– Arms-length outsourcing:

production is partially or fully outsourced to an independent supplier, where the TNC does not own them but still controls their activities.

UNCTAD’s World Investment Report 2011 defines arms-length outsourcing as:

“…the defining feature […] is control over a host-country business entity by means other than equity holdings.”

(Smith, p.69)

Transnational corporations are defined in the mainstream as “enterprises comprising parent enterprises and their foreign affiliates”. This captures the use of FDI’s, but ignores arms-length outsourcing, creating a definition that is inaccurate to how companies actually operate. Even if a TNC does not directly control a company, arrangements are easily made to maintain control. A TNC can convert an FDI into an arms-length relation by simply opening new bank accounts, signing legal documents and erecting new signage, all while making no changes to the labour agreements, work standards, prices of inputs or profits from the output. If they do make changes, they make these worse for the workers to extract more profit. “The actual process of production and value creation/extraction would then be identical in every respect. nothing would change except titles of ownership. Yet surface appearances would show a profound change: a visible South-North flow of repatriated profits from subsidiary to HQ would vanish without trace, even if the new arrangement turned out to be more effective in squeezing production costs and boosting the HQ’s profits.” (Smith, p.69)

All of the profits under an arms-length arrangement produced by the TNC would appear to be the result of its own value-added activities, while the actual labour put into the process disappears. Even if it could be argued that the northern activities are necessary for the profits, this does not excuse the disproportionate amount of money being given to the northern companies, with little compensation for the manufacturers. “According to this definition, Tesco and Walmart only count as TNCs to the extent that they operate retail outlets in other countries—Walmart’s 2.1 million global workforce (up from 2,600 in 1971) does not include any of the workers who produce the goods that fill its shelves.” (Smith, p.68)

Arms-length outsourcing distances TNC’s from direct responsibility for environmental failures, mass layoffs or pressure from unions; it also creates competition between firms in the South to obtain contracts, thus further driving down wages. Since these contracts usually do not require direct investment into production, this frees funds to be spent into financial speculation and leveraging assets.

How Outsourcing Profits are Hidden by Western Institutions

First, let us examine production. The amount of outsourcing to poorer foreign nations is supposed to be tracked by institutions such as the IMF and the World Bank; in reality, their methods for tracking “offshoring intensity” (“share of offshored inputs in gross input”) are extremely flawed. In 2007, the IMF estimated that the share of offshored inputs was only 2-3% in the US and Japan. However, the definition used “omits the export of intermediate inputs to low-wage nations for final assembly and excludes finished goods destined for consumption by workers. It also excludes finished goods destined for use as inputs by northern firms, including computers and other electronic goods, and it excludes finished goods destined for consumption by workers. […] The result is an absurdly low estimate of the extent and pace of the globalization of production processes.” (Smith, p.47) Smith also points out that the IMF takes no account of where imported inputs come from; they track an approximately stable ratio of imported inputs to total inputs, but “this conceals a big swing toward lower-cost suppliers in low wage countries”. (p.47) I argue that these inaccurate estimates are more likely intentional omissions than mistakes; it is their job to track these, and they have the means and motivation to not admit the full extent of production outsourcing.

For analysing profit, there is scant information provided. The United Nations Conference on Trade and Development’s (UNCTAD) publishes no tabular data on income from FDI, and the World Bank severely underestimates the true flow of profits from FDI in developing countries; one author, Alexander Lehmann, discovered that the real figures for profit in 1995-8 were twice that of the IMF’s published data. (Smith, p.77) He points out that there is a failure from national authorities to collect data on reinvested income, which are used to finance an expansion of the TNC’s affiliate; therefore, there is no publicly available information on the extent to which TNC’s use their foreign assets as financial conduits rather than production facilities. One of the only times the UNCTAD has reported on profits was the 2008 World Investment Report, where “the world’s TNC’s earned $1,180 billion in 2007 in profits from their foreign subsidiaries, 406,987 of which are located in developing economies and 259,942 in developed economies.” (Smith, p.76) However, this information is barebones, as FDI income has three aspects that need tracking: retained profits, repatriated profits and interest payments on loans extended to the affiliate by the parent company. The report offers no breakdown or detailed analysis of FDI profits by firm, sector or country, and “many countries fail to report reinvested earnings, and the definition of long-term loans differs among countries.” In 2013, they reported that the global average rate of return for FDI in developed economies during 2006-2011 was 5.1%, while the average rates for FDI in developing economies was 9.2% and 12.9% respectively. “In other words, the rate of return on FDI was twice as high in developing countries as in imperialist countries.” (Smith, p.82)

Comparing the flows of profit between North-to-North FDI and North-to-South FDI expose the complete asymmetry of the relationship between North and South. There are barely any N-S profit flows, while the other dominates: “the total foreign assets of the top 50 TNCs from developing economies in 2005 amounted roughly to the amount of foreign assets of General Electric, the largest TNC in the world.” (p.76)

We will return to this theme of manufactured statistics and unequal exchange, but first I will examine the covert financial mechanisms used to control labour and resources in the Global South.

Financial Domination: Debt-Traps and Systematic Underdevelopment

This control over the South’s resources and labour is not just due to corrupt business practises – they are only able to occur due to systematic underdevelopment of economies. Mainstream economists often blame inherent qualities such as geography, political tendencies and the innate laziness of workers for poor development in these nations. One headline from The Economist reads “Why are Latin American workers so strikingly unproductive?”, with the logline: “Blame education, corruption and a huge shadow economy”, with the article itself describing workers as “useless.” This ignores the reality that US imperialism intentionally underdeveloped Latin America, enforcing financial manacles through IMF loans and violently attacking and overthrowing any government dedicated to an independent national project of economic development. This is a pattern repeated throughout every continent in the Global South. Transnational corporations have needed these nations for cheap exports of minerals, agricultural goods and other resources, as well as highly intensive low value-added production. The US has a persistent trade deficit with Latin America, exposing their need for surplus value from these “useless” workers. As a result of preventing regions from “levelling-up” (I.e developing production facilities to create added-value), regions are made to be dependent on imports of high value-added products and technologies from the Global North. This makes workers suffer from low earnings while the richest earn their keep.

The unfairness of this system is described with precision by Fidel Castro in a 1986 speech:

“The reality, however, is that we are exploited in an increasingly ruthless way. What we import from the developed capitalist world, be it a truck, a tractor, a locomotive, an industrial component, a factory, a medicine, a medical equipment, a simple spare part, anything, is worth more and more expensive, and what we export is paid at increasingly cheaper prices. If we except oil, the privilege of a few countries, also currently experiencing difficulties, today we have to deliver three times, four times and even six times more sugar, tea, coffee, cocoa, henequen, copra, iron, bauxite, copper, etc., for the same product that we imported 30 years ago. Today there is more unequal trade [and] more manipulation of the international finance by imperialist powers than ever before in history. The price we pay as neocolonies is much higher than the one we paid, even when we were colonies.”

This disparity hits workers the hardest: on a list of the top 10 largest economies in the world, India places fifth with a GDP of $3750 billion. They sit between Germany and the UK on the list, which may look impressive, until you see the GDP per Capita for each country: Germany has a figure of $5138, the UK has $4631, while India amounts to $2.6. (Forbes India, 2023) The North prevents wages and resources from rising in price, by crippling the nations it exploits.

The major financial mechanism for maintaining this underdevelopment is the practise of giving foreign loans, issued by institutions such as the IMF and the World Bank. Set up in the aftermath of WWII, the Bretton Woods Institutions (US Department of Treasury, the IMF and the World Bank) aimed to promote international economic cooperation and rebuilding. The original stated purpose of the IMF was to regulate currency exchange rates to facilitate orderly international trade, and to be a lender in the last resort when countries are unable to borrow from other sources, with the World Bank’s role to “reduce poverty and increase shared prosperity” through strengthening the private sector in developing countries. (World Bank, 2019) In the eyes of the Western world, these institutions were international, apolitical and neutral from their conception, but this is far from the truth. In the World Bank for instance, five major industrial countries (with the US alone controlling 20% of votes) have more voting power than nearly 100 countries in the Global South; the voting power of a given country is measured by how much capital they contribute to the institutions, rather than any other more democratic metric. (2022, Prashad, p.243)

When analysing their history, these institutions have an identifiable pattern. During the 1950s and 60s, the World Bank granted loans to colonial powers, and also supported the apartheid regime in South Africa until 1968, refusing to apply a United Nations resolution punishing South Africa for violating the UN Charter. (Toussaint, 2022) In the 1970s, the profits of petrochemical corporations were used by large commercial banks to invest in third world countries, which came in the form of high-risk loans. As documented in the book “Africa’s Odious Debts: How Foreign Loans and Capital Flight Bled a Continent” (Ndikumana, 2011), these loans were diverted to corrupt local elites for private gains, saddling whole countries with ever-increasing debts while these individuals’ placed funds into personal Swiss bank accounts.

Clandestine Collaboration

This collaboration between colonial powers and local elites is a necessary link for labour and resource extraction, and often embodies the dialectic between overt and covert actions. A particularly well-documented example is the country of Gabon, where in the years following independence, the pro-French President Omar Bongo was aided into power by clandestine forces; in exchange for exclusive French access to oil and resource rights (creating “hundreds of millions of dollars available for the use of French elites”(Shaxson, 2011, p.3), he was given protection by the French military and the ability to spend loan money as he pleased. This resulted in Bongo having “66 bank accounts, 183 cars, 39 luxury properties in France and grandiose government constructions in Libreville” (Ndikumana, 2011, p.18), all at the expense of the country’s hospitals, schools and roads. The overt collaboration, which saw multiple visits by French presidents and public endorsements of Bongo, could only happen because of secrecy. As Nicholas Shaxson describes:

“President Bongo, one of the smartest political operators of his generation, tapped into French Freemasonry networks and African secret societies alike and became one of the most important power brokers in France. He was the key to French leaders’ ability to bind les grands — opinion formers and politicians from across Africa and beyond – into France’s postcolonial foreign policy. As the Elf system became more baroque, complex and layered, it branched out into international corruption so grand that le Floch-Prigent described France’s intelligence services, which also dipped freely into the slush fund, as ‘a great brothel, where nobody knows any more who is doing what’.”

(2011, p.4)

Structural Adjustment Programs

During the 1970s, interest rates were relatively low, allowing countries to service their debts; this changed in 1979, when the Federal Reserve Chairman raised interest rates and enormously increased the cost of these loans. This was happening simultaneous with a US recession that restricted cash flows, threatening many third world countries with the possibility of defaulting on their debts, which in turn had the potential to create large commercial bank failures. These debts could have been forgiven, but instead the IMF and World Bank offered bail-out packages, that required prospective countries to adopt “Structural Adjustment Programs” (SAPs) which continue to this day. SAPs require the adoption of neoliberal policies such as:

– Privatisation of public sector enterprises, such as utility companies and public transport.

– Increases in “labour flexibility”, I.e policies to weaken trade unions and caps on minimum wages.

– Financial liberalisation that removes restrictions on what foreign banks and corporations can buy, and easing the flow of international capital in and out of countries.

– Austerity measures, which cut social spending such as education and healthcare while increasing taxes on ordinary people.

– The devaluation of national currency. Devaluation purposefully undervalues the labour of the entire workforce, allowing those from the imperial core to purchase periphery labour for pennies on the dollar, while making imports very expensive for the exploited country. The stated purpose is to keep a country’s exports competitive, but this ignores how the SAPs force Global South countries in a race to the bottom and to maintain a reliance on the Global North.

Within the 1,550 debt relief programs given by the IMF from 1985 to 2014, as many as 55,465 political conditions were attached. (Ministry of Foreign Affairs of the People’s Republic of China, 2023) These policies were carefully selected tools; guided by the “Washington Consensus”, 10 economic prescriptions written by economist John Williamson, these neoliberal policies were presented as the End of History’s guiding hand finally arriving to develop the developing world. However, keeping in the theme of this essay, this overt goal was hiding a covert dimension: maintaining Western economic dominance and subordinating all spheres of society to the aim of maximum profit. These entities are inherently paradoxical: to supposedly liberate the market and end control by bureaucratic States, coercive action is needed by public institutions funded by the State. Referring to my points about “concealed intent”, we should establish the concrete fact that the harm done is not a product of faulty ideology or accidental malpractice:

“The fact that Africa’s public debts piled up, year after year, even as capital flight drained African economies and made timely and full repayment of these debts an impossibility, tells us that the problem was not simply creditor ignorance or ineptitude. These were transactions among consenting adults. The creditors were not naive babes in the woods. They included sophisticated international financial institutions […], the world’s most powerful governments, and the world’s biggest commercial banks. The creditors knew, or should have known, the score. And they continued to lend.”

(Ndikumana, p.23)

This intentionality is confirmed by a 100-page resignation letter from former IMF senior economist Davidson Budhoo (1990):

“…we manipulated, blatantly and systematically, certain key statistical indices so as to put ourselves in a position where we could make very false pronouncements about economic and financial performance.” He admits how after decades of these SAPs, most countries have not been able to pull themselves out of increasing debt while western corporations profit off cheap labour and newly available natural resources. This prevented countries from developing their economies for the public good, which had a massive human cost: violent conflicts proliferated, public health declined, and poverty was entrenched. Policies by the IMF were made with “utter disregard to local conditions” and led countries to “self-destruct” and “unleash unstoppable economic and social chaos”. In his letter, Budhoo exposes how the manipulation of statistics was used as their “most lethal weapon” against the arguments of governments and peoples “protesting […] against the need for currency devaluation and/or other measures to cut the real wage rate, initiate mass layoff of workers in the public sector…” (p.15-16)

In a particularly damning passage, Budhoo explains the extent to which data was manipulated:

“- we jacked up the fiscal deficit for 1986 by TT $1.9 billion over its actual level;

– we invented, literally out of the blue, TT$1.5 billion of “unpaid bills”, by the Government (build up of domestic arrears that never were);

– we augmented the approved 1987 budget deficit by around TT$850 million over its actual level;

– we overstated the decline in private sector deposits in banks in 1986 by some TT$250 million;

– we showed the deficit on the current account of the balance of payments as being above TT$500 million above the actual level;

– we inflated government transfers to the public enterprise sector in 1986 by some TT$1 billion over the actual level.

These are not minor deviations due to technical factors, or sloppy calculations on our part. Nor can we plead ignorance of what was happening, or lack of available information.”

(Budoo, 1990, p.22)

Wealth Extraction and the Importance of Unequal Exchange

This part of the essay has shown how the wealth extracted from the Global South is hidden through purposeful omissions and faulty statistics; through financial chicanery, corporations conceal profit flow from arms-length relationships, maintaining the invisibility of their operations. The flow of value from producers in the South to the capitalists in the North vanishes in official reports, but this can be combated by the work of other researchers: the book “Africa’s Odious Debts” highlights the methods used to get around proxy asset holders and bank secrecy jurisdictions, examining the “sophisticated statistical detective work” (Ndikumana, p.38) that is required. Thanks to work by them and others, there are staggering figures that empirically demonstrate the scale of the resource and labour extraction from the Global South; for instance, the 2022 paper “Imperialist appropriation in the world economy: Drain from the global South through unequal exchange, 1990–2015” estimates that drain from the South to the North is worth $10 trillion a year. Another study, “Plunder in the Post-Colonial Era: Quantifying Drain from the Global South Through Unequal Exchange, 1960–2018”, accounts for lost growth and places the estimate at $152 trillion since 1960.

Both papers emphasise the economic theory of “unequal exchange”, which argues that global price inequalities and wage inequalities are systematic, “a result of historical and contemporary forces that depress the costs of labour and resources in the south”, with growth in the North “rel[ying] on a large net appropriation of resources and labour from the global South, extracted through price differentials in international trade.” (Hickel, 2021) The Marxist economist Arghiri Emmanuel, who coined the term, argued that wages cannot be determined solely by the technical realities of production and circulation, the “ideal” conditions described by Marx. Due to Capital being an incomplete project, Marx was never able to open up his closed model to foreign trade, which he intended to do so – Lenin carried this forward and argued that one of the major factors of imperialism was capital exports. His view was that monopolies concentrated capital in the core to such an extent that they found it necessary to export capital in other areas of the world to create new profits. This was generally correct, but due to limited scholarly information (and his time being taken up by other activities), he missed how capital export was different when exported to settler colonies. Instead of industrialising and developing other nations, as Marx had thought would happen, (“The country that is more developed industrially only shows, to the less developed, the image of its own future.“ – Marx, 1867, p.7) the relationship was more exploitative than even Lenin considered. As Marxist economist Utsa Patnaik explains:

“…it was the tropical colonies that had huge trade surpluses and earned gold and foreign exchange from the world. Researching the details, we find that the metropolis took all of the colonies’ foreign earnings, and this allowed the metropolis to export capital to regions of European settlement. The producers of the export goods back in their colonies were never actually paid for their exports because the ‘payment’ came out of the cash taxes collected from the very same producers.”

(Patnaik, 2019)

Modern imperialism now works indirectly, through the exploitation of wage differentials between north and south. Emmanuel posits that the depression of wages in the South is determined by a multitude of political and social causes: these include the colonial dispossession and destruction of subsistence economies, the 20th century coups by Western powers against national governments in the post-colonial era, and the crippling policies imposed by the IMF and World Bank that continue today. Wages are kept low due to these historical forces and by restrictions on migration through global border controls, which prevents wage convergence between workers in the core and workers in the periphery. In Marx’s time, migration was much less regulated, and this led him to believe that wages would gradually converge between workers as they continually move to more favourable areas. Instead, workers are separated based on national borders and thus kept in their economic roles; the migrant crisis we are seeing in Europe is a direct consequence of the cracks in this global system.

In the past, wealth was extracted from the colonies in a direct and violent way – in the present, it is preferred to trust in the mechanisms of the opaque free market to exploit on your behalf. The isolated and excluded nature of production and the diffuse quality of financial exploitation means that neo-imperialism becomes mundane and invisible to those that benefit from it. This is due to the separation of core consumers from periphery producers, which is not by economic accident, but by conscious intent. The aim of this part was to show how the Marxist notion of the source of value being esoteric, is related in a concrete way to the esoteric practices of those who wield value. Exposing this wealth extraction was the first step, and to follow the thread of secrecy, Part 3 will examine how this stolen wealth is kept away from prying eyes.

Part 3 – Hidden Capital: How Offshore Financialization Hides Western Profits

”Each flight of capital out of Africa must have a corresponding inflow somewhere else.”

– Nicholas Shaxson

”The reality is not what you believe, that your Prime Minister has the power to decide on the future of your country: the power is hidden here.”

– Eva Joly MEP, Vice-Chair of the Panama Papers Committee

Financial Unconscious

It is not hyperbole to say that the entire financial system is propped up by secrecy and deceit – in fact, since the 2008 Financial Crash and its fallout, it is uncontroversial common sense. In an ironic way, it has never been more obvious that the functioning of the finance industry is anathema to transparency and accountability, yet this has not stopped the complex ecology of hidden wealth from expanding all over the world. Scandals such as the Panama Papers make front-page headlines (a collection of leaks from Mossack Fonseca, the 4th largest offshore law firm) and expose the existence of these clandestine networks, but no action is taken from governments to limit these forces that lie under the surface of world trade. To understand the reasons for this passivity, we must examine the main mechanism for hiding capital: tax havens.

Investigative economist Nicholas Shaxon defines these as:

“a place that […] attracts business by offering politically stable facilities to help people or entities get around the rules and regulations of jurisdictions elsewhere.”

(2011, p.281)

The aim of sidestepping law has the appearance of illegality, yet this activity is legalised and explicitly allowed by nations and legislators around the world. The distinction between illegal and legal activities breaks down when analysing tax havens, with the situation not as simple as activities of rogue elements behaving outside of international law. Just as a Marxist analysis sees the world economy as being inherently interconnected, the parapolitical lens correctly sees the world economy as being undergirded by a “financial unconscious”, flows of hidden money that allow capitalists of all stripes to keep their ill-gotten gains. The conflict between order and crime is overtly enforced by governments at lower levels of society, but this conflict becomes blurry when dealing with covert, high-level power struggles beyond any arm of the law: “offshore connects the criminal underworld, the financial elite, the diplomatic and intelligence establishment and multinational companies.” (2011, p.7) The centrality of this system to global finance cannot be understated: over half of all banking assets and a third of FDI are moved through offshore zones, with the IMF estimating in 2010 that small island financial centres hold up to $18 trillion, a sum equivalent to a third of the world’s GDP; other estimates place the capital and assets stored in secretive trusts to be up to $50 trillion in value. (2011, p.8)

Tax havens can be defined as:

1. Jurisdictions that have very low or zero tax.

2. The selling of secrecy that protect those who park their money.

3. Places where the financial services industry is very large compared to the size of the local economy.

4. A necessary arrangement for tax havens is that local politics be captured by financial services interests, eliminating meaningful opposition to the offshore industry. Politicians in these jurisdictions are often the same lawyers and accountants who work in administering accounts, and contributions from financial services interests are said to finance 50% of the funds of UK political parties.

5. In turn, this creates an institutional biases towards turning a blind eye to crime and corruption. Fraud is accepted as best business practice, and alerting the forces of law and order to wrongdoing becomes a punishable offence.

The City, the Empire and the Trust

The biggest global contributor to tax evasion is the United Kingdom, with The City of London Corporation at its centre. The history of the City is a long and storied one, but in essence, the City of London is a conglomerate of private businesses that operates as a separate entity, exempt from many laws that govern the rest of the UK. The City of London Corporation owns private police and private courts, and has its own unelected representative in the House of Commons (“the Remembrancer”), whose role is to lobby parliament on behalf of business. The banks have historically worked to remove state supervision, and they have largely succeeded. After the UK’s humiliation in the Suez Crisis, the value of the pound decreased, which forced Britain to limit the banks overseas lending. This left them unable to invest abroad, but they figured out a workaround: the banks made a deal with the Bank of England that if banks intermediated between two non-residents in a foreign currency, this would not be considered by the Bank of England as under its regulatory purview. Dollars became the market of choice in London, which became the London Eurodollar market; banks kept two sets of accounts (one domestic and one Eurodollar), allowing them to have unregulated and untaxed accounting happening “elsewhere”. This attracted international operations to the City and led to most of the City being owned by foreign corporations. Gordon Brown’s final surrender of the control of interest rates in 1997 was the final nail in the coffin for state oversight: “London had become the most important offshore centre in the world – a washing machine for criminal entrepreneurs, politicians, and the big winner in the shell games of globalisation.” (Ramsey, 2010)

The core of the British system is intertwined with the UK’s “second empire”: the Overseas Territories and Crown Dependencies. These are satellite jurisdictions comprised of the Channel Islands (Guernsey and Jersey), where the UK has full powers appoint to government officials, and to impose or veto laws. These tax havens work by attracting international capital, which is either kept in Trusts or funnelled through the City, allowing businesses to clean their money from legal or illegal sources without being charged tax. Most of the wealth held offshore is controlled from the City of London, but it conveniently distances itself as an independent entity when questioned on its connection. In public, these jurisdictions claim they are transparent and are engaged in legitimate financial activities, but the reality is that their services are sold on the basis of their discretion and secrecy. In 1968, the economist John Christenson applied for a position at the Jersey office of one of the world’s major accounting firms. He investigated over 100 of their clients and found that not one was involved in legitimate activity, with “trillions of dollars of capital which apparently belong[ed] to nobody.” (The Spiders Web, 2019, 18:47)

The mechanisms to hide this illicit activity are multifarious, but one major mechanism for tax havens are “Trusts”, which lie at the core of the British model. These differ from the more general banking secrecy used by places such as Switzerland, relying instead on the special circumstances of Britain’s secrecy jurisdictions. Trusts are the bedrock that under-gird complex structures of hidden assets, which are built of networks of shell companies, bank accounts and trustees across various jurisdictions. At the atomic level, a Trust works like this: a person (a Settlor) who wishes to hide their assets (The Trust Property) gives legal ownership to a lawyer (the Trustee) for the benefit of a third person known as the Beneficiary. The Beneficiary has to be a real person who owns, controls and receives profits from a company or asset, even if these belong to someone else on paper. For most cases, the legal owner of the trust and the beneficiary are one and the same, and if they are not, there is usually a legal arrangement between them. The trust creates a legal barrier between the Settlor and the assets, with the ownership of the assets temporarily suspended – none of the parties involved are technically own the assets, which are stuck in limbo. This means they cannot be taxed, and no details can be found about the Settlor or the assets. However, settlors can still maintain control over assets through secret “letters of wishes”, and continue to own and use their assets due to the simple fact that no-one will stop them: this is because there is no registry of trusts, there are no bodies to certify them and no obligation to financial reporting – regardless of the invisibility of these arrangements, it is entirely legal to have a mansion in a trust and still live in it.

These secrecy structures, often a type of trust called a “discretionary trust”, hides the identity of the owners while allowing for offshore wealth to be reinvested and moved around global markets. Offshore secrecy structures are notoriously difficult to untangle, designed to be confusing webs of ownership spread worldwide across numerous havens. A trust can exist in one jurisdiction and trustees in another; beneficiaries might have offshore companies elsewhere, with each of these containing assets owned by the original owner of the trust.

Thanks to groups like the Tax Justice Network, progress has been made in introducing limited reforms: in 2016, the UK was the first country to establish a beneficial ownership registration, and by 2020, 81 countries had similar laws. This appearance of reform is an illusion though, and is likely an effort to further obfuscate financial crime behind a screen of responsibility. Firstly, if these countries begin to log the ownership of these assets, tax abusers can still relocate their trusts to another country with laissez-faire tax laws. Another compounding problem is that even within established laws, there are still glaring cracks for finance lawyers to slip through. Most of these laws only require an individual to be registered if they own or control 25% of a company: the obvious problem is that a company can be owned by five or more individuals, thus having no beneficial owners in the eyes of the law. (Tax Justice, 2020) The reality is that the only way for laws like this to be effective is to drop the threshold to owning at least one share in a company, which has not occurred thus far. The staggering growth of capital flight and its effects on countries merits serious actions to combat it, if only for the benefit of populations suffering from underfunded services and infrastructure. However, the attitude from those in power seems instead to favour encouraging the practise:

“When the CIA was asked in 1992 by Kroll and Associates, working on behalf of the Russian government, to help locate $20 billion that was hidden offshore by the KGB and the mob, the Bush national security team declined to cooperate. The Bush group rationalized, according to Fritz Ermarth, a top CIA policy analyst writing in The National Interest, `that capital flight is capital flight. It doesn’t matter who has the money or how it was acquired even if by theft; so long as it is private, it will return to do good things if there was a market.’”

(Friedman, 2009, p.265)

This view of the market puts faith to “do good” with those who have no motive to invest in unprofitable (yet societally beneficial) schemes; it ignores the flagrant exploitation at the heart of capital flight, and is a weak rationalisation to what is globally recognised as a process of self-interest.

Now that we can see how elites avoid scrutiny and regulation, we can understand financial secrecy as a vital cog in the neo-imperialist machine; financial secrecy enables capitalists to continue their activities unabated. Wealth extraction and storage, enabled by globalisation, is a process built on the back of extensive covert violence which ensures the stability of the extractive systems. In the next part, we will analyse how and why this violence is secretly conducted.

Part 4 – Violence Exported Home and Abroad: Analysing Control through Covert Means

”Governments that violate human rights are almost always the same ones that flout the other key parts of that order – such as invading, coercing and threatening other countries, or breaking trade rules. […] The U.S. will continue to take a stand for human rights for all.”

– Antony J. Blinken, US Secretary of State

“In 1945, the Second World War ended and the Third World War started.”

– Vincenzo Vinciguerra, former member of Italian neo-fascist group “Ordine Nuovo”

”Every Communist must grasp the truth;

Political power grows out of the barrel of a gun.”

– Mao Zedong

A systematic analysis of capitalism must acknowledge the variety of tools at its disposal to subdue hostile forces; it is often forgotten the amount of historical effort it has taken to establish economic and political hegemony. The monopoly on violence is the implicit power of the State, a shadow that lies behind tax collection, the ballot box and the judicial court. However, the state is no longer the ultimate arbiter as in pre-capitalist formations, with direct control over production; it is merely the facilitator for “contracts between free private individuals, […] private property rights and [the protection of] exchange relations by managing the means of violence to maintain order internally and externally.” (Ahmed, 2016, p.59) This alleged distance between the state and private capital is paradoxically the aspect that allows for their enmeshment; labour is made to believe it is a member of a free market, while the violence required to create that market is concealed within a framework of law. To enforce the capitalist system of private control over labour and resources, requires a careful mix of stability and instability, with one often following the other. Countries like Chile in the 1970s are thrown into unstable civil wars, while in the aftermath dissent is put down with brutal force.

Globalisation, or the world consolidation and expansion of capitalism, is predicated on the systemic application of not just a single “deep state”, but of a “deep system” that incorporates intelligence services, the military-industrial complex, crime syndicates and transnational corporations. Although the United States and NATO play a large role as the current global hegemon, their control relies on the collaboration of many other military, intelligence and terrorist groups to manipulate the trajectories of local and regional politics. This is done through various techniques: acts of terrorism, military coups, assassinations and psychological operations are all part of the playbook. Instability is fostered in the West through a “Strategy of Tension”, employed by clandestine groups to sow chaos and prevent left political groups from gaining a foothold. The right-wing terrorist Vinciguerra, employed by the Italian military secret service, described it in morbid terms:

“You had to attack civilians, the people, women, children, innocent people, unknown people far removed from any political game. The reason was quite simple. They were supposed to force these people, the Italian public, to turn to the State to ask for greater security. This is the political logic behind all the massacres and the bombings which remain unpunished, because the State cannot convict itself…”

(Ganser, 2005, p.7)

Security is thus achieved through systemic insecurity. Legally sanctioned violence is insufficient; “extra-legal” activities are a tool of statecraft that, by their nature, must remain hidden to be effective. This is why intelligence services and the networks they maintain are the main vector for these operations. The influence of organisations such as MI6 and the CIA are the history of “parallel structures” that organise violence and subterfuge, to subordinate institutions, territories and labour movements.

Covert Action in the Global South: Subverting De-Colonization

First, let us examine the “extra-economic” force used in the periphery. The indirect economic violence wrought on these nations can only be achieved through direct violence, exemplified by the prevention of national liberation, de-colonial and socialist forces of taking ownership of production throughout the 20th and 21st century. The book “Killing Hope” by William Blum (2003) documents the various covert coups, assassinations and military operations conducted by the United States against the Global South; in total, the United States has launched 251 military interventions since 1991 and 469 since 1798, with only 11 having a formal declaration of war. This list also does not include covert actions or instances where US troops have occupied areas with security agreements and military bases. Nearly every single country in South America, the Caribbean and Africa have been subject to this international violence.

These operations were like the “militarized extension of 16th century English agrarian enclosure on a global scale – a vehicle of Anglo-American primitive accumulation by which political violence and state terrorism were deployed to forcibly open markets and establish national political-institutional architectures conducive to labour dispossession and Western capital penetration.” (Ahmed, 2016, p.71). The organisations involved are more “deep” than simple political manoeuvring between parties; they are “meta-political”, collaborations between various groups with mutual class interest: the assassination of Patrice Lumumba is known now to have involved Belgian paratroopers sent in by UK planes controlled by MI5 and MI6; the CIA also aided with plotting and with providing weapons and money to local Congolese leaders; and Belgian mercenaries carried out the killing by firing squad, with the new regime being supported by Belgian mining companies. (Blum, 2003, p.156-162)

In the 20th century, the anti-communism of the Cold War gave a casus belli to any intervention deemed necessary; “a peasant in the Philippines, a mural-painter in Nicaragua, a legally-elected prime minister in British Guiana, or a European intellectual, a Cambodian neutralist, an African nationalist – all, somehow, part of the same monolithic conspiracy…” (Blum, 2003, p.10) It mattered little whether they were communists or not, but whether they advocated for “self-determination” outside the narrow perspective of US policy. This continued after the fall of the USSR, but instead of anti-communism, “human rights abuses” were invoked to instigate wars that crippled nations and sent millions into poverty. NATO’s mandate of “Responsibility to Protect” led to one of the worst modern examples of this: the war against the Libyan government of Colonel Gaddafi. Though not perfect, Libya enjoyed the highest living standards and life expectancy of any country in Africa, assisted by Gaddafi’s refusal to acquiesce to neoliberal economic policy; schools and hospitals were free, conditions for women were better than other Arab nations and the country boasted the highest literacy rates on the continent. (Global Research, 2021) The abuses cited by NATO to justify their invasion were outdone by the brutal war that followed, that bombed its hospitals, schools and water distribution systems. The profits made from rebuilding the country with IMF loans and from freezing Libya’s overseas financial assets brought in billions of dollars for Western investors. Only violence could create this new “free market”.

Direct intervention is only one overt technique: a 2008 U.S Army Special Operations Field Manual, revealed by Wikileaks, described the use of “irregular forces” to support military objectives. These are comprised of secret collaborations with criminal terrorist networks:

“[Unconventional Warfare] must be conducted by, with, or through surrogates; and such surrogates must be irregular forces … These forces may include, but are not limited to, specific paramilitary forces, contractors, individuals, businesses, foreign political organizations, resistance or insurgent organizations, expatriates, transnational terrorism adversaries, disillusioned transnational terrorism members, black marketers, and other social or political “undesirables.”

(Ahmed, 2016, p.76)

This use of disposable proxies and patsies to do “dirty work” is what hides security states from culpability, allowing them to cut off branches of a network as soon as an objective is completed. This is a basic tool of intelligence, and a homegrown technique that was cultivated in 20th century Europe.

Covert Action in the Global North: Operation GLADIO

Although I stated in Part 1 that Western prosperity ensures a level of passivity, preventative action still needs to be taken against potential left-wing movements, especially in the wake of conflicts that demonstrate the destructive capabilities of inter-imperialist rivalry. Most historical revolutions have occurred in the wake of war, and with the last major conflict in Europe plunging millions into poverty, a vast secret network was implemented to prevent this possibility.

In 1990, Italian Prime Minister Giulio Andreotti confirmed that a secret army commanded by NATO existed across Western Europe, shaping 20th century politics towards increasing securitization. In the aftermath of WW2, the populations of countries liberated from fascism were increasingly turning to socialist ideas in the light of collaboration by capitalists with fascist atrocities. As the Nazi’s withdrew from Europe, they left secret agents in the former-occupied countries, known as “stay-behinds”. These were selected from the SS and the fascist black legions, and were poised to fight the “Fifth Column” of the USSR in the event of another imminent war. The OSS, precursor to the CIA, was also worried of an invasion by the USSR. James Angleton, a prominent OSS agent, started recruiting these Nazi stay-behinds “because he figured that the best way to control the communists was to hire fascists.” (Gladio, 2022, 10:36) The OSS left guns and explosives hidden in caches around Europe for the network, and leading officers were trained with US special forces and British SAS. The secret armies (code-named “Gladio” in Italy, with other names across Europe) were organised and directed in secret, with most politicians unaware; it was only revealed through scandals in the 1990s that The Supreme Headquarters Allied Powers Europe (SHAPE), directing organ of NATO’s military apparatus, coordinated the whole of the network. As it became obvious a Soviet invasion would never arrive, the secret war strategists in London and Washington fought a secret war against the communist parties in European democracies.

“The Italian problem was different because their principal enemy was not the Soviet Army, but the threat posed by Italian Communism. They got 40% in the elections. […] That’s why he had these task forces.”

– Andre Moyen, Belgian Military Intelligence 1938-1952

To do this, they directed the networks to carry out shootings, bombings and raids; these were blamed on anarchists, communists and the Red Brigades to prevent any possible support for left politics. In Italy, the chaos that ensued was named the “Years of Lead”, which lasted from the 1960s to the 1980s; two major events in the era, the kidnapping and killing of Italian prime minister Aldo Moro, and the Bologna train station bombing which killed 85 people, are now both known to be the result of Operation Gladio’s far-right terrorists. (Ganser, 2005, p.80) Gladio was not limited to Italy, with Belgium, France, Spain, the UK and Germany all having their own secret armies and reigns of terror; the reality is that a secret world war was being waged throughout the 20th century, with democracies being managed at home and abroad.

The story of Gladio is not an isolated tale meant to shock the reader; I wish to highlight how secret political violence enacted by the capitalist state has been part of its established functioning for decades, even while its political and legal structure disavows its actions. The threat of a turn away from capitalism, even in the smallest of ways, was enough for our official institutions to murder civilians and pin the blame on innocent people – this is not a fact that should be taken lightly. What should be understood is that these incidents are a pattern of systemic abuse by the intelligence community, that use and discard people to enact objectives unconcerned with the wellbeing of the people they claim to protect. Spies are not moral people by trade – duplicity, gaslighting and violence are their tools to manipulate, coerce and bend people to their will.

Perhaps we should pay more attention to the activities of those who wish to be hidden.

Conclusion

”Freedom does not consist in any dream of independence from natural laws, but in the knowledge of these laws, and in the possibility this gives of systematically making them work towards definite ends.”

– Friedrich Engels, Anti-Dühring

To recap, I have explained how the extraction of surplus labour-value is hidden in the obfuscation of the value-form; how and why production is hidden in the Global South; how extracted wealth is hidden offshore; and how hidden violence is perpetuated at home and abroad. Each of these different aspects of capitalism’s duplicity expose a contradiction at the heart of the system; the functioning of this system is based on systemic disfunction, that it is embarrassed about and must hide. This is why there are legitimation narratives, coverups, obfuscations and lies. If the system were truly impenetrable, if the people did not care, then the intelligence services would not have to spend millions of dollars maintaining the secrecy of their activities. The idea that the elite do not care what the people think is a lie: it is all they care about, for fear of what may happen.

I would like to stress that secrecy’s relevance to politics is not about a quest to enlighten the masses with esoteric knowledge – without concrete action to organise, agitate and govern, no matter how many people you convince, the world will not change. What is useful about this parapolitical paradigm is that it offers a method of “discernment”, that informs positions to take on a political line or program. Understanding how intelligence networks operate, how financing and bribery are illegally conducted, and who the working class is constituted of; these are the things that produce considered and careful politics.

Political philosophy should be concerned with the precise questions of how to enact change; the great strength of Marxist thought is that instead of appealing to an ideal of how the world should be, as the Utopian socialists did, it is concerned with the limits of the world that we live in. Rather than imagining a perfect world, we need to contend with the limits placed on us and act from there to overturn systemic issues; this is the essence of a materialist perspective and why history is so philosophically important for Marxist theory. My contribution is that I see the question of secrecy as one specifically concerned with the limits of our historical theory and practical action. For a scientific understanding of our historical moment, we need to attempt to uncover all the historical events, class motives and economic forces influencing us; only by acknowledging the secret and unknown aspects, can we reach full understanding. A central aspect of philosophical materialism is that the world is knowable, with no things-in-themselves; therefore, secret political structures are knowable. We should not shy away from social or political structures that are kept out of sight, and we should question what is readily given to us: I see recognising the fact of secrecy as cultivating a “philosophy of political discernment”. With a materialist understanding, suspicions towards mainstream narratives should not be consigned as conspiracy or quack thinking; a little bit of paranoia is sometimes helpful, as sometimes, they really are out to get you.

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