Salient. Victoria University Students Newspaper. Vol. 38, No. 2. March 11, 1975
The Menace of the Multinationals
The Menace of the Multinationals
The multinational (or transnational) enterprises which have proliferated over the past 25 years, represent one of the most spectacular phenomena of our epoch with an importance that circumscribes not only economic, financial and industrial areas but also directly influences governmental policy and state relationships.
The multinationals, with their economic-financial-political power, have become a species of 'super-states that pressure, control and subjugate many underdeveloped countries.
The term 'multinationals' is generally applied to those companies that operate in a minimum of six countries and whose foreign branches represent at least 20% of the operations and returns of the parent company. These monopolies-obviously extract billions of dollars in profits from their annual sales.
These are the characteristics of the 200 US enterprises that, because of their dimensions (with branches in more than 20 countries) have been given the name of 'multinationals'. Among the most important are: General Motors, (whose annual volume of sales reaches some $30 billion, a figure higher than the Gross National Product of all the countries of Central America and of many of South America); Ford Motor Company (annual sales higher than the GNP of Austria), General Electric, Standard Oil. ITT, IBM, Chrysler, Gulf, etc. which represent 80% of all US direct investments abroad and have an annual commercial volume of close to $200 billion. In 1950, the US multinationals had 7000 branches abroad (with investments of $4.5 billion). By 1966 they controlled 23000 and today must have more than 25000 subsidiaries scattered in every corner of the world with a total investment of $1.9 billion. With the export of capital to the underdeveloped countries, the US multinationals obtain fabulous profits. It is enough to point out, for example, that in 1970 alone, they extracted from those countries $3.1 billion, a figure that represents more than 50% of all profits returned to the United States from direct investments abroad.
Thus it is easy to understand why they have been called 'invisible empires'.
As we have seen, the annual economic budgets that the majority of multinationals manage are far greater than the GNP of most underdeveloped countries and equivalent or superior to those of the smallest European nations. In addition, the indices of multinational growth are much higher than those of countries, according to the economic magazine Fortune and Principal Economic Indicators, published by the Organisation for Economic Cooperation and Development (OECD).
A Well Protected Super-Nationality
The multinational enterprises have no nationality, but they are protected by a number of countries, mainly the United States. On one occasion, the Director of the Sociedad Nestle Alimentation (Nestle Food Company). Max Gloor, stated publicly:
We cannot be taken for pure Swiss nor for pure nationals, but rather as dependent on the entire world; if such a thing is possible, we are probably an intermediate thing, a race apart. In other words, we have a special nationality, the Nestle nationality.
This phenomenon is manifested in the way multinationals function. They are directed by a central headquarters which is the brain and nervous system of the enterprise, while the branches are nothing more than simple executors of the orders they receive. For example. Ford coordinates the activities of its British. Belgian and German branches as closely as each one controls its own factories. All the tactical and strategic decisions are made in the central office. Thanks to modern communications technology and computers that allow for long-distance direction of foreign operations, the multinationals augment their monopolistic control over markets and supply sources.
They must renounce all nationalist attitudes and understand that, in the final instance, their loyalty must uphold the interests of the stock holders of the parent company, and they must defend those interests even though they apparently do not coincide with the national interests of the country where they are working.
The US companies that operate on a large scale in the European Common Market area and the Free Exchange Zone, have succeeded in evading one of the objectives of these associations, which was to prevent the penetration of non-affiliated foreign companies. And that is how the US companies avoid taxes: because of their world-wide rather than national financial control, they can transfer to low-tax countries the profits accumulated by their branches in high-tax countries. These transfers are made by manipulating the products sold in the area of the various branches. And the victims of this policy are the peoples of all the countries where these companies 'operate'.
The oppression that the multinationals exert and the consequences, affect no only the underdeveloped countries: in Canada, for example, US multinationals own 45% of the means of production. Moreover, these companies don't invest in just any branch of production. What they do is take the cream off the industry, leaving aside the traditional sectors in order to concentrate in the dynamic sectors with advanced technology and high profits, such as electronics, petrochemical, etc.
When threatened, the multinationals do not hesitate to resort violence to corner and maintain control over the resources of the countries in which they operate: from United Fruit in Guatemala (1954) to ITT in Chile (1973), their methods are too well known to need to detail here.
Consequences of the Development of the Multinationals
The development of the multinational enterprises in recent years has brought with it consequences in all parts of the world, but especially in the underdeveloped countries.
From the commercial point of view, prices and monetary problems, control of international markets and the majority of basic products, belong not to the producing countries, but to the industrialised countries, through a network of financial relations and agreements among dominant groups.= These' groups are the ones that fix the prices according to the varying needs of industry in the developed countries. The tendency that exists in this area is oriented toward lowering prices of unfinished or semi-finished products and increasing prices of manufactured products.
International speculation achieves this on the basis of the monetary crisis and of inflation. The multinational companies have available important 'floating' liquid sums and diverse foreign exchange that they utilise to provoke monetary crisis in their favour.
Within world commerce, the part of the exchange that the branches of the multinationals are responsible for among themselves, is one of the most spectacular proofs of the influence these companies exercise over national economic policies. In 1966, 22% of the value of British exports came from transactions among filial enterprises, that is between a foreign branch and the parent company. Another example is that the sales made between multinational companies with, headquarters in the United States, and their foreign branches, represented something more than 25% of the total of US exports in 1964. Today these figures have risen tremendously.
As for the problem of financial transfers, it is no secret that the multinationals deposit enormous sums of money among their branches in different countries in order to evade control and tax payments. A study made in 1967 revealed that North American enterprises with branches in Europe ordered these branches to send between 90% and 100% of their profits to the parent company. The same method is used in Latin America: between 1955 and 1967, US multinational enterprises invested a total of $4.361 billion on the continent, a sum which brought them a total profit of $12.403 billion, of which $10.839 billion was returned to the parent companies.
Latin America, without doubt, is the region most (saturated' with foreign and especially US capital. At the beginning of 1971, investments by US enterprises in the countries on the continent rose to $14.700 billion, while in the underdeveloped countries of Asia, they totalled $4.100 billion, and in Africa $2.600 billion. This 'saturation' becomes more evident if we consider the population of these regions. In Latin America in 1970, for every inhabitant there was a direct investment by US monopolies of $51, in Africa it was $8 and in Asia still less, close to $3.
In Latin America, the capital invested and the profits obtained by the multinationals have directly caused a devastating undernutrition. In countries like Brazil, where income distribution is very limited and unemployment very high, the majority of the children of poor families, malnourished and easy prey to illness, are suffering a mental retardation that is reaching alarming proportions, as illustrated, for example, by recent studies made in the Brazilian northeast.page 5
The multinational companies represent the very essence of racism, unscrupulous economic, social and cultural plunder of non-white populations, under the pretext of white 'supremacy' and unlimited 'paternalism', the latter a front to hide their profound scorn for the countries that are the producers of raw materials and a cheap work force.
Racism continues to play its role in economic and social exploitation. Enterprises and governments practice racism with the objective of dividing the people, in the developed as well as in the underdeveloped countries. Thus the multinationals resort to the myth that the underdeveloped countries represent 'an inferior form of cultural development' and are greatly in need of 'the technological greatness' and the 'cultural values' (chewing gum, comics, Coca Cola) of the industrialised countries in order 'to have access to the civilised world.'
Future Limits and Contradictions in the Development of Multinational Enterprises
There are various hypothesis concerning the future of the multinational companies: some believe that the capitalist economy will soon be dominated by between 100 and 150 enterprises; others believe that a total of 300 multinational enterprises will be in control of 70% of the western world's production by 1975. What is evident is that their power will continue to expand.
Nevertheless, just as the process of the concentration of capital has clashed with national limits, it is easy to predict that it will also clash fatally with international limits. the multinational enterprises also commit errors. The 'giant' develops a bureaucracy, making relations and transmissions more and more difficult, there are job duplications and increases in waste. There is no doubt that the multinationals will also create their own anti-bodies.
The existence of the multinationals demonstrates that the search for maximum profits goes against the sovereignty of nations and the self-determination of peoples, and that social revolutions, therefore, represent a serious threat to the holdings of the multinationals. Their defenders, while they lament the 'hard work' and 'great risks' they must run to invest in underdeveloped countries, find themselves obliged to admit that one of 'the most disturbing problems for the directors of the multinationals is the existence of unstable governments and populations that have still not achieved political maturity'-paternalistic jargon for governments hostile to the multinationals and for people ready to defend their natural resources!
Everything that is said about the 'sane injection' of foreign capital into the underdeveloped countries is categorically refuted by World Bank statistics which prove beyond doubt, that the disporportion that exists between the capital invested and the profits extracted only widens the gap that separates the underdeveloped countries from the developed: that these gigantic octopuses feed on the misery of millions of human beings condemned to die of hunger and disease in a rich and prodigious earth that has been stolen from them.
But the activities of these enterprises are raising the consciousness of increasing numbers of workers concerning the nature of capitalism, on the basis of very concrete factors (jobs, salary, work methods) and awakening a new feeling and dimension of solidarity among workers of industrialised and underdeveloped countries, who are beginning to understand that their interests are common and that their struggle against capitalism and imperialism must also be common.