The term “multinational corporation” has become familiar only recently. Writing in these pages just five years ago, I felt obliged to explain that the multinationals were not merely giant corporations that did a world-wide export business, but giants whose manufacturing or servicing facilities were located around the globe, so that Pepsi-Cola, to take an example, could be bought in Mexico or the Philippines (or another 100-odd countries) not because the drink was turned out in America and then shipped abroad, but because it was produced and bottled in the country where it was consumed.

In recent years, largely as a consequence of the oil crisis, the word “multinational” has become standard newspaper usage, so that we now understand that Exxon or ITT are not just “American” companies, but maintain a network of refineries, factories, warehouses, service establishments, laboratories, training centers, and retail establishments spread across the continents. What we do not perhaps yet understand sufficiently is that the multinationalization of business is not just an American but an international phenomenon, so that when we fill up the tank at a Shell station or buy Valium at a pharmacy we are purchasing commodities produced in the United States by companies of non-American nationality.

Nevertheless, it is one thing to talk knowingly about the multinationals, and another to grasp the significance of their operations. Are they, as Richard Barnet and Ronald Müller write in Global Reach, “the most powerful human organization[s] yet devised for colonizing the future”? Do they challenge the nation-state as a main force for shaping the destinies of billions of men and women? Will their penetration into the underdeveloped world condemn these areas to perpetual backwardness—or can they serve as the conduits of technology and capital without which the underdeveloped nations will be condemned to eternal poverty?

It is not easy to answer these questions, for the impact of the multinationals remains in many ways obscure and perplexing. Or perhaps I should say that I find their impact difficult to appraise. Many other observers do not. Someone who wants a “clearer” picture of the multinationals would do well to consult the Guide for the Perplexed, appended to this essay, where I have briefly summarized a few recent books on the question. There the reader is sure to find at least one book that will tell him what he wishes to know.

Why are the multinationals so difficult to discuss? The first reason is that we know so appallingly little about them. How large are they? How big are their sales? How vast their profits? We really do not know.

Take, for example, the basic question of the value of the direct foreign investment—the plant and equipment, not the portfolios—owned by American enterprises. Our knowledge of the extent of this direct investment largely rests on a Commerce Department survey conducted in 1966. This survey collected data on 3,400 parent companies and 23,000 foreign affiliates. But efforts to enlarge and update that survey, now sadly out of date, have been systematically impeded. A government questionnaire sent to 500 companies in 1970 elicited only 298 responses. A more recent effort to discover some of the missing facts was severely truncated by the opposition of a committee of government representatives to questions that would invade the “privacy” of corporate life.

Hence some of the most important information required to assess the place of the multinationals in the world economy remains fragmentary or incomplete. We do not accurately know their capital outlays, their research and development expenditures, their foreign-based employment, the trade relationships between parent corporations and affiliates, or their full stockholdings in local companies. Let me add that if American data are inadequate, the statistical information obtained by other nations on their multinational enterprises is far worse. Many of the multinationals maintain two sets of books, one for the tax collector, another for themselves, and most European countries do not even have the staffs to compile the inaccurate statistics available from the “official” (i.e., tax-collector) books.

So we begin in a shadowy land of dubious facts. According to these facts (based largely on projections from the 1966 survey) the book value of American foreign direct investment was $78 billion in 1970 and is likely well over $100 billion today. In round numbers this compares with total assets (including foreign assets) of a little over $500 billion for the top 1,000 industrial corporations in America in 1973: we have no idea what the corresponding figures would be for, let us say, Sweden or the Netherlands or Switzerland.1

We have still less reliable data when we try to estimate the sales of US manufacturing affiliates abroad. The estimates we use are based mainly on guesses about how much output each dollar of investment is likely to generate. Working on this basis, the Commerce Department places the value of overseas production—not, remember, exports from the United States, but “American” goods produced abroad—at $90 billion in 1970. Assuming that sales abroad have been growing in accordance with past trends, this would put the value of American foreign production today at perhaps $125 billion. Again by way of comparison, total sales (domestic plus foreign) of the top 1,000 manufacturing companies are something over $600 billion, as of 1973.


This seems clear enough. At a first glance we can locate a second “American” economy, scattered around the globe (although mainly concentrated in the European industrial market and the Near East oil market), which is about a quarter as big as the “home” economy.

First glances are, however, notoriously unreliable. For example, the value of American assets abroad includes $22 billion of assets in the petroleum industry, as of 1970. The marketable value of that portion of those assets represented by oil reserves is now much larger than in 1970—or is it much smaller, because the oil now “belongs” to the nations under whose sands it lies in a much more decisive fashion than in 1970? Another example: what about the banks that play so critical a role in supporting the growth of overseas enterprise? Any appraisal of the extent of multinationalism should take into account the fact that foreign deposits in the nine biggest US banks have risen from less than 30 percent of their total deposits in the late 1960s to over 66 percent today, and that the total number of foreign locations for the twenty largest US banks rose from 211 to 627 over the same period. But this information also escapes the standard measurement of the extent of multinational wealth.

So we begin with uncertainty about the true size of the multinational sphere. But we do know, with a fair degree of certainty, that the sphere is expanding very rapidly. Industrial sales abroad, to judge by the fragmentary data we possess, have been growing twice as fast as sales at home. So has the flow of capital into new investments abroad—in 1957 American companies invested about ten cents abroad for every dollar of investment at home; today (at least until the recent depression) they are investing twenty-five cents. Total profits earned on operations abroad have risen from 25 percent of total profits at home in 1966 to 40 percent in 1970.

Furthermore, European and Japanese multinational firms are also accelerating their rate of growth. On the basis of past trends, these non-American multinationals are probably expanding even faster than US firms. According to the estimates of Karl P. Savant of the University of Pennsylvania, about a quarter of world marketable output was attributable to the multinationals in 1968 and this share will rise to a third by the end of the 1970s and to over 50 percent by the last decade of this century.

Are we then in a new era of capitalism? These scattered figures—most of them, I emphasize again, based on partial or even erroneous data—seem to indicate that some great sea change is underway. But here is where the picture becomes even more obscure and confusing. Consider, to begin with, the following thumbnail description of the multinational economy whose salient features we have been examining:

  1. The concentration of production and capital has developed to such a high degree that it has created monopolies that play a decisive role in international economic life.
  2. Bank capital has merged with industrial capital to create a financial “oligarchy.”
  3. The export of capital, as distinguished from the export of commodities, has become of crucial importance.
  4. International cartels, or oligopolistic combines, have effectively divided up the world.

This description, which might well have been taken from some of the books listed above, surely covers many of the salient features of the multinational phenomenon. The trouble is that it was written (with a few emendations by myself) by Lenin in 1917. This surely suggests that the phenomenon is not as new as we tend to think—or rather, that whatever is “new” about it cannot be discovered in the mere presence of great sums of capital invested by the enterprises of one country in the territory of another country.

Add to that the following disconcerting fact. According to the calculations of Myra Wilkins, in The Maturing of Multinational Enterprise, the value of total US foreign investment in 1970 amounted to about 8 percent of United States GNP. In 1929, long before the great multinational “acceleration” took place, it was 7 percent. In 1914 it was also 7 percent. Although the geographic location of investment has changed—out of the agricultural and mining belts into the industrial markets of the world—and although the type of investment has altered accordingly—away from plantations into factories—the global magnitudes remain surprisingly constant.

Of course one is tempted to say that the shift into “high technology” industry has hugely increased the economic leverage of this foreign investment. Has it? One could also argue that in an era of impending constraints on growth and technology, and increasing importance of food and raw materials, this very shift has also reduced their potential for economic power.

Can one, in the midst of so much confusion, make some sense of the multinational presence? With much trepidation, I shall try.

We must begin by recognizing that the fundamental process behind the rise of the multinational corporation is growth, the urge for expansion that is the daemon of capitalism itself. Why is growth so central, so insatiable? In part the answer must be sought in the “animal spirits,” as Keynes called them, of capitalist entrepreneurs whose self-esteem and self-valuation are deeply intertwined with the sheer size of the wealth they own or control.


But growth is also a defensive reaction. Companies seek to grow in order to preserve their place in the sun, to prevent competitors from crowding them out. Hence the struggle for market shares has always been a central aspect of the capitalist system, lending color to the robber baron age, taking on a more restrained but no less intense form in the age of the modern “socially responsible” firm.

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).

This Issue

March 20, 1975