Günter Minnerup’s recent article on West Germany (nlr 99) is to be welcomed as a study of the economic and political transformations that have taken place in what is now the most powerful eec country. Minnerup, however, neglects a key aspect of these changes: the growth in West German foreign investments. This communication may do something to supplement nlr’s discussion in this respect; its aim is to document the very striking economic changes which, inevitably, will change Bonn’s role in international affairs within the capitalist and imperialist world. To put the issue in its starkest light: in 1976 West German investment overseas exceeded, for the first time since the war, total foreign investment in West Germany (see Table 1). Until now, the West German and Japanese economies have been contrasted to the us and uk ones. The former showed a much higher rate of internal investment and their international success rested upon their export of their own manufactures. The two major ‘Anglo-Saxon’ economies, by contrast, are dominated by banking and finance capital that invests abroad directly, and by large international firms which also export their investments rather than finished products. It now seems, however, that West Germany is moving closer to the ‘Anglo-Saxon’ model, if it can be called that; partly because the strength of its currency allows it to, but also because this very strength obliges West German companies to protect their overseas markets by making use of the now often much cheaper labour to be found outside the borders of the Bundesrepublik.footnote1

West German firms appeared late on the post-war international scene. Initially, this was attributed to psychological inhibitions, since German property abroad had been expropriated as a consequence of the two world wars,footnote2 combined with the general ban on direct investments abroad which was not lifted until 1952 and the non-convertibility—up to 1958—of the D-mark.footnote3 But psychological states of mind and legal prohibitions cannot provide us with an adequate interpretation of the events, unless they are related to the actual economic situation of a particular time period. In the fifties and early sixties higher profitability was earned from domestic projects than that from expansion abroad, mainly because the home market was quite unsaturated and the government was granting special incentives for home investment in the form of high depreciation rates and various forms of tax relief.footnote4 Later, as home costs soared (and the D-mark revaluations made exports more expensive and foreign investments cheaper), profits were squeezed tightly and many West German companies were forced to venture overseas.footnote5 Added to this was a reluctance to accept extra ‘guest’ workers in West Germany, when subsidiaries could be set up in the labour-abundant countries; also the introduction at home of stringent (that is, costly) regulations affecting the air-and water-polluting industries, especially steel and chemicals, which motivated West German firms to dump their factories in other countries.

The growth of West German overseas investments is listed in Table 1. It shows a rate of growth (based on the us$ figures) in foreign investments that averages 23.6 per cent over the period 1960–73—i.e. one that was exceeded only by that of Japan (31.8 per cent). In the same period the us rate of growth of overseas investment was 9.8 per cent and that of the uk 7.1 per cent.footnote6 It should be noted that the figures in Table 1 significantly underestimate the real value of direct investment assets since, unlike the us and uk statistics for instance, neither the volume of foreign subsidiaries’ reinvestments through self-financing nor the amounts of capital raised locally are included in the statistical returns.footnote7 Moreover, they do not reflect the successive revaluations of the D-mark.footnote8 For a realistic comparison, at least 20–30 per cent should be added to the total figure.footnote9

West German investment overseas is still fairly small relative to the size of its economy. More specifically, although West Germany’s foreign production in relation to annual exports rose from 13 per cent to 35 per cent in the years 1960–73 one should record that us foreign production is more than three times the level of its exports (and remaining more or less stable), while that of the uk is as high as two times (though declining).footnote10 In other words, the very remarkable rate of growth of overseas investments by West German concerns must nonetheless be placed in the overall context. Table 2 shows West Germany’s growing but still relatively small stock of foreign direct investment.

If this is the general picture, what is the quality of West German investment, and where is it going? Table 3 shows that it is overwhelmingly committed to manufacturing, and that most of it is going to the already developed capitalist economies. The significance of this needs to be stressed, perhaps, because it represents a major part of an important shift in European/North American relations, Basing himself on the figures for the fifties and sixties, Nicos Poulantzas once argued that European investment in the usa was relatively less significant than us investment in Europe: ‘whereas the overwhelming part of American direct investments in Europe is concerned with the processing industries, hence directly productive capital, a minor part (approximately a third) of the direct European investments in the usa is concerned with directly productive capital, the greater part going towards the “services” sector, insurance, etc.’.footnote11 However, as Table 4 shows, this is no longer the case. The consistent increase of the manufacturing share of European direct investments in the usa had by 1975 almost reached the manufacturing share of us investments in Europe. It seems likely, on the evidence available, that this increase has to a considerable degree been generated by the expanding activity of West German capital.

The dynamic of the West German economy has, of course, made it an attractive zone of investment for American firms; but it is an increasingly expensive one. From 1959–67, us companies maintained a higher rate of growth of new investment in the Federal Republic than West German firms did in the United States. But while us investment is still growing, in recent years its rate of growth has sunk back so that now West German capitalism is increasing its rate of investment in the United States at almost twice the rate that American capital is increasing its stake in West Germany. As a result, West German direct investments in the usa now stand at nearly 15 per cent of the value of American holdings in West Germany, whereas in 1968 they were worth only just over 10 per cent.footnote12 It may not be too long before a ‘West German lobby’ begins to make itself felt in Congress, as it already has in some of the us states, as Congressmen from regions where large German factories are located act to defend the special interests of their area.

But the major State agency that acts to support West German interests internationally is Bonn itself. Apart from the conclusion of bilateral agreements on the protection and promotion of capital investments and double taxation agreements, the West German government founded in 1962 the German Development Company for Economic Co-operation to support private investments in developing countries by either participating in the equity capital of a direct investment or by providing loans.footnote13 In 1969, a law was introduced that enables West German firms to write off operating losses on their investments abroad by setting them off against domestic profits.footnote14 In 1970, the West German government improved the 1960 guarantee scheme covering West German investments abroad against political risks by reducing the annual premium from 0.8 per cent to 0.5 per cent, and by allowing the inclusion of reinvested profits into the guarantee.footnote15 Finally, the revised form of the Developing Countries Taxation Act of 1975 aims at adapting tax incentives for West German firms investing in developing countries, towards development criteria.footnote16