In this segment we are going
to attempt to answer one the questions posed in the previous article; that is,
do the players in this great game of economic globalization want to play by the
same rules?
The Transnational
Corporations (TNCs) most cherished rule is the rule encapsulated in the much
used term “free trade.” What is meant
by “free trade” is trade unencumbered by any governmental restrictions. They, for the most part, would prefer to let
the so-called “unseen hand” of the market place be the only arbitrator. In other words, the customers signal their
approval or disapproval in the products by either buying or not buying. Thus, the marketplace, where the buyers
votes with their money, is seen as the purest form of economic democracy; the
customers determine what products or services are provided and, woe unto the
provider that does not cater to their preferences and demands. The conclusion being, that there is no need
for any governmental restraints, or oversight; the system is
self-regulatory. In its purest form its
called “lasses-faire”(leave be) capitalism.
Well, we, in this country,
did not entirely buy that logic. During
the great expansion of industry and commerce at the end of the l9th and the
beginning of the 20th century it became obvious that some
restrictions were necessary to safeguard the interest of both the public and
business itself. The power of the
railroads to make or break a particular company by either charging favorable or
excessive freight rates was curtailed in 1887 with the passage of the
Interstate Commerce Act which mandated published, non-discriminatory and
reasonable freight rates. Congress
passed the Sherman Anti-Trust Act in l890.
It was enacted in response to the monopolistic practices of the infamous
Standard Oil trust (formed in 1882) and other subsequent emulative
anti-competitive agreements.
Although, the courts
temporarily mitigated the full implementation of the act, nevertheless, it
established the principle of federal regulations on business excesses and
opened the door to future restraints.
At this point we should note that there is little or no restraints on
TNCs foreign operations; which is pretty much what the non-governmental (NGO’s)
(labor, environmentalists and Public Citizen, etc.) are complaining about.
For the balance of this
article, I believe, that it will be useful to examine how a specific TNC
operates. Depending on whom you ask,
General Electric has been cited as both the best and the worst example. Much of its success has been attributed to
Jack Welch, the recently retired CEO (chief executive officer), who has been
acclaimed the world’s most successful manager and, made GE the most admired
company. According to the prestigious
magazine “The Economist” from 1981 to 1999 GE stock doubled in value 30 times. From 1990 through the end of the first half
of 1999 GE’s global revenues doubled from 50 billion to 100 billion (with
nearly half attributed to its foreign operations) and its net profits more than
doubling to over 10 billion. All the
success has been attributed to Mr. Welch’s style of management which The
Economist dubbed “Creative Destruction”, that is, the willingness to destroy a
reasonably successful company in order to create an even more profitable one;
even if it necessitated the laying of 100,000 workers in the process.
According to The Economist,
there are four stages in a multinational’s life. The first is corporate colonialism, when companies use foreign
outposts to distribute goods made at home.
The second integrates manufacturing along global lines. The third uses foreign subsidiaries for
ideas as well as production. The fourth
when firms become “multicultural multinationals” the nationality of the staff
ceases to matter; GE is fast moving into the latter stage. A call asking why your credit-card payment
is late may well be coming from India.
Most new technology for consumer finance still come from America; but
most sales and marketing come from the rest of the world. The clever innovations of the new Spanish
plastic factory were designed by a multinational team of mainly Japanese and
Dutch scientists. GE’s non-American
managers (mostly in their 30’s and 40’s) is growing. Ten of the 21 direct subordinates to the boss of GE’s Medical
Systems are foreigners. Of the 23,000
people in its international consumer finance division fewer than 200 are
American.
Space does not permit the listing of all of GE’s business operations that manufactures, insures and services its products; from the above noted items it is apparent that GE is a very successful TNC. However, not everybody is enamored of its “modus operandi.”
In the next article we will
cite some of the comments of its critics, and cite how the NGO’s would like the
globalization game to be played.
STAY TUNED.
Art Peracchio
11-16-01
Art
Peracchio