Atelier N°. 0, article 14

Corinne Eldin Chait :
(Term Paper, May 2001)

Theories and Methods Developed in  the Book, GLOBAL REACH, by Richard J. Barnet & Ronald E. Müller (New York, Simon and Schuster, 1974)

                                                                                by Corinne Eldin Chait
                                                                                    DEA -  Term Paper
                                                                                    Université Stenhdal
                                                                                         (May 2001)

Published in 1974, Global Reach  describes thoroughly the globalization context of that decade. As President Nixon proclaims in the 1973 International Economic Report: « By any quantitative measure the post-World War II era has been the most successful in international economic history"(p123).

This book studies two opposed visions of the world: the global vision and the national vision.  Each with its own ideals, set of values and principles. Globalization is pushed by multinational companies. Their vision of the world is based on an ideal of interdependent, borderless world with open markets and no trade barriers. Will the result be a new golden age or a new form of imperial domination? Richard J. Barnet and Ronald E. Muller question the ideology of the Global Managers to demonstrate that they are not compatible with the future of our planet, neither with our general well being nor with  peace. To demonstrate how the interests, goals and ideology of World Companies go against our interest the authors describe the impact of multinational companies around the world.

In PART I the authors describe how global corporations are organized and to what extent their technology, money and ideology have shaped our contemporary life as an integrated unit, with a centralized planning of the world. Then they give an evaluation of the World Managers’ global vision based on their record of performance in poor and rich countries because is on performance that their legitimacy depends. PART II deals with poor countries that accept a global corporation as an instrument of development and PART III shows us the impact of global corporations on the territory and society of the U.S.
How do global managers prove to the rest of the world that they are the fittest to lead the world economy? This is what will be examined in my first part. The second part describes the limits of their international political and economic control and the analysis of their vision by Barnet and Müller.

Global Companies aspire to impose their reign because they consider that they are the only power capable of having a global vision of the future and hence decide on what is best for us. To establish their political legitimacy they must demonstrate that the maximization of global profit is compatible with human happiness and is beneficial for our future. Mr. Barnet and Mr. Müller study the principles sustained by the Global Managers to seek legitimacy:

The growth and concentration of power in a few hands meet little opposition because the assumption is that the growth of the whole enhances welfare of all the parts. This is one of the reasons why multinationals meet little opposition around the world. Global managers think that when US firms invest abroad "everybody benefits". Poor countries get needed technology, finance capital, taxes, managerial expertise, and increased exports. US citizens get more jobs, improved balance of payments and the benefit of a peaceful world. But Global Companies are not interested in the welfare of the parts. It is only profit motive that makes industry responsive to needs, even social needs. The authors call it a "virtual dictatorship". The benefits of having an international corporation established in a city of a developing country are minimum; capital does not trickle down to the population.  This can be explained because of three major institutional weaknesses:

-Antiquated governmental structures. Laws are inadequate for collecting taxes, controlling foreign business or preventing the drain of finance capital and the lack of efficient administration to reinforce the laws

-Lack of strong labor movement in many underdeveloped countries to bargain with transnational business

-The lack of competition from local business also explains why Global companies exert such strong power. Many decide to join them instead of fighting them. Others think that they can sell the family business at a good price but once foreign giants become established in the local market, the alternative may well be a forced sale at low price or bankruptcy.

World Businessmen claim that they are the moving force for world progress, development and free enterprise and they will bring healthier happier and more productive lives to people everywhere…The World Managers consistently use the development of the U.S. economy as their model for the world economy: "The world today is very similar to the American continent 100 years ago". This idea is based on the "Modernization Theory" and is used to convince developing countries that American investment will lead to a modern and wealthy economy as is supposed to exist in the United States. Most underdeveloped nations have decided to emulate the economies of the developed countries through a process of industrialization and therefore dependency on outside technology, finance capital and marketing techniques, especially the ideology of the consuming society. Now it has to sacrifice the buildup of its own technological capacity, a long and difficult process for the possibility of the quick boom that foreign investment can bring so that the nation’s technology becomes subject to foreign control.

Another assumption is that global management of the world is more efficient. It is the most effective and rational force to develop and distribute the limited resources of the world. Our generation is the first to discover that the planet’s resources are not everlasting and we have a particular reverence for efficiency. However, in running an engine of development, top managers do not stop to analyze the adverse effects of their standard business practices. Resources are taken at low expense from poor countries where they are the most needed and transferred to rich countries and regions where they are the least needed. The society of consumption in developed countries creates a huge amount of waste. Using scarce mineral resources to produce ever-greater consumption of energy, non-reusable packaging produces more heat and ecological imbalance.

We also tend to think that it is world competition that maintains low prices and develops new technologies. However oligopolies seldom challenge one another to a technological race or to a price competition. They prefer cutting costs by automation or the removal of companies to low-wage areas. Products are all very similar, only the prices vary according to with the packaging and the advertising campaigns.

Global managers say the planetary enterprise is a key to peace. By doing what comes naturally in the pursuit of profit, global corporations bring harmony to the world: World peace through world trade. For a company to develop in a country it needs political stability. This is true but only in the short run. In the long run world companies are concerned with development so that the social, ecological and psychological unbalance they create is not their "business". To make sure that their industries based in foreign countries are safe they must anticipate political problems that might destabilize the economy and some American companies were ready to help or do business with dictators, revolutionaries and communists. Their concern is to make profit where ever it can be made as long as labor is cheap and submissive. Countries with a stable authoritarian government are as good or even better  for transnational companies because they are not confronted to organized labor and power is never challenged in these countries.?

The dependence of advanced capitalist society on privately owned sources of power for maintaining employment, transferring money, distributing technologies and services is so great that government can no longer control them and cannot achieve social stability. Thus in its quest for its own stability the Global Company is helping to create instability for society as a whole. Despite their vision of world peace through world trade they are more likely to act as instruments of competitive economic and geopolitical rivalry.

 Because of the increasing concern around the world that big corporations are in a position to dominate governments, dislocate national economies and upset world currency flows Global Companies can obtain legitimacy by merchandising fear, by threatening people or countries, by using pressures or even force when governments, laws or organized labor challenge their power. They can also obtain it by persuasion. Convincing the world of the efficiency of global management by education campaigns, TV and radio broadcasting, slogans, marketing etc… will allow multinationals to go unquestioned. Advertising helps to market their products, spread a materialistic, capitalistic, individualistic, competitive and over consuming society. They use the media to commercialize culture. Through global marketing they want to create a "consumption community" with common values that transcend border, race…etc. Because different psychological and cultural attitudes make it harder to sell and it means that multinationals would need to adapt to these differences at great expense. Their vision of the world: global cities, global universities …a global culture with supra national events is an antidote to overly nationalistic culture. It is the great ideological power of the new globalism. We learn that control of ideologies through mass media in poor countries is as important a source of their power as their control of finance and technology. The same use of these three elements of corporate power is used in the United States with the same negative effects.

Superior management skills are the World Managers’ claim for sovereignty. The underdeveloped world is the supreme management challenge; it is the ultimate test of the World Manager’s global vision of peace and abundance. In 1973, the World Bank President McNamara said that development is not reaching 40 percent of entire populations of the developing world. As this development crisis becomes more obvious the World Managers’ claims are being questioned. The problem of world poverty now looks less susceptible to business-like solutions than the experts of the 1960’s led the public to believe. Why are underdeveloped countries still so poor? They have huge labor forces and raw material and great potential markets. Rich nations have a number of explanations often rooted in racism. Perhaps the most decisive factor in the relative bargaining power of an advanced nation over that of an underdeveloped society is a difference in philosophical outlook. Nations need technology to build machines but also to create and communicate a set of values that puts creation of wealth at its center. The capacity of advanced nations to spread to developing nations the ideological foundations of modern capitalism and to make the elites of poor countries disciples in the science of enrichment gave the industrial nations big bargaining power. No aspect of technological superiority of the developed world is more important than its mastery of the techniques of ideological marketing and wealth creating knowledge.

The authors describe the global corporation as having a power greater than the military force and needs the world resources to reach its goal: profit and market shares. Power comes from control of the means of creating wealth on a worldwide scale. Its destructive force is not interested in individuals, subsidiaries, and the suitability of products or the social impact of their activities. Extraordinary concentration of wealth and power leads to weakened democracy, weakened public voice and weakened public advocacy. Instead of countries making their own decision these are determined for them. Decisions taken from the outside robs nations of their sovereignty. Multinationals do not have more loyalty towards the people of their native homelands, they close plants and relocate if they can produce at less cost elsewhere.  Global Corporations have no boundaries, no limits, they no longer belong to one country, they are no longer controlled by one government. They belong to themselves. Components are produced in scattered places thanks to new transportation technologies and satellite communications. The global factory has no geographical ties: the capital comes from a country, the natural resources comes from another, and the labor from a third one. However they can have strong impact on where people live, work, what work they will do, if any, what they will eat, drink, wear, what sort of knowledge schools and universities will encourage, and what society their children will inherit.

National sovereignty, which protects a country from foreign invasions, goes against the interests of global corporations. Local officials, laws, or traditions that inhibit the free flow of finance capital, technology and goods on a global scale are perceived as problems that come from nationalism. But the frontal attack on the nation-state has been replaced by a subtler campaign against borders, cultural differences, protectionism and the deeply imbedded fears of those who attack the international corporations. They make an effort on "educating" those who think that the nation-state is necessary to their happiness.
The authors’ solution to these problems is more control over world companies, but not total control. Nationalization they say, in many cases is not a solution because global corporations are highly centralized structures with specialized subsidiaries in different parts of the world. The nationalization of one of these very specialized industries would be useless to a country.
Given its drive to maximize world profits, the pressures of competition, and its bargaining power, can Global Companies modify their behavior in ways that will significantly aid the bottom 60 percent of the world’s population in rich and poor nations? Yes, say Barnet and Müller but if multinational corporations do not undergo profound changes in their goals and strategies or are not effectively controlled, they will continue to act as disturbers of the peace on a global scale. The heart of the problem is excessive power, and self-imposed limitations on power are not characteristic of human institutions. The issue is to develop countervailing powers. The authors, then, do not recommend the breaking up of Global Corporations but they want more control over them.

Four billion inhabitants of the planet aspire in 1973 to greater control over their own lives and more political participation. If the Global Corporation with its worldwide division of labor no longer represents the ultimate in economic efficiency, then much of the rationale for the Global Company is gone.

The authors’ method to fight the system is to change it, and this can only be achieved with political support. The following
series of specific reforms must be examined in the light of long-range preferences and the global framework.

In order to encourage the social responsibility of Global Companies, governments and citizens must know what these corporations own, what they are doing and what they are planning. The books of Global Companies should be public. They ask for total transparency and disclosure of financial transactions for corporations over a certain size. Argument against imposition of disclosure by national legislation would put U.S. firms at a competitive disadvantage. No government is going to put its own major industry at competitive disadvantage even to regain sovereignty. A solution is harmonization of disclosure requirements among the major countries in which Global Companies are based.

International regulation by an international agency is another possibility but the problem is that they are too weak to regulate the corporate giants. For the authors the precondition for effective international regulation is the restoration of certain powers to national governments and local communities to manage their own territory. But nations use sovereignty to escape accountability so it must be used with limitations.

The underlying reason for the socially disruptive effects of Global Companies is that they are treated as private organizations despite their increasing public role. Their technology was assembled with direct subsidies, tax write-offs and other benefits traceable to the public treasury. The social capital of the nation water air mineral treasure has been expended. Much of the foundation of wealth of Global Companies  is of social property in origin and character and it should be treated as such. Also, the risks of the global companies are social, not private in areas of  financial loss, bad planning, pollution and  unemployment area. They decide without being accountable, without having being democratically elected . They are not socially committed. The authors suggest that basic goals for our society should be less waste and pollution, full employment, control of inflation, better public services such as education, health, transportation,  investment in reconstruction of cities and towns decentralization.

Another method to change the system, the authors explain, is to set production priorities: some things should not be produced in a time of resource scarcity. There should be qualitative standards for what we produce they say. Build in the human factor in the assessment of costs: what does it do to men, women, air … to produce this good?

The authors want to see power shared by all the people, they believe in the need for a consumer, worker, and citizen sovereignty. They want to end subsidies, which encourage private wealth with public money and stop laws favoring foreign investments. Investments should go to alternative technologies, in job creation and the extension of social services. Banks should be required to get out of non-banking businesses.

Another objective of a national development program should be reasonable level of self-sufficiency in raw materials and manufactured goods, otherwise there is the risk of becoming dependent on other countries (where multinationals have invested money) and live off investment income thus vulnerable to political vicissitudes. This accelerates a shift in the global distribution of industrial and economic power away from the United States. The writers want the U.S. to protect its sovereignty.
They say that economic power must be redistributed in the world but Global Companies are not the instrument to bring about this economic redistribution. The global enterprise may spread wealth geographically but it concentrates it politically and socially which brings class division while stability and justice are eluded. Redistribution of wealth can be done by: "preferential trade agreements" , encouragement of locally owned industries, higher prices for raw material.

Local communities in the US have the same ambivalent relationship to global companies as do underdeveloped countries: they are controlled from the outside. The solution is giving priority to the local public need instead of global profit maximization. Corporations providing essential public services such as transportation, communications and power are social institutions and should be subject to community ownership and management. Corporations could be required to file a plan with local authorities covering the corporation’s local operations with an estimate of its employment requirements, its expenditures to ensure job safety, its research to increase local employment, its plans to increase community participation on decisions affecting the community and finance studies on the impact of pollution it emits in the community. Global corporations should be required to demonstrate that the enterprise is having a positive impact on the community. Such local reforms should be integrated into a national policy in order to guarantee success, because corporations will try to find the best investment climate to move into a community and will chose more manageable ones to invest. Laws must establish  responsibilities and hold companies accountable.

The rise of the global corporation is the culmination of the modern industrial era and its system of values. The authors of Global Reach have proposed modifying the current system and necessarily changing our values to make a better future. The authors say that the only values needed to assure the  survival of our species are "respect for human dignity, justice, frugality, honesty, moderation and equality". Our contemporary values -competitive individualism, comfort, waste, infinite growth, security through accumulation- must be challenged and radically changed .

If we consider the world today, we realize that globalization has not fulfilled  its promises  of global wealth, global technology, and global economic growth: 49 of the 100 wealthiest and most powerful institutions are now corporations rather than governments and they control 70 % of the world trade and 80% of the world’s foreign investments. The power, the grasp and the freedom of maneuver of the transnational corporations has increased but we are much more aware of it now than in the past. There is growing discontent, the number and the confidence of protesters around the world is increasing too. Although the  meetings of the corporate globalisers  take place behind high barbed-wire fences and lines of riot police, these measures to protect their interests will not last. Globalization  is not inevitable. World solidarity is a powerful force too. The "fight" against supra national powers has started.