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None of Your Business

A number of economists, primary among them Alfred Chandler,2 have described the dynamics of the typical stages of business expansion, from the small owner-operated factory to the managerially directed multiproduct, multiplant “big business.” Only recently, however, have we begun to describe the sequence of events that drives a firm to make the decisive leap across national boundaries, with all the headaches and problems that such a venture entails—foreign governments to deal with, foreign languages to speak, foreign currencies to worry about. As Myra Wilkins points out, any number of stimuli may finally tempt an expanding company to make the leap. It may have begun to penetrate a foreign market with exports, and then may decide to locate a production facility abroad in order to avoid a tariff that impedes its exports. It may locate a manufacturing branch abroad to forestall—or to match—a similar step by one of its rivals. It may seek the advantages of manufacturing abroad because wages are cheaper—Hong Kong is the great example of this—although Dr. Wilkins believes that lower wages have not been a major stimulus for most overseas expansion.3

This phenomenon of expansion, with its aggressive and defensive roots, emphasizes an extremely important aspect of what we call “multinationalization,” which is that all the multinational companies are in fact national companies that have extended their operations abroad. They are not, as their spokesmen sometimes claim, companies that have lost their nationality. Two giant companies—Shell and Unilever—have in fact mixed nationalities on their boards of directors, and IBM never wearies of boasting that Jacques Maisonrouge, president of the IBM World Trade Corporation, is French. But I can see little evidence that IBM is not an “American” company, notwithstanding; and no evidence that any other of the giant multinationals cannot be unambiguously identified as having a distinct nationality.

This puts into considerable doubt a thesis that runs through much of the literature on the multinationals. When Richard Barnet and Ronald Müller write in Global Reach about the multinationals as the great colonizers of the future, they swallow whole the declarations of a few companies that they have risen above the parochial views of mere nationalism. Yet even Barnet and Müller speak of the advent of true multinationals, responsible to no one but themselves, as a possibility rather than an actuality. So, too, although Myra Wilkins sketches out a sequence of multinational organizations evolving from a “monocentric” to a “polycentric” form, in which the planets disengage themselves from the parent sun and wander about the economic universe on their own, she is hard-pressed to cite a case of the latter. (She suggests that ITT could properly have been called such a “true” multinational as early as the 1920s or 1930s, but recent events in Chile make one wonder how much ITT today is “above” the considerations of national identity.)

Thus I think we must view the world of very large, expansive national enterprises, extending their operations abroad, as a change in degree, not kind, from the world of very large expansive enterprises still contained within national borders. I realize that this suggestion challenges the central thesis of the books I have read, above all the one by Barnet and Müller. Nevertheless, I think skepticism is in order when we ask whether the multinationals signal a radically new development in world capitalism.

Here it is useful to review the basic characteristics of monopoly capitalism. An economy dominated by the kinds of expansive organizations I have described sooner or later encounters extreme difficulties of economic co-ordination. We do not know if a world of atomistic enterprises would run as smoothly as the theory of pure competition suggests, and we never shall know. We do know that an economy dominated by giant firms encounters serious problems in dovetailing its private operations so as to provide substantially full employment, maintain a stable level of prices, and produce the full array of goods and services needed by the population. In every capitalist nation this has led to what is euphemistically called a “mixed” economy—an economy in which the world of business is restrained, guided, subsidized, protected, buttressed by a growing array of public instruments and agencies. Governments, for all their ideological skirmishes with business, have always been the silent partners of business; indeed, as Adam Smith was explicit in declaring, private property would not exist a minute without government.

In what way does the multinational change this basic picture? I must confess that I do not think it changes it at all. I am aware, of course, of the much discussed erosion of “sovereignty” caused by the ability of the multinationals to locate their plants in this country or that one, or to transfer their profits from one nation to another by means of arbitrary pricing. But is this significantly different from the failure of nation-states to exercise control over companies within their national boundaries? What effectiveness does the United States have, for example, in directing the location of the investment of General Motors inside the United States, or for that matter in affecting the design of its products, its employment policies, etc.? What difference does it make to our national sovereignty if Valium or chocolate bars are made by a Swiss rather than a US firm?

Of course, there are some differences, mainly having to do with the flows of funds across our national borders. But in the absence of the flows generated by the multinationals—the export of capital out of the US, the import of profits back—there would be the flows of funds generated by normal exports and imports, equally capable of working international monetary mischief, equally difficult to control.

The situation is somewhat different with regard to the underdeveloped countries. Foreign corporations play a powerful and sometimes pernicious role in determining the pace and pattern of the economic advance of these nations. They often support technologies and social structures that are inimical to the rounded development of the backward areas—for example in shoring up corrupt and privileged classes and in encouraging some countries to concentrate agricultural production on exports rather than on badly needed food for local consumption. The technology they introduce is as often as not deforming rather than transforming for these countries, as Barnet and Müller show in vivid detail; the profits they earn are often extremely high.

But is this a new condition of affairs? Myra Wilkins reviews for us the company towns and plantation enclaves of an earlier era, in every way as deforming (and as profitable) as the operations of the multinationals today. It was, after all, under the drive of foreign capital that such countries as Brazil and Honduras and Rhodesia first became adjuncts of the modern industrial system, each producing a single commodity for the world market. If there is any remarkable change to be noted, it seems to be the long overdue assertion of political independence on the part of these one-time economic colonies, and their attempts to impose much stricter forms of supervision over the foreign bodies embedded so firmly and dangerously in their midst. Indeed, where is the process of the subordination of private international economic power to local political control more evident than in the places where the multinationals are most visible—the oil-producing regions of the world?

In suggesting that the role of the multinationals may be exaggerated, I do not wave away the charge that these companies exercise vast influence, both overtly and covertly. I only maintain that this is an old rather than a new state of affairs.

What remains, then, of the multinational phenomenon? Certainly some new and very important problems have been introduced. The problem of the trade unions, facing companies that can offset the growth of labor strength in one nation by transferring production to another nation, is one.4 The ability to juggle profits by arbitrary pricing is another. The prospect of a dangerous coalition of world-wide national corporate power with world-wide national political power is a third: witness the case of Chile,5 and the covert operations we hear about in other Latin American countries.

Yet with regard to the proposition that the multinationals represent a wholly new phase of capitalism I have become increasingly doubtful. Throughout the capitalist world the trend toward bigness and unwieldiness is evident, and the difficulties of managing national economies are front page news. This is driving all industrialized nations, whatever their ideologies, toward a system of centralized planning: socialism, a cynic might say, has become the next stage of capitalism. But I cannot view the international scope of economic power as constituting a special feature of this “socialism.”

Suppose that every multinational corporation, whatever its national base, suddenly had its foreign affiliates lopped off and awarded as prizes to the management of domestic enterprise—that, for example, GM lost its plants in Germany to Volkswagen, or that Olivetti-owned factories in the US were transferred to Pitney-Bowes. In some of the underdeveloped countries such a shift would be regarded as a windfall—and it would indeed be one for those nations where the benefits of ownership could be widely distributed and not simply taken over by small groups which are already too rich and powerful. (Where are such countries?) But would the problems of capitalism as a social order radically change? Would the management of unemployment, inflation, pollution, energy, workers’ alienation, corruption, or any other of the evils of our time be greatly lessened or worsened? That capitalism will have to make farreaching adjustments to keep the lid on things I do not for a moment doubt; but that capitalism has entered a new stage, in which corporations will fundamentally change the intrinsic problems of the system by extending the international reach of their operations, is an assertion that I do not believe has yet been convincingly demonstrated.

A Guide for the Perplexed

Global Reach, by Richard J. Barnet and Ronald E. Müller: This book has been highly praised by a diverse group including Hans Morgenthau, Paul Sweezy, J.K. Galbraith, Erich Fromm, and Michael Harrington. It is easy to understand why. It is fast-paced, hardhitting (although never strident), and packed with fascinating material about the operation of the multinationals: the rise of a “global shopping center”; the impact of the multinationals on the underdeveloped world; the “Latin-Americanization” of the United States, at the mercy of corporations it cannot control. What it lacks, to my mind, is a saving skepticism. In the Saturday Review, Eliot Janeway writes, “The book’s main flaw is to take [the multinational] spokesmen at face value as operators instead of laughing them off as hucksters.” I think there is something in the reproach. Nonetheless, with this caution, I am happy to join the panel of admirers.

The Maturing of Multinational Enterprise, by Myra Wilkins: This is the successor volume to Dr. Wilkins’s study of American business abroad from colonial days to 1914. When I reviewed the earlier book I lamented its absence of a theory of corporate expansion. That lack has been repaired, but another has surfaced. Dr. Wilkins writes admirable prose and is a marvel in organizing vast amounts of business history in coherent and interesting form. But there is not a breath of social imagination in this otherwise admirable work. The questions raised by Barnet and Müller hardly exist for Wilkins: one reads the book and is almost uninformed about the implications of multinational activity for politics and national development. In addition, a determination to bring accounts to a close in 1970, for purposes of statistical convenience, also permits Dr. Wilkins to avoid the sticky questions of corporate machinations in the oil crisis or in Chile, a position that helps to sustain the tone of polite conservatism that dominates the work.

America After Nixon: The Age of the Multinationals, by Robert Scheer: Another gallery of admirers praises Scheer’s book, among them David Halberstam, Jules Feiffer, Jane Fonda, Susan Sontag, and Congressman Ronald Dellums. Bless their good intentions, but I wish they had done a little homework. The book is about the domination of big business in American life, and the possibilities for radical change. The former is treated uncritically; the latter at a level of wishfulfillment; viz., “The ‘new majority’ in America is populist in its opposition to centralized power and its determination to restore citizen control over political life.” The book interests me mainly as an example of the manner in which “the multinationals” have captured the radicals’ imagination.

Capital, Inflation, and the Multinationals, by Charles Levinson: Rambling, dreadfully organized, idiosyncratic, this book is nonetheless full of interesting ideas and facts (perhaps I should write “facts,” because Levinson does not stoop to citations) about the operations of the multinationals. Written by the secretary general of the International Federation of Chemical and General Workers (ICF), the book is weakest on the very subject we would like most to learn from it, i.e., on the possible response of unions to the shifting of production by multinationals to countries where labor is cheaper and more docile. For more information on that question, see the pamphlet, by Levinson mentioned in footnote 5 above, as well as International Trade Unionism by the same author (Allen and Unwin, 1972).

  1. 2

    Strategy and Structure (MIT, 1962).

  2. 3

    In my own view, one important explanation of the recent surge of multinationalization is the development of technologies of travel and information that make it possible for executives to visit distant plants, or to communicate with overseas subordinates, with as little trouble as with underlings on one US coast or another.

  3. 4

    A problem much debated is whether the multinationals export jobs. This is a difficult question to answer, since foreign multinationals coming into the United States create jobs. In any event, is the problem altogether different from the loss of jobs that results from automation, or from the movement of a textile firm from New England to the South?

  4. 5

    One aspect of the multinationals that has received too little attention is the growth of networks of corporate intelligence that may be put to political use. See Richard Eels, “Do the Multinational Corporations Stand Guilty as Charged?,” Business and Society Review, Autumn, 1974, p. 86, and Charles Levinson, A Concrete Trade Union Response to the Multinational Company, ICF Secretariat: 58, rue Moillebeau, Geneva, 1974, p. 70.

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