Multinationals and the Limits of Power
Grant, James
"Multinationals and the Limits of Power" bands and other forms of blandishment. If thought and its expression were primarily an effort to exercise power over others the very concept of "objectivity" would become unintelligible. Thought...
...The Russians have not merely armed and trained the Arab armies and provided technicians to man some of the more advanced weapons...
...C a r l Gershman Israel's Fate It is of some significance that the coordinated offensive launched by the Egyptian and Syrian armies on October 6 was called Operation Saladin...
...So it goes: Of private economic power, which without state leverage is finite, it is asked, "How can we control and regulate this powerT' But of state power, which is infinite, we ask, "How can we broaden this power...
...The more effective economic integration is among member countries," the UN counsels, "the greater their collective ability to present a countervailing force to multinational corporations...
...But as private and public interests began to merge with the expansion of state power, it became apparent-notably to Friedrich A. Hayek---that only trade between individuals serves peace...
...As to the restraint in the media, one may observe sarcastically that Kissinger may have been referring to the failure of the Soviets to report anything about their massive resupply of the Arabs...
...The report urges governments to form regional bargaining units, the better to wring concessions from multinationals while offering them larger, more integrated marketing areas...
...But until better thinking prevails in the order and connection of our ideas about social order, as well as about social disorder, the less likely is it that we shall devise the policies required to realize the great promise of American life...
...The Arab goal in this war was the same as Saladin's eight centuries earlier: to expel the infidel from holy Moslem soil...
...Kissinger would have us believe that the Administration's ddtente policy was responsible for preventing the U.S.-Soviet confrontation of October 25 from getting out of hand...
...Saladin was the Moslem warrior who defeated the Crusaders in 1187 in a great battle that led to the capture of Jerusalem...
...In theory and song, if only occasionally in practice, multinationals wield decisive influence over host-country economic policies...
...About ten Arab countries joined the fighting, aided directly by the Russians, the North Vietnamese (who advised the Syrians), the North Koreans (whose pilots flew missions for the Egyptians), the French (whose Mirages, sold to Libya, were The Alternative January 1974 9...
...It managed to combine the behaviour of the ostrich and the hen...
...The case for property becomes less compelling as business forsakes the boardroom for the lobby, the market for the commission...
...Canada's Watkins Report reckoned "the most serious cost . . . resulting from foreign ownership is the intrusion of [foreign] law and policy...
...We greet each new proposal for state intervention only in terms of its ~'direct and proximate effects," net for its ~direct and distant effects," lamented Herbert Spencer more than one hundred years ago...
...It is unclear whether multinational corporations have the backbone to resist beth expropriation and state-proferred favors--and in the long run the latter may prove no less destructive to individual rights...
...200 of them generate annual sales of more than $1 billion...
...That is, when a few firms control or dominate one market...
...Nothing illustrates my point so well as the recent attempts to rewrite the history of the Cold War in order to establish either that the United States and the Soviet Union were equally responsible for the Cold War or that the United States was chiefly, if not completely, responsible for it...
...Harold Demsetz and Yale Brezen have challenged a warhorse of American antitrust doctrine, the idea that market concentration presents a reliable index of monopoly power...
...The Arab offensive may not have destroyed Israel, but it did wipe out the Israeli doves, who are now, like everyone else, calling for secure borders...
...Syria's Assad said on October 15 that a "war of total liberation" would follow the retaking of the Golan Heights...
...During the first week of the war, the United States turned a blind eye to Russian irresponsibility in the hope of salvaging d~tente...
...First, the fact that after the Second World War, the United States withdrew its armed forces from Europe while the Red Army bestrode the continent like a colossus...
...But whether such forbearance is possible for a socialist state, one that owns outright a threatened "corporation," is doubtful...
...An indication of U.S...
...If the Russians are going to make us cold," the head of the longshoremen's union said, referring to the oil boycott, "we are going to make them hungry...
...There has been some hope expressed that the recent war would move the parties closer to peace...
...This is the gravest danger that today threatens civilization," observed Ortega y Gasset in 1932: ~State intervention, the absorption of all spontaneous social effort by the State . . . . " Nowhere, it seems, has the ambivalence toward power been more visible than in debate over the multinational corporation (defined as a corporation which pursues a global strategy of investment, production, and marketing, enjoying correspondingly high sales and earnings...
...Remarkable, rather, is the symbolism of it all: the democratically elected socialist leader railing against concentrated economic power (ITrs net worth, Allende grumbled, ~is bigger than the national budgets of several Latin American countries put together"), then flying off to confer with men who dictate without check their nation's politics, economics, and art...
...What do governments know about making jobs...
...In this era of monoliths--public and private--there are no easy solutions: Allende caricatured the idea of government even as 1Tr parodied the notion of property...
...The very same persons who took one view then take a quite different view now and discover a constitutional crisis in differences over political issues...
...Many wonder whether a corporation that relies on the advice of the Commerce Department and the backing of the Overseas Private Investment Corporation can really be called its own agent...
...The peaceful influence of international trade on foreign relations is one tenet of nineteenth-century liberalism that still enjoys a respectable following...
...Sadat and others have defined a two-stage struggle...
...What's more, the UN says, the top 187 multinationAl.q account for one-third of American manufacturing output...
...Here is not the place to argue the point that if there had not been a Cold War to combat Soviet expansion, the world would have been engulfed in a hot war, or its free areas swallowed by a totalitarian despotism...
...A more credible explanation is that it was the American alert---an oldfashioned tactic reminiscent of the Cuban missile crisis--that kept the Russians in line...
...The delegates gave the speech a seventy-second standing ovation, the Associated Press reported...
...The mood in Israel is grim and embittered, in contrast to the elation and confidence after the Six Day War...
...No single jurisdiction can cope adequately with the global phenomenon of the multinational corporation," the UN report concedes, "nor is there a (competent) international authority...
...As the postponed Israeli elections approach, there will be very few voices calling for the return of any of the territories occupied in 1967...
...Third and most important fact: when the United States had a monopoly On the atomic bomb, which would have permitted it to impose its will on any nation, when even the expacifist and anti-American, Bertrand Russell, urged that it be dropped on the Soviet Union, the United States offered to surrender its monopoly to an international authority...
...But in 1973 it is clearly property--and the defenses it affords liberty--that requires sustenance...
...How well I recall the argument about the scope of presidential executive power when Roosevelt committed American destroyers to fire on German submarines in the shipping lanes of the Atlantic and when Truman committed American troops in Korea...
...The AFL-CIO has called the multinational ~a modern-day dinesaur, which eats the jobs of American workers...
...Finally, what of the impact of multinationals on local tradition...
...They have not yet, nor is it clear that they ever will, accept the presence of a non-Arab state in "their" Middle East...
...A Senate Foreign Relations subcommittee has recommended that OPIC's operations be transferred to private insurers to reduce the likelihood of governmental meddling on behalf of American corporations...
...It is an article of faith in which has been invested Arab dignity, pride, and visions of future grandeur...
...Stories abound, he wrote, of Geneen putting off the Shah or snubbing the King of the Belgians...
...There is no reason to believe that Dr...
...See Charles P. Kindleberger, ed., The I n t e r n a - t i o n a l Corporation MIT Press, 1970...
...A Republican administration decrees wage-price controls, caring nothing for their long-range impact on the rights of property...
...I am not so naive as to think that the disorder of our times can be cured merely by building dikes against irrationalism...
...It will have to create the jobs itself if multinational "X" prefers capital-intensive investment...
...The future Arab program, it seems, will now have to be divided into three stages...
...But if corporate autonomy worries bureaucrats, it has occasionally encouraged diplomats...
...Will market discipline operate on a global scale among a relatively small number of producers...
...Still, a peace of sorts could come to the Middle East were it not for one additional factor, and that is the Soviet Union...
...he was president of the American Political Science Association in 1961-62, and he is the author of several books, including The Supreme Court o n T r i a l (1963), and Popular Government i n America (1968) . . _9 Harold Mort is a professor of electrical engineering at the University of Alabama . . . Stephen Rosen is a student in government at Harvard University . . . Peter Rusthoven is studying at Harvard Law School . . . C. Bascom Slemp is the chief Washington correspondent of The A l t e r n a t i v e . . . Benjamin Stein is a free-lance writer residing in Washington, D.C . . . . Judy Tyrrell is a graduate student in English and French literature at Indiana University . . . George Will is the Washington correspondent to N a t i o n a l Review and a rising television personality . . . impractical, "X" can dodge taxes by transferring its earnings to a less heavily taxed corporate branch...
...By the middle of the eighteen-day war, when the tide had begun to turn in Israel's favor, the Arab leaders reverted to form...
...accommodation was Secretary of State Kissinger's remark, following inflammatory statements made by Soviet UN Ambassador Malik at the Security Council (Israel, inter alia, was said to have "ravaged entire civilizations") that the United States was favorably impressed by "the relative restraint that has been shown in the public media in the Soviet Union and in the conduct of their representative at the Security Council...
...More significantly, he notes, recent research shows "correlations between market concentration and various measures of market power to be less persistent and considerably weaker or even nonexistent than in the earlier work...
...Senator Henry Jackson has aptly compared the Russians to a thief who walks down a corridor checking all the doorknobs to see if one is open...
...The next day--December 5, 1972---the late Chilean president left New York for Moscow (aboard an Aeroflot jetliner via Algeria), returning home by way of Havana...
...The Administration might take its cue from the maritime unions which threatened to boycott all ships engaged in trade with Russia if the USSR continued to aid the Arabs...
...If that is Contributors David Brudnoy is a visiting professor of history at the University of Rhode Island, a commentator with WNAC-TV (CBS) and WBGH-TV (PBS) in Boston, a free-lance writer and lecturer, and an associate of The A l t e r n a t i v e . . . Lindley H. Clark Jr...
...Combined spending last year reached $382 billion, one-third of the gross national product...
...Profit, he observed, is a far more stable force than nationalism: "If the resources of different nations are treated as exclusive properties of these nations as wholes, if international economic relations, instead of being relations among individuals become relations between whole nations organized as trading bodies, they inevitably become the source of friction and envy between whole nations...
...It seems evident to me (and I speak as a critic of the present administration's domestic policy--as distinct from its foreign policy) that so long as we have a tripartite system of government, the result of Montesquieu's misreading of the English constitution, and not the more democratic British system which gives supremacy to Parliament or to the legislature, such conflicts of interpretation are inescapable and must be settled by compromise...
...It was tentatively accepted by Czechoslovakia and Poland until vetoed by Stalin...
...Does Liberia want more jobs and more tax revenues...
...Tariff Commission, command more than $250 billion in assets...
...The statistics are awesome: multinational corporations, according to the U.S...
...Still, the Administration's response to the crisis was light-years ahead of the European response, with the exemplary exception of the Dutch...
...The Arab-Israeli conflict has opened the door of the oil-rich Middle East to the Russians, and they are now burglarizing the region...
...They continue to see the Jews as outsiders, foreign invaders, who have no real attachment to the land...
...It would be amusing to witness "progressive" secularists in the West go overboard in their support for this Jihad (holy war), were not Israel's survival and the lives of its people so gravely endangered...
...Was this a proposal of an imperialist power eager to impose its armed hegemony on the world, as the revisionist historians claim...
...Sadat emphasized "the restoration of the rights of the Palestinians," a euphemism for the destruction of Israel...
...Yet doubts remain, if not over jobs and income, then certainly over size and market power...
...The same thing is true of controversies concerning the composition and role of the Supreme Court...
...The fact that his exploits were chosen as the model for the recent Arab offensive says volumes about Arab psychology and intentions, not to mention Israeli fears...
...This seems highly unlikely...
...These statements are entirely in keeping with the Arab program outlined over the past six years...
...In some industries--including automobiles, pharmaceuticals, and fabricated metal products--the proportion exceeds t~-ee-quarters...
...Almost everyone ganged up on Israel...
...A measure of this value is that a book is produced in Israel about the life of each soldier killed in combat...
...The Europeans no doubt felt that they had to remain neutral or pro-Arab in order to keep the oil flowing...
...Usually some narrow and partisan interest couples the attack on historical objectivity with a completely new reading of the past...
...Israel might be forced by Great Power pressure into making territorial concessions, but it is unlikely she will do so if the Arabs do not meet her half way...
...Fortune, in its August issue, also predict~ a slowing in the rate of multinational expansion as two of the conditions that nurtured their rise--cheap foreign production costs and high tariff barriers--grow less attractive in the seventies...
...The Middle East war has been the first major international conflict in which Russia has been able to throw around her newly-acquired political and military weight...
...Still, Israel occupied more of the Golan and about 750 square miles of the Suez Canal's west bank...
...This unhistorical and irrational reinterpretation of the past with its use of double standards is also found in reinterpretations of the domestic scene...
...Sadat, Assad, Faisal, and the rest exercised restraint in the beginning by defining limited objectives for the war: the ejection of Israeli forces from territories occupied in the 1967 war...
...But the subject is by no means closed...
...The only condition it made was that inspection be undertaken to detect secret violations that might result in the bomb being used against the United States in an atomic Pearl Harbor...
...We need creative intelligence to devise specific policies to modify our institutional practices...
...But I cannot forego mentioning the stubborn facts that make a shambles of this mythical reconstruction of the past...
...This suggests that a policy of compulsory deconcentration of concentrated industries . . . would be likely to reduce productive efficiency in those industries...
...Since 1929, the Federal Reserve Bank of Chicago reports, government spending on all levels has grown thirty-fold...
...This is not a mere misunderstanding that could be corrected by more contact between Arabs and Israelis (though this would help...
...James Grant Multinationals and the Limits of Power Salvador Allende must have known he was among friends...
...If he finds one, he walks in...
...John Kenneth Galbraith, the poet laureate of American statism, now urges a dose of socialism for our troubles, never questioning how a yet stronger state might choke individual liberty...
...Soviet foreign policy is opportunistic in that it exploits whatever opportunities exist for expansion...
...If uncorrupted by the State, it will serve beth our wants and our liberties...
...To what avail if the local branches of multinational banks will not cooperate...
...The UN has similarly urged governments to renounce foreign economic intervention...
...The losses suffered have been heavy, especially for a small country which places tremendous value on every life...
...If trade (or foreign manufacturing) reaches sufficient proportions, many reason, conflict will become unthinkable: "Declare dividends, not war...
...The Economist characterized Europe as "trying to shut its eyes to what was at issue (between Russia and America), and then running round in frightened circles because the problem would not go away...
...is economic news editor of the Wall S t r e e t J o u r n a l . . . D.W...
...Indeed, the whole problem with our approach to detente is that it has not made use of what Andrei Sakharov has called our "trump cards" America's economic leverage on Moscow...
...We are witnessing," he proclaimed before the United Nations General Assembly, ~a pitched battle between the great transnational corporations and sovereign states, for the latter's fundarnental political and military decisions are being interfered with by world organizations which are not . . . accountable to or regulated by any parliament or institution representing the collective interest...
...Allende's speech was inspired by the Soviets or that his stop in Cuba was more than ordinarily sinister...
...By 1980, Fortune magazine suggests, the return might reach $20 billion annually...
...Even if Professor Demsetz's data prove iron-clad, the insecurity of states in the face of mobile and efficient private power isn't likely to diminish...
...In the scheme of countervailing power, who or what is to hinder the growth of the state...
...Goneen asks trenchantly...
...But their vulnerability to blackmail and their blindness to the long-term implications of Soviet audacity and western division are certainly among the most distressing developments to come out of the October crisis...
...And if Liberia presses the tax question, "X" can peddle its investment in a more hospitable country...
...At any rate, it was a proposal accepted by every major nation of the world except the Soviet Union...
...Cooper is a regular contributor to these pages . . . Allen Crawford is a student at Indiana University . . . J. Tim Fennell is studying for his doctorate in political science at the University of California at ~ Angeles . . . Carl Gershman is director of the Youth Committee of Peace and Democracy in the Middle East and National Chairman of the Young People's Socialist League . . . .James Grant is on the staff of the Baltimore Morning Sun . . . Sidney Hook, professor emeritus of philosophy from New York University, is now working at the Hoover Institution on War, Revolution and Peace . . . Charles S. Hyneman, Distinguished Service professor of government from Indiana University, now works at the Woodrow Wilson Center for International Scholars...
...In a study published jointly by the American Enterprise Institute and the Hoover Institution, Professor Demsetz wrote: "New data . . . indicate strongly that the productive efficiency of large firms relative to small firms is correlated with market concentration...
...Sampson writes of ITr's need to convince governments that Washington stands behind it at the bargaining table...
...The story, which quotes from the journal European Chemical News, describes industry dissatisfaction over the "unbending principles" of government price decisions: "Continued Government intransigence on chemical price increases could become the sole reason for Britain's chemical producers concentrating their next round of investment outside the United Kingdom . . . . " The multinational challenge to sovereignty has captured the UN's imagination in much the same way that Senator Kennedy's health care program impressed the American Medical Association...
...Further, the department told the Senate Finance Subcommittee on International Trade, domestic employment attributed to U.S.-based multinationals grew faster between 1966 and 1970 than other nongovernmental employment...
...In light of the warm reception given wage-price controls by the Republic's businessmen, we might indeed ask whether they have the will, the power, or the desire to resist heightened government control at 8 The Alternative January 1974 home, what Albert J. Nock called "[the] great redistribution of power between society and the State...
...The implications for Nixon's d~tente policy are not encouraging...
...Israel won the war, though less decisively than she would have had the Great Powers not imposed a cease-fire when they did...
...One congressional witness charged global corporations with ~economic arson," claiming they ~'pnshed the dollar into a new devaluation and drove the price of gold out of sight," In a report widely hailed for its evenhandedness, the United Nations acknowledged the material contributions of multinational corporations even as it stewed over the problem of regulating them: '~rhe power concentrated in their hands, and their actual use of it, their ability to shape demand patterns and values and to influence the lives of peoples and governments . . . have raised concern about their role in world affairs . . . . " For the charge that multinationals export jobs and undermine American incomes, there appears to belittle evidence...
...Second fact: the United States offered the Marshall Plan to all European nations, even to those in the Communist orbit, to rebuild their economies...
...Anthony Sampson paraphrased Harold Geneen, czar of the ITr empire, as declaring his company "above governments, above controls and above morals" (Anthony Sampson, The Sovereign State of ~ Stein and Day, 1973...
...A story in the T/mes of London (August 17) illustrates how multinational corporat-ions can bargain--and countervail...
...According to an analysis by Stephen Hymer and Robert Hawthorn, mere size seems not to have guaranteed the growth of multinationais between 1957 and 1967...
...At least two studies suggest that the answer to these questions is yes...
...Is Jamaica trying to restrict credit...
...The Department of Commerce estimates that foreign afmiates of U.S...
...Instead of withdrawing to its prewar borders, it forcibly imposed minority Communist regimes on Central and Eastern Europe in crass violation of the treaties that pledged the Kremlin to abide by free elections...
...An important question is that of competition: will natural economic forces prevent the domination of world markets by a handful of corporate conspirators...
...multinationals shipped back only 7 percent of their output The Alternative January 1974 7 in 1970...
...From Israel's point of view, the war showed a frightening erosion of international support...
...It all depends it seems on whose political ox is being gored...
...Narrowly defeated in the California legislature recently was a bill banning foreign banks from the state...
...All indications are that they helped plan the aggression, and they threatened full-scale intervention when Israel appeared on the verge of victory...
...Thought would then be judged in terms of its success rather than its accuracy, and prevailing lies would be thought more legitimate than suppressed truths...
...There's the nub of the difficulty, for the Arab leaders still see themselves in the role of Saladin fighting the Crusaders...
...Stage one, the regaining of the territories, would correct "the 1967 problem:" Stage two would correct "the 1948 problem," which of course is the existence of Israel as such...
...The United Nations reports that international production---production "subject to foreign control or decision"surpassed trade as the chief form of international exchange in 1971...
...Unfortunately, this is still the only language the Kremlin leaders understand, which makes Moscow's behavior during the war not very surprising and the road ahead for ddtente quite difficult, if not treacherous...
...The authors' data indicate that beyond a certain minimum size---modern research, development, and marketing costs require sizable outlays of capital---growth can petrify, rendering giants vulnerable to smaller, more agile competitors...
...In 1971, the UN report estimated U.S...
...multinationals invested $4.8 billion abroad in plants, inventory, and equipment, while generating a return flow of $9 billion in interest, management fees, and other earnings...
Vol. 7 • January 1974 • No. 4
