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Business Forecasts

Business Forecasts

The early 1970s saw the build-up to a global recession brought on by the collapse of the international monetary system, rising inflation and quadrupling of oil prices.

At the beginning of the 80s the world economy has still not recovered and is in far worse shape to face a widely-forecast new recession.

For the multinationals, recession is bad news. But as the top few hundred corporations move towards control of over half the world's production of goods and services, they are financially and institutionally in a stronger position than many governments and peoples to ride out a downturn in the world economy. And they are fully aware that recession may bring in its wake certain political benefits. With jobs scarce and money tight, they will face less criticism. Pressure for political accountability, a fair deal for labour and an end to exploitation of developing countries will relax.

The trend is already evident. Monsanto Europe has justified closing its chlorine and polystyrene plants in Spain by saying 'the picture is different when there is a growth rate of no more two or three per cent and everyone is being squeezed'. Last year Ford of South Africa sacked the leaders of the Fort Elizabeth Black Consciousness Organisation for protesting againstthe relocation of the Ford workers' convenient township. They were reinstated - only to be arrested by the government. In Valencia, Spain, Ford has also sacked 54 leading trade unionists and suspended a further 500 workers. The government has since denied unemployment pay and social security benefits to the 500. In Denmark similarly, Ford has been able to suspend senior shop stewards for resisting plant reorganisation.

ELECTRONICS Competition between IBM, Philips, Olivetti, Fujitsu and Hitachi in the field of micro-electronics, telecommunications, mini-computers, and office equipment will bring unemployment to both industrialised and developing worlds in the next decade.

Now micro chips imported from the U.S. and Japan are wired onto circuit boards by hand in dozens of assembly plants from Hong Kong to Singapore, South Korea, Taiwan, Malaysia and the Philippines. In the 80s these jobs could go, as the automation of the electronic and computer assembly industries gradually undermines the Third World's one advantage - cheap labour.


In the last quarter of 1979, 152,000 American car workers lost their jobs. With sales falling and imports stealing in to take a 25 per cent cut of the market, more and more voices were calling for import restrictions - among them United Auto Workers Union boss, Doug Fraser, and that old apostle of free trade, Henry Ford.

If the door is closed on imports, the Japanese companies are well placed to squeeze through. Honda is planning a S200 million assembly plant in Ohio;

Ford is prepared to sell its Los Angeles plant to a Japanese company; Nissan is hovering over the ailing Chrysler.

Some analysts forecast that intense competition is going to thin the field to only 12 major car companies by the end of the 80s, with smaller companies like British Leyland and American Motors going to the wall. To protect themselves, Volvo and American Motors are linking up with Renault; Ford with Mazda; British Leyland with Honda; Chrysler with Mitsubishi and Peugeot-Citroen.


If the outlook for world trade in the 80s is generally cloudy, there are at least two bright spots on the multinationals' horizon. The first is China - the world's most populous country and largest potential market. A 'Financial Times of London' survey in 1978 reported Chinese government interest in contracts between mainland factories and Hong Kong's textile and electronics firms. In 1979 armies of salesmen, especially from electrical, constructional and engineering companies, invaded the mainland.

The sky is also clearing over southern Africa. The soaring price of gold has done South Africa's economy no harm at all and, with the prospects of peace in Zimbabwe, the time may be ripe for the establishment of a southern Africa common market - something South Africa has wanted for some time.

If Barclays Bank's financial input into the coal-to-oil project at Sasolberg is anything to go by, then South Africa is likely to get all the external assistance it needs.


If the rich world is likely to catch cold during the next decade, then, as usual, the poor world is in line for pneumonia. The hunger and unemployment which came to the Zambian copper belt as a result of mine closures in 1974 could seize many other mining areas of the Third World as world trade, and with it the demand for basic materials like tin, copper and zinc, begins to fall. Already, there is a surplus of 400,000 tons of copper looking for a buyer.

Recession in the Third World will hit real wages, reduce employment prospects, increase external debts and weaken the hand of developing country governments in their negotiations with the multinationals and with the International Monetary Fund (which has already sent the 'receivers' into Zaire because of that country's massive debts).

Meanwhile, the multinationals, unlike most developing countries, are rich enough to diversify into other fields. Shell, for example, is now mining large coal deposits in South Africa and most oil companies are hard at work prospecting for uranium.


The 80s will also see more international codes designed to govern the conduct of multinationals. But when legally-binding codes can be disregarded with the connivance of governments (neither British Petroleum nor Shell are to be prosecuted for illegally supplying petroleum to Zimbabwe for 15 years) it is difficult to place much faith in such pious resolutions.

It is also likely that the contervailing power of governments, social interest groups and the churches will be weakened by recession. The pressure on growth and employment will tend to dispel the liberal climate which demanded accountability from the multinationals.

The 'main resistance is likely to come from those in the front line - the workforce and their trade unions. One of the most encouraging developments in the 80s is the trend, already underway, towards closer national and international co-operation between workers on plantations, in mines, on the shop floor, in the offices of international corporations, and of social action groups.


A swing to the right in the world's political climate in combination with a renewed arms race will also boost those multinationals involved in making and selling arms. While the profits of Lockheed, Boeing, General Dynamics, Bell, Northrop, Fuji and Mitsubishi soar, welfare benefits in their home countries will be cut back and the people of the developing world will be further deprived as their leaders increase spending on weapons. Already, there are more people in military-related occupations than there are doctors, primary health care workers, nurses and teachers. The 1980s now offer little hope of a reversion to sanity.

New Internationalist issue 085 magazine cover This article is from the March 1980 issue of New Internationalist.
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