Special Report

What’s Developing With the Developing Nations?

China is so much better at this than Western investors.

By 11.9.06

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It is de rigeur in international development circles to extol the virtues of Western investment in and trade with the developing world. This politically correct theme has been around for decades. It is dragged out annually during those wonderful gatherings of government and corporate economic moguls amidst baroque opulence at exclusive resorts. There they listen to hired speakers -- and themselves -- discuss the moral and material rectitude of bringing the world's poor the advantages that these nobles already have.

The problem is that the "developing nations" of which they speak are not a monolithic grouping. Sudan clearly is a developing nation, but frankly no one but the leadership in Khartoum seems to approve of how it's developing. Whether the United States and Japan like it or not, North Korea is a developing nation and no one seems to be rushing to help it develop. Of course China for political reasons enjoys being referred to as a developing nation, though it is hard to accept the idea that this great Asian economic power can be equated with, for instance, Uzbekistan.

The fact is that while there may be several tiers of nations that can be considered "developing" (and perhaps a separate one just to satisfy China), investment and development in all these countries only can be considered on an individual basis. Not only is this a legal truism, it is an economic and political necessity.

Recently a striking example of the uniqueness of participating in the economic growth of an under-developed country was made excruciatingly clear in Vietnam. A Dutch bank's office in Vietnam was used as an unwitting intermediary by an ambitious employee of the national state bank to transfer that bank's money in order to speculate on foreign exchange for himself.

Unfortunately for all concerned the forex market took a tumble and the state bank found itself short $5.4 million. The state bank employee and two local workers of the Dutch bank were jailed. The Vietnamese authorities then took the matter a step further by suggesting they might release the jailed, but untried, local staffers of the Dutch bank if the losses were covered by the Dutch concern.

The law under which the Vietnamese acted is one of those communist state devices that permit the government to criminally charge any entity that causes an economic loss to the country, even though the Dutch bank was a completely unwitting participant. Not exactly a way to encourage investment and trade with this developing nation.

There is no doubt that these industrially poorer nations of the world need help in struggling up the ladder of economic development. It is specious, however, to argue moral responsibility. The world is still divided along a nation-state basis. Countries operate in their own self-interest. If aid to the so-called developing nations is to be successful, it must be tangibly beneficial to the "developed" world's economic and political structure on a national basis.

Perhaps the best example of this pragmatic approach to aid has been China. The Chinese have declared in self-serving general terms they will be the source of billions of dollars of assistance to their "brothers" in Africa. They have offered their assistance in the international sphere claiming they can be counted on to support African interests in the United Nations -- again in the broadest terms.

Most importantly, China has announced at its recent African summit meeting in Beijing that China will be a dependable and major trading partner. African raw materials are to be imported and Chinese manufactured goods and industrial development projects to be exported in return. Now that's a plan to warm any capitalist's heart -- and there wasn't a single pseudo-altruistic businessman present -- unless you count the various African politicians, themselves.

This is the frame of the future extended relationship between China and the nations of Africa. The deals will be cut on the lower level in such a manner as to be beneficial to both parties. The traditional requirements of personal advantage will be satisfied where necessary and called whatever is deemed appropriate at the time. China has no Foreign Corrupt Practices Act, nor does it need it.

The ironic thing is that Africa will benefit substantially from modern China's ancient approach to trade and investment. The Chinese have been in the business of international trade for over five thousand years. They do not suffer the pangs of embarrassment over their newly found wealth nor guilt of past colonial exploitation. They meet each of their "developing" brother states as equals. Of course as in all things Beijing views itself the more equal. Don't take it personally; it's just business!

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About the Author
George H. Wittman writes a weekly column on international affairs for The American Spectator online. He was the founding chairman of the National Institute for Public Policy.