you dont have to read the whole thing, thank you!!
Democratic countries in the developing sector, such as Poland and South Africa, are losing out in the race for American export markets and American foreign investment. Dictatorships such as China or semidictatorships such as Indonesia are winning.
And the trend is growing. As more of the world’s countries adopt democracy, more American businesses appear to prefer dictatorships.
If trade and investment strengthen developing countries, then U.S. businesses may be weakening the very countries they say they most want to help.
These are the conclusions of a report recently released by the New Economy Information Service (NEIS), a think tank set up to gauge the effects of globalization.
"The democratic countries in the developing world are losing ground to more authoritarian countries when it comes to competing for U.S. trade and investment dollars," NEIS said.
"This finding," it said, "raises the question of whether foreign purchasing and investment decisions by U.S. corporations may be inadvertently undermining the chances for survival of fragile democracies."
NEIS compiled the report using U.S. government and World Bank figures on trade and investment. It borrowed political ratings compiled by Freedom House, a human rights organization that ranks countries as "free," "partly free" or "not free" based on the level of their political rights and civil liberties.
In 1989, when the Cold War ended, democratic countries accounted for more than half–53.4 percent–of all U.S. imports from Third World countries, not counting oil. Today, with more democracies to choose from, the democratic countries supply barely one-third–34.9 percent–of U.S. imports from the Third World, it said.
After the same decade, democracies got 28 percent of American manufacturing investment in developing countries, up from 26.2 percent when the Cold War ended. This slight improvement–1.8 percentage points– paled beside the 5.7 percentage-point growth in U.S. investment reported by dictatorships, especially China.
China, which ranked 18th among recipients of U.S. investment in 1989, is in fourth place now, ahead of long-established democratic partners such as Argentina and South Korea.
The NEIS report asked why dictatorships are outbidding democracy for the American market, but said it does not know. "We are left with as many questions as answers," the report said.
"Something is going on, and it’s worth pursuing," said NEIS Executive Director David Jessup. "We can’t say that U.S. businesses have an absolute preference for authoritarian countries. I doubt that the issue of democracy-or-no-democracy is on businessmen’s minds when they make an investment decision. But maybe it’s an unconscious preference."
Wages tend to be lower in dictatorships than in democracies, giving businesses in dictatorships an advantage on selling exports abroad. The investment question is more complex than that, Jessup said, but the report suggested a combination of factors–lower wages, easier environmental laws, bans on labor unions–that give dictatorships an edge.
Such rulers tend to be strong leaders who can provide quick decisions, deliver results and stamp out opposition. These qualities can appeal to many business leaders, who themselves operate in a non-democratic structure.
When Indonesia overthrew its dictator, Suharto, and installed a less authoritarian leader, investors tended to sit on their hands. One currency expert, Ron Leven of J.P. Morgan, was quoted as saying that "democracy is a desirable form of government, but it’s not necessarily the most efficient form of government."
There is an "amorality" here, said Thomas I. Palley, assistant director of public policy at the AFL-CIO and a member of the NEIS team. "Profits and morality don’t mix very well."
Palley noted that dictators, not having to answer to voters or a legislature, can often deliver investment incentives–such as tax breaks, freedom from environmental laws and a docile work force–that are powerful lures for foreign corporations.
But the U.S. government is part of the reason democracies come up short in luring investors, Palley said. "It says that, if you deal with these guys (dictators), you make them more open. This provides the moral reasoning that businessmen want."
The result is a boom in investment and trade with China in the interest of "engaging" the Communist regime there.
Tags: american businesses, american export, authoritarian countries, civil liberties, democratic countries, developing world, dictatorships, effects of globalization, export markets, foreign investment, Forex, fragile democracies, freedom house, human rights organization, investment decisions, investment dollars, losing ground, new economy information service, s corporations, slight improvement, third world countries