Today I want to examine the role of the multi-national corporations in development. These bodies are not new. In an earlier post, I mentioned the effect of the South Sea Companies, but the current corporations are perhaps even more pernicious. This is because where the former corporations were arms of the state with some sort of protected monopoly, the new corporations are stateless. We can talk about where these corporations are located, where the US went to war in Latin America to protect the United Fruit Company or even more broadly the forever war in the MENA to protect the Good Arabs against the Bad Arabs and Persians and to ensure continued oil flows, but even wars started 20 years ago feel like relics of the past. The modern, globalized economies no longer have oil companies or industrial giants at the top of the leaderboard of market capitalization. Instead we have more nebulous technology companies where Amazon and Apple and Microsoft are pushing a trillion dollars in market capitalization, though they gave a large percentage of that paper wealth back over the winter. What we see is that the multinational corporations have more power than the most powerful states. In the United States, the corporations have been dodging taxes for years by claiming that the revenue that they created really was created in low-tax jurisdictions through accounting tricks like selling intellectual property to a subsidiary in Ireland and then leasing back the rights to that intellectual property to the parent company. The US has twice enacted one-time repatriations where they lowered the tax rate in hopes that the corporations would move that capital back to where they are technically domiciled and invest in the US, but when it happened instead the money went right to dividends and buy backs. The recent tax changes wiped forty percent off the top corporate rate from 35% to 21% because the people in charge are so beholden to the wealth and power of internationalized capital. It feels like a very vulgar and superficial analysis, but it has power because it is true.
The age of globalization is the age of the large corporations, and that is depressing because at the very least the age prior to or postmodern period was driven by state actors who were accountable in theory to its citizens. We see that even Apple can subvert the will of the citizens of the United States and take advantage of all the benefits that helped it grow from the technology developed in American universities and the giant market that a post-war industrialized economy built. They then take access to that market and do not reinvest in it, instead concentrating wealth in the hands of the stock-holders which is a small minority of even the United States. What I worry about in development is the impossibility of development upwards. There is still manufacturing that needs to be done. It keeps getting shifted to lower cost areas from China to Vietnam to Bangladesh to Ethiopia. There is arbitrage in terms of what needs to be paid for labor and the environmental standards that factories will be held to, and subcontract arrangements so that the miners and the manufactures can claim reasonable deniability when a factory collapses or a tailing dam collapses, and thousands are killed and a river basin is poisoned for a generation because it was cheaper to do that than to build in the protections from the beginning. I worry about convergence because this is happening but faster — corporation are leaving Bangladesh before it becomes self-sufficient and moving on, yet the industrial base is not there yet. I worry that Brazil will give away the rights to the Amazon rainforest so that it can be logged to the soil and then farmed to exhaustion quickly because the soil was not made for farming. I worry that countries from the most developed to the least are giving control to the corporations because the only thing worse than being exploited is to not be exploited. I worry that the multilateral organizations are forcing the hands of many countries because part of the restructuring process is opening the markets though we have seen from Chang and other how important it is to protect the industrial base of developing countries in a managed way, and not to expose a nascent industry to the full onslaught of the market.
It is not just the seeming impossibility of development upwards that concerns me. What we see with the current mood in the United States is illustrated by authors like Branko Milan and Thomas Piketty, in that the postmodern, globalized economy, there is a reconcentrat8ion of wealth. Where the industrial economy, there was a much broader sharing of the wealth so that in the west the postwar era gets called the “Golden Age of Capitalism” or “Les Trente Glorieuses” to indicate a more inclusive economy where capitalism worked — if you were a straight white male in the west. The less inclusive growth has presaged a political mood that has seen the rise of political movements like neo-fascism in the rise of Donald Trump and Victor Orban and Recep Tayyip Erdoğan and Brexit. This is all in the face of an incredible shifting of the ground that the economic battle is fought on. Global climate change is a fact and is not just in the rising sea levels. In the near term we must deal with the melting of the Himalayan glaciers which provide water to billions of people in Asia. Deserts are spreading in Australia and Africa, and farmland in coastal regions is becoming impossible to grow crops on because the ground is salinized. And what is the response of global capital? They celebrate the possibility of shipping times being shortened through an ice-free Artic Ocean.
There then is a real question to be asked about what kind of policies you can make as a country that has little leverage. The world, which is burning, is more and more controlled by multinational corporations. There is still a twofold response that is available. The first is that there is a second mover advantage. It is incredibly arrogant to say from the standpoint as a western observer that the less developed countries are stuck in their relative and absolute positions. There remains a possibility for growth that is not as harmful for the planet and allows for moving to a more comfortable existence. Through a green-focused growth strategy, LDCs can develop these industries, and be leaders in the technology. This will allow so many of the remaining low-hanging developmental public health issues like safe running water to be dealt with. It is just an entirely different context, so we do have the past to look to, but it is an entirely different field of battle, as Cypher notes: “no nation can or should attempt to duplicate the success story of any other. Nations have been able to build on the accomplishments of other nations, often skipping over, and learning from, the arduous steps taken by path breaking nations” (383).
Works Cited
Cypher, J. M. (2014). The process of economic development. London: Routledge, Taylor & Francis Group.
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