Weighing the risks
It seems that the overall answer to whether foreign investment is likely to harm or help may be – it depends.
There may be some truth to the (left wing) economist Joan Robinson’s claim that “the only thing worse than being exploited by global capital is not being exploited by global capital”. But only in the right circumstances.
As a result, we used the following method to try to weigh up the risks:
l If the country’s per capita GPD (adjusted for different price levels in different countries) is over the global average ($17,300), we used only the Political Terror Scale, Press Freedom Index and Modern Slavery Index to determine whether a country went on the list.
l If the country’s per capita GDP was under the global average, we used the SERF score and the Trade Union Rights score to give them an additional adjusted score, and then used both scores to decide if they went on the list.
This means that if a poorer country has a good record on translating money into social goods, and good trade union rights, they are less likely to go on the list.
The thinking was that that makes it more likely that operating in the country will do some good.
Exempting countries in a state of humanitarian crisis
We also decided to exempt any country listed by the ACAPS (an independent Norwegian analyst research centre) as being in a state of severe humanitarian crisis. This is currently Afghanistan, Democratic Republic of Congo (DRC), South Sudan, Syria and Yemen.
This was done for reasons of caution – because of the seriousness of the situation, we felt that we shouldn’t issue blanket pronouncements telling companies to get out.
We do something similar on conflict minerals. We ask companies not to simply leave the DRC, but to commit to stay and to work to ensure that their minerals are not funding conflict. This is partly in response to pleas from the DRC, where workers depend on mining for income.
There is some empirical evidence that more foreign investment tends to be associated with less war, and that war, on average, tends to lead to a reduction in investment, as companies don’t want to deal with the risks of operating in a war zone. But again, it all depends on the details. Violence can lead to increased investment if the violence is to the benefit of the corporations, as happened in Colombia.
Changes to the list
Many of the countries on the list have not changed. However, some countries have been removed – for example India and Vietnam did not make the list this time, although since our methodology has changed, that may not reflect a change in the underlying reality.
There are also some notable additions – Mexico is one. This is greatly due to the Mexican drug war, estimated to have claimed more than 100,000 lives to date, which – astonishingly – puts it amongst the most bloody conflicts currently going on in the world.
Egypt is another, as the human rights situation has collapsed there since the briefly hopeful ‘Arab Spring’ uprising at the start of the decade.
While there are no clear answers in this area, we hope that our new list goes some way towards balancing the risk of aiding an unpleasant regime and harming the people who live under it.