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This paper summarizes the conceptualization of a world economy
dominated by transnational corporations, creating an international political and
economic environment where less developed societies are pushed to "modernize" as
dependent capitalist economies. This notion is, of course, the cornerstone of dependency theory as
created and developed in Santiago, Chile, during the 1960s. I include Sunkel's text in this section
to contribute to the understanding of the basic tenets of what is known as
integrated international production
systems .
Róbinson Rojas, 1990.
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THE TRANSNATIONAL CORPORATE SYSTEM.- by Osvaldo Sunkel
( CTC Reporter (Autumn 1985), a publication of the UN Centre on
Transnational Corporations )
There are some crucial questions relating to the TNC which one
cannot begin to understand, much less to answer, if one does not
have a more realistic picture of contemporary capitalism. The
so-called market has in fact been superseded to a significant degree
by public and private planning. To a very large extent, the visible
hands of the State and the TNC have long replaced the mythical
invisible hand of laissez-faire capitalism, if it ever existed. It
is not really the individual institution of the TNC as such that is
the object of so much attention. There have been individual instances
of large world-wide business organizations in the past which have not
aroused such great concern. The focus is rather on the emergence of a
transnational business system with such a great potential for socially
uncontrolled power and influence that international society finds
itself forced into a profound reorganization in order to accommodate it.
Interest in the TNC has been aroused because it has become so
obviously visible, owing mainly to the political, financial,
environmental and other incidents in which it has been involved. But
it should be recognised that this is only the tip of the iceberg, the
visible emerging representative part of a system in the process of
structural transformation.
It should be easy to recognise that both in the developed and in
the developing countries a kind of dual but closely interrelated
segmentation of the economy is taking place. On the one hand, there is
the oligopolistic economy and competition of the transnational giants.
On the other, we have the traditional market economy of medium-sized
and small producers. To this second economy we must add the vast mass
of the semi-capitalist (marginal, informal) economy in the developing
countries and the growing segments of structural unemployment and the
underground economy in the industrial countries. The traditional and
new sectors of small capitalistic and semi-capitalistic producers
participate partially or totally in markets characterised by
oligopolistic price competition in which the individual producer has
little power. They have to abide by the rules of a game imposed from
above by government and the transnational oligopolistic segment.
The managerial class of the transnational business system, in
contrast, possesses sufficient power and influence to set the rules
of the game, either by trying to induce or force the authorities to
adopt the rules which TNCs require for their growth and expansion,
changing the authorities if necessary, or by circumventing established
rules. This kind of corporate behaviour must therefore be considered
normal and not exceptional.
INTERACTIONS BETWEEN TNCs AND GOVERNMENTS
And there is conflict in this mutual adaptation because TNC
policies are based on considerations which trascend those of host as
well as home countries. TNC policies are the outcome of the structural
requirements for survival and growth of the oligopolistic transnational
segment of the world economy, present to a greater or lesser degree in
all countries, and the managerial class of this aggregate of TNCs is
in charge of formulating and implementing those policies,
notwithstanding their contradiction with national policies. These will
have to be reformulated by their colleagues in the State techno-
bureaucracy in order to accommodate the demands of the transnational
process.
The transnationalisation process has in fact consisted, among
other things, of the formation of new structural actors and new
structural links among them and across national boundaries. This
situation gives rise to a host of questions regarding the control of
the national State over these actors. It raises questions about the
nature of the national State itself. If a national bourgeoisie has
in fact become structurally integrated and transformed into a
transnational bourgeoisie, how one can expect the State to represent
the interests of an evaporating national bourgeoisie, not to speak of
those of the working classes?
There are by now enough indications in actual historical
experience and in the literature that a transnational or supranational
capitalistic system is emerging, overlapping national states DE FACTO,
and even DE JURE, as witnessed by the conditions under which
accumulated foreign debt is being renegotiated. Private transnational
financial integration during the 1970s has been a crucial phase of
the transnationalisation process and the main cause both of the
generation of the huge foreign debts and of the way they are being
handled by Governments and banks - i.e. between a small cartel of
transnational banks and the local financial authorities representative
of the transnationalised business segments of the debtor nations,
under the policing of the IMF. Can this perspective be simply dismissed
on the doubtful grounds frequently invoked that Governments are
increasingly powerful? If, as is more probable, Governments and TNCs
are adapting to each other, would this not be a sign that it is the
emerging transnational capitalist system rather than the national
Government which is growing more powerful?
THE SPREAD OF TRANSNATIONAL CAPITALISM
It seems to be clear that contemporary transnational capitalism
bases much of its formidable dynamism on the ever-increasing and
diversifying stimulation of consumption, and on continuous
technological innovation in products and process of production. The
unique contribution of TNCs is their ability to convert different
kinds of lasting knowledge into commercially viable processes and
products. Furthermore, the commitment of significant amounts of
resources to technology is largely induced by the expectation of
monopoly rents from new products and processes, as well as from the
need to match the efforts of other such firms in order to protect
their market share.
But since monopoly rent decrease over time, TNCs are forced to
keep innovating products and processes in order to keep reaping
monopoly rents over time, before they decline and eventually disappear.
For this same reason, and owing to competition among themselves, they
are also forced to keep tapping potential markets in all available
"host" countries. In order to keep this growth mechanism functioning,
both home and host countries provide substantial subsidies to the
transnational corporate system: on the part of the developed countries,
basic research, R & D, and government spending, particularly in the
military-industrial complex, the international transportation and
communication network, tied public foreign loans, foreign aid and
technical assistance, etc.; on the part of the developing countries,
protection, low-interest credits, special tax concessions, low salaries
and docile labour, etc. On the other hand, through its pervasive
influence on consumers, producers and Governments, the transnational
corporate system stimulates by all possible means the accelerated
diversification, obsolescence and replacement of existing consumer and
producer goods. It has in fact discovered the technique of planning
the accelerated expansion of consumption. Keynes may have been
dethroned from the realms of government economic policy making, but
TNCs have not missed the essence of his message: stimulate consumer
spending.
If it is true, as stated above, that transnational capitalism is,
on the one hand, heavily subsidised, and that, on the other, it has
the power to influence public and private spending, there are no solid
grounds to claim, as is often done, that their spread implies increased
productive efficiency and reduction of risks, with a positive effect on
the allocation of resources. There is no doubt that this is a
convenient situation for TNCs to be in: they are able to mobilise not
only their own resources, but also the resources of others throughout
the world in order to combine them in economically feasible and
commercially profitable activities.
In the process of doing this, local entrepreneurial groups are
expropriated, traditional and not so traditional economic activities
are disrupted, unemployment and underemployment are generated, national
decision-making centres are eroded, balance-of-payments problems are
aggravated, huge foreign debts are accumulated, and property and income
are increasingly concentrated. All this does not preclude growth in per
capita income, because the transnational segment of the economy and its
ancillary activities expand, albeit at the relative expense of the rest
of the economy. It is obviously not the TNC as such that induces this
kind of process in developing countries, but the new transnational
capitalistic system of which the TNC constitutes its dynamic kernel.
TNCs AND THE EMERGENCE OF A NEW INTERNATIONAL DIVISION OF LABOUR
It is clear from the above that the most characteristic and
significant change that has taken place in recent decades is the
internationalisation of manufacturing production. To bring out this
fact forcefully, there is a need for an adequate time perspective.
Before the 1950s, foreign private capital was invested mainly in
public services, mining, agriculture, and petroleum. Excluding
petroleum, in all other sectors, foreign investment has declined
substantially, while increasing dramatically in manufacturing and
such related services as banking, marketing, mass media and
advertising. This highly significant structural change can also be
observed in the statistics on the evolution of the number of
subsidiaries in developing countries.
The reorientation in the activities of TNCs represents the
reorganisation of the international economy and the emergence of
a new international division of labour. Before the Second World
War, we had the nineteenth-century pattern of manufacturing countries
and primary producers. But since industrialisation took root and
expanded in developing countries during the inter-war period and
especially during the post-war decades, a new pattern started to
superimpose itself on the previous one.
The new model is operationally structured around the large
manufacturing TNC that has emerged as a dominant factor on the
economic landscape in the last few decades, mainly as a consequence
of the huge expansion of government contracts -especially in
armaments and space exploration- and the spectacular technological
progress which resulted partly from this.
In the plants, laboratories, and design and publicity
departments, as well as in the planning, decision-making, personnel
and finance organisations that constitute their headquarters -always
located in an industrialised country- the big TNC develops
a) new products;
b) new ways of producing those products;
c) the machinery and equipment needed to produce them;
d) the synthetic raw materials and the intermediate
products necessary for their production;
e) the advertising needed to create and activate
their markets; and
f) the subsidiaries, joint ventures or licensing
arrangements necessary to market, assemble or
produce them in other countries.
Therefore, both the import-substituting and the export-promoting
strategies of industrialisation are part of the TNC's strategy of
penetration of foreign and their own domestic markets. External public
and private credit and international technical assistance contribute
efficiently to expanding the global markets for the big TNC -North
American, European or Japanese. In a world of defenceless consumers
(faced with advertising, consumer credit and the "demonstration
effect"), a new form of international division of labour appears, with
its corresponding agent: the international manufacturing oligopoly.
At present we seem to be moving a stage further, towards the
twenty-first century pattern of international specialisation, with
the ( former?) industrial countries moving towards the service economy,
and some of the Third World countries becoming (at least partially)
industrial economies, the new dynamic agent being the transnational
oligopolies specialising in R&D, communications, information and
finance. As in the previous phase, there is also the same techno-
scientific specialisation: the centre concentrates on the generation
of new scientific and technological knowledge, which is also moving
from manufacturing to services, and the periphery on its consumption
and or routine utilisation.
TNCs AND THE TRANSFER OF TECHNOLOGY
The last point is very important, because it implies that in the
field of science and technology, where the TNC is supposed to make
its most essential contribution - the ability to combine different
kinds of lasting knowledge into commercially viable processes and
products - that contribution is not transferred to developing
countries. It is true that the developing country may obtain, through
skilful negotiation and policies, a larger share of the benefits from
the use by the subsidiary of parent technology, such as local skill
formation, various socially valuable externalities, a higher proportion
of local inputs, and a larger share of profits. But as far as transfer
of technology is concerned, what developing countries obtain are
strictly end products, not the capacity to develop them. Regardless
of their efforts, those elements that are essential to the competitive
advantage of TNCs are likely to be kept off-limits to host countries.
As a matter of fact, the tendency of local firms and subsidiaries
towards the wholesale importation of technology, ready-made and
foolproof (or not so foolproof, as shown in the case of Bhopal) has
deleterious effects on such local technological activity as may exist.
It may even replace technology developed through long experience and
adapted to local conditions, with very negative effects on natural
resources and the environment, employment ( particularly in the case
of services), use of local materials and the balance of payments.
On the other hand, such scientific and technological research
as may exist and be of potential value for the TNC can be monitored
by its local technological staff and sent to headquarters for proof.
This tapping of R&D by the net of technologists of the TNC around
the world goes undetected by the scientific community of the
developing countries and is another instance of its advantage of
"world-wide sourcing".
THE WORLD ECONOMY AND THE ROLE OF THE US
There are other critical aspects of the contemporary world
economic situation which could benefit from a more appropriate
conceptual approach. Consider, for instance, the United States
economy, which has in recent years shown enormous and growing
deficits in its fiscal and international accounts. These are financed
by the rest of the world, whose exports to the United States are
growing faster than United States exports, while a voluminous and
growing flow of financial resources is converging from all over
the world to that country. Both phenomena are closely related, since
the United States Government's demand for funds to finance its deficit
is a major influence on the unusually high levels of interest rates,
which attract massive flows of overseas funds and has led to an
unprecedented strength of the dollar, thereby contributing in turn
to a large expansion of cheap imports. In the rest of the world, the
imbalances in the United States economy lead to high interest rates
and the adoption of recessionary policies in order to avoid
inflationary pressures from arising in foreign exchange, savings/
investment and factor markets. This contributes to low investment
and high unemployment, in a general situation of low growth and
high instability.
If the United States economy is considered just another
national economy - bigger but not basically different - those enormous
and growing fiscal and external deficits constitute unbearable
macro-economic disequilibria, which must be corrected with some of
the same recessionary medicine that the IMF administers so readily
to other economies that spend above their means. But the United
States economy is of course not just any other economy, and the world
economic system is not just a collection of national economies.
The United States economy constitutes in fact a hegemonic and
predominant segment of a highly transnationalised and interdependent
global capitalist system. The interests of transnational capitalism
require the restructuring of both the world economy and of its core,
the United States economy, so that they can become mutually compatible
and functional to the further progress of the transnationalisation
process. The aim would be the elimination ( or renovation ) of those
branches of the United States economy which are no longer
internationally competitive, in order to make space for the imports
from those countries which represent the most competitive production
sistes for TNCs. On the other hand, structural adjustments are being
pressed on developing countries which would encourage them to
concentrate on internationally competitive branches and open up to
the more efficient and dynamic science-and-technology-based industries
and services located mainly in the United States, but also in other
home countries of TNCs.
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