ABSTRACT
This chapter argues that circulationist theories of underdevelopment are logically flawed and for that reason should be rejected. It demonstrates their inconsistency with empirical evidence. The chapter identifies the predictions which circulationist theories make with regard to the flow of capital on an international scale. It deals with quite clear predictions as to what the pattern of US foreign direct investment should be if circulationist theories are correct. The chapter suggests that the circulationist theories are not sustained empirically; that the underconsumptionist and "cheap labor" explanations of the export of capital are inconsistent with available evidence. US foreign direct investment has, in tact, shifted sectorally over time towards non-extractive activities. The fact that far less than half of US foreign manufacturing investments are in underdeveloped countries and that this proportion is declining is particularly damaging to circulationist theories.
