issue 246 - August 1993
Today's giant global corporations have integrated production, sales, research,
marketing and finance on a world scale. The clout of these private economic fiefdoms
is so great they threaten the sovereignty of independent governments. New moves
to dismantle global trade barriers will only add to their power.
THE BIG PLAYERS
The combined sales of the world’s largest 350 multinationals total nearly one third of the combined gross national products of all industrialized countries and exceed the individual gross national products of all Third World countries.
More than 90% of all multinationals are head-quartered in the industrial world. France, Germany, Japan, the UK and the US account for 70% of all foreign investment by multinationals and about half their total number.1
The largest multinationals operate in dozens of countries and employ thousands of employees. PepsiCo, the world’s biggest beverage company, has more than 500 plants and 335,000 workers in over 100 countries. Nestlé, the giant Swiss food manufacturer, operates in 126 countries with more than 200,000 employees.
Investment brokers, mutual funds, managers and multinational banks now control the fate of nations. National currencies rise and fall according to how closely governments tailor their economic policies to the interests of corporations.
Every day nearly $1 trillion-worth of currencies is traded on world financial markets without any regulation. Huge flows of speculative capital wash around the world as central banks vie with each other, increasing interest rates to stem the outflow of capital. 3
MORE PLAYERS, FEWER WINNERS
There are now 35,000 multinationals with some 150,000 foreign affiliates. The largest 100 manufacturing and service companies accounted for $3.1 trillion of world assets in 1990; about $1.2 trillion of that was outside the multinationals’ home countries. 1
Multinationals control 70% of world trade; much of that is inter-firm trade, ie between branches owned by the same parent firm.
Although the total number of multi-nationals is increasing, a small number of companies continue to dominate most major areas. The top five companies typically account for 35-70% of total sales across a range of industries.
‘TRANSNATIONALS’ OR ‘MULTINATIONALS’
The two terms are used interchangeably. ‘Transnationals’ (TNCs) is more precise, but ‘multinationals’ is in more common usage. The UN defines these companies as ‘associations which possess and control means of production or services outside the country in which they were established’. Although they may operate in dozens of countries, hiring workers and managers of all nationalities, most are firmly controlled from their national base.
THIRD WORLD BARGAINS
Western corporations have expanded investment in the Third World over the last few years as poor countries relaxed foreign investment restrictions. In 1991 nearly 30 countries made it easier for multinationals to invest and corporate investment jumped from 19% of total foreign investment in 1990 to 30% in 1992. 4
As part of 'structural adjustment’ programmes, Third World nations have been forced by the Inter- national Monetary Fund and World Bank to sell off state-owned enterprises at bargain-basement prices. In 1990 more than 70 countries had privatization programmes in place and sold state firms worth $185 billion.1
The 1980s was a decade of corporate cannibalism as companies sought to buy out or build strategic alliances with competitors.
Nearly $1.3 trillion was spent on corporate mergers in the 1980s, more than the annual economic output of the UK. About 90% of all mergers were between companies from the industrial world.
The inter-relationships between corporations can be Byzantine. All major auto manufacturers now have alliances with competitors. Ford owns 25% of Mazda; Chrysler owns 24% of Mitsubishi; GM has joint ventures with Toyota. 5
Most corporate investment goes to the rich world. Of the $150 billion of foreign direct investment in 1991, more than two thirds went to the industrialized nations.
Of the investment that multinationals direct towards the Third World, nearly 70% ends up in just 10 countries, a select group of Asian and Latin American nations. Sub-Saharan Africa is almost totally ignored. 1
ALL ILLUSTRATIONS: JAMIE BENNETT
1 World Investment Report 1992, UN Centre on Transnational Corporations.
2 ‘The Global 500’, Fortune, 27 July 1992.
3 North-South Institute Review, Autumn 1992.
4 The Economist, 27 March 1993.
5 The Nation, 8 March 1993.