Issue 243 of SOCIALIST REVIEW Published July/August 2000 Copyright © Socialist Review


Can we stop global capital?

Never before has there been such a massive concentration of wealth and power in the hands of just a few multinationals. But does this mean they have unlimited power? Peter Morgan says it is still possible to oppose them
IBM, Ford, Ericsson, Microsoft, BA, Intel, Nissan, Panasonic

The symbols of multinational capitalism are everywhere. McDonald's and Burger King; Ford and General Motors; Shell and BP; Coca-Cola and Pepsi; Starbucks and Aroma; IBM and Microsoft. In fact, think of any industry and invariably there will be just a handful of companies that own and control large swathes of the world's markets. One of the main reasons why recent protests have ended up with the trashing of a McDonald's, a BMW showroom or a Starbucks coffee bar is because they have come to represent the all-powerful multinational, imposing their policies and practices at will, ruining people's lives, destroying communities and wreaking havoc on the environment.

In part these symbols have become the focus of opposition because of the huge amount of money spent on advertising to promote a brand which consumers can identify with--crucial as companies seek to capture even larger sections of the world market. Today annual spending on advertising in the US is estimated at $196.5 billion, while the 1998 UN Human Development Report says that global advertising spending 'outpaces the growth of the world economy by a third'.

A few companies control and direct large chunks of the world's economy. Take car production. At the start of the 20th century no single firm had a well known brand name or national dealer network. Each was confined to a small geographical region. In 1909 in the US alone there were 274 companies manufacturing small volumes of cars at extremely high prices--mainly as playthings for the rich. Today the picture is different. The top ten corporations account for 76 percent of global production (the five biggest account for 50 percent). The combined revenues of General Motors and Ford exceeds the GDP for all of sub-Saharan Africa. It is estimated that the car multinationals are directly responsible for the direct employment of over 20 million people and many times more in associated industries. Today the fate of governments can rise or fall on the decisions taken in the boardrooms of some of these industries--as was demonstrated by the recent decision by BMW to sell off Rover.

Other industries show a similar concentration of ownership and control. Today two corporations account for 80 percent of global coffee production; four corporations control 87 percent of the world's tobacco industry, and two corporations--Boeing and Airbus--account for 95 percent of civilian aeroplane production. As capitalism has progressed and changed throughout the 20th century, so new companies have emerged which a few decades ago barely existed. McDonald's is a household name with outlets in virtually every country and major city throughout the world, yet barely two decades ago no one had heard of it outside the US.

The top 200 firms now control over a quarter of the world's economic activity. Among the top 100 the increase in total assets has been phenomenal. In 1980 these amounted to $0.5 trillion. By 1995 this had grown to $4.2 trillion. Of the 100 largest economies in the world, 51 are now global corporations and only 49 are countries. For example, the 'economy' of the food and retail multinational WalMart, which recently bought Asda in Britain, is now bigger than 161 countries, including Israel, Poland and Greece. General Motors is bigger than Denmark. Ford is bigger than South Africa. Described by the United Nations as 'the productive core of the globalising world economy', these few hundred multinationals account for most of the world's industrial capacity, technical knowledge (multinational corporations hold 90 percent of all technology and product patents worldwide) and financial transactions.

Political and economic clout

The symbols and power of multinational capital

One company can dominate a whole economy. The Japanese giant Mitsubishi has a combined economic activity which makes it larger economically than the fourth most populous nation on earth, Indonesia. There are over 160 different companies that make up the Mitsubishi group and they make everything from chopsticks to rocketships. Total annual revenue exceeds $175 billion. Mitsubishi Bank is one of the largest in the world with assets of $820 billion. Mitsubishi Motors and Mitsubishi Chemicals are both in the top ten of their sector. Mitsubishi Heavy Industries is Japan's number one ship and rocket builder, gas, oil, coal-fired and nuclear power plant maker, and heavy machinery producer. It is estimated that Mitsubishi Foods indirectly feeds about one quarter of the entire Japanese population, probably washed down by a drink from Kirin brewery--part of the Mitsubishi conglomerate and the fourth largest brewery in the world.

No wonder then that corporations exert such huge political and economic clout. Today the interests of the world's most powerful governments are intimately intertwined with them. It has therefore become commonplace to believe that these multinationals have taken over the role of the state, have superseded the powers of government and now rule the world. 'Globalisation' became the buzzword of the 1990s. In a new book, On the Edge (edited by Will Hutton and Anthony Giddens), Robert Kutter argues, 'As [multinationals'] economic power grows, so does their political and intellectual reach, at the expense of the nation state that once balanced their private economic power with public purposes and national stabilisation policies. The very economic success of global corporations is taken as proof that their world view has to be correct: that global laissez-faire is the optimal way to organise a modern economy.' The political conclusion that multinationals can roam the world at will was seen by the response of New Labour to BMW's threatened closure of Rover. There is nothing we can do to buck the workings of the market, proclaimed Tony Blair.

Yet is it the case that multinationals are now so large and powerful that they can simply dictate policy to governments? If this is so it has important implications for socialists--for power will now be transferred even further away from the democratic process to one of complete unaccountability, giving multinationals free rein to move around, control and exploit the world at will. What is the truth about multinational power?

Larger and bolder protests

Confined within national boundaries

The internationalisation of production and economic activity is nothing new. Some commodities have had an international character for centuries--for example foodstuffs, spices or exotic goods. Such internationalisation was enhanced by the spread of industrialisation from the 18th century onwards in Europe. Nevertheless until very recently the process of production was primarily organised within national boundaries. Large companies did exist in days gone by--Coca-Cola, Johnson and Johnson, Kodak, General Electric, Goodyear, Reebok and PepsiCo were all formed at the end of the 19th century and in a short period of time began to dominate their respective markets. But what distinguishes the giant firms then from what we see today is that they were not generally based upon integrated international research, but were concentrated primarily within their own national states. The early multinationals tended either to be based on extracting raw materials from the Third World for manufacture in the west (such as Unilever or the oil companies), or on the ownership of foreign subsidiaries which were involved in completely local production (such as Ford). This began to change in the period after the Second World War as new patterns of production emerged. The more successful firms operated development, production and marketing strategies on an international scale.

The driving force was partly the need of companies to search for profits throughout the world, partly a conscious effort by the major capitalist powers--particularly the US--to open up and liberalise the world market. Following the Second World War, and with the US dominant in the world economy, a series of steps were taken aimed at reorganising the world trading system. The US government led a coordinated movement to slash tariffs and liberalise economies throughout the world. New transnational institutions were promoted such as the General Agreement on Tariffs and Trade, the World Bank, the International Monetary Fund and the United Nations. The US government opened up its own market which became by far the richest single destination for other countries' exports. The government also assisted US companies--to the tune of millions of dollars in the form of tax subsidies and direct contracts--to expand and conquer new markets.

So IBM--with the help of the US military--was able to make huge advances in the production of computers during the 1960s; Ford and GM began to talk about a 'world car' during the 1970s; and Boeing--again with the help of the US military--began to dominate aeroplane production, forcing the European aerospace firms to pool their resources and talk about building the Airbus during the 1970s and 1980s. Once the process of the internationalisation of production was under way there was no stopping it--mergers and takeovers became common in order for companies to survive and grow. However, it was not always onwards and upwards. The fate of companies was also tied to the boom-bust cycle of capitalism. One of the largest airlines in the world, Pan Am, went bust in the 1980s, and were it not for state intervention by the US government in the 1980s the giant car multinational Chrysler could have suffered a similar fate. The health of those companies that survived depended on being able to enlarge their operations and production internationally. By the end of the 1980s there was hardly an industry in which firms did not have to work out an international strategy based upon joint research and alliances with other firms and states. The day of the huge multinational corporation had arrived.

Up until the Second World War global production and trade were dominated by the old established core countries of north west Europe and the US and manufacturing production remained concentrated in this industrialised core. Prior to the war 71 percent of total world manufacturing production was concentrated in just four countries and almost 90 percent in just 11 countries. Japan produced just 3.5 percent of the world's total. It is true that the nature of capitalism has radically changed since the 1940s--Japan has emerged as a key player in terms of the world economy, and the service sector has expanded enormously and is now a crucial part of the world economy. But a look at the concentration of manufacturing and services still shows a similar dominance in just a few core regions.

The overwhelming majority of the world's production is still concentrated in a relatively small number of countries. By the late 1990s four fifths of world manufacturing was located in North America, western Europe and Japan, with three countries--US, Japan and Germany--accounting for 60 percent of the total. In the service sector, multinational companies are still concentrated in their 'home' state, and it is from here that the majority of their profits are derived. Of the 45,000 estimated parent multinationals in the world, some 37,000 are 'home based' in the 14 major developed OECD countries.

The state still plays an important role in the futures of multinationals. The airline industry is a case in point. One of the most important and profitable industries in the world, airline carriers are intricately linked to the states in which they are based and from which they have emerged. Despite the closer alliances that have developed over the last decade between the major airlines, this link between state and company still dominates the industry and places real limits on the ability of companies to merge and take others over.

Today's system dates back more than half a century to an accord reached in Chicago in 1944, as allied leaders tried to work out what shape world aviation would take after the Second World War. The accord is a dense web of bilateral agreements. Yet this is creating political and economic tensions as problems of competition intensify and the major carriers try to carve up larger sections of the world market. Donald Carty, chairman of American Airlines, stated, 'Free movement of capital and ideas is what's driving the world's economy today. Unfortunately when it comes to aviation much of the world remains governed by restrictive and outdated bilateral agreements.' The treaty still requires carriers to be majority owned by nationals of the countries where they are based. The governments of the EU have legislated to ensure that all airlines are protected by a 49 percent ceiling on ownership by non-EU investors. And in the bastion of the free market, the US, the government is equally protectionist--foreign ownership is limited to 25 percent and internal services are reserved for US carriers only. The upshot is huge tensions between the rival firms as they try to carve out larger markets for themselves--such as we have seen over the years between BA and Virgin, for example. But the tensions also express themselves politically as rival states fight for the interests of 'their' carrier--hence growing problems between the US and Britain when talks last January over access to their respective markets collapsed in acrimony and required the intervention of Bill Clinton and Tony Blair.

Similar intervention by the state exists in the defence industry, one of the most heavily dependent on government support. Most obviously, governments wage war, but they also protect defence business interests. In Britain the arms industry and the government are inextricably linked. The Export Credit Guarantee effectively means the British taxpayer underwrites arms exports. Similarly in the US, the two largest weapons manufacturers, Lockheed Martin and Boeing, have been the most enthusiastic supporters of Nato expansion. According to the US magazine Multinational Monitor, 'enlarging Nato could pave the way for the creation of a huge new subsidised outlet for US weaponry, including $8 billion to $10 billion in sales of fighter planes and a total weapons market of $35 billion over the next decade.' East and central Europe are seen as one of the 'bright' spots for US weapons manufacturers.

State intervention

Anti-WTO Steelworkers badge

The links between multinationals and governments operate in a whole host of ways. When Nato gathered for its fiftieth anniversary last year a dozen companies contributed $250,000 each to have their chief executives serve as directors on a number of the Nato summit's host committees; corporate sponsorship was also a feature of the WTO summit in Seattle last year. Companies such as Ford, GM, Microsoft, Boeing, and Deloitte and Touche all contributed over $250,000, which entitled them to send five guests to the WTO opening and closing receptions; in Britain whenever a member of the royal family makes an overseas visit they are accompanied by the heads of industry and leading figures from the CBI bosses' club, with the relevant British embassy turned into a trade fair for British interests.

More important, however, is the way the state operates to prop up and rescue firms when they face difficulty. Such was the case with the British, French and Italian steel firms in the 1980s; Chrysler in the 1980s, which was effectively rescued by the US government; the Swedish government's intervention in 1993 which supported two of Sweden's largest banks which had large holdings in Volvo, Electrolux and Ericsson; the bailout of the hedge funds led by the US government as the Asian crisis deepened during 1998; and the intervention by the Japanese government in the form of massive tax breaks for companies and giving consumers cash to boost the economy.

So governments still play a crucial role in the day to day running of huge firms, as well as the general running of the system. In one sense, this is central to the needs of multinationals. No capitalist wants to face alone a bitter world of unregulated competition between giant firms. The capitalists need subsidies, a workforce and infrastructure, personnel and assistance, so capitals will always turn to the state for support. And there still exists a strong overlap of interest between those who own and control productive, commercial and financial capital and those who run the state. Moreover, although the system has always been international, and firms will always seek the most profitable states, this does not mean they are 'footloose' and can abandon sites at a moment's notice, nor does it always mean they can go to where the labour is cheapest. They are still inextricably tied to their 'home' states on which they rely.

The state-big business relationship has not disappeared or withered away under the impact of multinational capitalism, but has been raised to a different level. The multinational company has not ended its link to the state, but rather has multiplied the number of states to which it is linked. So we live in a world in which the tensions between firms have intensified and this embroils the states to which they belong. Often this expresses itself in bitter negotiations over government policy and treaties (such as the EU project over the last few years), but it can also spill over into military conflict (such as the Balkan War and the need for Nato to expand eastwards). It is no coincidence that the period in history which has seen the greatest concentration of capital is also the time when the military power of states is at its greatest. Marx's description of the ruling class as a 'band of warring brothers' rings more true today than it was when he wrote it during the 19th century.

Multinational capitalism therefore makes the system far more unstable today than even 20 or 30 years ago. This works in a number of ways. Firstly, the very size of corporations means that if one were to go under it could pull the whole system into a deep and protracted crisis. One of the reasons why the Japanese government has pumped billions of pounds into its economy over the last five years is that the consequences if a multinational such as Mitsubishi went bust would be horrendous for the Japanese economy. Secondly, alongside the growth in size of capital goes an intensification of competition. The move by the US government to break up the giant Microsoft empire is tied to the fact that the very monopoly of Microsoft in the computer industry is restricting the ability of other computer firms to develop and expand. Yet in moving against Microsoft, the US government has created real problems--the fact that the share price of Microsoft dropped 45 percent in the course of the court case could affect future investment and, as the Wall Street Journal warned recently, could pull down the companies which are so precariously placed at the moment.

Finally, the very size and influence of multinationals have greatly increased the power of those who work for them. Partly this is because of the production methods multinationals are forced to introduce to increase profitability in an ever more competitive market. 'Just in time' production, on the one hand, increases profitability by preventing capital being 'idle', but also makes the power of the workers so much stronger--a strike at one plant can cripple the whole multinational's operations within a short period of time.

This was vividly illustrated in 1998 when 9,200 car workers went on strike in Flint, Michigan, to protest against GM's decision to send union work to outside suppliers in the US and Mexico. The strike shut down 27 of GM's 29 North American assembly plants, causing GM to lay off 192,000 workers. By the end of the strike these 9,200 workers had cost the company more then $2 billion in lost production and GM management was forced to back down on a number of key demands. Such power was also evident earlier this year in the strike by white collar and technical production workers at Boeing. Such is the intensity of competition between the rival aeroplane manufacturers and so strict are the production schedules that the six week strike meant Boeing missed the deadline for the production of 15 planes, costing the company millions of dollars and possibly future orders. Little wonder then that the bosses were forced to concede virtually all the workers' demands in a short space of time.

The international power of workers is now inextricably tied up with the international system of production. When 125,000 dockers in India came out on strike in January this year, they shut the major ports of Bombay and Calcutta, forcing the army and navy to intervene, and disrupting the major trade routes of south east Asia, leaving many ships idle with produce having to be dumped at sea. It is this power that multinational capital cannot contain. And the more it seeks to expand and open up new markets, the more problems it creates. So the decision to allow China into the WTO may give greater access for US multinationals to tap the huge Chinese market. But it has been estimated by the World Bank that some 35 percent of China's industrial workers face the sack because they work in industries that cannot compete with the multinationals. So political and social convulsions are inevitable.

The world working class is massively bigger and stronger today than at any time in history. As multinationals have expanded over the globe, so they have created a world working class in which there is increasingly a common interest. The level of organisation has also not been seen before. Enormously powerful trade unions now exist in virtually every country, in virtually every sector of production. It is this power that, ultimately, will halt the power of the multinationals in their tracks. When those who produce the profits for these huge multinationals come out on strike, not only can they damage one giant firm, they can bring the whole world system into crisis.

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