Capital flight

[bricolage]

When things turn into arguments about taxing the rich, taxing corporations etc you normally just get the reply of 'but then all the businesses, money' will leave the country and everyone will suffer. Now I know I know socialism must be international and it won't even involve taxation but I'm talking about the here and now, how do people generally respond to these points?

[ZeroNowhere]

Generally I'm the one who makes it.

Otherwise, one can perfectly well run a factory without a capitalist. If we wish to expropriate them, and they just let us and rush off, I really don't see much of a problem. If we're talking about taxing corporations under capitalism, there is not much wrong with the point. Of course, it's a point against capitalism, not socialism.

[Ravachol]

As ZeroNowhere said, I don't see much of a problem. Seeing as we are struggling AGAINST capital, I do not see much of a problem with capital fleeing. They will not be able to take their means of production with them so the workers can seize those. Obviously this is a highly unrealistic scenario as the revolution will be a gradual process and when the boiling point has been reached, capital flight will be the least of the worries of the bourgosie and their defenders.

[Psy]

As ZeroNowhere said, I don't see much of a problem. Seeing as we are struggling AGAINST capital, I do not see much of a problem with capital fleeing. They will not be able to take their means of production with them so the workers can seize those. Obviously this is a highly unrealistic scenario as the revolution will be a gradual process and when the boiling point has been reached, capital flight will be the least of the worries of the bourgosie and their defenders.
Argentina in 2002 showed capitalists will try to flee with capital in the form of even extracted raw materials not yet processed, it is actually very easy for capitalists to change the delivery orders of freight trains to drop off their loads cross borders if railway workers are still following the orders of their bosses. So in that regard it is of strategic importance transport workers to be close to the vanguard if not part of the vanguard itself.

Of course if for some reason we wanted to prevent capital flight we just need bank workers to take over the banks before the capital can be moved.

[vyborg]

The capitalist use this excuse but not when they are really interested in something. Look at what they did after 9/11, when they were really interested in tracking financial flows of their former allies of Al Qaeda...they were very much able to do it even if the world is globalized, the capital moves constantly etc etc...

It is only a political excuse to avoid to bother the rich

[cyu]

Excerpt from http://z9.invisionfree.com/NS_Anarchy/index.php?showtopic=36&st=660

> the appetite for crapola in America seems endless
> ("Precious Moments" collectibles, anyone?) while the
> purchasing power (again, here's the monetarization of
> demand) of the Chinese population is much less.

Again, this scenario sounds much like slavery (though an indirect form of slavery). The important question is how this kind of scenario develops. I'd say economies like this develop around finance centers. These centers may be Wall Street, a gold mine, a government mint, a counterfeiter operation, or a pyramid scheme. What comes out of these finance centers are representations of wealth, but not wealth in themselves. (Real wealth has to be imported in from elsewhere around the world.)

So anyway, imagine the head of the gold mine or counterfeiter operation with lots of spending money. This of course allows him to consume a lot more than everyone else, since he can spend much more than everyone else. The type of economy that pops up around him turns into a service economy, because, basically, everyone is servicing this guy and his closest cronies. The person at the center is at the top of the pyramind - those directly serving him are the next tier down and are second richest. The "wealth" really does "trickle down" to the rest of the people at the bottom of the pyramid, however, it is only vapor wealth. The real wealth is grown, manufactured, produced, and done by everyone at the bottom of the pyramid.

So if those at the bottom of the pyramid (ie. the manufacturing bases in the rest of the world) want to free themselves from the "finance centers", the first step is to stop accepting whatever it is that these finance centers claim is "wealth" - ie. no "investment instruments", no gold, no paper money, no shares in whatever schemes they promote... and replace that vapor wealth with the real wealth that they are already producing.

[KurtFF8]

Interesting topic. I once had a conversation with a professor of mine about this subject: it was after a lecture on the accomplishments of the Swedish welfare state (and its' origins). He explained in the lecture how Swedish Social Democrats had to plan their strategies around the possibility of things like Capital Flight.

I countered (after class of course) with the question of why they didn't just nationalize industries that would engage in Capital Flight and his response was that the possibility of violence and maybe even civil war would have increased (especially considering the Inter-War period was full of all out class war during this period).

My problem with this "fearing capital flight" argument is that it ignores that Capital Flight is just another tool of the ruling classes against the working classes. There are of course different ways to combat it for example: nationalization. The idea that these socialist strategies will "have consequences" is an obvious fact that the Left accepts, not using those strategies also has consequences (for example, the continued rule of Capital over Labor)

[Durruti's Ghost]

When things turn into arguments about taxing the rich, taxing corporations etc you normally just get the reply of 'but then all the businesses, money' will leave the country and everyone will suffer. Now I know I know socialism must be international and it won't even involve taxation but I'm talking about the here and now, how do people generally respond to these points?

I often use this exact argument as an illustration of one of the flaws of reformism. Capital flight is a real and dangerous risk...to reformism. As a revolutionary socialist, I argue for the seizure of all capital, rending capital flight impossible.

[ckaihatsu]

Not to mention that reformism opens the door to *racist* arguments, as well -- the racial analogue of "capital flight" is "white flight", meaning that wealthy whites upheld social apartheid against those few blacks who were able to make gains in the postwar era.

Today the current version of reformist racist anxiety-mongering is the response to "Once you go black you never go back" -- it's "Once you go white your credit's all right."

[eyedrop]

Interesting topic. I once had a conversation with a professor of mine about this subject: it was after a lecture on the accomplishments of the Swedish welfare state (and its' origins). He explained in the lecture how Swedish Social Democrats had to plan their strategies around the possibility of things like Capital Flight.

I countered (after class of course) with the question of why they didn't just nationalize industries that would engage in Capital Flight and his response was that the possibility of violence and maybe even civil war would have increased (especially considering the Inter-War period was full of all out class war during this period).Capital flight aren't only theoretical concept but a very real thing that happens to smaller degrees every time someone flees their money to a tax haven or just to a country with more capital favourable government, or on the opposite end when an investor decides to not invest in a country due to an unfavourable government. The scandinavian countries still rates as some of the most desirable countries to invest in last time I saw a list (couldn't find one now).

I always wondered how it would work for a reformist government to stop financial movement outward through high taxes on it, so they would be free to reform without the threat of capital flight. Would that be feasible at all? The country wouldn't have much outside investment, but that shouldn't be a gigantic problem since the domestic capital would be forced to invest domestic.

Real capital aren't that affected by capital flight as moving buildings and factories aren't feasible.

[Durruti's Ghost]

Real capital aren't that affected by capital flight as moving buildings and factories aren't feasible.

Moving machines can be, though.

[KurtFF8]

Capital flight aren't only theoretical concept but a very real thing that happens to smaller degrees every time someone flees their money to a tax haven or just to a country with more capital favourable government, or on the opposite end when an investor decides to not invest in a country due to an unfavourable government. The scandinavian countries still rates as some of the most desirable countries to invest in last time I saw a list (couldn't find one now).

I always wondered how it would work for a reformist government to stop financial movement outward through high taxes on it, so they would be free to reform without the threat of capital flight. Would that be feasible at all? The country wouldn't have much outside investment, but that shouldn't be a gigantic problem since the domestic capital would be forced to invest domestic.

Real capital aren't that affected by capital flight as moving buildings and factories aren't feasible.

I wasn't trying to make the argument that it is just a theoretical question, sorry if my post was unclear

[eyedrop]

I wasn't trying to make the argument that it is just a theoretical question, sorry if my post was unclearIt was just a general expansion on the theme that popped into my mind that I fel the need to write down.

[graymouser]

The point is basically correct - if we leave things within the logic of capitalism, the bosses will simply take the means of production and leave. That's why you need a program of transitional demands that go beyond the system. The transitional demand about this is not just "tax the rich" but to establish a sliding scale of wages and hours: mandate a living wage, indexed to inflation, while decreasing the number of hours worked (with no loss of gross pay) until everyone is employed. When bosses declare bankruptcy, force them to open the books; when they close factories and other workplaces, occupy them and nationalize them under workers' control. This is how you get from the common-sense "tax the rich" to a series of measures that goes beyond capitalism.

[eyedrop]

The point is basically correct - if we leave things within the logic of capitalism, the bosses will simply take the means of production and leave. That's why you need a program of transitional demands that go beyond the system. The transitional demand about this is not just "tax the rich" but to establish a sliding scale of wages and hours: mandate a living wage, indexed to inflation, while decreasing the number of hours worked (with no loss of gross pay) until everyone is employed. When bosses declare bankruptcy, force them to open the books; when they close factories and other workplaces, occupy them and nationalize them under workers' control. And then you are left with factories without raw materials to produce products, since you are probably closed off from the world market (Spain was more successfully cut of from the world market than Nazi Germany I think), gold reserves aren't as useful anymore (International money supplies have sky-rocketed away from gold values) and all your foreign currency has flown abroad. Most of your accumulated buying power is set back to 0.

This is one of the reasons why socialism in a small, largely not self sufficient area aren't very feasible.


This is how you get from the common-sense "tax the rich" to a series of measures that goes beyond capitalism.I don't really see how your transitional demands are much different in essence than a standard reformist state.

[Paul Cockshott]

Interesting topic. I once had a conversation with a professor of mine about this subject: it was after a lecture on the accomplishments of the Swedish welfare state (and its' origins). He explained in the lecture how Swedish Social Democrats had to plan their strategies around the possibility of things like Capital Flight.

I countered (after class of course) with the question of why they didn't just nationalize industries that would engage in Capital Flight and his response was that the possibility of violence and maybe even civil war would have increased (especially considering the Inter-War period was full of all out class war during this period).

My problem with this "fearing capital flight" argument is that it ignores that Capital Flight is just another tool of the ruling classes against the working classes. There are of course different ways to combat it for example: nationalization. The idea that these socialist strategies will "have consequences" is an obvious fact that the Left accepts, not using those strategies also has consequences (for example, the continued rule of Capital over Labor)

The most effective emergency strategy is the general cancellation of debt.

[Paul Cockshott]

The point is basically correct - if we leave things within the logic of capitalism, the bosses will simply take the means of production and leave.


No. In general they are not portable. By capital flight people are refering to transfers of funds, purely book keeping operations.

[graymouser]

And then you are left with factories without raw materials to produce products, since you are probably closed off from the world market (Spain was more successfully cut of from the world market than Nazi Germany I think), gold reserves aren't as useful anymore (International money supplies have sky-rocketed away from gold values) and all your foreign currency has flown abroad. Most of your accumulated buying power is set back to 0.

This is one of the reasons why socialism in a small, largely not self sufficient area aren't very feasible.
Well, yeah, that's the theory of permanent revolution in a nutshell, and the reason why Trotsky fought so hard against the Stalinist theory of "socialism in one country." Good summary, I agree with it. The revolution must be international or it will fail.


I don't really see how your transitional demands are much different in essence than a standard reformist state.
Unlike the minimum program, the transitional program is written to force a direct confrontation with capital by taking away the areas in which it can generate surplus-value. Following it through to its end means that, by starting with entirely reasonable demands, a workers government (or workers and farmers government, in the less developed countries) is forced to take the measures that will lead to a workers state.

[eyedrop]

Unlike the minimum program, the transitional program is written to force a direct confrontation with capital by taking away the areas in which it can generate surplus-value. Following it through to its end means that, by starting with entirely reasonable demands, a workers government (or workers and farmers government, in the less developed countries) is forced to take the measures that will lead to a workers state.
I would say that the last 50 years of evidence points towards that the government will be forced towards taking measures that pleases capital? Or is there a certain limit, where if you step over it, the government will be forced to take measures towards a workers state?

Generally a state is more dependant on international capital than the international capital is on the states markets.

[Paul Cockshott]

Generally a state is more dependant on international capital than the international capital is on the states markets.

Not true of countries running trade surpluses like China or Venezuela

[MilkmanofHumanKindness]

When things turn into arguments about taxing the rich, taxing corporations etc you normally just get the reply of 'but then all the businesses, money' will leave the country and everyone will suffer. Now I know I know socialism must be international and it won't even involve taxation but I'm talking about the here and now, how do people generally respond to these points?

First, since the thread is about flight of capital my post will work to discuss the flight of both Human Capital, and Financial Capital.

Second, this is something that does happen. Brain Drain from East Germany to West Germany, from Sub-Saharan Africa to the West, from the United Kingdom to the United States, etc.

Third, there is really very little that can be done to prevent it without resorting to Authoritarian measures to keep people within the country. You could offer perhaps, financing, grants etc. to keep intellectuals within the country doing research. For a Corporation, it belongs to the workers, the previous Bourgeois class is free to leave but all assets remain in the country.

You may notice that the above relies upon a Revolution having succeeded. I assume this because you are talking about what happens to a country after/during socialism, not what happens to a Capitalist Welfare State country.

Capitalist Welfare States may offer reduced taxes, subsidization etc. to keep corporations there.