A Nation of Hamburger Stands?

Global Reach By Richard Barnet and Ronald Mueller Simon and Schuster, 508 pp., $4.95

IN DECEMBER 1972, Salvador Allende charged before the United Nations that the crisis of the beleaguered Chilean economy was the result of an "international financial-economic blockade ... to prevent the exercise of our rights as a sovereign state." Allende also charged that the crucial decisions concerning the Chilean economy were made in New York. Three months later, a spokesman for the AFL-CIO testified to the Senate Finance Committee that the transfer of production overseas is making the United States "a nation of hamburger stands ... a country stripped of industrial capacity and meaningful work ... a service economy ... a nation busily buying and selling cheeseburgers and root beer floats."

The Chilean socialist and the American union bureaucrat were both pointing to the same phenomenon: the growing domination of the world economy over the past two decades by multinational corporations--giant firms with operations scattered all over the world. Multinationals, such as ITT, Anaconda Copper, IBM, and General Electric, coordinate production, distribution, and sales on a global scale rather than within the confines of a specific national economy. Consequently, their commitment to any particular country in which they operate is limited to the ways that country can serve as a means to its ultimate ends--the maximation of the overall profits of the multinational corporation--regardless of their impact on that country.

The rise of the multinationals represents an important structural transformation in contemporary capitalism, a change in the American economic order comparable only to the rise of national corporations at the turn of the century and to the beginnings of government regulation of the economy in the 1930s. Americans who seek a new social order are thus faced with a major challenge: to provide an adequate analysis of this new stage of capitalist development and its consequences for the American economy and to create new strategies capable of coping with corporations which operate on a global scale.

BARNET AND MUELLER'S Global Reach is the first attempt to synthesize recent research on multinationals from a radical perspective and to develop a set of specific political strategies to combat their power in American society. Barnet and Mueller believe that the 1960s saw a crucial shift in both the operations and the orientation of the giant oligopolistic corporations that dominate the American economy. In that period, a new breed of "global managers" arose who no longer see the national economy as the natural focus of corporate interests. Instead they aspire to organize and direct the world economy on their own. These men, such as Jacques Maisonrouge of IBM and George Ball of Lehman Brothers International (a former Undersecretary of State and a possible Democratic Secretary) agree with William Spencer of Citicorp that "the political boundaries of nation-states are too narrow and constricted to define the scope and sweep of modern business." They sympathize with the desire of Carl Gerstecker of Dow Chemical (a former America-Firster) to establish his company's headquarters on an island under the sovereignty of no nation.

At the same time as the directors of multinational corporations seek to transcend the limits of national economies and states, they offer a promise of prosperity, peace and economic development for all. And they claim that only their innovative technological and organizational abilities can lead to this end. Barnet and Mueller refute the claim that multinationals (or "global corporations," as they prefer to call them, to emphasize the national limits within which they recruit their executives) are engines of development, by examining their impact on the economies of the Third World. Drawing on conventional leftist analyses of the causes of underdevelopment, Barnet and Mueller present convincing evidence to show that far from stimulating economic development in the Third World, global corporations perpetuate backwardness.


Rather than bringing needed capital into underdeveloped economies, investment by global corporations actually siphons off capital by repatriation of profits, in most cases away from operations which are locally financed because of the superior ability of such enterprises to secure credit. Where there is significant investment in productive facilities, it is rarely in those areas that would aid the underdeveloped country to develop autonomously; instead, capital is invested in labor-intensive industries through which the global corporation can exploit the low wage rate in the underdeveloped countries. Similarly, the technology they provide is that which no longer yields high profit rates in the developed countries, and hence cannot contribute to changing the dependent position of Third World economies. Consequently in the area most involved with global corporations during the 1960s, Latin America, income distribution became more unequal, unemployment increased, and the standard of living of the majority of the population dropped, particularly in those countries such as Mexico and Brazil which registered high growth rates.

The novel aspect of Barnet and Mueller's argument is their claim that the growing independence of the global corporations from the American economy has reproduced in the U.S. many of the characteristics of underdeveloped countries, a process they term the "latin-americanization of the United States." Since the global corporations are no longer committed to the U.S. economy, they invest a larger portion of their capital in other countries, particularly in Western Europe, and draw an increasing proportion of their profits from foreign sales. Equally importantly, they have begun to remove blue-collar jobs from the U.S. into low-wage "export platform" countries like Taiwan and South Korea, where the costs of production are many times lower than in the U.S. Twenty five per cent of the workers employed by the 298 global corporations listed by the Department of Commerce now are outside the U.S., while the manufacturing sector as a whole is losing jobs at a rate six times that of the 1950s.

THE CONSEQUENCE OF these developments, argue Barnet and Mueller, is the simultaneous appearance of inflation and declining employment in the American economy during the late 1960s--a puzzling phenomenon for economists here, but a familiar problem in underdeveloped countries. The distribution of income, which had leveled slightly during and after the New Deal, has become increasingly unequal during the past ten years. The threat of corporations removing jobs from this country has weakened the bargaining power of organized labor: economists calculate that wages were approaching the "fair return" equilibrium price for labor before 1960, but have since been receding from that point, a factor further worsening the distribution of income.

As in many underdeveloped countries, the federal government is finding it increasingly difficult to manage an economy dominated by global corporations. The traditional tools of Keynesian monetary and fiscal policy no longer seem applicable. Global corporations have created off-shore banks which allow them to control their own credit supplies, thereby subverting the efforts of the Federal Reserve System to regulate the economy through control over the money supply. Similarly, the corporations have been able to wield the same weapon against U.S. fiscal policy as they have against those of Latin American governments: "transfer prices" (the manipulation of internal transactions to minimize taxable income) and "tax havens" (bases of operations in low tax areas), not to mention political influence to preserve attractive loopholes in legislation.

In addition, global corporations are able to prevent the government from acquiring sufficient information about their operations to regulate them effectively, even if this were politically possible. If this analysis is substantially correct, it means that the U.S. government will find it increasingly difficult to maintain the economic growth and high employment rates that have been responsible for social "stability" since the New Deal.

IN MANY RESPECTS, Global Reach is a microcosm of the strengths and weaknesses of the American left. On the one hand, the book is very good on the level of values, of program, and of critique of corporate ideology. Barnet and Mueller are particularly eloquent in demonstrating the social costs of corporate planning and in refuting the technocratic claims of the global managers. They polemicize effectively for a holistic approach to the problems posed by global corporations and provide a suggestive interpretation of the consequences of the structural changes in the American political economy.

But on the other hand, Barnet and Mueller fail to present their program systematically. They mix arguments from different theoretical perspectives eclectically, conflating, for example, Daniel Bell's claim that manual labor in the "post-industrial" U.S. is becoming progressively less important with Stanley Aronowitz's that the labor force is being generally proletarianized. The book jumps from general to particular in so haphazard a manner as to make it easier to find anecdotes about Harold Geneen's world vision or the loss of shoemaking jobs in Lynn than precise information about the importance of the global corporations in the U.S. economy.

Furthermore, the formulation of basic concepts is confused, including Barnet and Mueller's concept of the state--they alternatively see it as the "executive committee of the ruling class," controlled by the corporations through interlocking directorates and political influence, and as a somewhat class-neutral group of economic managers who regulate the economy within the confines of the capitalist system. Since the growing independence of the global corporations from the nation-state is the central theme of the book, it is particularly disturbing to find that the authors lack a coherent idea of what exactly the state is doing when it regulates business. As a result, many of their strategies for controlling the corporations are either contradictory or ineffectual. Some, such as full disclosure of corporate operations, more rigorous regulation, tax reform, and anti-oligopolistic legislation, are not much different from what reformers have been proposing about corporations for some time or from what the government has been doing unsuccessfully. Others, like national planning, which have intrinsic potential for meeting the challenge of the global corporations, may not be politically feasible because of the structural dependence of the American state on private capital accumulation. But because Barnet and Mueller have no developed theory of the state, they are unable to shed any light on the type of strategies that are possible within the context of a capitalist state.

The other central conceptual confusion in Global Reach is on the subject of nationalism. Barnet and Mueller rightly attack global corporations as a form of internationalism whose social costs are unacceptable. But as a result, they tend to be overly sympathetic to economic nationalism, and to the anti-trust tradition of American populism, though they recognize that the notion of trust-busting is "quixotic" and not historically possible. Not only does an anti-oligopolistic strategy, such as that Barnet and Mueller in part propose, lead nowhere, but it is also directly at odds with other strategies they suggest which might be more effective, such as national planning.

Similarly, Barnet and Mueller recognize that the labor policies of the global corporations require the development of an international labor movement capable of dealing with a corporation as a whole, although they present a good account of the obstacles to such a movement. But they are also sympathetic to the protectionist maneuvers of conservative American organized labor, which have the effect of preserving the jobs of some American workers at the expense of accentuating sectional divisions within the working class at home and abroad, undermining the internationalism which they recognize is the only viable long-term strategy for fighting the global corporations.

There is an important sense in which the global corporations represent a further development of the universalizing aspects of capitalism, pointing capitalism beyond itself as a system organized on the basis of private profit toward a final goal of an integrated international economy and a socialized national economy. It is therefore a mistake for radicals to advocate a strategy for coping with the power of the global corporations which attacks precisely their most progressive aspect in the name of the backward-looking, defensive appeals of anti-trust and economic nationalism, as Barnet and Mueller end up doing. There are of course serious obstacles to such an internationalist course--not the least of which may be a well-founded belief on the part of the American working class that solidarity with workers in other countries may not be in the short-term interests of their standard of living.

Thus in order to meet the unprecedented challenge presented by the rise of the global corporations, the American left must transcend the ambiguities and nationalist confusions of popular political discourse and develop a perspective and a strategy capable of satisfying both the long-term and the short-term needs of the working class. In that context, Global Reach has delineated the dimensions of the problem: it remains for American radicalism to provide the answers.

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