World Beaters

Posted on Jul 22, 2011 | 8 Comments

The title is provocative—and, during a week in which the Dodd-Frank financial reform law is celebrating its one-year anniversary, fairly appealing.  “How to Liberate America from Wall Street Rule” is the heading of a new report by the Institute for Policy Studies. It proposes, according to IPS, “a six-part agenda for ending Wall Street’s disastrous hold on the economy.”

We won’t go into all the policy recommendations in the report—of which few, if any, stand a chance of being implemented in the United States today. But the IPS analysis turns out to be only partly about Wall Street. Equally important as a theme running through the paper is the desire for local control in an age of multinational giants.

On this score, the report suggests that we “rewrite international trade and investment rules to secure national ownership, self-reliance and self-determination.” It cites “cooperative, worker- and community-owned enterprises” as “positive examples” of securing the “economic sovereignty of people.”

We have closely aligned ourselves with IPS on other issues, such as runaway CEO pay. But Peter Drucker, we think, would have been skeptical about many of the remedies being offered up this time.

Image source: NASA on The Commons

He certainly understood the resentment and distrust that has built up against multinational corporations, a distrust with which he partially sympathized. “The multinational is seen as a means to evade, if not to subvert, political authority and of creating a superpower, not accountable to anyone and yet in control of economic policy, of jobs and even, to a large extent, of policies in noneconomic areas,” Drucker observed in Management: Tasks, Responsibilities, Practices.

Unfortunately, however, there is no easy solution. “To reassert against the multinational the reality of national sovereignty is also futile,” Drucker warned. “This is what De Gaulle tried to do. The only result was a rapid decline in the competitive position of the French economy in the world.”

Drucker also was cool to worker-owned enterprises. “Worker ownership…has a long—though not a very distinguished—history,” he wrote. “It has worked only as long as the enterprise is doing well. . . . As soon as business profits drop, worker ownership no longer resolves the conflict between wage as living and wage as cost.”

What Drucker did believe was that to the extent multinationals were a problem, they should take the lead in proposing solutions. “They are problems which it is the duty—and the opportunity—of top management in the multinationals to think through,” Drucker declared. “Otherwise, it is safe to predict, political solutions will be imposed on the multinationals which can only damage them and the world economy.”

What do you think: To what extent, if any, should multinationals be reined in?

8 Comments

  1. Marilyn Ambrosini
    July 22, 2011

    That’s an interesting challenge. I have been recently think about the question and my thoughts on it. But now that I read Peter Drucker’s thinking on it…I’ll have to get back to you.

    I love this stuff.

    Reply
  2. Jeffrey Smyth
    July 22, 2011

    Oh, dear! Here we go again! What is the nation? What is the corporation? Who defines the boundaries between the two? And how is that measured — only by profit?

    Example: America is hell-bent to extend genetic modification to every kind of human food crop. For the benefit of its people? For quarterly profit of its corporations? Whatever measurement is used is on quite different scales.

    What if the little people at the bottom of the nation, outside the rewards of the corporation, have a different perspective? What if they are scared about food that is declared by corporate scientists as safe — as they are now scared with financial manipulation of their mortgages, Are they stupid?

    We have the equivalent of Winston Churchill’s “irresistible force meeting an immovable object.”

    Peter Drucker would have undestood that. What would have been his resolution? I wonder.

    Reply
  3. Kim Hall
    July 22, 2011

    Lincoln believed he fought so that a Government of the people, by the people, for the people, shall not perish from the Earth.

    Unless he would agreed with the Supreme Court that corporations are people too, he fought in vain.

    There are no easy answers, obviously. But our government is controlled by special interest groups, i.e. lobbyist, on behalf of large corporations. Drucker believed in considering the ‘‘cost’ of production when determining price and profit. We are subsidizing oil companies. And we ignore the environmental impact and disposal cost in the price of gas. He believed in social responsibility and corporate responsibility. Where is that today?

    If companies are not concerned about the impact on the people, i.e. taxpayer, why are taxpayers required to subsidize corporations. This is entitlement/welfare for corporations. We slashed it for people, but we won’t for corporations? Subsidies smack of socialism. This means that taxpayers are actually paying the contributions corporations pay as political donation to advance the corporation’s goals at the “expense” to the taxpayer.

    So now we are a Government of the corporation, by the congress, for the corporation.

    Just say no to corporate subsidies.

    Reply
    • Marcos Boschi
      July 23, 2011

      Good comments
      I just would add, as complement:
      …”we are a Government of the corporation, by the congress’men working for themselves, and the corporation…or person…or other reason with a good agreement on the pay-back”.

      The problem is that “democracy” and we have no control and and how to stop “congress” to be used as a personnal “business desk” first. Second incredible true is: USA Congress can be ignored by a “personnal interest of the highest authority – Mr. President”, and let “him” do what he wants, without the Congress opinion, autorization, or even consulting the world international authorities, country representatives. That was shown to the world in the Bush administration, when he did what he wants, with personnal acts, which by coincidence were on his business interest. Using Sadam to justify…a personal decision, without giving any chance to Congress to analyse the consequences on the use of “people’s bills to be paid later”. If Congress can be ignored (and accept that silently) with all the world watching, a personnal act like that, and present no reactioin or argue about, who can protect people’s representatatives rights, and who is in control of USA? The strongest power in the world is vunerable when comes to personnal interests of the top USA authorities, and people’s representatives uses the people of America, for personnal strategies to get to the power. That is the truth.

      Reply
  4. George L. Williams
    July 22, 2011

    The U.S. multinational corporation is a creature of U.S. Congressional acts. Congress must place some restraints upon it or it will consume the government in time. With the “money is speech” ruling of the Supreme Court and subsequent rulings empowering corporations, the United States is in line to become ruled by corporations of all sort; but most imperiled by the multinational corporation. The irony is that corporations gained their standing in U.S, law through the 14th Amendment to our Consitution. What a perversion!

    Reply
  5. Marcos Boschi
    July 23, 2011

    Naive Viewer

    “the pocket bleeding pain is the only thing people, multinationals, organizations respect”. Tied-up – before the action – the “bills payment guarantees up-front” for sure will limit and control results, keeping them to the real responsible, protecting people’s money. No Congress action, nor bills left over will come in discussion, and no responsabilities will touch American people.

    The previledge of the “big, strong barking, agressive business dogs” shall finish. And the Congress – sharing table’s splitting interests – never will stop, slow, or do anything comming against to their own personnal interests. Nor Mr. President consulting what Congress aprouves.

    People elect the “wolves” and put politicians to be the guardian of the “people’s sheeps”, get to know and see the “wolves getting fatter, stronger, and bigger”, and complain that too many sheeps are missing, and they (the people) always must pay the bill of the losses. Who controls the “wolves”?

    Mr. President, consulting in what can, or cannot be done in transparent public act? Or positive -alternating results – beeting a smaller oposition of those who wants something and “played better”?

    U.S. multinational corporations, Wall Street buniness, and any other organization shall have a “credit limit” for their operations, backed-up on “real guarantees” given in advance. Above guarantees’ limited – with possible consequence to public interests, and risks of “´Americans paying the bills later” each operation shall be consulted, analised, and requested “added guarantees”, before the business can be executed.

    If we take as reference Joseph A. Schumpeter’s theory (see The “Theory of Economic Development”) on chapter I – “The circular Flow of Economic Life as Conditioned By Given Circumstances”, crisis is so predictable and necessary making part of business, as a “cicle” that Amercian economy should have notice that, and observed that “Desctructive criativity” comes with new big, medium, or small business, as a real fact. Historic facts such as crysis of 1930′s, 1970′s, and 2010′s (2008-2010) are in a 40 years cicle, and with it big “development economic history”, thecnology, corporations and international business growing, jobs and people’s home holder’s fertility and consumption booms. It is exactly in the “prosperity time” this kind of business hapens.

    After crysis it is time for “innovation” in the American economy (as Schumpeter also states). But, who is interested, besides American people, tired to pay all the big bills? Why big dogs, banks, multinationals would “create risk control ideas” to give them responsabilities and risks of paying for their business consequences, if so far, USA Government have doing that…friend and nicely?

    Should be created a “credit control and consequences of negative results in big and international financial operations” with “real guarantees in advance” to any big business, doesn’t matter what kind, what type. First to limit the consequences and control de losses, problems, and after deal’s bill to be paid for those who are responsible for the “action and risk taking of each operation”; second to keep, like personal credit, and normal corporation’s banking credit, the amount and value of the “operations” up to 70 or 80% of the backed-up “real guarantees given, and accepted up-front”.

    If works for personnal credit, organizations, institutions, corporations normal business, why do not stop “responsability’s insention” of the biggest multinationals, biggest business, controlling the biggest volume of money, with the biggest risks for America, and to the rest of the world? That is part of the responsability of the strongest, biggest, and world leader “number one”. Who is above “number one” to complain, demand, or send the bill for “number one to pay?”. No one.

    Too many operations? Impossible to control all them? Means that there are too many “uncontroled deals without any notice of government’s side effects of “risks happening whitout any government institution controlling and restricting them”. Stopping them of doing business the way they prefer.

    After all, if a government is able to control the taxes law – people’s payment dayly-yearly – why can not control the “private interests business” which put government money, people’s money in risk, and responsabilities to be paid by losses were “private profits’s business acton”?

    I have a though of “Naive Viewers” very simple: When the mistake is so big, everyone can see, and everybody don’t understand how come, the “responsible main authority, director, or who is running the show cann’t”, it is not a “mistake”. It is an arrangement “with benefits, paying back” somehow the way it was fixed (among interested third parties).

    Reply
  6. Marilyn Ambrosini
    July 25, 2011

    Multinationals can be either large or small and producers of product, services, and resources, all which are either imported or exported.. The World Trade Organization in Switzerland is the governing agency that establishes the agreements for international business.
    In addition, the United States Agency, OPIC, insures companies doing business oversees from events such as unstable governments, countries without laws, protection of property in host countries. Consider all the processes that a multinational company needs to comply with to do business in its home and host country (ies). So with that said, I conclude that 1. government is involved, 2. multinationals do not have free reign; and 3. a large amount of dollars from multinationals go to paying for protection, having legal expertise in international trading, to mention a few. I think government should be involved in closely monitoring multinationals that either provide a service or product, or resources that has the potential of destroying lives, and protects its citizens from terrorism, whether chemical, bombings, or in the food they eat.

    Years before the 9/11 bombings I was predicting such an incident. Deregulation of airlines left open to many holes that caused a major lack in security–so it seems, it was our Country’s own laws that aided in this event. The U.S. is strong in protecting civil liberties, which is okay but not at the cost of killing innocent lives by allowing such a lack/breach of security. When government deregulated banking, well we all see now what happened. I cannot blame multinationals for all the ills this and other countries are experiencing. It is the “whole” not the “part” that creates vulnerability and instablity.

    Do I think our political parties with their own constituients have a lot to blame, you bet. But remember, the blame bears more on the people who put them in office. I also think it would be refreshing to see younger generations enter the political arena– either way, either side, they are the people who have a long road ahead of them. So for those “same old same old” sitting in who are representing us think about retiring, not for yourself but for your country.

    What we have experienced globally over the last several years was inevitable. Too many “smart” people proving how smart they are, and some with power got really “STUPID.” Those are the ones who should pay, and pay dearly.

    Taxes on billionaires is a good thing. As I always say, they wouldn’t be billionaires with out the less monitary people. Taxes on Corporations, absolutely…but not on the backs of companies trying to make it in and for the USA.

    Reply
  7. Alba Patricia Valencia
    July 26, 2011

    A multinational firm obtains higher profits thanks to its market power. Its philosophy is an overall concept; maintain a global perspective on their business in the market, customer service, and effective products, always focusing the whole world as your target (market). These companies are successful by the employment of both the country of origin and the country in which they settled.

    In some cases, they become heads of state because they offer employment and prosper in countries where workers’ wages are low, which makes the product costs less.

    Generally, Transnational Companies employ only 3% of world power (and less than half of these employees are in the South of the planet). Countries continue the battle between governments to attract investment from transnational. This is causing a dramatic decline in working conditions, leading to an instability that has undermined the rights of workers. Within this context, large corporations use their enormous buying power to take control of local markets and literally sweep them from the scene.

    I should add that mining and oil corporations are active participants in the exploitation and destruction of entire ecosystems. Added to this are thousands of people killed in disasters, such as BHOPAL, India.

    Transnational Companies are not important in the progress of world population, but are the protagonists of abuse and exploitation (McDonald’s, General Electric, Microsoft, Compañías farmacéuticas, WAL-MART, ADIDAS, Starbucks, Nestlé, Google, Yahoo, MSN, EBAY, Amazon, Banco Mundial, Fondo Monetario International, intereses militares…). Unfortunately, despite great reviews, this is a phenomenon that is growing stronger worldwide, with few controls by government authorities.

    Una empresa multinacional obtiene unos beneficios más altos gracias a su poder de mercado. Su filosofía tiene un concepto global, mantienen un punto de vista mundial en sus negocios sobre los mercados (clientes), servicios y productos, bajo el cual conciben al mundo entero como su mercado objetivo. Estas empresas se caracterizan por el empleo de trabajadores tanto del país de origen como del país en el que se establecieron.

    Estas compañías se convierten, en algunos casos, en explotadoras de los países en los que se encuentran, pues éstas muchas veces se ubican en países en los cuales los salarios de los trabajadores son bajos, lo que hace que los costos de los productos sean menores.

    Por regla general las empresas transnacionales emplean sólo un 3% de la fuerza de mundial (y menos de la mitad de estos empleados está en el sur del planeta). En aquellos sitios en los que la contienda entre gobiernos atrae a las inversiones de las transnacionales, provocando una caída espectacular de las condiciones laborales, dando paso a una precariedad que ha perjudicado los derechos de los trabajadores. Dentro de este contexto, las grandes corporaciones utilizan su inmenso poder de compra y de acción para coger las riendas de los mercados locales, y las compañías locales son literalmente barridas de la escena.

    Debo agregar que grandes corporaciones mineras y petroleras son participantes activas de la explotación y destrucción de ecosistemas completos, y también de miles de personas muertas en desastres como el de BHOPAL, en la India…

    Las transnacionales no son cruciales para el progreso de las poblaciones del mundo y son protagonistas de abuso y explotación. Pero lamentablemente, a pesar de las grandes críticas, son un fenómeno que se hace cada vez más fuerte a nivel mundial (McDonald’s, General Electric, Microsoft, Compañías farmacéuticas, WAL-MART, ADIDAS, Starbucks, Nestlé, Google, Yahoo, MSN, EBAY, Amazon, Banco Mundial, Fondo Monetario International, intereses militares…), con escasos controles por parte de los poderes públicos porque la política y la legislación es débil.

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