[No.5] The political stance of the Communist Party of Greece… a communist stance?

Chilean Communist Party (Proletarian Action)

September 23 2023

Part 1: Critical approach to the positions of the CPG​

• Reasons for a response to the Communist Party of Greece (CPG)​

• Greece must leave NATO! Or should not it?​

• The CPG’s subterfuge to avoid debate​

• No support for capitalists?​

• Reactionary Venezuela?​

• The member organizations of the Platform “ignore or deny” that the current mode of production in the world is capitalist…

Part 2: Criticism of the ideological foundations of the CPG​

• A handful of countries?​

• “Imperialist pyramid” or Lenin’s theory of imperialism?​

• Idealism hidden in “imperialist pyramid”

• Methodological error​

– No participation of communists in governments led by the bourgeoisie?​

– Are there no stages between capitalism and socialism?​

– Erroneous positions are not harmless​

– Incorrect and damaging derivations​

Part 3: Imperialism vs. imperialism?​

• A long work​

• Brief and concise summary of the “imperialist pyramid” and the CPG study method​

• A big mess​

• China and Russia belong to the G20​

• State presence in Russian companies​

• Foreign penetration of the Russian economy​

• “Gigantic amounts” of capital export from Russia​

(The previous sections have been published in past issues.)

“Gigantic amounts” of capital export from Russia​

What does the CPG lecture us on the “export”1) of capital from Russia?

“In 2014, Russia ranked eighth among exporters of Foreign Direct Investment (FDI) globally and fell to 18th place in the world ranking due to sanctions in 2018. In 2021, Russia’s FDI reached $65.189 billion, of which $1.808 billion had been invested in CIS countries and $63.381 billion in ‘far’ countries.”2)

Thus we learn that in 2014 (9 years ago) Russia occupied a remarkable 8th place in the “ranking” of the largest “exporters of capital” in the world. It seems that the CPG considers this to be a relevant “scientific” data to prove that Russia is a great exporter of capital, thus fulfilling the “scientific requirement” that Lenin had established for the definition of an imperialist country. Unfortunately for the CPG, Russia was not stubborn and did not retain this place in the “ranking” of the world’s largest exporters of foreign direct investment and decided to drop 10 places in 2018 to a not so spectacular 18th. For 2021, the CPG simply omits Russia’s place in the “ranking”. Instead, we read a huge number.

The astuteness of the CPG never ceases to amaze us. Reading its paragraph on Russia’s capital exports, what remains in the head is the data delivered for the year 2014, forming the imaginary that Russia would be a major exporter of capital that would occupy a place among the “top ten” of the largest “exporters” of capital of the countries recognized by the United Nations and for which data are available.

The place occupied by Russia in 2021 was 20, in other words, from the year 2014 to the year 2021 Russia lost 12 places. What imperialism!

But, the issue of capital export is not only one of numbers, that is, of quantities of capital, but also of the way in which capital leaves a given country for abroad. For this it is necessary to understand what is export3) of capital. Now, between the concepts used by political economy and those used by the economic science of scientific socialism there are profound divergences. So also in how to understand the outflow of capital from a given country abroad:

The first, i.e., political economy, distinguishes two forms of capital outflow from a country abroad: Foreign Direct Investment (FDI) (the capitalist invests in assets, usually by way of the purchase of shares) and Foreign Indirect or Portfolio Investment (FII) (the capitalist invests in funds or portfolios). The way in which the capital is placed abroad defines, according to this conception, its type, or rather, its character. Regardless, however, of the form that capital assumes when it leaves the country and is placed abroad, this conception considers both forms of capital outflows as capital exports.

Different is the conception of capital export according to the economic theory of scientific socialism:

“We–says Hilferding–understand by capital export the export of value, which is destined to create added value abroad.”4)

This involves the purchase of means of production, labor power and sources of raw materials abroad. Not all capital leaving a country in the form of money to be invested abroad is capital export. 

It seems to us that the CPG does not distinguish between the forms of capital leaving a given country abroad, at least not in the way that the economic theory of scientific socialism does, perhaps because, without saying so openly or perhaps without realizing it, it adheres to the postulates of political economy, that is, to the postulates of the ideologues of the bourgeoisie.

The economic science of scientific socialism distinguishes the outflow of capital not according to the form in which the capital is invested abroad (directly or indirectly), but according to the aim which its owner, the capitalist, pursues in investing the capital outside the country. The capitalist pursues:

• the creation of new value added through the purchase of labor force in the country receiving the capital (the investment) and of the means of production necessary for the exploitation of that labor force5) and, if the industry receiving the capital belongs to the extractive sector of society, of sources of raw materials; or

• the redistribution of the value added already created.

When the outflow of capital from a country to a foreign country is aimed at creating new value added by exploiting the workers of the country receiving the capital, it is called capital export. If the aim of the capitalist is not to create new value added, but to redistribute the capital created in his own country, it is called capital flight6). For example, if the owner of capital in a certain country does not want to pay the high taxes imposed by the State of his country and knows another country where the tax burden is low or nil, he decides to take his capital out of the country and place it in that other country. In this process no new value added has been created, but the value added created in the capitalist’s country of origin has been redistributed to the second country. Or another example: an organized crime capitalist wants to cover the tracks of his misdeeds. Knowing that there is a country that does not demand explanations about the origin of the money, he decides to take the money out of his country and deposit it in a bank abroad, where he can hide the money obtained by illegal means without major problems and thus evade national legislation. Once again, no new added value has been created, but a redistribution of that already created. The country receiving the escaped capital can benefit in two ways: either through low taxes, or through the circulation (in its own economy or abroad) of the foreign capital, i.e. the capital that escaped from the country where it absorbed new value and where it grew.

Capital that leaves a country without creating added value abroad is therefore escaped (and not exported) capital.

In summary: In the first form of capital outflow (intended to create new value added), the export of capital, we find mainly what political economy calls FDI, but also partly what it understands by FII, for example, when a bank (or more rarely an industry) makes a loan to organizations abroad (these organizations can be other banks, industries and even governments or public enterprises) that creates new value added indirectly because it allows the borrower to invest it in something to create value added. According to the economic theory of scientific socialism, these cases, i.e., cases in which one organization lends money to another organization abroad, also constitute capital export and are relevant both for understanding imperialism and for defining imperialist countries.

A concrete example of capital export is the installation of branches by the Santander Bank in most of the world’s economies (capital export through the purchase of labor, means of production and/or sources of raw materials) to exploit workers in distant regions.

A less clear example of capital exportation is Santander Bank’s lending to the Chilean Army7). If the loan to the Chilean Army indirectly creates value through the transactions carried out by the Chilean Army and the Chilean Army repays the loan with interest to Santander Bank, Santander Bank has engaged in capital export in the form of a loan. If, on the other hand, Santander Bank decides to lend the money to the Chilean army for “altruistic” reasons (i.e., to receive services from the Chilean military) without receiving interest, it is not a capital export but a capital flight.

In the second form of capital outflow, capital flight, that in which no new added value is created, but rather the added value already created is distributed, we find, as we have mentioned, from speculative acts (speculation with shares in the stock exchanges and the derivatives market, speculation with the value of currencies, metals, etc.) to corruption and organized crime whose perpetrators seek to hide their traces (e.g. tax evasion, money laundering, illegal commercial transactions), including money transfers to NGOs, political parties, etc. When a company invests its monetary capital abroad (usually in a bank) without creating new value, but in order to:

1. transfer the value added from its own country to the country where it invested the funds8), or.

2. participate in the process of distribution through speculation of the added value already created, 

then the economic science of scientific socialism understands this kind of capital outflow not as capital export, but simply as capital flight. Capital export, then, according to scientific socialism, is essentially an outflow of money capital (sometimes even in physical form, i.e., in the form of means of production) that ultimately leads to the creation of surplus value.

The export of capital (in the form of investments or loans) must be distinguished from capital flight, which is usually a corrupt act, rejected even by sectors of the bourgeoisie itself, in which various capitalists place their capital, in the form of money obtained on the basis of the exploitation of national workers, in some “tax havens” or similar countries in order to evade taxes, hide illegal acts, etc. Nor does the placement of capital in, for example, stock market values for speculative purposes, count as capital export.

Therefore, not all capital outflows from one country to another have theoretical relevance for the study of a nation’s imperialist character.9) Only capital destined for exploitation to create value added has analytical relevance in this regard.10) However, measuring exactly how much value added flows back to each country that has exported capital is a daunting task that is far beyond the scope of this article, so such an investigation will be omitted on this occasion. Comparing data on the amount of capital flowing out of the country and trying to determine (approximately) what proportion of this is capital export and what proportion is capital flight will be a sufficient indication, at least for the purposes of this article, which is to answer the CPG’s argument that there is supposedly sufficient data to demonstrate Russia’s possible imperialist character.

The concepts used by political economy differ from those used by the economic theory of scientific socialism, and consequently the available statistical data are not structured according to the logic of the economic theory of scientific socialism, but according to the concepts used by political economy. This complicates the research work for those of us who adhere to the first type of science, but does not make it impossible.

In this sense, an important fact that brings us closer to the study of capital flight and export from Russia is the determination of the destination country of capital leaving Russia. If the destination countries are countries with rules that facilitate tax evasion or concealment of traces of illegal activity, the capital (at least a large part of it) with such destinations cannot be considered as capital export, but as capital flight, which, as we have already noted, consists of the outflow of the surplus value that has increased a certain capital in one country as a product of domestic social exploitation and ends up circulating or paying taxes or both in another country.

According to the database of the IMF data11), in 2021, more than 80% (!) of the capital leaving Russia will end up in countries with legal provisions favoring tax evasion or concealment of illicit traces, including Cyprus, Austria, the Netherlands, Switzerland, Jersey and Singapore. These five countries occupy at the same time the first five (!) places in the outflow of Russian capital abroad. This proportion remains very constant over the years, since 2009, according to the same source. Some 20% of capital outflows can be qualified as capital exports.

Cyprus, which received no less than 54% (!) of the capital outflow from Russia in 2021, with a population of just over 1.2 million inhabitants, is not a country of which it can be said that the big Russian capitalists “exploit millions of workers”. Although Cyprus was one of the countries removed by the OECD from the list of so-called “tax havens”, it still maintains legal structures very similar to those of such “tax havens”. Forming a company in Cyprus with a bank account can still significantly reduce the tax burden for your business. In addition, Cyprus offers a wide range of benefits and incentives to foreign investors and companies, which are comparable to those offered by numerous tax havens. Cyprus was organized as a tax haven immediately after the unification of Germany, geared mainly towards Russian billionaires, as well as Eastern European individuals and companies. Austria is another case that is on the verge of being a “tax haven”, because it allows to circumvent the tax authorities through the tax-free deposit in Austria of money made in the country of origin, thanks to a double taxation agreement between Austria and Cyprus.

Very different (not to say diametrically different) from the capital export situation of Russia is the capital export situation of the imperialist countries. 

Of all the capital that left Canada in 2021, more than 75% (!) was not destined for a country where there are legal provisions favoring tax evasion or allowing the concealment of illegal activities12). In the case of France, 75% of the capital that left the country the same year cannot be considered as capital flight13) but as capital export. More than 75% of the capital that left Germany in 2021 can be classified as capital export. Only slightly more than 20% capital flight. In the case of the United Kingdom, more than 80% (!) of the capital outflows in 2021 can be classified as capital export and only slightly more than 15% as capital flight. In the case of the United States, the same figures are over 70% and slightly over 25%, respectively.

What a difference between imperialist countries, whose capital outflow consists in putting themselves in a position to exploit human beings and nature, and a country like Russia, where capital outflows mainly to evade taxes or to cover traces of any kind.

These facts that we have just pointed out do not speak at all of a so-called imperialist Russia, but of a Russian national oligarchy with little patriotic feelings. We hope that the sanctions against this country will serve to deeply reduce the radius of tax evasion and capital flight from Russia in general. The Russian oligarchy exploits its workers and then, without the slightest patriotic feeling, takes money out of their country to evade taxes or even the law. Today we believe that it is in the interest of the peoples of the earth who aspire to national sovereignty, or at least a greater share of national independence, that Russia has a healthy economy. Capital flight, in our opinion, is an unpatriotic act because it deprives the homeland of resources so vital for running a war economy and preparing against a NATO military escalation against Russia.

The bourgeois press understands the fact of capital flight much better than the CPG and rejoices in this fact:

“Another pressure on the Russian currency is the ongoing capital flight. Faced with the prospect of an uncertain future, many Russians began moving their savings abroad since the war broke out. Transfers worth the equivalent of more than $1 billion were made in three days of domestic turmoil in late June, according to the central bank, when mercenaries from the Wagner group rebelled against the army.”14)

Just today, capital flight has accelerated in Russia. This capital flight should be controlled in Russia with stricter legal and economic measures to encourage domestic production in areas of strategic interest and in the arms industry.

If the capital outflows of all the countries for which the IMF has data were subtracted from the capital “flight”, Russia would be some ten to fifteen places lower in the ranking of the largest capital exporters.

We see that, here too, the bombastic accusations of the CPG against the WAP that “with these statements, the WAP once again seeks to distort reality. It is as if China and Russia do not…” does not hold true.

In the next section we will analyze the “huge” Russian bank.

Notes

1) Below we will point out why the word “export” is in quotation marks.

2) Communist Party of Greece (CPG), op. cit.: “On the so-called World Anti-Imperialist Platform…”

3) This time without quotation marks.

4) Hilferding, Rudolf, “Das Finanzkapital. Eine Studie über die jüngste Entwicklung des Kapitalismus” (in english: “Finance Capital: A study in the latest phase of capitalist development”), Dietz Verlag, Berlin, 1955, p. 468

5) It may be the case that the investor, i.e. the capitalist who exports and places his capital abroad, brings it from his country of origin or acquires it in a third country if the country obtaining the capital does not have the necessary means of production.

6) Since this paper is not an economic treatise, the question of capital transfer is not addressed here, although it is of great importance, for example, for the current process of deindustrialization in Europe and especially in Germany.

7) SETEM, “Banco Santander, Vínculos financieros con empresas y proyectos controvertidos en el mundo” (in english: “Banco Santander, Financial links with controversial companies and projects around the world”), Madrid, December 2007, Federación SETEM, p. 40, in PDF version available at: 

https://documentslide.org/download/documents/setem-banco-santander

8) The capitalist who transfers his capital abroad earns the difference between the tax he has to pay at home and the lower tax he pays abroad.

The country receiving the transferred capital benefits from the payment of taxes that it would not have received if the capital had not flowed into its country. Countries with tax exemptions are usually small countries which, as such, cannot collect large amounts of taxes because they have few workers and a small capitalist class. Thanks to tax exemptions, they attract foreign capital to the country. The country receiving the capital also benefits from the fact that the capital circulates in its own country or that it can have resources to invest abroad.

9) It is precisely due to this fact that we had previously placed the word “export” in quotation marks.

10) “It is essential that–said Hilferding–the surplus value remains at the disposal of domestic capital. If, for example, a German capitalist emigrates with his capital to Canada, produces there and does not return home, this means loss for German capital, denationalization of capital; it is not capital export, but capital transfer. […] One can speak of capital export only when the capital used abroad remains at the disposal of the home country and the surplus value generated by this capital can be disposed of by domestic capitalists. […] The export of capital reduces pro tanto the domestic quantity of capital and increases the national revenue by the surplus value produced.”

 HILFERDING, Rudolf, op. cit. “Das Finanzkapital. Eine Studie über die…”, p. 468

11) The data presented below are all from the same source: International Monetary Fund (IMF), “Table 2-io: Inward and Outward Direct Investment Positions (Total) by End-Year”, by country and for the years 2009 to 2021, in:https://data.imf.org/regular.aspx?key=60564261 

12) No less than 56% of the capital leaving Canada in 2021 was destined for the United States and the United Kingdom.

13) In 2021, 50% of the capital leaving France went to two countries: the United States and Belgium.

14) Infobae, “Las drásticas medidas económicas de Rusia desnudan sus aprietos en tiempos de guerra” (in english: “Russia’s drastic economic measures reveal its wartime predicament”), from Anatoly Kurmanaev, 17 Ago, 2023 10:34 a.m. EST, in: https://www.infobae.com/america/the-new-york-times/2023/08/17/las-drasticas-medidas-economicas-de-rusia-desnudan-sus-aprietos-en-tiempos-de-guerra/

The World Anti-imperialist Platform