Multinational
Item
- Title
- Multinational
- extracted text
-
*0®. PSICISCULATlOr
OHM euroo «■" ««•«=»a» «r*««aoe>«3>«s*»
1-■ tr
r
’ I. S. I. Doru'nenhtion Centra ’
I
P. BOX Xo 4698,
BANGALOP\ -560 0 4 6.
INTRODUCTION
Multinational corporations have emerged as mighty social organisms.
Th,y have come increasingly to dominate domestic economies and inter
national relations. They straddle nations
: owned by shareholders
in one country(and most of the time more ), their operations are
wide. The
world
international character of multinational corporations have
made them irresponsible in a national context . their main motivation
being the maximisation of world profits and their sole responsibility
being to their international shareholders, they have no moral, political
nor economic
commitment to the
particular people of the countries
in which t-bay operate.Multinational corporations'decisions ore made
out of the country.
Multinational corporations are
equipped with the best scientific
minds (they s-pend billion of dollars in research ) , the best information,
the greatest financial resources, the most efficient technology and
the most complex organisation.They produce everything that man can create,
from ordinary goods to cultural values.Some even claim that they can
solve all the problems of human
history 1
Multinational corporations have also built for themselve an
enormous political power. They have created
some form of new technocracy
in which technocrats and believers in science and technology form the
dominant force and seek to solve all social and human problems.The
practical implication is that technocracy
emerges as a new system of
politics where the political life of the people is limited to the tune
of technology. The participatory process
is more and more curtailed
through technocratic politics.This is true in both capitalist and
socialist societies.
Dr. Kim Yong-Bock,Co-Director for Research at the Institute for
the Study of Justice and Development,who spent years to the study
of the functionning of multinationals, wrote I‘■'if wo had all the
information
about the
Multinational corporations for accurate ana
lysis, all the categories of social analysis would probably be very
much strained." He adds, "they are the most
powerful social corpus
ever to emerge in human history."
The present filo is meant to help in the study of this now phenomenon.
The file has been divided into two sections. Section one is a broad
introduction to the
topic.lt gives the historical background of
the Multinationals (paper one), describes and analyses the enormous
power they have developed (paper
two) and looks into the effects of
multinationals in gencralC paper three).
The papers that follow in this first section takes again and more in
details the main
papers.Concrete
aspects
which have been covered in the above three
applications to India are made.
The second section deals with concrete studies analysing the
functionning of the multinationals in
actual
certain areas of trade. One of
the case studies explains how, for instance,
85 per cent of world
food supply is controlled by 5 corporations.Another case study analyses
the control exercised by a few
multinational corporations on the trade
of seeds. Studies of specific corporations have also been presented, thus,
for instance the case of NESTLE.
Finally, in that same section one will find concrete instances of
how people have attempted to stand up against the exploitation
of the
multinational corporations and their domination.
new international order ushered in by Capitalism at a new stage of
development. It is hoped that the materials presented, in the two
sections of the file will help studying tho*a
new developments- .
.9
This file has been brought out with the conviction that multinatiohal
and transnational corporations represent an essential component in the
SECTION -I = An Introduction to Multinationals
An Over View of its functioning
Pages
*
S
7• Historical Background of the Multinationals
1 - 11
Tugendhat examines the origin of the Multi
nationals and traces their history .upto
the Secound World War. .. .
*
**
**********************************************************************************************
”*********************************************************************
Monoool.ii Power: The New Face'of Imperialism
Meaning of Multinationals
Source: Prerre Jalee, How Capitalism Works,
Oxford Press, Delhi., pp. 31-85.
11a - 11e
Social Effects of Multinational Corporation
The emergence of Multinational corporations
has come up as new challenge to the world
12- 20
■21-26
I
4• Transnational Corporations Part -I
The term 'Transnational' or 'Multinational ' ■
company is now part of currentvooabulary.But
i t is. no-t-without its ambiguity...
£
5- Transnet, tional Corporation
27 - 50
i
'*
*
*
*
*
■’7'
*
*
l'..
*
5.
’.
" "
"
<i
Case~J~
- Part - II (Indian
*
ff national state like India are not vigilant
these Industrial Giants, may pose a threat
to the Economy.
t
*
.*
Transnationals and Consumerism
'The influence of Multinationals on the taste and
culture of the people is being studied.
Y
51 - 58
*
*
*
*
\
+
*
*
*
7. TNCs Impact on the Third World
Third world country over-burdened with labourCheap Labour
59 - 42
3. India and the Multinationals
An under-current of antipathy towards foreign
investment based on the mistaken impression that it
dominates the country's economic scene .. A View
from the 'Establishment'.
45-45
*
*
*
*
*
9- I N Cs I N. India
According to RBI figures, the value to total
foreign business/investment in India was Is. 5,204
million, of which Rs.2,501 million (71.9%) were
accounted for British business investment alone.
46-49
**
**
******* ** ** * ** ************* ****** *****■«--»»* * * ** ************* * * * ** * ** *
1*
.Ms
■*
fO. Poli tical pnact of Transnational Corporation
'*
J*
..Xi '
' * •
a*
*
*
*
*
*
*
*
*
*
*
*•
. *
*
*
.. *
*
Xi
*
*
., *
■ *
*
Xs
*
*
*
*
*
*
*
*
Xs
*
*
*
*
*
*
*
*
*
*
Xs
*
*
*
*
*
*
*
*
*
*
*
J
X-
*
*
*
*
*
*
*
Xi
*
*
Xi
*
*
*
*
*
Xi
*
Activities in India
Transnational corporations have posed many major
problems in the field of political relations,
economi independence and International law
50 - 54
1 1Bonded Capital
International Institutionitkethe IMF play hey
role in facilitating the penetration of Inter
national finance, capital into the developing
countries.
55-60
12-. -Foreign Collaboration .• The Facts
A quick glimpse into technology import in
a few
key sectors of the Indian Industry during the last
three years.
61-66
15. From Corporation to Conglomerates : A Review of
Multinationals
The wise of Multinationals have increased
dramatically over the last two decades. Five
basic changes have occured in the structure of
Multinationals.
67 - 72
14. Foreign Aid, Multinational Corporation : A
Blessing or Curse ?
The problem of Foreign Aid as well as the
investment by the Multi-Nationals (MNC) is very
much on the forefront these days.
75 - 78
SECTION _II
CASE
STUDIES
When one speaks of Multinationals
we often think interms of the big
industrial or financial concerns.
This section presents a general view
of the big and powerful Companies
which are in operation in the
different sectors like food, seeds,
drugs and soft drinks etc.
15. The So rid Trade of Grain
85 percent of world food supply controlled
by 5 private owned companies.
79 - 85
16. The concrete Functioning of a Multinational
A Case Study : NESTLE.
lie s tl e is the most pro ft table food indusTtr^ on
Earth. Bigger than any of the US Food Gaints.
86-91
**
*
*
*
*
*
*
*
*
* J******************************************
**********************************************************************************************************
.* ********************************************************************
**
■*
.* ******************************************************************** *
10. Political pnact of Transnational Corporation
*
***
*
**
*
Activities in India
Transnational corporations have posed many major
problems in the field of political relations,
economi independence and International law
50 - 54
The Bonded Capital
International Institutionjikethe IMF play key
role in facilitating the penetration of Inter
national finance, capital into the developing
countries.
55 - 60
12, -Foreign Collaboration ; The Facts
A quick glimpse into technology import in
a few
key sectors of the Indian Industry during the last
three years.
61 - 66
15- From Corporation to Conglomerates : A Review of
Mui tingtionals
The wise of Multinationals have increased
dramatically over the last two decades. Five
basic changes have occured in the structure of
Mui tinationals.
67 - 72
Foreign Aid, Multinational Corporation : A
Blessing or Curse ?
The problem of Foreign Aid as well as the
investment by the Multi-Nationals (MNC) is very
much on the forefront these days.
75 - 78
71.
*■
**
**
*
■. ***
**
**
*
*
**
**
**
**
**
14
SECTION _II
**
♦**
**
***
*
**
**
**
*
**
**
**
**
***
***
**
***
**
**
**
**
**
**
***
**
***
**
**
***
***
**
*
*** *
***
**
**
**
*
***
**
***
**
**
CASE___ STUDIES
**
When one speaks of Multinationals
*
we often think interms of the big
**♦
industrial or financial concerns.
**
This section presents a general view
*nof the big and powerful Companies
*
which are in operation in the
different sectors like food, seeds,
*
drugs and soft drinks etc.
**
** 15. The ftorld Trade of Grain
79 - 85
*
85 percent of world food supply controlled
*
by 5 private owned companies.
**
**
86 - 91
16. The concrete Functioning of a Multinational
A Case Study : NESTLE.
***
Nestle is the most profitable food industry on
**
Earth. Bigger than any of the US Food Gaints.
*
*
**
**
**
**
**
** «***************<***************************************************.*
92 - 100
Operation Flood is comparavle with the Green
Revolution. Both depend on Extensive national
and International Funding.
18. The Role of International Foundations
The Rockfeller and Ford Foundations.
.Foundations, like the Ford and Rockfeller
Foundations, are examples of such deceptive
appreances of capitalist institutions.
101 - 106
19. Standing up to Multinationals
Bolton argues that if trade unions don't take
on the Multinationals no-one else will
and explains how multinationals trade unionism
can work.
107 - 109
20. Coca Cola : The Hard Company behind the
Soft Drink
s
A case study of a multinational dragon
(coca cola J and why it was uprooted in Ihdia.
110 - 114
. 21. Seeds af the Earth
115- 118
Multinational-Corporations have quietly gained
control of the first and most vital link in
the Food chain.
22. Regulation of Drug Multinationala in India
119 - 125
The operation of the multinational drug companies
in line with national needs and priorities,
25. Challinging Multinational Corporations
126 - 155
Bristol Myers company belongs to the largest
Multinational Corporation in the world. The
Compa ny has operations in more than 80 countries.
24. CARTOONS
>
25. BIBLIOGRAPHY FOR FUTHER STUDY.
0 0 0 0 0 00 00 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 9 0 .0 0 0 0 0 0 0 0 0 00 0 0 0 0 0 0 - 0 00 00 0 0 0 0
7 7- Operation Flood : A Case Study of Hairy Aid
00couoooooocGocoooouocoooooooooocdoo00000C000000000oooocooooooooooooooooooooooo
00 00 0 0 0 0 0 0 0 0 0 9 0 0 0 0 0 0 000 0 0 0 0 0
Co o o o o o o o o o c o o o e o ■* ?. ? o o o o .'o n o o n o o o o o ^ o o o o d o o o o o o o c o c o o ^ o o o o o o o o o o o o o o o o o o q o o o o o o ^ o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o ffo ^
oooooooooooooooooooocoo 00000000000000000.oooooooooooooooooocoooooooooooooooooooocoo
PRIVATE CIRCULATION. ONLY
HISTORICAL BACKGROUND
0F~ THE
multinationals
In recent years vast international companies have developed
which dominate the commanding heights of the economy
throughout Western Europe and North America and
exerts great influence on the economics of the
Third World countries. In the following pages,
Christopher Tugendhat examines the origin of the
multinational and trace's .their history up to the
second world war. '
This is taken from Christopher Tungcndhat,"The
Multinationals", a Pelican bokk published in
1971.
The author, born in 1937 and educated at Ampleforth
College ,and at Gonville and Caius College, Cambridge
had a seat in the British Parliament as a conservative.
He was a regular writer in the Financial Times,
Multinationals being-.
his special subjects.
Ho has also published "Oil
The Biggest Business"
In June 1969 the International Chamber of Commerce held, its
fiftieth anniversary congress in Istanbul. To mark the occasion the
organizers wanted to find a suitably momentous theme. So the chamber’s
president, Arthur K.Watson,
*
who was at that time Chairman of IBM’s
World Trade Corporation^ proposed 'The Role, Rights, and Responsibil
ities of the International Corporation1, The choice proved a good
one. More than 1,800 delegates turned up, among whom were the heads
and’ other senior executives of most of the world's leading companies.
There can be no doubt’that in business circles the importance of the
growth of large international companies, and the gravity of the res
ulting problems, is fully appreciated.
Yet Watson's choice came in for some criticism. Several of
the larger multinationals felt ±± was dangerous to’stir up debate on
this subject. Leroy D. Stinobowor", a vice president of Standard
Oil (New Jersey), expressed concern lest ’all this talk lead host
countries to believe that international companies are something compl
etely new from what we've had in the past, which will cause them either
to welcome or discourage investors becasue they fit some description
they've read of multinational companies
The critics represent a sub
*
Arthur K.Watson is now the U.S. ambassador to France.
+
The IBM subsidiary responsible for the company’s non-U .S.
interests.
J
Business Week, 14 Juno 1969.
-2-
stantial segment of business opinion. Many industrialists feel it is
‘clangorous to discuss the implications■of the rapid growth of inter
national companies in public. They argue that it tends to alarm gov
ernments and public opinion, and will therefore provoke political
action that will bo harmful to their interests.
1 .
INTERNATIONAL CO MP ANILS :
They prefer to argue that international companies have a long
history, and that, despite their rapid growth in the postwar period
the novelty of the present situation is being exaggerated by politicians
and writers. They have plenty of ammunition to draw on. Banking
has been conducted on international linos since tho Middle Agees; some
academics trace tho origins of international trading companies back to
the Mesopotamians, and even if that thesis is rejected it is true
that the East India Company, which at one time ruled India, was est
ablished in the reign of Elizabeth I; in the- nineteenth century compan
ies from Britian, the U.S. , and sevoial European countries wore conduc
ting huge international trading operations, while others wore running
public utilities, such as tramways, and gas and electricity undertaking
in foreign countries; also in. the nineteenth century companies from se
veral -countries, notably Britain and the U.S., exploited the jre w
material and natural resources of Latin America, Asia, Africa and
Austrialia on a vast scale from about 186^ onwards manufacturing compan
ies began to establish production facilities outside their own
countries and by 1914 many of today's giants woro already operating in
several countries.
International companies are certainly not a new phenomenonBut to list these examples is to evade the issue
.
*
The present sit
uation is quite different from the past, and it is important to be clear
about those differences.
The most striking characteristic of the modern multinational
company is its central direction. However, large it may bo, and however
many subsidiaries it may have scattered across the globe, all its
operations are coordinated from tho centre. Despite frequent ass
ertions to the contrary, the-subsidiaries are not run as separate
enterprises each of which has to stand on its own feet. They must
all work within a framework established by an overall group plan
drawn up at headquaters, and their activities are lightly integrated
with each other- They are judged not by their individual performance,
but by the contribution they make to the group as. a whole. Thgs a
subsidiary which records a loss but whose operations prevent a rival
from moving into one of its parent company's more profitable markets
may be fulfilling a more valuable task than a subsidiary with a better
financial record.
Central direction of this sort on^y became possible in the last
two decades. It depends for its effectiveness on rapid and reliable air
*
Comparisons are also som.times drawn between the enormous inter
national investments of Britian in tho nineteenth century, and those
U.S. and other international companies- today. Those arc based on
misconception.
Britian wasindoed on enormous foreign investor, and nt tho out
break of the First World War its overseas investments amounted to
some £4,000m, compared with about & 1 ,200ra, for Germa,ny, and £600m.
for the U.S. But international companies comparable with those whose
operations arc discussed in this bock played a negligible role in this
total.
-x
F
travel, an cffic ent telephone, telegraph, and. telex system, and.
computers capable of handling a mass of information. When transAtlantic and trans- European journeys took several days, and most
communications were by letter, it was impossible. Subsidiaries had
to be left with a larger mcasuie of independence, and their operations
had to be kept separate. Each was established to serve its local
market, not as a link in an inngrated network.
Another factor.preventing closer integration, especially between
the wars, was the absence of any commonly accepted set of rules
governing international trade. Countries signed separate and often
mutually exclusive tr .de agreements with each other. Thus a
factory in one country might be used to supply components to a plant
in another, but it could not do so on the same terms to a plant in a .
third. As a result of the establishment soon after the war of the
General Agreement on Tariffs and Trade (GATT), to which all but the
Communist countries subscribe, this problem has been immeasurably
reduced.
After central direction, the most notable feature of the modern
multinational.companies is their importance, which is increasing all
the time, in the industrial and economic life of the most powerful
nations. This is shown by their leading positions in key manufacturing
industries, and their influence on the flow of trade among develope-d
countries. In the past the main impact of international companies, •
except and semi-colonial territories’. The companies themselves wcro
generally involved in trade, the running'of publiccutilities, or the
exploitation of raw matorials/ln the more advanced oun'^£Bthc role of
international companies was very small until after the Second World
War, as the figures for U.S. direct investment in Europe show. 'In
1929 their total book value, including ventures ofevery sort,
amounted to only $21,554m., of which manufacturing companies accounted
for $12,225m,, and oil companies for $4,805n-*
The vast and rapid expansion of the last twenty years has brought
momentous changes in its train. In the past it was a characteristic
of an independent country that the must powerful economic interest
in the state - at first the great landowners and later the great
manufacturing companies - should be citizens. Today these interests
may just as easily be foreign-owned, and even if they are domestically
owned they may have interests and commitments abroad that are greater
then those they have at heme.
Some forty per cent of the British investments were in the share
of foreign or imperial railway companies, ’thirty per cent in
government and municipal bonds, ten per cent in raw materials, and
eight per cent in banking and finance. Those were portfolio investments
undertaken for the purpose of financial gain. They did not involve
control of the operations in question, as thu history of the U.S.
railroad companies, much of whose stock was owned by Britons, so Amply
demonstrates. Nor did they evolve ownership of physical assets, except
in cases cf default. Contemporary international companies, by contrast
make direct investemonts, which means they established or take over sub
sidiaries and factories in foreign countries which they own and control.
Portfolio investments still flourished on a very large scale, as
the enormous European holdings on Wall Street, and huge investments b y
Britons and Americans in Austrialian shares, show. But there is all
the difference in the world between buying shares in a foreign company,
and establishing a subsidiary in a foreign country.
* Department of. Commerce.
/through mining, plantation, and ranching bentures.
2.
GROWTH OF MULTITUTIGNALS :■
The forerunners ;f the modern multinationals began to expand
beyond their home countries in significant numbers in the 1860's.
Among the pioneers was Friedrich Buyer, who took a share in an.aniline
plant at Albany in Few York State in 1855, two years after establishing
his chemical company near Cologmc. In 1866 the Swidish inventor of
dynamite, Alfred Nobel, set up an oxplcisivos plant in Hamburg. In
1867 the U.S.Sirgor swing machine company built its first' overseas
factory in Glasgow. Singer w -.s th:. first company to manufacture and
to mass-mafcket a product in basically the same form and bearing the
sane name across the w.-rld. It has the str'-ngost claim to be regarded
as the first of the multinationals.
Each company that went abroad in search of higher profits had its
own particualan reason for doing so. But there were a number of factors
that influenced them all. Industrial enterprises were becoming larger
and mass markets were beginning to develop. The improvement in transp
ortation and communications through the development of the steamship,
railways and the telegraphs drew the attention of manufacturers to for
eign opportunities, and made it possible for them to oxdrcis^ come
control over distant subsidiaries. They discovered that it cuild
be cheaper tc manufacture in a foreign market near the final consumer
than to do so at heme chid pay the cost of shipment. It was for this
reason that Bayer decided to invest in the U'.S. and Singer in Scotland.
The spirit of nationalism also played a part, Companies begin to
realize that it was often more effective to supply local needs through
local managements who understood their customers far better than an
export manager in the home offices. Direct pressures of various sorts
emphasized this point. The U.S. Westinghouse Airbrake was induced to
establish manufacturing facilities in France becasue of stipulations in
railway contracts that supplies had to bo made locally. Edison built
a plant in Germany because it found that 'national feeling' resulted
in local suppliers receiving preference over imports. In addition
governments could in effect force importers to sot up local plants
by insisting that patents should bo worked in order to maintain their
validity.
However the .most important reason for the growth international
companies in tho last thirty years of the nineteenth century was the
spread of protect!, nism, itself a manifestation of nationalism.
Expept in Britian, then the world's lending manufacturing and expor
ting nation, governments everywhere introduced tariffs in order to
reduce imports of manufactured goods, and to foster the growth of local
industries. Sometimes tho tariffs were specifically designed to encou
rage foreign companies to invest in the country concerned. This
was the case in Canada where the government wanted U.S. companies to
establish local plants rather then supply its market from over the bor
der. More usually tho object w:s to encourage the local citizens them
selves to create new industries. But as there wore no currency
restrictions and few regulations preventing foreigners from estab
lishing factories if they wished tc do so, tho more tariffs were
imposed the more international business tended to become.
The effect tariffs could have on a company's thinking was
explained in 1902 by William Lever (later Lord Lovorhulme), the
founder of the Lever Brothers sopp empire: 'The question of erecting
5
-5-
workers in another country1, he said, ' is dependent upon the tariff
or duty. The amount of ’uties we pay on soup imported into Holland
and Belgium is considerable, and it is only required that these
shall rise to such a pmint that wo could afford to pay a separate
staff of managers with a separate plant t< make soap tc enable us
to see ouT way to erect works in these countries.
When’the duty
exceeds the cost of separate managers and separate plants, then it will
be an economy to erect works in the country that our customers can
be more cheaply supplied from them'* Other companies reqponded to
traffis in the sone way. In 4887 Bismarck introduced a tariff des
igned to protect Gorman :'.graria,r. interests against imported food, and
to encourage a Gorman margarine industry. ■ Within a year the large
Du±th margarine manufacturer, Jurgens, lad built a factory in Germany,
and by 1914 Jurgens and Van deft Berghs, the other principal Dutch
margarine company, each had seven factories in Germany. High import
duties also prompted Bayer to sot up dyestuffs factories in Moscow in
1876, at Flors in France in 1882, and at Schoc.nacrde in Belgium in 1908.
Most of the loading European countries had companies of their own
involved/: in the now move, but from quite an early stage. U.S. companies
began to play a particularly prominent role. In the 18808 and early
48903 the U.S. went through a period of intense industrial concentration
Over 5,000 companies wore consolidated into about 500. trusts, and, al
though a great many small companies remained, those giants dominated
the.industrial scene. Some, such as Standard Oil, United States Steel
and International Harvester, are still household names today. Most-had
no desire to extend their activities beyond North America, except to
export thoir surplus products' and to secure raw materials, but those
that did provided formidable opposition to the Europeans.
They'know how to think and plan on a much larger scale. Their
management was frequently more officent, and because of thoir larger
profits at home they could afford to allow a foreign subsidiary to run
at a loss while it established its position. When a U.S. company
went abroad it often did so in a massive fashion. In 1901 the British
were, surprised to loam that the local American-owned Westinghouse fac tory was the largest' single industrial plant in the country. John
B. Rockefeller's Standard Oil was the largest oil company in Europe'
and by 1914 Ford was producing a quarter of the ears made in Britian.
Moreover the American emphasis 'on research and innovation coupled
with the high cost of American, labour often meant that the U.S. secured
a lead over other countries in some of the most technically advanced
industries of the period, such as telephones, heavy electrial equip
ments, seqing machines, and cars. Many of these had been invented
in Europe, but were first mass-prmducod in the U.S. The result was
that Europeans and others frequently wont to American companies with
suggestions that they establish a foreign subsidiary. The early expan
sion of the Ford Motor Company occurred in this way. Within a year
of its establishment in 1930 Henry Ford was approached by the Canadian
Gordon MacGregor with a proposal for a Canadian subsidiary, and in
1906 the British Perceval Perry wntit to ^oarborn with a scheme for a
British Ford Company. These approaches enabled Ford to build up its
otrerseas network far more quickly than if it had to rely entirely
on its own efforts. ,
* The History of Unilever, Volume 1, By Charles Wilson (Cassell).
6
-6-
The movement across the Atlantic was both ways. Some European
companies secured very important positions in the U.S. BY the outbreak
of the first World War, to take only three, examples, the Bristish
Courtaulds dominated the new and rapidly expanding U.S. rayon industry
through subsidiary the Viscose Company (later and better known as the
American Viscose Corporations), that dynamic Dutchman Henri Defending
had established Royal Dutch Shell as a force to be reckoned with in.
the oil industry, and Lever Brothers was prominent in’soap. In dyest
uffs, the forerunner of much of the modern chemical industry, the U.S.
producer^ were holblessly outweighed by the Germans and to lesser ext
ent the Swiss. U.S. producers supplied only about ten per cent of their
own domestic market, and even, for this smell output they imported
about ninety per cent of their intermddiates.
In both the U.S. and Europe foreign companies arouded controversy
But the U.S. was so large that beyond their particular industries
foreigners did not make a great impact on public opinion. In Europe,
by contrast, the U.S. companies by virtue of their size in relation
to the makkets aroused widespread fears. In 1920 F.A. Me Konzic wrote:
’American has invaded Europe’not with armed mon, but with munufacutucd
goods. Its leaders have been captains of industry and skilled fin
anciers whose conquests are having a profound effect on the lives
of the masses from Madrid to St Petersburg'. Nothing, he fell,
was Safe before this onslaughter: 'Our aristocracy marry American
wives, and their coachmen are giving place to American-trained drivers
of American-built automobiles
Our Babies are fed on American
foods, and our dead are buried in American•coffins'* McKenzie was
referring as much as to the flood of imports from the U.S. as to the
establishment of U.S. subsidiaries in Europe. But his outcry was to
be the forerunner of many similar attacks on American business abroad
down to the publication in 1967 of Jean-Jacques Servan-Schreibor's
le De'fi American.
J.
CONCEPT OF INTERNATIONAL COMPANY:
By 1914 the concept of the international company was firmly est
ablished. This was especially true of those industiri.es, such as cars,
oil, chemicals, and aluminium, which are so important today. But the
scale of the international companies' operations in relation to to til
economic activity in the industrialized countries was very small. In
what were then the most important industries - coal, railway, iron,
and steel, engineering, shipbuilding, textiles, and above all agri
culture and agricultural products - international companies played
an insigificant role. All the main companies in the leading countries
were locally owned. Relevant figures are almost impossible to produce
since countries drew np distinction between direct and indirect investmenf'in their
statistics.. But it has beon estimated by Professor
John Dunning that in 1914 ninety por cent of all international cap
ital movements took the form of portfolio investments* by individuals
and financial institutions, whereas today seventy-five percent of the
capital outflows of the leading industrialized nations are in the form
of direct investment by companies}..
*
*
■
4.
The American Invaders by F.A.McKenzie (Grant Rishards, 1902),
For an explanation of the difference between portfolio and direct
investments, sec the footnote on pace 30-31.
'The Multinational Enterprises: Some Economic "and ‘Conceptual Issue'',
Speech by Professor John Dunnjngat a conference on the multinational
enterprises held at Rending University, 28-30 May 1970.
-
■>
•
Another indicatiin of the smallscale of pre-First World War direct
investment is that in 1914 Britian, the main recipient of U.S. invest
ment, had only 12,000 people employed by U.S. - Owned companie^
4.
INTERWAR PERIOD:
During the inter-war period a number of companies continued to
expand their international interests. They were mostly in the new
technologically advanced industries of the day, or producers of goods
for which there was a mass consumer demand. General Motors and Ford
were particularly active in establishing manufacturing faciltities
in Europe and elsewhere, while the oil companies created petrol dis
tribution networks to keep p'"-ce with the growth in car ownership. ■
However, Remington Band, and Proctcr& Gamble all crossed the Atlantic
in this period, and by 1939 more than half the employees of the Dutch
Philips Electrical were outside Holland. Another notable international
investor was the Gorman IGFarbcn chemical trust. Initially in the
1920s it set out to recover as much as possible of Germany's pre
war position in the industry after tho expropriations and sequestrations
of the allies. In the 1930s it went on to become the most powerful
chemical company in the world. But the most trend was not all one way.
Many companies disposed of their international interests to concentrate
on their domestic markets.
u n n n in
■
■
l,H
In the intet-war years conditi ns were not favourable for a rapid
expansion’of international direct investments, or the growth of
international companies. There wore many factors' to discourage tho
expansionist. What might bo described as 'was psychology' was the
most pervasive. People were not only living in the shadow of the
1914-18 holocaust,- they also believed for most of the period that an
other was of some sort would probably break out. This simulaneously
deterred companies from investing abroad, while encouraging governme
nts to aim for industrial self-sufficiency and to discriminate against
f oreigners.
5.
NATIONALISM:
Nationalist! was strongest in Nazi Germany where the government
required companies to 'swear* that they were 'pure Germans' and no
under'foreign, Jewish or Marxist' control. But it was to be found
everywhere. In the U.S. tho American Viscose Corporation, which
was the world's largest rayon producer and owner by Courtatilds, was
hounded in Congress and tho Press until in 1941 the U.S. Government
insisted that it should be sold at a knock-down price as a condition of
lend-lease aid to Biitian. In Franco, when tho Czech Bata company
wished to construct a shoe factory, the Poullen Law of 22 March
1936 was passed forbidding tho opening of now factories or ateliers for
shco manufacturing, or the cnlargohont of existing ones.
Tho curron cy. situation was another major deterrent to inter
national investomunt. Before 1914 currencies were based ongold, funds
could be moved easily from one country to another, and inflation was ,
not a sorious problem. After the war chaos took tho place of certainty.
5
The American Take-Over of Britian by Jarnos McMillan and Bernard
Harris (Lesli Frewin).
8
In 'Germany arid Austria • th. early 1920s in.-.'la'ciin
-.cr.td the point
where money became wowf itsn >• Uewbcro aJ.se was iv so had. but every
country' -suffered t sc i extent. Inflations .core fc Hewed by deflations,
currencies lacked coni’ nlj- co , -nd exchange controls ocganto appear.
Finally there w- o the G.eat Depression, which brought with it a
catastrophic docli'. in the level of world, trade and sent company
profits tv.nbiing- lik? ”a: wall :f Jericho. In tho light of all these
factors it is peivur.c ;.ur prising that inter-?attend companies
wore able to rxpc.nc.
> an th :y did.
The most characteristic form i international industry entorpises
in the inter-war pori.d was i., cartel. There wire many variations
on this theme from a straightforward exchange of information on price"
and investments at one end of the scale to common marketing arrangements
at the other. The specific aims of each cartel varied, but the
underlying objective of all was to mainta ” prices and profits, and to
provide- some mechanism whereby companies could reconcile their confli
cting interests without less of blood. Inevitably this tended to re
duce the level of investment undertaken by companies in the markets of
their rivals.
As Adam Smith, the father of economics, pointed out iin the
eighteenth century, businessmen have an insiictivo porference or cur
tailing competiti.n rather than for intensifying it. Cartels may be
found anywhere, and at any time, and they still exist today. But iri
their development on an international scale. Industrialists were wor
ried about excess capacity. In many industries they had expanded thoijfr
factories during the war only to find that after an initial boom the
level of post-war demand was lower than they required. With the onset
of the f-'reat Depression the problem of overcapacity grow worse. At
the same time the number of large companies involved in most industries
was quite small owing to the rise of great monoliths in co rpo ratting
many smaller concerns that had taken place through the industrial
concentration of the preceding decades. It was obviously much easier
for the British Imperial Chcihical Industries (iCl), the German IG,
Farben, and the U.S. Du Pont and Allied Chcmeical to roadh under
standing with each other than it would have been for the plethora of
British, Gorman, and U.S. chemical concerns that had been absorbed
into those giants.
To th'o’ mon 'who ran the monoliths the concontraction of a
particular industry within eno country was frequently regarded as merely
the first'step towards an agreement with similar concerns abroad. The
founder of ICI (established in 1926) certainly took this view. A ■
Du Pont official yocorded for his company's confidential files the
following account of a conversation with ICI's chairman Sir Harry (Late
Lord) McGown: * Sir Harry .... went on to give me a general picture'
of what hu and Sir Alfred Mor.d (another of ICI's founders) had In mind
in the matter of international agreements .... Sir Harry explained
that the formation of ICI is only- the first step in a comprehensive
sbhema which ho lias in mind tv rationalize the- chemical manufacture
of the'world. The details of such a sdahomo arc not worked out, not
even in Sir Harry's own mind, but the broad pic turo includes working
arrangements between throe groups - the IG in Germany, Imperial
Chemical Industries in the British Empire, and Du Ponts and Allied
Chomoical and Dye in America’
The next stop in the scheme is an arr
angement of some sort between the Gorman and the British'*.
Cartels" in Action by George W.Stocking and Myron W.Watkins(tho Twentieth
Century Fuhd).
......9
<i
&
fp
-9-
6.
INTERNATIONAL CARTELS:
The first intorncti nal cartels wore formed well before 1914.
One of the earliest documented examples is in the aluminium industry
in which the U.S. Alcoa and the Swiss AIAG reached an agreement in
1896. In 1901 this was expanded td include tlirce ether producers.
Also before the war the Hobcl Dynamite.Trust. which at that tine had
subsidiaries in. Britain and Germany,the German Vereinigte Kcin-Rottweilcr
Pulverfabrikcn and Du Pont formed ar. explosives cartel to divide world
markets between then. However it was not until niter 1918 that the
cartels became really widespread. At one tine r another they were
to be found in practically every major industry.
Soemtimes their internal arrangements were so extensive and the
degree of cooperation demanded from their members so far-reaching
that, on paper, the scope of their activities looks much the same
as that of an international company with subsidiaries in several diff-r
erent countries. But the modern international company is a highly coo
rdinated, disciplined, and integrated form of organization. The
cartels, by contrast, tended to break down under stress, and the
members often failed to fulfil their obligations to each other.
In the first steel cartel, established in 1926, the main
steel-rproducing companies of Germany, Luxembourg, Belgium, the Saar,
and France, undertook, in effect, to ppol their interests. It was ag
reed that each country should bo allotted production and export quotas,
and that, those members who"'exceeded their limits should bo fine. To
contemporaries the formation of the cartel s omed an event of great his
torical significance. A representative of the U.S. Departm.ent of Comm
erce in London said:
'The conclusion of the European steel argecmont
has been hailed by some of its sponsors as the greatest recent economic
development and the first step towards the formation of an "Economic
United States of Europe"
.
*
Those high hopes were quickly shattered. The Germans were suff
ering from an enormous over-capacity, and exceeded their export
quotas from the start. In the first year of the cartel their fines
amounted to the equivalent of G10m., which was ninety-five per cent
of the total penalties incurred by all the members. This situation
mould not endure, and by mid-1931 the cartel had collapsed.
A second arrangement was started in 1933 to which the British
American, Czechs, Poles, and the Austrians in duo course adhered as"
well as the original members. A central management groups considtinjj
of representative from each country was set up, and Another representative
committee doalt with the export and sale of the various products (bars,
rods, structural shapes, and the like)The exports of each country
were determined centrally, and all export sales were made through
the central organization. Distributors in the importing countries were
licensed and guaranteed both a fixed profit margin, and a share of
thoir local market. This cartel was more successful than its pre»
decessor. Prices rose throughout the duration of its life. But this
was at least partly due to the revival of business conditions in gen
eral, and to the fact that the Gorman rearmament programme meant that
the German companies no longer had to fight for exports.
*
Cartels in Action.
10
SO U R C E ;C hristoper T ugendhat, The m u ltin a tio n a ls , P enguin B ooks, 1971, p p -2 9 -4 4 '
-10-
Tho oil carta! ras f:?3 daily formed in 1928 when Shell, AngloPersian (row British ctroleum;, and Stundor'. Oil (hew Jersey), the
three largest oil con .iiies in int .rnati nal trr.de, agr. cd to c< mbine
their non-U .S. intcro'ts, and tc shore each ether's facilities. In
various markets this offer v.as extended tc. ether c npanies, and usually
accepted, even by th. Russian export agency. The cartel members agreed
to change common prices, one r -t t<> steal -o'. t'w-r's customers.
At one time they even greoc. tc c .rdir-t;. their .Ivortistising, and
ret to submit thei-i 1" 1. ?. •. ■. pla.nst: ?.
irt ccmitt.e. These
commitments undov.bt
h’-l..'i io ■ cenyetiti
nd
*
helped maintain
prices at a higher
- than would the_-w_sc have been the case. But
it is significant that the rules wore broken so often that four
separate agrocmo"ts had to be oigrod. Even in Sweden, whore there was
a relatively small market, feu c mpanics, and unusually close coo
peration, Shell estimated that the cartel never achieved more than
fifty or sixty per cent effectiveness.
The loss ambitious cartels fared nc better. In 1927 Courtaulds,
and the load-ing raycn producers in Germany, Itahy, Holland, Swit
zerland, France and Belgium reached an agreement for limiting exports
to the U.S. in order to maintain prices there. Within months it was
broken. When the Depression began in 1929-30 the rayon companies
put forward ambitious plans for exchanging information on all their
activities and sotting sales quotas. But as soon as business began
it revive in 1953 those were forgotten.
In all industries the desire of management to increase sales
at the expense of the other companies always remained stronger than
tho desire to cooperate when it actually cane tc the point of having
to chocso between securing a contract and making a sacrifice for
tho common good. It also proved impossible to devise rules to which
tho members of tho cartel would adhere in bad times as well as in
good, and which could bo enforced at law
.
*
Another weakness of the cartel was that companies wore not
sufficiently tightly organized for the central management always to know
what its subsidiaries were doing. In 1936 my father, Dr Georg Tug
endhat, and Dr Franz Kind started an independent refining company in
Britian called Manchester Oil Refinery. This was contrary to tho
interests of the cartel, and a,leading figure in Shell warned them that
they would nit be able to secure’supplies. However, without much di
fficulties they found.an American broker, who dealt in crude mil on
a wholesale basis, and ho provided thorn with cargoes purchased from
the Shell subsidiary in the U.S. The major companies also tried to
prevent Manchester Oil Rcfinersy fr.m selling its output in Britian,
end this problem was circumvented when the Belgian subsidiary of Gulf
oil, another cartel member, agreed tc buy it^-
For alltheir deficiencies the cartels wore a step in the evolution
of todays multinational companies.
They gave industrialists a traning
Gtional
*
intiE
cooperation. They also gave them an understanding of
national difierenccs and of the need to modify business p radios to take
these into account. Instead of thinking primarily in terms of supplying
their home markets, and exporting surpluses, their industries on a world
basis. These lessons were to prove extermcly useful in the changed
conditions of the post war world, especially to tho Americans.
*
■f
For further details see Appendix.
For full details cf the pre-war international oil cartel see Oil:
the Biggest Business by Christopher Tugendhat (Eyre and Spottiswoode)
MONOPOLY
POWER
THE NEW FACE OF IMPERIALISM
IMPERIALISM ,THE "HIGHEST STAGE OF CAPITALISM".
-
.
Lenin made a special study of the first great movement toward con
centration in the capitalist world, which occurcd at the end of the
last century. The concentration of capital finds its most notable
expression in the tendency to monopoly. A monopoly, in the fullest
sense, would be an industry which has absolute control of an entire
maiket. Such enterprises ape extremely rare in the real world and
the term monopoly is used for large-scale corporations which control
a significant slice of a particular market and strive to expand to
dominate the whole. In western Europe, during the last third of the
nineteenth century, such monopolies grev' so rapidly that natijonal
markets soon appeared too smal for'them.Customs barriers hindiftd
real competition between British,French, and German monopolies, in
their respective national territories J on the other hand, there were
many countries, some vast, in Asia and Africa,' which were still outside
the capitalist system or on its fringes.Moreover, many of these had
very poor defenses.The principal West European states, sharing the
objectives of their own capitalists, launched or relaunched a powerful
new wave of colonial conquests designed to provide bheir respective
monopolies with vast reserved of privileged "economic space".
Thus was imperialism,"the highest stage of capitalism",born. Impe
rialism is nothing more than capitalism which has reached a given
...size and scale, entailing, in turn, qualitative mutations and trans
formations of its resources and methods. From the first, the colonized
lands offered imperialism some raw materials (oil) and some products
for mass consumption but, above all, they provided an outlet for
commodity exports and the investment of capital which was accumulating
so rapidly that it was difficult to apply at home. Imperialism was
to modify the effect of. imbalances inherent in the capitalist system
and the tendency of thq rate of profit to fall.
Rivalries between imperialist nations are, on the -other hand,
exacerbated by colonialism. Some-had more colonics than others, and
the partition of the world was virtually c'ompletc
by the end of
this century, leaving the less fortunate no recourse but to seek a
redivision of the spoils by violence.Therein Lio the root causes of
the First World War (191^-1918) whose end saw Africa repartitioned
at the expense of a vanquished Germany.Between the two world wars
the capitalist world was somewhat stagnant with exports of commodities
and capital stable and the movement toward concentration slow and
oven.
THE CHANGES AFTER THE SECOND WORLD WAR
During the period following the end of the Second World war in
19^5, a variety of major changes occured.Thc world capitalist
economy regained momentum through necessary reconstruction, enhanced
its efficiency through a now technical and scientific revolution,
and learned to use various palliatives and buffers to prevent reces
sions and depressions degenerating into general crises. In these
conditions growth, was rapid, exports of commodities and capital
increased prodigiously,, and rates of capital accumulation reached
new heights, engendering a similarly •
_L
unprecedented
movement toward concentration. This development^began in the
United States and the United' Kingdom and extended to Japan and some
Western European countries. It came rather late to France, where it
became equally marked by the late 1960s. New mergers, regroupments,
etc. are constantly being announced, often with capital foreign to
the country concerned in control or participation.
During the same period, an irresistible movement for political
emancipation spread like wildfire through Africa and Asia, where most
countries gained nominal independence peacefully or through violent
struggles.This independence is termed nominal because the subordination
and pillage of what is called Third World continues.The form has
simply been adapted to the new situation of neocolonialism and is
usually operated through indigenous governments which are virtually
at the beck and call of imperialist masters.
The imperialists and monopolists of the present are the successors of
those which flourished at the beginning of the century, but there are
a number of important differences.
STRENGTHENING OF FINANCE CAPITAL
With reference to the Monopolies, capital accumulation and concen
tration have not been specific to the industrial sector, but from the
nineteenth century onward have also characterized banking,giving great
impetus to the growth of 'investment banks' .’J-'hese are specialist
banks which concentrate on investing their capital in a great variety
of different undertakings, but with special emphasis on industry and
alwyas seeking to gain control.The barrier between banking capital
and industrial capital has thus begun to break down and more deeply,
it became finance capital. Conversely, and more recently, many giant
corporations of inaustrial origin have begun to invest a major
portion of their accumulated profits in enterprises operating in quite
unrelated sectors..They function very much like investment banks and
are called 'holding companies*
1.
THE FINANCIERS OLIGARCHY
Financiers who direct investment banks and also rule expensive capita
list empires enjoy a form of power which has long been described as
1 oligarchy1. Now this form also .
applies to the capitalists of hol
ding companies and is extending to the large capitalist corporations
which are diversifying their activities. In fact, the financial,
commercial, and in.justrial sectors overlap one another more and more.
Thhs the ologarchy consists of a small number of very big capitalists
whose direct and/indirect power enables them to dominate the economy.
Their real powe is,moreover, much greater than is reflected in the
volume of capital they own. Small and medium shareholders do not
iigiinl 1 y attend mootings, or exercise proxy votes, and so the major
shareholders can do as they like.The company may be control by the
person or persons • holding a minority of shares — JO percent,
20 percent, or oven less..The game of acquiring subsidiaries reduces
the holding required for control still further.
HOW THE CONTROL BY A FEW IS EXERCISED .
Let us supposed the average number of shares required for control
to be JJ per cent ,through one financial group. If company A in this
group controls 33 per cent of its capital, in turn holds 33 per cent
of the shares in subsidiary company A', the latter can be controlled
by the group through 33 per cent of 33 per cent, or 11 per cent-.
And there is nothing to prevent subsidiary A' from sotting up a
further subsidiary.This is why the capital of investment banks and
holding companies is often invested through a complicated netwon
of subsidiaries. ThusA-J. capital of 1,000 units might control an
an empire of 5,000 , 10,000 or more.In 1973 the Suez Finance Company
and the bank of Indochina admitted to joint control of 300 to 400 com
panies I
THE TRANSNATIONALS
-
Industrial and banking monopolies show an increasing tendency to
transcend national barriers and are often called multinationals .—
which is not quite accurate.These are largo corporations and invest
ment banks whose activities extend beyond the frontiers of their
country of origin and often penetrate the whole world.Two hundred
of the world's largest corporations have affiliated(affiliates) in twenty
or more countries.The Compagnie Gcnerale d' Elcctricite is a
French company which is only a modest international monopoly, yet its
1969
'report stated that it is present in more than one hundred
countries. So too ,Citibank, N.A., a Nev/ York-based commercial bank,
reports branches, affiliates, and subsidiaries in over a hundred
: countries worldwide.
It,-is broadly true to say that __Lmost major companies, and almost
all monopolies, are transnational.The most remarkable transnationals
are those industrial monopolies with productive enterprises scattered
about most diverse countries- throughout-the-world.The French alumi
num monopoly, Pcchiney, is an interesting example s in 1972 4^ percent
of its production took place in France and 56 per cent in five other
countries from the United States to the Cameroons.
THE MULTINATIONALS
Firms can bo not only transnational, but truly multinational, if
their capital is drawn from different countries.Such companies are
often joint subsidiaries of a number of national monopolies from
different countries. Multinationals are still fairly uncommon in
i.ndustriallized countries
but are, on the other hand, becoming increa
singly numerous in Thids World countries.
THE GENERAL TsimLEUCY OF MONOPOLIES
There arc other forms of partial association or international
cooperations between monopolies of different nations. What stands .
■ out from the points outlined is the general tendency for monopolies
alone or in combination , to spread their tentacles over the entire
world market, always with the purpose of accelerating the accumulation!/
concentration of capital. It is alsoe their desire to trade as freely
between Chicago, Paris, and Singapore as between two cities in one
state ; and to set up factories in Montreal, Sao Paulo, or Abidjan
with the same case they would have in a single industrial country.
To this end they aspire to a world economic and political order which
would free the movement of capital and commodities and regulate
currencies and their circulation. The European Common Market is simply
a regional forerunner of such a world order.The crises which
frequently occur in this field are’§n indication of the enormous diffi
culties in the way of achieving such a .
. world order (oven without
taking into account the possibility of revolution intervening).As we
have seen every tendency clashes with its opposite ; every development
is contradictory within itself. However the dynamics of a situation
are best understood by seeking out the dominant tendency.Within
monopoly capitalism today this is the aspiration for an integrated world
order.
There is no longer much argument about the fact that international
monopolies pillage of the Third World in various ways.But debate
continues as to the extent of the proceeds of this pillage in relation.
to the vast surplus value extorted from workers in the 'developed'
countries , and ns tu its effects on the system's prospects for but-
TRADE AS ONE IMPORTANT FORM OF PILLAGE
‘
THE UNEQUAL EXCHANGE
Trade is the vehicle for one important form of pillage We know that
the value of a commodity is determined by the amount of labor socially
necessary to produce it, and that the value of the labor force is
represented by the value of the goods required to maintain and renew
it. It is recognized, however, that the value of such goods is infi
nitely lower in underdeveloppedcountries, where it is a little more
than a "physiological minimum" (the exact amount indispensable
for subsistence and work) in, and that in developed countries
it
combines a complex
individual and social expenditures. It
follows that, oven if one were to calculate on a basis of equal
productivity, which is unreal,African, Asian, and South American
labor is at a far lower price than that of Europeans and North
Americans.To give a concrete instance, if our coffee, cocoa, banans
etc. could be produced in Europe and North America they would be
much higher in price. It is generally true that the underdeveloped
countries export goods .
’ are relatively undervalued
while thbse
of the developed world are overvalued.This is known as unequal exchange
The financial value of unequal exchange is almost incalculable. At
best one can make a few rough estimates. It is however possible to
measure its progress.For, it is progressing in a negative direction.
It is described as the"deterioration in the terms of trade1,1 which orc,
for any country, the relationship between the average value of a ton
of goods exported and a ton imported. Thus we know statistically
that the Thrid World countries, taken together, had to export 15
percent more of their raw products in 1970 than has been necessary
in 1956 to import the same amount of manufactured goods. In pro
ducing this 15 percent of their exports in 1970 they were working not
for their own development but for" the King of Prussia", that is
for the monopolies and the imperialist economies.
Though the amount so extracted is vast on the Third World scale, it
makes only a modest contribution to the coffers of the imperialist
economies, for only 19 per cent of the total external trade of all
the advanced countries together.is conducted with the entire Third
World, or 2.25 percent of their gross product. And this proportion is
declining.
The capital * the imperialist monopolies have invested in the
Third World countries, on the other hand, drains them large profits.
Very little is reinvested (less than 15 per cent), the bulk of it
being repatriated to the imperialist countries. In 197O-7I an
annual average of $ 8.8 billion were so repatriated,This was a
significantly large sum for the Third World, in excess of all
overseas aid received during the some period. Yet the amount px
represents only some 2 per cent of internal savings in the rich
countries — to whom it is,therefore, of little significance.
To sum up, superprofits from unequal trade, together with those fom
capital invested in the Third World and any other forms of pillage,
have a countervailing effect on the tendency of the rate of profit
in imperialist countries to fall, and this may have been important
in the past. Now it is only marginal, and those superprofits cannot
bo regarded as the safety valves of the imperialist system.
DEPENDENCY OF DEVELOPED OUNTRIES ON DEVELOPING COUNTRIES FOR RAW MATERIALS
It seems that imperialism's continued, interest in the Third World
stems from something else. Today the whole industrial edifice
of imperialism rests on the energy (fuel oil) and industrial raw
materials of the Third World. In 1975 it was only possible for tho
developed industrial countries to satisfy
their global needs by
turning to the underdeveloped nations for the following proportion of
their supplies
50 percent of requirements in fuel oil
35 percent of requirements in iron
50 percent of requirements in bauxite
85 percent of requirements in chromo, manganese,antinomy
70 percent of requirements in cobalt
90 percent of requirements in tin
^5 percent of requirements in copper.
All the major industrial countries arc dependent in this way, and not
only those which lack natural resources, such as Britain, Germany, Italy,
and Japan, but also those which were originally well endowed, such as the
United States and, to a lessor extent, France. The latter was onRce the
world's biggest producer of bauxite, and is now sixth,producint only
5 percent.The United States is still the world's biggest producer of
fuel oil and copper (but reserves arc beginning to dwindle) but even so
it has to import, ever increasing quantities of both.
WHY CAPITALIST COUNTRIES WOKR OFR INTEGRATION
Being common to all, this dependency tends to strengthen the urge for
imperialist integration aimed at establishing a firm, multinational grip
on the indispensable wealth of the Third World.This is why corporations
built on multinational capital proliferate in the field of extraction and
preliminary processing of minerals from the underdeveloped areas --espe
cially Africa. Such corporations arc still relatively uncommon elsewhere.
The monopolies of the new imperialism arc quite firm about their preference
for a Third World where natural wealth would be accessible to all, with
trade and capital movement as free as possible for all. The raw materials
of the Thrid World arc the vital safety waive of the system and of each
national imperialism.And so, all, including imperialist states themsclve,
are basically agreed to maitain and, if possible strengthen, the struc
tures enabling them to dominate and exploit the peoples of Africa, Asia
and Latin America. State-to state aid to the Th irti World is now almost fully
coordinated with economic interests. It serves to open the way for private
capital and to insure the subservience of so many indigenous authorities.
It serves to open the way for private capital and to insure the subser
vience of so many indigenous authorities. Intent to control the Third World
is now a dominant tendency of monopolistic capitalism. In some field it is
still weak, but it is already acting with some effectiveness and little
hindrance to subrodinato the peoples of the underdeveloped countries and
pillage the fruits of their labor. In reaction, hoover the consciousness
of the masses in these countries is stirring and the voice of protest is
making itself heard.
SOURCE = Pierre Jalee
ls! DOCUMENTATION CENTRE
Post Box, ^628
Bangalore 5&0 0^-6
"How capitalism works"
Translated by Mary Klopper
University Press, Indian Impression, 1980
Chapter 11, pp. 81 to 89
Edited by our Contro
PRIVATE CIRCULATION ONLY
(
PRIVATE CIRCULATION ONLY
SO CI Al. EFFECTS
OF '
---- s.
multinational corporation
(11}
The emergence of multinational corporations' has come up <s
new challenge to the whole world. The powerful corporations
have not- only exploded the traditional thesis of consumer's
sovereignty but have created economic implications of farreaching ramifications in both developing and developed
countries of the world.Whereas the developing countries
consider them as instrument of neo-colonialism, the developed
countries arc trying to establish the credibility of non
intcrfercnccC?) in other countries politics and the medium
of socio-economic development.
The present paper is taken from
N.S. Gupta's " Multina
tional corporations". It is partof a paper prepared by the
author for an International Seminar held at Mexico between
18th to 22nd October 1976. Dr.S.N. Gupta is professor and
dean, faculty of commerce and management studies, University
of Jammu.
Much has been said about the economic implications but very little
about the social effects of multinational corporations in the thiid
world. Tho social implications are perhaps more deep seated and subtle
than the economic effects which erode the premises of economic indep
endence and viability which are needed for the existence of a nation
state. The economists, the business scientists, the United Nations
Conference on Trade and Development and the Economic and Social Council
of the United Nations have studied at length various facets of
economic implications cf the working of multinational corporations.
They have given scant attention to the social affects except in so
far as the political interference* 'Inter-governmental confrontation*
or challenge to the 'sovcrcighty'_of host countries having a bearing.on
international relationship are concerned.
The social effects I would like to discuss under the following
headss*
*
*
*
*
*
i
i
i
I
I
i
I
I
I
I
»
>
►
Social Tension
Socio-culturel transfiormatinn
Political interference and the challenge to sovereignty of
nation states.
Socio-economic inequality
Restricted development of Social amenities and their la ■'sided
distribution and
others
SOCIAL TENSION;
Tension in a society exists on account of class, caste,
racial, regional or lingual conflicts. Multinational Corporations
have succeeded in creating, tho classes of haves and have nots - the
two rival factions which are generally in clash with one another
thereby bringing the entire society in the arena cf conflict. The
means of production and distribution concentrated in the hands of a
few persons have led to widen the gap between the rich and the poo r
on account of improper income distribution which is quite evident
from tables
and 3.2.
.......... 2
9
9
9
9
Pattern of Income Dis crsbutim in'some of the Developing Countries of
Eastern Asia sr■’ the Pacific:
tear
•rross
O '->
9urma
India
Iran
Malaysia
Pakistan
& Bangla
desh
Phi Hippines
Republic
of Korea
Sri Lanka
Thailand
Average
GIT
Income shaued
p er.
Mid.
Richest
ita
capita 40
2C$
be lew I- oorest to
9)
4<$
80
rl d g
o n cn
O *-
1
Q
•H
••
-P
o
c 'o r. o
ci
C'
C’ A? t.r
al"^ of popu
r i fb -ri m
1 ?O?iUC
!i oh ofl -
•Country
2
3
4
5
6
7
8
1964
1968
1970
72
100
350
323
54
45
9
11
—
99
332
330
—
16.0
12.5
11 .6
32.0
33.0
32.4
—
52.0
54.0
56.0
1964
100
33
100
17.5
37.5
45.0
1971
233
13
239
11 .6
34.6
53.8
1970
1969
1970
224
95
173
124
6
33
27
38
235
95
180
201
18.0
17.0
17.0
15.1
37.0.
37.0
37.5
35.2
45.0
46.0
45.5
49.7
9
9
9
9
3
4
(1
4
4
- 4
q
q
q
q
q
q
(
(
(
1
2
TABLE 3.2
Pattern of Income Distribution in Some of the Latin American andi the
Caribbean Countries :
XI
-Country
% of Popu
lation per
Brazil
Chile
Colombia
Costa Rica
Ecuador
El Salvador
Mexico
Peraguay
Peru
14
——
15
2
37
14
8
—
—
Poorest Poores?°me §^eived
2($
2Q£
40^
3
5
4
—
—
—
4
5
2
■ <■
12
7
11
—
—
—
Richest
5^
\
36
30
33
59
74
52
29
30
34
1-
UNO Repart on world social situation, 1974, New York, 1975,
p. 80—81.
2-
Ibid, p.47.
.3
■ The pattern of Income distribution indicating income inequalities
though the result of economic activity in general'and the governmental
policy in particular has further been distorted and made more and more
disparity-oriented by the activities of multinational corporations.
Tire data of income distribution in the developing countries of East
Asia and the Pacific shows that about 4C% of the total population of
this region exists below the poverty line i.e., having per capita in
come of less than S 50 par annum. The percentage of the population
below the poverty line fluctuates between the minium of 6% in the
Republic of Korea and the maximum of 54$ in Burma. Again the richest
2C% share 49*7% of the total income and the poorest 4C% only 15.1%
of tho total income.
The level of disparity though comparatively of a lower degree,
exists in the countries of Latin America and the Caribbean. The per
centage of population falling below the poverty line in this regt on
has been estimated on an average (1960-70$ at 11% as against 38% in
the country of East Asia and tho Pacific. The porccnrage of tho categi ry
of population varied between the minimum of 2% in Costa Rica and the
maximum of 37% in Ecuador. Similarly the poorest 2C% of the population
received income betwenn 2 to 5% the poorest 40% between 7to 12%. But
the top 20% received more than 52% of the total income in Elealvador,
59% in Costa Rica and 74% in Ecuador. The disparity of the highest
order is manifested by tho fact that 29 to 36% of the total income
in the repective countries of Brazil, Chile, Colombia, Mexico, Paraguay,
and Peru is shared by only 5% of the richest class of those countries.
Tho concentration of the means of production and distribution th
rough ownership control or other restrictive busi’^oss practices in the
hands of a few multinational affiliaties in the developing countries
has led to the formation of the two warring groups of'rich and poor
which seek to inflame the fire of conflict and confrontation resulting
ultimately in social tensions.
Tho other source of conflict is tho creation of two classes in
the industrial workers of the developing countries consequent to the
entry of tho multinational corporations. One-the class of low income
earners employed in tho local industries and the class of high income
earners in tho industries and other establishments of foreign affiliates.
The creation cf "elite" groups or the formation" of "enclaves" of high
income groups naturally confronts with the low income groups apart from
inculcating a psychological complex between the two. Even the group
of eminent persons appointed by tho U.N'.O. to assess the impact of
multinational corporations also recommended that the "over all object
should be to reduce ^inequalities between the industrial workers and
the poorer sections of the population or among industrial workers
themselves: thereby avoiding the undesirable creation of small
"enclaves of high income groups".
Though tho comparable data on the wages of tho workers’employed
by the multinational affiliaties and the local concerns is not .'available
to make a comparative study possible but it may bo stated on the basis
of I ,L .0 . Report og Zambian WorkorsPand a study Of multinational corpo
rations in Jamaica
thit tho workers employed in the foreign affiliates
got more wages than those in local concerns.
3.
For details refer to Multinational Cprporations in world develop
ment, op.p. 53.
4
The creation of g reppi sin among the industrial workers "Will not
only result in conflict among this class cf workers but will spread
the conflict beyond cho confines of factories and commercial establi
shments. It is net'only the wage diff erence which creates "elite" and
"enclave" groups but also other welfare amenitii s such ns housing,
medical care, rccre ti ,.ny education and training which cement the
forces of dispertieis in the rank"end file
labcurfcnce. The
wage payments and the a .If•■we amenities provided by the multinationals
to workers may not ..n.
cause grwyis: directly but contribute indir
ectly to augment the f rces
discord and discountent by way of for
ming. 'elite1 or 'encl vo1 jjgrrcs cf groups. They provided amenities
not merely to incro sc efficiency of workers but also to attract
efficient workers froii other concerns. Further they pay higher emo
luments not merely for the welfare of the employees but to convert
the taxable surplus into non-taxablc deficits. In other words they
pay higher emoluments at considerable social cost.
The other source of tension in the host country is the adoption
of their own standards of work for the .labour bjr multinational
corporations and the adoption of their own "policies and practices
much different to national customs and patterns" These corporations
have adopted a number of# the trade unions by the threat of or actually
shutting down a plant gr trun’serrring productive operations from
one country to another 1
CULTURAL TRANSFORMATION ;
Social institutions and values’are the basic premises’of social
framework. They provide an independent indentity to a nation, state
and the requisite norms of social behaviour. Every nation therefore
tries to protect their institutions and values from every encroachmdnd from outside so as to sustain their identity, solidarity and
the fabric of their culture.
There are historical evidences on record which throw' ample
light on the technique'of cultured transformation adopted by
European rulers to fortify their political domination in the colonies
of Asia, Africa and Latin America. The dilution of culture and
social values by the overwhelming influence of their masters' acti.vitL ies
weakened the forces of emotions and sentimental of nationshood.
Ibid. Also refer to the Impact of Multinational Corporations on
Development and on International Relations p. 76.
5. I .L .0. Report to the Government of Zambia on income, wages and
p prices in Zambia: Policy and Machinery (Geneva doc. ILo/tap/
Zambia/R5,1969: Mimeographed) pp.9-15.
6.
Jeffrey Harwel: Multinational Corporations, trade Unions and
Industrial relations: A case study of Jamaica in Hans and Gunter
(ed): Transnational Industrial relations: The Impact of Multin
ational Corporation and economic regionalism on industrial relation
A Symposium held at Geneva by the International Institute of Labour
Studies, London, Macmillan, St. Martin Press pp.175-495.
7. For details refer tb ILO; Multinational Enterprises and Social
Policy, op. cit., p. 95.
8.
ibid., pp. 90-99
Also refer to the impact of Multinational Corporations op. cit.
’
- p-77.
#ways to weaken-or neutralise the strength
■ ’ of collective bargaining of the trade unions.....
4.
Ql)
The psychological'-strategy of denouncing t.ie w;-. five culture provided
invaluable dividends to the- foreign rulers at the minium cost. This
experience is fresh in the ms;.-ories of th: people living in"the
countries of third world. They apprehend that history may not repeat
again through the medi-.m of multinational corporations. The creation
of "elite groups" or the. "c-slave groups" are more susceptiable to
foreign influence which may at a future stage develop into the protogonists of foreign cultur- which may in addition to provid ing political
domination may also provide economic dot n-cw.
Multinational co.,-pur.,->?s like their ancestors are trying to
transplant their Gulfira 1 values in t...-; social fabric of developing
countries. These values being alien to native cultures are apt to
clash with the way of living and social behaviour of the people- in
these countries" more specially where national sentiments are so strong
as to tolerate no infringement by transnational cultures.
The impa.ct of their influence is so overwhelming that the restri
ctive measures adopted bjj the nation states have, failed to punctuate
the pace of penetration. The sustaining factor is the pockets of
energy created by them"in the form of "enslave groups ". These groups
of local population manifesting foreign values prove provocative more
specially to the local elites consisting of intellectuals, politicians
and business arid labour"'leadd-rs which generate the force of class
conflict to the detriment of developing countries. More often the
vested interests throw certain powerful social groups in the lap
of multinationals without regard to legitimate politico-economic
development. This opens the floodgates of political interventional in
local politics to the powerful multinational corporations.
The study of Multinational Corporations and social policy conducts
b£ the ILO further suggests that "the multinational corporations as
an employer is ^he (source of) potential conflict between the cultures
of the home country and the host couj-’try and the effect of any such
conflict on industrial relations
is particularly hazardous. In
this connection John C.Shearer" ‘rightly suggestes*'that the AmericanFirm usually operate on the basis of the values and assumptions
obtaining in their own countries which prove generally conflicting with
the local values, tie further states that these corporations are not
even prepared to mend themselves to local conditio^. This malad
justment to local environment in Chrysler in U.K.
General Motors.
in Canada '’and Kohn Deere-Lanz AG in Federal Republic of Germany.
Another source of conflict i. s the privileged position of tho
expatriate staff as compared to the local staff. The locals resent
disparities in incomes, perks and living conditions between the local
and the expartiates. Tile difference in tho wages and benefits of the
9.
Multinational Corporations in
10.
ULO
11.
John C.Shearer: Industrial Relations of American Corporation
abroad i.e. Sol mon Berkin ct al (eds) International Labourj
Harper & Row New York, 1967. p.23.
12.
Trade’Union Congress: Report" of?. Conference on International
Companies, congress House, Lc-ngon, oct. 1 970,p.7.
World Development, op., cit.,
P-57.
Document, op. cit.. p.78.
6
-6-
of the local minors, and the outsiders was a source of great social
conflict in Zambia immodiotelj after indepe-d:' c . This difference
was not based merely or the o.. ficxoncy factor but the racial factor
which led to infuriate racial violence.
The Governors t
tho
vol oping co-t” trd.es shpuld stop immediately
the dangerous erosi:” f their cultural .1 ritagc by"transnational
cultures’with
, f consolidate; their frs.-.iom and preserve, their
sovereignty and integrity. J....' t’.is process is n t averted it may be
apprehended that no ’.r<-..s cu
reign ■.?■.'■
■ >n the politicoeconomic dcs.-.s&ons •
u
v .rw. 1::..'\ l’-.t '■. cy ’.-ill not be able
to forgo ahead their
ogr-ri. •. c. c:on.mic dsvul jpmo.it and social
welfare,
POLITICAL INTERFERENCE AID CEALlEuGE TO SOVEREIC-r. TY OF NATION STATES;
The economic domination exorcised by multinational corporations
in the host country by way of their control of national resources
and other means of production and distribution has made them powerful
enough to afford political interferor.ee, if the host government docs
not too their lino of action, and even challenge the sovereignty
of a nations state. This challenge, as already pointed out is not
merely confined to economic sector alone but ex nds to encompass anther
aspects of the national life such as social, political and even
international. Their capacity to circumvent or subvert national pol
itics
and programmes has increaased further as a result chf modern
means of communication, the advanced technology, skill’and capital
possessed by them, the general agreement or Tariffs and Trade under
which the host countries have agreed to liberalise gradually the trade
barriers, their policy to integrate and centralise their production a nd
trade strategy on a global scale and their capacity to bargin"with the
nation sta^e on the basis of agreements, patent rights, licences and
also the capacity to execute cartel agreements with other concerns.
There is a fundamental difference in the goals of a Corporation
and the Government. Whereas the former concentrates largely on
growth and profit, the latter on growth with welfare within the
broader framework of the national policy.
In pursuance of the broader national policy the government may
even sacrifice in short period the growth aspect for development or we
lfare aspect. For instance many public sector undertaking in India,
inspite of incurring losses are allowed to continue becasue they seek
to achieve the hhsic goal of social equality by decentralising the
ownership of means of production and enforcing equitable distribution
q£ income and wealth generated in the country.
The corporations and.
13.
14.
15.
16.
Duane Kujawa: International Labour Relations Management in tiie
automotive industry: A comparative study of Chrysler, Ford and
General Motors, Frenger Special Studies in International Economic
and Development, Proagor, i’ew York, 1971,pp.199-201 .
Shearer, op.cit., p.117
For details refer to ESSO eastern Review Fully- A.ug. 1971.
For details refer to Jack N .Bahram: National Interest and'
Multinational Entcrpireses: Tension among the North Atlantic
Countries, Frontice Hall Inc. Englo Wood Cliffs, Now Jcrrsy,
g§.2-11 .
7
more specially the- foreign r:u.'.-;inati..nal corporation. is not concerned
with promoting the filter at < f a particular nation, but maximise their
goal of growth with prof. - •uirctfgh all the inuividual affiliates op
erating in different ccuntricj of the wcrlc. i.n pursuance of their global
strategy. Both thee : c bjoct.-J are c qn tr nd inter:/ '..-it?, one another. When
-ever the oultinati-. nal corp- n'ati n finds fair.f a decision of c. government
will
obstruct tho ju'rcuanco of their glob 1 .;tratu,-y and object, the
multmati.nal corpora ti. r. t?,.’.;.s all stops to- circumvent or disrupt their
trade, fiscal or mcnqtr?.’?. .noli ,ios through suby .rsi n dr political
influence in tho top h?.-.rcichy .f government.'
To influence a government decision’the multinuti rial can go
to the extent of bribing diplomats, ministers and tho policy makers in
difforcn^gcountrics of tho world. This was exposed in the Lockheed
scandal.
It has been stated that the Gulf Oil paid S5 million
to different parties in South Korea, Lebanon, Bolivia and Italy.
With their economic power thoy can wield considerable influence
on government policies. Their economic power and contacts in the
government cadres, political and social organizations arc instrumental
in influencing political dcsisions, making or unmaking of the
governments and implementing or thwarting any programme of socio-econo
mic developkent according to their liking.
Tho record of operation of soke of the multinational corporations
is most alarming which has attracted the worldwide attention. It is
now an open
secret that the multinational corporations in collusion
with other parties overthrew ar. elected government in Chile. Their
record in other countries is also of the sane nature.
There arc further positive signs of erosion of. sovereignty
of the host countries'. If the government policies and programmes
are directed to bring about economic growth and social welfare
against their wishes, they arc either sabotaged or thwarted by the
multinational•corporations. For instance the strategy of multinationals
on capital intensive industries concentrated in urban areas and their
decisions as to products and product mix may confront with basic policy
of import substitutions to reduce the burdun of foreign earnings and
the policy of lab ur-intensivo industry pursued by the host goVeimment
The host government looks as a helpless spectator to the negation
of tho domestic policy to tho enormous disadvantage cf the public
at largo.
It will bo more appropriate to state that the working of multin4
ationals acts mere often against the national interests in a number
of ways. The concentration cf economic power in the hands of a few,
the inequitable distribution cf benefits among different regions and
different people, the oxtincti r cf competition in the home market
tho truncated economic development, the creation of social inequality
and the tactics of transfer pricing adopted by multinationals arc the
ether outcomes of the operations of multinational corporations. "All
these effects are generally contrary to the national policies and
programmes pprsued by the government of host countries. Thoy have
indomitable capacity to upset economic stability or equilibrium. A
17.
18.
Multinational Corporations in World Development, op.cit.
If shock many countries of the world such as Netherlands,
Japan, Italy, etc.etc.
8
str.bliscd economy Having enormous fiscal capacity in the -shape of
asset transfer will not only put the host country to insurmountable
economic difficulties in regard to fulfilling its basic Coahinonts
but more importantly its intcrratinnil commitments. It decs not
neon that the host governments' arc unable to de anything. Thoy’also
do a lot by chopping of the unbridled command of the multinationals in
their countties. The international ccmrainity is also quite alive
to the gigantic power enjoyed by then, They have also suggested a
number of stops which I will discuss in the last part of the book.
However, I on inclined to agree with the following observations of
the group ofeminent persons a ppeinted by the Secretary-General of
United Nations.
"Corporate power cannot bf course, be compared with the political
powers of governments which possess both legitimacy and"means of
enforcement. Yet many development countries may hesitate to exercise
their governmental power because of the" real er perceived costs entailed
It is clear that not always are the governments in the host
countries able- to take action against the activities of multinational
corporations. Sometimes the governments policies fail to escape the
commitments made to such corporations which have been instrumental not
only in retaining then in power but also helping them to perform their
day to day functions. The multinationals have done a lot to instal
people in government through their economic power and their influence
am; ng the electorate or different soetKrs of people. Under these
circumstances the governments deliberately do not take any action
because they arc not strong enough to fulfil their rights and
responsibilities without the open or covert support of the multinational
corporations.
In other cases they arc really helpless,. They should exert
through regional cooperations and international agencies like U ,N .0 .
to dilute their impact. They should also cre’ate a strong industrial
base which could, break the monopoly of those corporations.
OTHER
—
———EFFECTS:
——
z
Apart" frem the socio-economic implications, already discussed
at length under spparate heads the residual effects formed as other
effects concern directly with (i) social welfare (ii) problems of’
urbanisations (iii) neglect of rural society or the process of urban
socio-economic activity and the (iv) problem of migration.
Social welfare is attained by infireading the level of expenditures
on social amonitites like education*, health, utilities and recreation
"by a government. The government, in every country while seeking
resources for defence, maintenance of law and order if unable to get
sufficient revenues to meet expenditure on these priority sectors
perfer to scuttle the expenditures of social amenities. Inspitq of
this constraint the modern governments have realised the significanne
of social welfare and are doing their best to fulfil their commitment
The level of welfare will, however, be determined by the revenues
available, the most important source of which is thb taxes on income,
profits and wealth. Corporation tax has occupied the most important
place in the +-nx structures of practically every'nation.- The technique
of ttansfer pricing and tho exorbility charges of multinations cor19.
Tho impact of Multinational Corporations...op.cit.p.51 .
-9-
porati ns convert the taxable profits into non-taxable costs. Transfer
pricing is the- most effective weapon' under which prices arc charged
on the inter-corporate transfer of inputs such as raw material, capital
equipment and even skill. The foreign affiliates are required to pay
a very high price for the compulsory imports of the inputs from their
head officers located in the dcfclcpmcnt c metrics. This is a fory
serious problem which needs to tackled in a systematical manner.
Other heavy chcrg...s on the revenues of the i.reign affiliates
are the fees and salaries,leave and pension contributions which prove
a burden on the over all resources cf the hast gevornent. A similar
situation resulting in heavy burden on the revenues of the foreign
affiliates as a result cf excessive payment to expatrates has already
bc>_n pointed out earlier. The emoluments including perquisitics and
other rocejpts are much higher than the local with the same qualification
and efficiency.
The activities and cf multinational corporations relying most
on the capital intensive techniques arc mostly localised in the
urban areas. The unban areas which are already infested with the
industrial activity tend to be concentrated further by the operation
of multinational corporations. This gives rite tc many social
problems of housing, sanitations, pollution etc, in addition to
agravating the level of moral degradant gon as a result of gambling,
excessive drinking, prostitution etc.
The Urban centres being the scats of governments and the
industrial corporations attract top doctors, scientists, lawyers, and
other technocrats to the neglect of the vast human populations living
in the backward rural areas,. People living in rural areas arc donined
the fruit of development and welfare which hightens the process of
uneven development , The process of uneven development has deep seated
ramifications, both on the economic and social planes. The malady
of regional inequality accentuates the degree of social conflict to
the determent of the entire human population in that country. When
the- vast C; unk of human population in a particular society is denied
the fruits of rowth process, how can that society register the desired
level cf growth and welfare? Instead, most cf the creative effort will
find extinction in regional feuds whih will lower the degree of efficency
processes by people. The amenities and opportunities provided by the
urban centres have attracted efficient and hard working people from
the rural area. The continuous migration of people from the rural to
urbuh areas lias affected not on^y the offecinney of agriuulturc and
other crafts carried in the rural areas but also accentuated the prob
lem of urbanisations. If the account of the factor migration is prep
ared it will shew a huge social deficit. Inter governmental confront
ations is also associated with the functioning of multinational
corporations. Three situations may arise which nay inflame 'the bogy
cf inter-governmental disputes : (i) nationalisation of the branches
of multinational corporations (ii) jurisdictional problem and (iii)
multinationals as instruments to disrupt or subvert the socio
economic apparatus in host countries.
The host country is perfectly competent to nationalise any
venture in tho wide national interest. Their authority in this
regard may not bo questioned. The host couhtry nay however be persu
aded to give adequate compensation tj the foreign affiliates. In the
10
-10-
event of any difference. of opinion on the quantum of compensation it
may be settled amicable under the agios cf Centre for the settlement
ef Investment Disputes established by the Internati_nal Bank for
Roconstruction and Development of which the majorities countries ff
the world have sough : emberships. It will hewover be appropriate that
host countries should nvl od confrcntati.n _ni t-iis issue. The host
©sample in this regard of negotiated settlement nay be of India
and Uganda. After nati u'lisr.ti .n ,.f trade and industry run by Indian
in Uganda and their re-? tri.-.ti^n, the home ecu-. try negotiated a conpondaticr. frr then whica is stated to be suf ;,ieic” t in offical
quaters .
The jurisdictional issue for the operating area of foreign
affiliates on account of the restrictions imposed cither by the hone
country or the host country try also" bo settled amicably. If the
host country imposes a restriction on Mie exports of its goods to sone
country, it should generally be respected not only by the foreign
affiliates but also by the hone government too. Similarly the rostriictions of hemo country should also be respected by the host country
generally.
The third and the most serious source cf confrontation nay
be the extra economic object cf hone country townros host country
either as a result of the policy of the hone country or as a result o
of the persuasion by the affiiatc of multinationals as in the eigh
teen and nincteeth centuries. It has been observed that multinational
corppration have acted as the tool cf their government in certain
countties to hatch a political conspiracy which nay perpetuate an
atmosphere of chaos and strife eiMier to weaken the government or eveXjn
to topple it. This is by far the most serious crime against humanity
which should be curbed by the international agency. If the" involgement cf any country in the political or economic disruption is
proved, the international c&mmupity should take strict ncnsur s against
’•he erring government that it nay oct an example tc be emulated by
■others.
Source: Dr. N.S. Gupta, MULTINATIONAL C0RP0J8ATI0HS, Prapati
Prakashan,Meerut-250 001. 1978, pp. 29-4 1 '
ISI DOCUMENTATION CENTRE
P.B. 4628
Bangalore 560 0^6
For private circulation only
/
TRANSNATIONAL
CORPORATIONS-/
TRANSNATIONAL or MULTINATIONAL CORPORATIONS are
an enduring phenomenon in' the new capitalist re
structuring of the world economy , they continue.
to raise novel and grave economic , political afUd
socio-cultural problems for large sections of
mankind.
CAPITALISM in its ultimate conglomerate phase is
marked by its bminidi^ectional predatory qualities,
its inherent and irreversible annexationist thrust.
This article rives a brief introduction to TNC s
their origin , spread and global influence ; tending
to a unitary culture.
The next despatch will carry the
concluding article " TNC s and India" with a bibliography
and some guidelines for group study.
I. Transnational Corporations (TNC S)
The emergence of a transnational economy is now a major feature of -our ~time^-^_
The growth of TNC's may seem a recent phenomenon, its roots are in .the
past. Quite a number of big world groups were founded around 1880 - eg.
oil companies like Esso and Royal Dutch, or engineering firms like
McCormick - but others like I .B ,M . for ins-tance, date from 192O’s. The
world-wide expansion was achieved in three stages the first was prior to
1914 the second extended from the end of 1st World War to the crisis of
1926 and the third was post 1945.-The crucial element in the phenomenon
has been the change of scale over the past 20 years. Expansion that was
limited to the exploitation of natures raw materials - of the mineral type-^
like oil, or plant type like rubber and bananas and to heavy engineering or
heavy-elecrtrical equipment has now become a general movement. Multinational
expansion has more or less actively filled the whole range of ecnomic and
-—industrial activity. It has become essential in certain services (.transport
t our i smadvertising., communications, minerals, metals and now in agrib-usiness, nuclear, space and several areas of armaments). For the last ten
years, in fact, it has unsettled the worlds'Banking and financial networks.
Under its various aspects, then it offers a complete and coherent system
for organising activities.
A few statistics will reveal the importance of the T.N.C's. The leading
4000 odd TNC's account for 40^ of total market production (in the capita
list countries); they employ several million people abroad and they are
responsible for one-third of world trade.
Whatever the power of Nation-states, the TNCs'contribution is essential from
the economic angle, also very important is the social and, pnli.t.iraJL spheres.
Definition
and Birth- —
of -----TNC -----------------------------------
/
The term ’transnational’ or ’mu-ltinationa I*-company is now part of current...
vocabulary but it is net without its ambiguity. In its most widely
accepted sense -it signifies an enterprise cr group of. enterprises, whos^
activities are carried on in.several countries. In fact specialists and
international bodies like the U .N . distinguish between two categories of
enterprises, depending on how internationalised their activities are.There
are:- (i) the Transnational Ccmpanies with affiliated branches abroad
that produce and sell goods, and do so under close control from the head
office from one country, (ii) the Multinational Ccr.oar.ies that are world
oriented, whose sales and production operations, spread over several coun
tries, are thought rut ana organ is cd on a world-wide scale - the managers
and capital coming from the whole group of countries in which the corpora
tion operates. Drawing this distinction between the two types stresses the
enormous difference between the s all and large TNCs as regards their nature
and importance. But in either case, the TNCs arc not basically different
from other enterprises. It i.- simply a company that has been led by its
success to extend its actl''ri oies abroad, since it has particular features
of its own that' give ii a decisive and lasting advantage over its competi
tors, better organisation, greater dynamism and so on.
Only gradually does a company become transnational, and only in favourable
conditions. The Transnational, as it grows goes through
stages.
1 . There is a period of commercial expansion and limited industrial expan
sion. This stage is marked by the establishment of neteork of sales subsi
diaries, depots and repair services and the setting of one or two produc
tion subsidiaries.
2. Then comes a sta,ge of generalized commercial and industrial expansion
with 1 inking together of many countries., of a whole ensemble of relay
affiliates and work-shop affiliates, eith&xx^pecifically built or else
bought,up. The latter are often based, on assembly—or—precessing shops. It
is only with development of the market and the acquisition of industrial
experience that local production gradually replaces imports.
3. Finally, there may be a period of integrated world expansion, marked by
the creation of regional commercial and industrial complexes run by Screen
af filia tes*. The TNC then tends to specialize its industrial subsidiaries^
and is led to create ’service1 subsidiaries that have a financial or
research function. ■
This ideal process does not hlways carry to its final stage. In practice
only the largest groups (IBM, ITT, or Philips) get thatpS’for completion of
the final stage of the process depends on the utilization on a world-scale
of the groups resources and growth potential and this requires a complex
organisation at once centralized yet flexible. The transnationalization
can sometimes be reversed should circumstances become unfavourable. Cer
tain American companies, for example, ceased all international production
after 1973.
The Spread of TNCs
In 1978 no sector of activity tes really free from TNCs. The place the
TNCs occupy, however, varies greatly. In general, an activity is all the
* The role of Screen-affiliates (G.Bertin) is that of directing
. and overseeing the operation of a whole complex of integrated
affiliates at regional level.
- uaore transnational for being based on the exploitation of a rare product
- some limited natural resource or technical discovery - or on large scale
manufacture resulting hi lower production costs. These two factors ex
plain the concentration of activities among a small number of important
world producers. While TNCs may crop up in other sectors their presence
there is a limited phenomenon.
(1 ) Highly—transnational!zed sectors: in which more than 50% of world
activity is control!ec ’"by" a linivcT no. of groups (from one to twenty)
that held a dominant position - the following sectors in particular: '
Mineral production and res. jar'll toil, ores? seabed mining etc): certain
vegetable products tea, rubier, trbacco etc): High technology products
(calculators computers, ic?aproc • ssers, electronics, fine chemicals,
pharmaceutical .products etc): Heavy complicated goods, (aircraft, cars,
chemicals, heavy electrical equipment, paper. Also in the service sectors:
Activities involving advanced techniques (telecommunications) or capital
intensive activities (maritime transport), for example and more often with
defense productions.
Moderately Transnaticnalised Sectors
In which, along side a small number of sometimes highly specialized
world producers, there is important fringe of National producers - in
light engineering, machine tools, precision tools, eletrical household
appliances'.
Sectors only slightly touched by transnationalizaticn (less than 30% of
total activity) where activity is only on a modest' scale: farming pro
duce*, building, the greater part of food and textile industries.
Such a classification is neither absolute nor unchangeable. S.oma-sec.tcns__.
--w-ere-transnationalized only recently• (wood, publishing etc.) on the other
hand, transnationali.zation'^metal production has fallen off over the laat
ten years. The iron and steel industry, for example, has alnost/.had a always
national basis, but.iron ore production is highly internationalized.
■ The Origin of TNC’s
Up to about 1970, it was American based companies that were most of all
noted for transnationalization, and they still held the front rank posi
tions of the 1000 TNCs of European origin with 5000 affiliates, 40% are
German, 24% British and 15% Frenchthus illustrating the importance of
older industrial economies. But a good number of the largest TNCs began in
'small1 countries that of necessity were open to the outside world: the
- Netherlands (with Royal Dutch, Philips), Switzerland (with Nestle', Hoff
man-Laroche etc) the Belgian-Luxembourg union and Sweden all have scores
of TNCs. The most recent expansion of all is also the most rapid, that of
the Japanese TNCs for the large Japanese groups together control more
than 2000 affiliates throughout the world
* See "U.S. food complexes and multinationa corporations"
SPI7 Special Number 1980, page 1815.
65
The growing number of TNCs originating frcn countries, almost 150 toiay
compared with less than 10 sone few years ago, shews the movement is be
coming general. The companies belong cither to new countries or countries
where industrialization is developing rapidly, (Canada, Brazil, Iran) or
to medium developed countries (Spain and Austria). Finally, in a different
context and on different foundations the movement is gaining ground also
in countries of the East, where industrial groups are increasingly em
barking on combined operations not 'only in the industrized but also in the
developing countries. *
Transnationalizaticn is no longer a simple phenomenon signifying American
domination, even if the American TNCs power is still by far the greatest.
Despite the most recent development, however, transnationalization is
above all the fruit of the most advanced capitalist economics.
The Diversity of the TNCs
A composite picture of the TNCs is impossible due to their diversity of
form and structure. They differ notably in their area of activity, their
orientation, their si-ze and nationslity.
There are primary TNCs which exploit natural mi neral and Agircultural
resources, and secondary TNC’s which produce manufactured goods. The- fnr.meX,
look for long term control of natural wealth, and in order to reduce costs
try to integrate the various stages of production. They need very stable
'—operating conditions and access to resources 'centred' on a single product^
or be it many sided arn: anxious to establish their presence in_.dif f er ent
national markets -under-the best possible conditions.—They are able to
accomodate themselves to more changeable conditions and they often have.,.
a more flexible strategy. Those secondary TNCs are of two kinds; those
that work 'for-rarkets .in which they are established-and those though -es—
. t-ab 1 i sbed in a particular country, wurk_j£xn>-export.
"heapite— s iir_h differenc-es-^a 11 TNCs have in common a system of action,based _
on the principle of aiming at-ihe best performance possible. It involves
the TNCs achieving high profits; i;hisL_necessary~dlar~-preserving —ond~il—possi
ble, improving the corporations position over against its competitors, far
fi nan ci ng research, and for remunerating schareholders and., executives.
~The TNC‘~atr±v~es to get’the utmost from its resources and capacities at its
disposal in the-sphere of technique, financial means and manpower-. It does
so in a systematic way (i) by making use of the possibi]j ty of largescale production (ii) ensuring free access to the whole range of means of
.production regardless of frontiers (iii) taking advantage of the
differences in costs as between different countries, especially in the
case of enterprises that produce in any one country for export markets
and (iv) trying to control the basic markets.
The TNC, then, is able to take advantage of a world in which local situa
tion show great contrasts, and is able to profit from those veiy differences
But it is also.able to develop just as strongly within entities that
pursue policies of integration (the EEC, for example).
*( 1)
■ (2)
z Assembles an Asian. Empire"
Tifds i n y n 7 nu st a. and S'inrjc^ re
- ------- F’or the attainment of its objectives a TNC in pratice needs two conditions
to be fulfilled.:. (1) Freed?. to transfer from country to various elaments
involved in production and (’ii) a certain stability in the international
si'..at ion. As the letter is not always whar it would like, the TNC operates
in a world of constraint.? with which it has to come to terms. Its action
does no- therefore always run iii the direction of the goals proposed by
ctner international agon s in particular nation-states.
The Socir-.ulturaj. Inflv..ace of TNCs
Due to their validity ari their widespread growth, TNCs have a profound
effect cn thought and
■ganisrtion. Over and above local or national cul
tural dif f ,'rnnces, they i -ve largely contributed towards the development of
what may be called a l.-f'r . 'yle, a way of looking at things, common atleast
to th j Western world and based on a few postulates connected with the princi
ples on which TNCs themselves conduct operations. While-TNCs are far from
being the only agents responsible for the evolution towards a materialist
^-consumer society (the.American way of life) they do corfrib-ute in several
ways to the spread.
First , in its concern to ensure its continued existence and development
the TNC tends to give priority to efficiency and profitability and essential
criterion in its relations within the group, with consumers, with other
producers and with public authorities. This logically implies attention to
control of demand, rationalisation of conditions and methods of productian^
regards for the ways consumers act etc. (in a subtle way also includes con
trol of consumers tastes Leading f inally-±q_ research into forms of mind
control etc.).
Sec-ondly, growth depends on continued progress in-•theoconsunption of goods_
which satisfy the needs that have been suggested, stimulated and constantly
---- r-eawakened . Salles—d-evelopment^ essentinLjf or ensuring low costs and good
profitability, leads TNCs to standardize produciwijni—bn±_aJ_s<r_in_ja_-certain x
extent consumption.
Thus—d-epend i ng on the level of consumers’ .means tinned or processed, foods
or a demand f or -argan ined trarveL..is promoted. "Create a demand and meet
that demand". "Produce only what brings in the greatest profits.and not
what is the need of the people". "Produce things that become rapidly ou_t— —
dated or have limited life" (use and throw away).
This-orientation. inevitably calls into question old and local forms of be— haviour, and implicitly challenges traditionaL cultural forms. It is
difficult to preserve an archaic way’ of life when production and.marketing
is oriented towards promoting cons.unpti.on or, indeed wastefulness.
■lj th the success of a cultural schema, of American inspiration perhaps
on? taken up and spread by TNC as a whole regardless of their country
of origin, there comes a cultural leveling, along with impoverishment of
local. vel urn.-and_-their--rejilac ament by a w.arld- cailturaL. nod el. conducive
for TNCa .
CONCLUSIONS
TNCs, in the present form and in the present day world production system,
do occupy an important place . These also happen to command huge financial
technical manpower and natural resources ,
They have access to a variety
of crucial information for carrying .out commercial operations , to their
advantage on a world-scale.
TNCs also represent a culture , a philosophy and a powerful economic f
force which can at times be manipulative and. corruptive when it w^nts
to obtain political and administrative favours .
In brief , TNCs represent
a giant force — spreading its tentacles like an octopus.
In countries like
India , oneview could be in seeking complete isolation
from TNCs ; and the other to submit to the pressures of the TNCs .
Both.stances reflect extreme positions .
Before taking a position,
policy- makers need to examine more critically many of the claims made,
and the merits associated with TNCs .
It is for countries like India
to equip themselves with more objective studies , so that .while formu
lating policies , the essentials do not get missed— as has been the case
of enacting FERA ( foreign exchange regulating act).
This-Aspect will
be dealt with in a forth-coming article "TNCs and India
IS I DOCUMENTATION CENTRE
24B?1M°^6O 046
FOR PRIVATE CIRCULATION ONLY
"When the forces of virtue rise one foot the forces
of vice rise ten feet "
( a Chinese proverb)
INDIAN CASE
TRANSNATIONAL CORPORATIONS,
■
■
paper II
TNCs with
vast economic and technological
PO'JER at their command, have little use for politics
and even less for ideology . They seem to thrive
in any political enviroment . TNCs belong to East,
f/est and even the Socialist Blocs. Every group is
represented in India. This paper attempts to bring
together the facts related to this phenomenon in
the Indian context. If nation States like India
are not vigilant these Industrial Giants may pose
, d threat to the economy if not its sovreigni ty.
IN_INMA
India has been very much, of, late, a su
bject of keen debate by groups who want
to change the investment climate to. faci
litate the entry of TNCs, as well as
those who express the view that TNCs are
Already entrenched and it will not be
long before they dominate the economy.
It is a fact which cannot be disputed
that the aggregate inflow of foreign
capital in the corporate sector and ind
ustrial and commercial enterprises has
been steadily growing. Further, the num
ber of foreign c®mpanies in India has
also increased from 890 in 1972-73 to
,113.6 in 1976-77.
The main thrust of foreign private inve
stment through TNCs in India has been
from .the U.K., mainly because of the
colonial past. As pointed out by J Ade
"the former control of. politeo'economic life of these countries by the
governmen.+.a of western countries has
not ended, but merely been passed on to
the MN investors."
A
Initially, the British companies were
'dominating the puolic utilities and
mineral industries, and those areas of
ngx-inultural sector wj^ich provided raw
' trials for British industries such
puulit’'* tea and rubber* Among the
i.tios t
IJ'T«-l.ways provided.
the most important monopoly capital in
colonial India . The total capital inve
stment in 1938-39, according., to the sta
tistical abstract far the British .India
was Rs 8,478.2 million on which the
return was Rs 359.6 million. In 1943—44
the capital investment was Rs 8,585.3Mn
and profit was doubled to Rs 852.1 Mn.
Investment in other. British companies
operating in India totalled £ 300 Mn
in 1929. On 30th June 1948, according
to RBI figures, the total value of for
eign business investment in India, in
manufacturing, mining, utilitiesr tran
sport, trading, financial, plantations
and other industries, was Rs 3,204 Mn,
of which Rs 2,301 Mn (71 .9^)were accoun
ted for British business investments
alone followed by US (Rs 179.7 Mn,5.7%).
The investment was both direct, ie,fin
ancial as well as portfolios (shares ) .
Over the. period 1948-55, the British
investment increased and the main incr
eases were in manufacturing and pl anta—
tion industries.
The vast market, the low production
cost and cheap labour tended to attract
the British investment in manufacturing
and plantation industries. The planta
tion manufacturing industries centered
around cigarette, tobacco, food produc
ts, jute, coir goods, electrical goods,
medicines and pharmaceuticals.
705
By the end of March 1970, branches and
subsidiaries of foreign controlled compa
nies held a direct foreign investment of
Rs 7,350 Mn. At the end of 1972-73, there
were 740 foreign companies operating in
India, of which 538 operated -a branches
and 202 as subsidiaries of TNCs.
Origin
Branches Subsid .
Affiliates
U ,K.
USA
Switz.
Japan
If .Germ.
Sweden
320
88
140
28
21
18
17
14
ASSETS (Rs in Million)
Origin
1 967-69
17,980
1 972-73
18,180
U .K.
USA
5,270
5,420
Total of all affiliates: 29,22
ASSETS AND NETT SALES OF BIG TNCs
(Rs in crores)
TNC
Hindustan Lever
Dunlop India
Indian Explosives
Ashok Leyland
G .K .Williams
Metal Box
Peico electronics
Alkali & chemicals
Glaxo Laboratories
Siemens India
Motor Industries
General Electric
Bayer
Chemicals & fibres
Chloride
Assets
136
104
77
74
72
66
60
48
47
45
43
34
29
26
22
Total assets of 125 TNCs(branches & sul,
sidiaries) have gone up from Rs 3154 cr ’
in 1972-73 to Rs 4107 cr. in 1978-79!
'
(this is excluding companies not; "tech
nically known as 'Indian Companies' be-
(MNC—Big Business, India-Today, Feb .1-15,
1981, p. 19).
If this increase is taken as a per cent
of total assets, the increase of USA is
significant and points to a direction
when it would overtake British capital.
1
■
d
As regards the UK branches, the assets
Q
of 351 branches in 1969-70 was Rs 823 Mn c
which increased to Rs 10,840 Mn in ...72-73
if!
despite a fall in the number of the
branches from 351 to 320. For USA, the
branches has increased from 84 in 69-70
to 88 in 12)72—73, and the total assets
rose from Rs 2370 Mn to Rs 3500 million.”
Here again, the lend of USA is sigini—
ficant. Most of the investments went to
manufacturing and processing sectors
(Rs 13,480 Mn) in which cigarettes, pet
roleum refineries, medical and pharma
<8i
ceutical preparations take the lead.
Next comes trades and finance, account
ing for Rs 11,580 Mn of which whole-sale
trade & insurance company a ccounted
for Rs 1 ,830 Mn.
Sales
275
146
76
123
92
117
80
46
58
71
71
41
42
16
30
1
New form of entry:
F <R SIGN C OLLAB ORA TIONS
A new fern of entry into Indian econo
my is being utilized by foreign compa
nies because:(i) a higher profit thro
ugh royalties and technical fees can be
drawn on a lower rate of taxation;
(ii) a fixed rate of interest on loons
and credits far imports of machinery
and plant is assured free of tax under
certain provisions of the Indian income
tax Act, subject to the approval of the
Central Government; (iii) licences can
be tied upto the purchase of raw materi
als, machinery and plant, spares from
the foreign company or its associate 't
high cost; (iv) preferential access is
gained to improvements made by the lo
cal licensee on the processes licenced;
and (v) exports can be restricted to
certain specified areas and companies
so as to maintain the world wide hold"
that the foreign company has. In fact,
uni ess the Indian collaborator is vigi—
lant and exercises proper care in accept
ing-the terms of the foreign collaborator
as Walter Hamilton saii; the relationship
between the patent owner and licenceevrill
fall ir+o a kind of feudal formula of
lord and vassal.
Upto the end of June 1977, there were
5498 foreign eollborators in Indian indu
stry (.chemicals & drugs: 662; industrial
machinery-—other than textiles- -759;ele
ctrical equipment & components: 705:tra
nsport equipment: 382).
In several eases, foreign collaborations
have been entered into by a foreign com
pany with’ its Indian subsidiary, so that
the foreign company obtains both dividens
and technical fees, apart, from exercising
other controls over the activities of the
subsidiary as a result of the overall de
cision-making power that it possesses.
'Fortune" (Aug 1976) has listed 50 larg
est transnationals of the world , Of these
23 operate in India directly through bra,
nches or subsidiaries, or indirectly thr
ough foreign collaboration. Thus nearly _
...half of the 50 world corporate giants are
in India. If one takes into account the
fact tk',x thete/otal sales of each one of
these TNCs are higher "than, the annual
budget of the government of India-,, one
can gauge the power and strength of these
companies in any bargain that they may
choose to make for extending or curtail
ing their activites in India. There are
other foreign companies operating in Ind
ia, outside the UN classfication-of TNCs,
"but. are nevertheless, operating in signi
ficant'sector s of the economy.
.TNG. s_in .C onsumer_Sec t.ors
The impact of the TNCs products on the
daily life of the average middle-class
'town dweller is so pervasive that one
hardly notices the degree of his ens la„v?mcnt to the foreign products. His ent
ire life is p.aught in a web of foreign
.pnoducts.,_through they are manufactured)
in this country under
eign companies. It is difficult to get
away from the suyle of life so well re
gulated and aided by these TNCs produc
ts. This also shows the measure cf in
fluence these big companies have exer
ted on the economic & cultural life of
this country. For example, Colgate,
Nescafe, bates, terene, dunlop, erasmic
philips, surf, glaxo baby food, etc are
a few of the trade names that influence
us much more than we arc sure of...
Ec OTiomic_Ef f ects
The total foreign investment in India
has been on the increase as pointed
out earlier. But the rend, of late,
has been to lessen the risks and incre
ase earnings through foreign collabor
ations. Nearly 5.5CO foreign collabora
tions have been approved by the Govt.
of India fa? both public sector and pri
vate business during 1968—77 covering
corporations ~r state undertakings df
more than 20 countries, According to
one estimate, 750 Indian organizations
were.linked to foreign companies with
total assets • estimated 'ate- Rs-2 r535--Cx..---(Patriot,30 May 1977).
The actual direct foreign investment
through TNCs in the form- of paid up
capital loans etc., was estimated in
1978 to be around Rs 1,800 Or, which is
roughly
of the total investment in
the corporate sector, both private and
public. If a total view is taken of
moneys brought in an' coneys taken out
it would be seen tha£ over the period
1964-65 to 1969-70, there was a nett
outflow of foreign exchange of Rs 684cr.
which d pf i n-i t.A~iy affected the balance
of payments position thon. Imports of.
subsidiaries alone amounted to Rs 749 cr
against the exports of Rs 248 Cr. resul
ting in a nett out flow of Rs 510 cr .
In the case of total exports and impor
ts resulting from technical or financ
ial foreign collaborations, the ±c±al
exports amounted to Rs QOtecr. while
imprts by TNCs amounted to 1/5 of the
total Indian imports, their exports
formed only 1-/8^_cf- the tosta.l lazdign
xports. Streeton and Lail had shown that
8 foreign companies operating in India
.as a negative impact on foreign exchange
alance, It has been stated in Parliament
in tne case of IBM and C
e has Been a nett outflow of foreign
ietal Box with a turnover of i;
.80 Crs
exported only & V;,QOC vcrth I goods in
1975. Pfizer reported • rale v =• 28.02
mores, and export <■ .co < v-Jcd for only
62 lakhs. -.induStan Lever lad exported
?oods worth Is 5 >2 lakh ,
they h-.O.
» turnover of Fs 227 lakhs.
“572-79 the
same company reported ■- t;w>v .of Hsiao
crores, and experts of 32 arrr-.s, though
they exported only Rs18.11 worth of the ar
own products!
Disguised remittances were 3.1s c made on
account of what is known as Haats Office
expenses to the extent of Rs 4.21 creres,
whereas profits remitted by way of divi
dends was Rs 5.88 crores. IBM had remitted
78$ of- its income as Head Office expenses
while a TNC bank remitted 70$ of its in
come as Head"Office expenses!
Therefore the TNCs have yet to demonstrate
that their activities in India are calcu
lated to help this nation to increase its
production in the desired sectors of eco
nomy and that their contribution to export
earnings is significant and real.
>iffusion of technology and training
People in modern managerial skills is
laimed to be the second advantage cf
'NGs. Here again, the operations of TNCs
n India have shown that they extract a
ery high price for transfer of technoogy, which, moreover, is only a thirdine technoi^y,Even that transfer is not
he appropriate technology suited, to the
eeds and requirements of this country.
regards labour relations, the inten
tional labour organisation has been
peatedly pointing out the disparity in
strength between TNCs, with an inte
grated financial and managerial control
and the labour unions dispersed over
many countries. In a paper submitted to
the ILO (Statesman,New Delhi, 8 Dec ’76)
it has been found that a majority of
the millions cf workers who produce
the most widely used products, such as
rubber, sugar, tea cotton or coffee,
earn less than S1 a day in developing
countries which supply these products
to industrial countries. Many of these
companies pay less than Rs 4 per day
in India! Another phenomenon is the
massive exploitation of casual/contract
workers in collusion with some labour
unions. In tea plantations, besides
paying low wage's, overcharging cf com
pany supplied products and services
between 25$ and 60$ over that of city
prices is common. It also reported
that their children remain undernouri
shed, uneducated and potential victims
cf all kinds of diseases.
It was stated earlier that very little
capital is actually brought into the
economy by foreign companies when they
enter the developing countries and a
very significant part of the direct
foreign investment _c.onsists of retain
ed earnings. In India this is-most .
pronounced.
For 1972-73, nett equity brought in
was only about Rs 5.6 crores, wereas
Rs 6.4 crores was taken out!
For 1973-74, Rs 17 crores was brought
in as against 16.2 crores taken out.
The nett investment brought in e.&
the retained earnings for the above
two years amounted to Rs 70 crores.
( See RBI bulletin , India's
international investment position,
1973-74 , March 1978 p. 170-7.)
..nlcss controlled ‘J holts!: t! warns
that the " rise of Super national
Corporations pose new dangers for
human freedom. "
PRIVATE CIRCULATION ONLY
_TRA- L;?‘ ATIOPALS AND CONSUMERISM
The impact of transnationals on the Thrid World countries
is very ■ i-cat. j? iis is so more specially in the countries ,
of Latin America and on some countries of Asia like the
Philippines. In. those countries the impact is at the
maxi.iu. and pervades the entire life if the people.
In c :is a. tide by two Philippines, both of them professors
of psych-iepy at the University of the r ..ilippines,
the influence of the multinationals on the saste and culture
of chc <-■ ole is being studied. This study will help people
in Ineia tZ grasp better still the r-.lc of the multinationals
in their own country.
IHBACT ON FILIPINO TASTES AND VALUES:
Ono nay bo tempted to leave all about transnational corporations
(TNCs) to the economists, as the processes and their consequences
are largely economic in naturev However, TNCs make a socio-psycho-r
logical impact on the people of host countries which economists terfi
to overlook. This.discussion focuses on the effects of TNCs on the
values, habits, thinking and social status norms whilethe economic
aspects form only the backdrop of the picture.
Transnational corporations are characterised by several features,
the most obvious being the tremendous size of capital, sales and in
come. To qualify as TNC, a corporation must have a capitalization
approxmating US 315 million,
with gross sales reashing the same
figures. They have subsidiaries and Affiliates which are scattered
world wide. Based in the advanced capitalist countries from where
central control is exortiised, the TNCs possess a distinct global nature
which sets them apart from the ordinary business organizations which
are local, independent, and national. The TNCs arc also known as
multinational or global corporations.
A study by Tsuda, Tiglao and Atienza ? reveals that there are*'
250 TNCs operating presently in one comparatively small spiitjj Asian
country, the Phillippines.
Of those, 122 are American 96 Japanese,
British, and seven others based in Germany and elsewhere. From
these 250 TNCs originate some 356 sc called Philippine enterprises
171 of which belong to the top 1000 corpora.tion in the country in
1976.
Most of the TNCs operate in the industrial sector particularly
manufacture of food and drugs, potroleum-rref ining, automobile
assembling and supplies, machinery and so on. They .are entrenched
in the banking and finance sectors. Of tho ten investment houses in
the Philippines two are fully and tho rest partly owned^by foreign
investors and banking. TNCs of the US, Japan and Europe'.
2
Dominati* g nearly every sector of the Philippine economy foreigners
parctically dictate to the ordinary Filipino what to use every hdur of
the day. The■Fili;
uses soap manufactured by Unilever, Procter &
Gampie or Col. a to-’aline live; takes medicine produced by Muller-Phipps,
Bris tol-Hyers, Uyoth-Sw co, head. Johnson, Warner Chilcott & Abbot;
drinks milk manu’i ctv.: ed vy Janna, Inc., Nestle SA,., Vevey, Carnation
Cc. or C <ohr.~:c Go., ahd ■- -ires to wear clothes made by Bargain
Hous;, ( ncci, lijv
.-I- -..v- s
d Co, Christian Dior Paris, K D Lee co.,
A'.co, UranglvU
i oi'-os.
.u.nt v
.
>uch as Pe >si. Co] i, Coca-Cola,Del Monte, Dole,
Shell,
Ik.. q jo
,'c sc intimately related to the lives of the Fil
impact,. than an the peoples of such
ipinos that they create a gr
.
. v
countries as i'eru, ‘ -n .lades'
This is equally true for other Asian countries like Indonesia and
Malaysia. In Malaysia, for example, a study on consumption expenditure
of female electronic workers showed thit many of them spend a good
portion of thoir small incomaron TMC products such as tendy clothes,
consmc-tics and entart,".inmen .
PRO CL Al i'lBD BEN.1? ITS:
Ono of the proclaimed benefits of the TNCs is economic growth
and development from which flow other blessings: higher living standards;
improved quality of life, be ctor educational facilities, and moro
employment opportunities. Do TNCs really bring these about?
Tho Gross National product (GNP) of the Philippines in 1977 was
10.5 billion US dollars. The earnings of one corporation, the Exxon
(formerly Esson) in the same year was S54 billion or five times the
Phillippines1 GNP. Indeed, tho TNCs arc richer than their host
countries. As cartels with all the advantages of exporters of capital
goods, TNCs purchase raw materials at every cheap prices from the host
country. Superprofits derived from these operations go either to
tho parent company out of the country or arc hharod among the members
of the indigenous socio-economic elite who control the economy and
politics on behalf of the TNCs. Draining away the natural resources
this unequal trade is definitely useless to the host country.
Transfer of technology, another advantage attributed to the TNC
operation, doos not uplift aH underdeveloped economy. The technology
transferred is often obsolete or inappropriate. Indigenous technology
is given no chance to develop. All this loads to faulty planning
based on capital-intensive technology which in turn results in increased
dependency.
TNCs promise employment. Unemployment has long been the bane
of underdevelopment. With the advent of TNCs, hopes were raised of.
an end to all unemployment. But what most people did not realize was
that the TNCs arc capital-intensive, using large amourtrs of a capital
rather then reserves of unemployed labour. In addition, the high
unemployment rate makes labour cheap and reduces labour costs. Nn
1975, Bock and Harvey found that a labourer is paid'one dollar for
work that is equivalent to 3.65 dollars, illustrating that but for
the small sh^re that goes to the local elite, the surplus goes out of
the country.
...........5
’.■here
Os dOFiJ •;•_, t... ic unions arc either weak or non-existent.
Malaysia's electro-nir _-;duwtry has no trade unions worth the name.
An ordi'.anco prohibi , > •. worhei’ from joining a union unless hg or she
had worked in that :art: cular industry for over three years.
Very
few d(b. The high la ’ir turnover rate duo to the flexibility with
which TICs decide on '. k
to increase or decrease production accouhts
for the weakness of
1 ibev.r unions. The ban on strikes by restrictive
laws as in th. i-kil. lues, is another factor responsible for the weak
bargaining power. .h.c 1 n''. ci-’nic policies in fact are supposed to
attract TiiC pai'tici ; .d■ ' in the economy.
ARTIFICIAL WANTS:
Since there used to be little or no organized market structurres
in development countries prior to TNG penetration, the developed cou
ntries began to create a market, establishing structures similar to
those in developed countries. Catchwords like modernization and
urbanization were used to describe schemes for imposing new types of
consumer habits. Impact-advertising or hard-sell propaganda was
employed to create false wants,
Far from meeting the basic needs of food, clothing and shelter,
Third World people are increasingly being led to a kind of "product
trap". To illustrate: while the existing economic situation prohibits
people from owing high-costs luxury goods, impact-advertising generates
want! for these items: ever a‘poor fisherman starts nursing desires to
have a colour television in his home. Those wants are a warped and
contrary to the people's well being. The priorities, then, are so
distorted that satisfying these wants are intimately linked with the
operations of TNCs which market products and services that do not
contribute to economic improvement of Third 'World countries. The
cultural weapons used in the process arc evidently persuasive and
havo become so institutionalized as to bo accepted as legitimate.
It is no more craving for TNC products. A neurosis of wide
social dimension set in, generated by urges to adopt the lifestyles
and albeit poorly, to ape the food and dress of the West, Characterized
by a ' raving for flashy cars of the latest model, clothes of the latest
design, supermarkets, fastfoods, luxurious appliances and the like,
tills is a sickness of capitalist origin.
To satisfy those wants is
beyond the means of ordinary citizens; nevertheless, their minds are
so conditioned to the reality of thof o wants
.
....
. that they consider these
things as pressing economic needs. This new lifestyle is wasteful
and quite inconsistent with social reality. Aspiration to improve
social status through acquisition of TNC products assumes such power
that hire-purchase instalments and loans pile up.
Human behaviour is greatly influenced by TNCs. Creative energies
go to waito im such activities as new hairstyles or dress designs
and not in the cultivation or propagation of a national culture.
Witness, for instance, writers with literary potential racking their
brains for lines to go into an effective advertisement copy. Indigenous
cultural progress is stunted, human productivity is wasted.
Lot us now lock into some of the values imposed on the Filipinos
and the impact on their behaviour.
.4
-4-
WHITE. IS. EElJ!'?!'.
Many TACs cat .r to wok.:.. Among other things, -joncn use cosmetics
and fashionable clot:..-. th-.t ;j\. supposed to enhance good looks. And
how is a beautiful
q;,-n dofi? d? "White is beautiful". An attractive
lady is one wk.' is ■ 1'1 and fair-skinned, with round, deep-set eyes,
aquiline- nose, and thin lips. During the Spanish era in the Philippines
this corx-^spo'’' .1 tc f, Virgin Mary type f beauty.^ The American
counter;; -vt i.- t’.._ a ■ 1 ' -wood. filra star. This is one of the values
perp..tn..tee by tl.
C.-..
1 • played by thoii models who are usually
Caucasian.:;. D.-.y a
\ vut, ;.a arc bonbarddd with conmercials that
say the same thin;;.
f o srv.o definition of beauty.
What is the effoe ■: < f this kind of value on the mentality and
behaviour of an average Filipina, who is nor fair-skinned, but morena
kayumanggi, or has brown ccmplexion? Her eyes are not round and deep
set; in fact, there are more Filipinas with chinita eyes, similar to
the Chinese. Her nose is not aquiline, nor is it flat, but just the
right size for her snail face., HerQlips arc net thin or thick but
simply malaman "full of sensuous".
She may not be tall but tall
enough for her Filip? n,. partner. However, she does not realize these.
Due to her adhcrc-nc< tc a false notion that "white is beautiful",
anything that io not white is criminally ugly. A national inferiority
complex is there ii pos-.d. There is a deep-seated, yet unconscious
"conviction" of being an ugly people, not worthy of boihg scon or too
plain and simple tc be noticed. A concept of beauty is'formed to
which they fool tike misfits.
So what docs the Filipino de? She would spend half of her
salary or allowance buying expensive, facial f<fedations and eye-shadow
to cover up her natural features in order to approximate the Western
picture of beauty, and also to measure up to bourgeois standards. A
few women would even spend lavishly on surgery abroad to have their
eyes or nose "repaired". They also dye or streak their hair in order
to look like television commercial model.
This is one of the most ridiculous and destructive expressions
of folonial mentality. This value betrays an idiotically superficial
view of beauty. It diverts people's attention from the true meaning
of beauty which is beyond physical features, but which can be found
in the goodness and dignity of a person.
Why would the TNCs want to propagate such a concept of beauty?
The answer seems clear: in order to turn people into avid patrons
of their products. A value like "white is beautiful" has helped to
create a national inferority complex reflecting a destructive colonial
mentality and a very superficial mind. Moreover the value is based
on an artificial want that supports a foniegn economy.
SOCIAL ACCEPTABILITY:
TNCs also impose a wrong criterion of social acceptance. You are
not part of the group if you have body odour , pimples, dandruff or
bad breath. You will be "in" if you patronize these Ti<C products,
and "out" if you dont. At the same time, some other concepts are
derived like "class", "cultured", and "baduy". "Class" means youve
with the latest fashion, cosmopolitan. "Cultured", means you possess
an air or fincss, sophistication and urbanity. A "baduy41 is one
who has provincial mentality, who docs not know the right thing to
5
.v.'- ■ •
'■
.
'•
to'."hey .at the right .time uubr.ria’e" lie"-'lacks experience in interacting with
people., This is -.
n.t. ,/i alls tic view of social 'ncoeptancewhich
■■
value.) the supcrfici .1 eovoi r«..thc’r'than th< finer inner abilities and
qualities of a pernor. ’.,’h.nt will a person not familiar' with' Philippine
culture think after heir-,-; exposed to the advertisements in the mass
. 'media-that’.'th s, i’i..i jir-oo-, -uierur.. 'a' parson 'c worth'by the freshness,'
■ of hi-‘breath, tile : .lu^cjth" or-ar-of .his o'oriplbtibh op the .absense ■ of ■ dan'’draff from 'his. scalp.-1"
a .■■' "•
,.r
■
.
A f?.1S‘V..hope fi'i' go-.-nd cr.sy-fcrtUnc's is instilled, in the minds
thr .
,1.-, ,ic'
-.v, "A Trir to Disney.!,-, “d", ."Win Aa";-. Lot" ■, . ;
■_ yu p; vary ■ way fabulous .prizes. like cars,
■ ap_.■linnccs, .grcceriqs.s and other items. • The- poor consuuor who gets
stomach ulcers drinkin.- bottles oi softdrinks, who buys and stores
;sd.ap. oo that th.. p ,qkp c;_ n b< .dropped in raffle boxeswould jjust wait
f.or. hi.s^go,qd . fortune .which .usually-does • not come for 99.99 pciycenrf;.
of the. patrons, of the-c o.phsui.’or items.
Instead of earning. money
the hard way, c-yen,if • consecutive off erts; at joining these contests havd
failed",, they, would, still try, b-cchsue-overt before they have, fully
.recovered from the effects, of thesd gimmicksj another one immediately
follows to raise false hopes again. -Attention is"diverted from the
more urgent questions of. why a person is suffering. Who exploits the
person, and makes one passive to the worsening social conditions.
A solution has been prescribed for poverty: buy a particular product
and then sit and wait for the pay-off. This is nothing more than .
a debilitating sickness of relying on chance.
.
■ '■
.of Sc
■
A‘Sense of. admiration for companies that sponsor such projects
is even cultivate. They are looked upon as individual's who would
share their fortunes with the less endowed. People tend to. feel
beholden to these companies for whatever little luck or.benefits they
receive from them. Little do these mesmerized people realize, however
that the prizes are not really free since they are paying for these- pr
izes themselves when they, buy products that ‘allow them to jmin the.
product promotion compaigns. By generating sales in the process", the
companies cannot at all be the good Samaritans that their ad agencies
would like to advertise. Contest■participants actually subsidize their
own winnings and this is sheer exploitation and dishno'esty.
Beauty queens, movie stars-and celebrities whom people admire
are used as mod'els not only for beauty products but also for adver
tising appliance, food-.i tomes, clothing and drinks. A pattern of
modelling is naturally expected. By their mere media exposure, it ps
hoped that the public would imitate their ways' and would avail of the
products they advertise.
EDUCATIONAL SYSTEM;
(People are made to buliovo that close family tics can bo enhanced
with the purchase of products for- family consumption 1 ike soft drink
and noodles, soap, shampoo, cars and gas ranges. This is not so,
because close tics arc narturdd in an atmosphere of love, selflessness,
and concern for the- ether person.
Children are easy pre. to the gimmicks of impact-advertising.
Instead of proper, adequate and nutritious food, children and adults
a like- would rather have junk foods like barbecue curls, potato chips
or chichoron for snacks. Children fall for TU programmes showing car
toon, Sesame Street and the various robot shows like Voltes V as
.....6
-6-
Mazinger Z. Moreover; they could neg their parents to buy icems that
resemble the char-ac-ors in these shows, products the#.are sold at
exorbitant vjiccc. . \ or ■•■•vents, ii wanting to please their children,
would save r.p .' d
t?...ir budget in order to buy these products.
J.'.u wh.-1 valu': J t. cse -<nd other TV shows reinforce: Violence
ir. the guise of r<bo play; p. .ejudicos against certain races of people;
belief
"'fir- '
•;ou.:.,-.s as the only successful crimefighters.
Quite ui ccrscl n sly, he cor.c itioning and brainwashing start at a very
young age as they •. . ■< ’ tolev ■ sics shows and movies. The belief gains
ground that chc white .- ic.-.ican is the superior race, which is also taken
to mean th.-.t other vn.-o;: are inferior. Obviously, such values and beli. ofs de not make for -'Lntional x’/ldo.
The oducatic al system has not escaped tire effects of TNCs.
In some Philippine universities there are courccs which are considered
'marketable1 and 'non-marketable*. Among the marketable courses are
business administration, tourism and psychology. Why are these marketable?
Becasue these are courses that 'will land graduates in white collar job
in large, mostly foroign-owncu, corporations.
The system of education docs not help improve the life of the
broad masses of the people. Through this education, they are detached
from the native culture and value system. The terms 'scientific',
'objective' and 1 technological1 arc overemphasized to such an*‘extent;.
that anything outside is n t considered useful. Therefore, one cannot
eipect a person from the barrio who finished a course in tourism to go
back to serve his people.
A close examination of a curricula course content will reveal that
most of the knowledge imparted fails ±o make one understand one's" own.
country better. According to Filipino historian Renato Constantino
the existing,educational system docs not aspire for and encourage
nationalsm.
This orientation, indeed, has a historical background.
No one can forget how throe different powers;- have colonized the Ph
ilippines, and how the influences o'f one- of them is still greatlyfelt even up to this day, Constantino uses the term "miseducation"
in referring to the past and present education.
?v
... .a ’
••
,
. .
»■
1. HUMAN RIGHTS;
When speaking of human rights, whose rights are we referring to?
Obviously, not the rights of the managers of the TNCs but those of the
Third World people whom the TNCs have come to victimise: small farmers,
fishermen and minorities who are forced to have their lands (and seas)
for the sake of. so-called industrial projects; the urban poor who
have to give way to the onslaught^of urbanization and modern technolo
gy; the consumer of TNG products.
Profits are given precedence over
hjiman rights by the corporations.
1 along the western technological pa.th to development, factories
and industrial plants have’ boon built right and left. Hydro-elect±ic
dams have been constructed to provide cheap electric power. In the
process, thousands of families have been displaced from ancestral lands
to be relocated to places far up in the mountains, or lands which will
take years to cultivate. The psychological effects of relocation may
seem to bo simply in .adjustment to a new place but may in fact be as
7
1
~7~
377
ho will to live. Resistance tc these moves arc
■-t powerful enough tc make their proponents
"dove.-.' .pmer.t projects". The cost-of industrialisation
in case like these includes the lose of lives, the frustrations, and
.violations cf the human right.; cf those people to live a decent life.
Demolitions arc also prevalent in the urban areas; Urban poor commun
ities arc demolished c-'d the people are usually relocated to places
without adequate water-supply and far from sources of employment-and
livelihcc'd.
grave as cneulos
not few, but the,
Thousands cf Indonesian;; have been uprooted from the lands which
sustained then over the years i: their ancestral abode. They are tran
sported to live a new life with.a. different set of values ih place
where the new social organization and new economic structures makes
them ill alt case. Those who manage to survive, do so by adopting
extreme individualism, quite .contrary tc their former values, but
rational in the- new circumstances.
Other dangers posed- by TNCs are environmental pollution and oil
shortage. The industrial s ctor where TNCs are deeply entrenched
consumer a much bigger percentage of oil supply and yet it is the Pub
lic sector which is nagged tc conserve energy and fight pollution.
CONCLUSIONS AND RECOMMENDATIONS
Operation of Tl'Cs are so extensive that their impact, is not only
economic but also socio-pyychological. Through impact-adverstising the
Filipinos continue to fall .prey to the TNCs. In view of the above
analysis the following recommendations are proposed:
1 . Organize an intensive,, informaton dissemination programme that
wthuld reach a largo number or, people from as many sectors as possible
to expose tho effects of TNCs ..and to stop further deception in the
process. This programme .may:'consist of distribution of printed
materials, sponsoring and holding of lectures and slides prosentatipns.
2.
Carry out. mere intensive research so that empirical data cun
bo provided to support existing information.
5, Create a coordinating body that would direct all efforts"
against .TNCs. Wo propose an Institute on Transnational Corporations
4.
Suggest to tho governments to intensively weigh and analyse
the rioal effects of TNCs.
.This paper has rasiod a nuiiber of issues. In analyses like these
psychology is making itself relevant to social problems,. ' It has
always .been suggested that psychologists should come down from their
ivory towers and open their eyes and use their skills in the solution
of everyday problems, big or small. Social scientists by virtue
of their objective'to understand nan own such a responsibility to soc
iety. Hie solution nay not lie in their hands, but somehow they can
be instrumental in unveiling the real roots of tho problems.
Cross.culturcal studios have to bo undertaken. This paper
illustrated the experiences cf the Philippines. As an undcrdeveloped country, it lias a lot in commcn with other Third World cowiitries.
8
who uro victinoo <-f 2.1Cs. IP data on tho socio-psychological inpact
cf THCs on countries like India, Malaysia, Indonesia, Singapore,
Korea and Thailand can be properly documented, there will be a use
ful literature, which, can bo built up. Sono tentative answers can
be found as. to why people fr-.-n the Third World think,, fool, or
act in certain ways.
BM Villages, "Foreign Invesltnonts and the Multinational Corporations"
Philippines’ in the Third World Series, 11,4978.
2. J PMCunanan, "Mula ulo hanggang tnlampakang pagsusuri ng pagkabihag
at pagaasanant.-.la sa mage Pilipino ng mga Koporasyo ng multinatiohasyqhal" (a hc-ad-to-fo’od analysis of the. exploitation of multi
national corporations on the Filipinos), 1978.
3.
M Tsuda,”R D Tigalo and E S’ Atienza" The Impact of TNCs on the
Philippines; Profile of Transnational Corporations and their
Philippines Operations" U P Law Centre, Quezon City 1978.
4.
JR Salonga "Multinational in the Philippines; a Brief Analysis and
Proposed Approach", Lecture delivered at meeing on Multinational
Corporations in the Philippines Setting, Kapatiran-Kaunlaran Foun
dation Manila 1975.
5.
Salonga, op,cit.
6.
K Y Bock and PtJ Harvey, People Toiling under the Pharaoh|i Urban
Rural Mission, Christian Conference on Asia, Japan 1976.
7.
Bock and Harvey, op cit.
8.
Inid.
9.
N Tiongson, "Four Values in F-lipino Film and Drama" in Lumbers
and Mac^da (eds), Rediscovery 1977.
10. Philip ^aite, "Isang Makasayayspng pagsusuri sa pagnataong Philipno"
(FilipiKo Personlity from a Historical Perspective) Lecture delivered
at a Psychology class, General Psychology UP, Quezon City 1978.
11. Tiongson, op cit,.
12. ff S David, "Aspects of Filipino Experience with Transnational
corporations", Philippines in the Third World Papers Series 7,
1978- .
13. Renato ^onstantino, " The Misoducation of the Filipinos" in Lum
ber and Haceda,eds' Rediscovery, 1977.
14. Muto Ichiyo, "Multinational Corporations and Human Rights",
■ Third World Studies Dependency Series 16,1978.
15. Bock and Harvey, op cit.
16. Rogelia E pe, "Krisis sq langis: pahapyan na pagtala k&y sn
maga dahilan implikasyon at kalutasan" (Oil Crisis: A General
1.
Fpr Private Circulation
TNCe Impact on the Third World
The TNCs are continously moving
from ope production process to
another,routing labour-intensive
traditional workslps only to re
appear under a different signboard
either in trouble-free European
State or in a less developed
Third 'World Country overburdened
with labour - CHEAP LABOUR.
CANNOT EXPECT A BETTER
TOMORROW
:
Mounting unemployment, endless lock-outs, reorganisations.
and rationalisations, dubious tactics of corporate merger and
multilateral tie-ups, rising industrial sickness, a constant
reduction’in spending power, systematic attacks on whatever
remains of democratic rights, virtual absence of workers
;
resistance: all this forms the background of the industry scene
as it is today. T ^e situation looks equally gloomy for the
villagers — in fact they are worse off. With industrial stagrration
reaching an alarming stage, the hinterland -- both in terms of
the globe and individual underdeveloped countries -- .cannot expect
a better tomorrow. The Manufacturing companies, more precisely
the big ones, have undergone drastic changes .in their style of"
functioning during the la.st two decades or so. They look almost'
transnational within the national boundary.
INTERNATIONALISATION OF CAPITAL :
■ \
■ The workers in the West are today facing growing internatiohalisation of capital which in real terms means’.dissolution — or
in m?st fortunate cases - shifting of different departments of a
plant or export of the plant altogether. The TNCs are■continously
moving from one production process to' another, routing labourintensive production such as textiles and some aspects of the
electronics industry, closing the traditional workshops only to
reappear under a different signboard either in a trouble-free
European State or in a less.. developed Third World country over
burdened with labour - cheap labour. Interestingly, the capitalist
West
prefers "COMMUNIST" East Europe to heal the wounds inflicted
on it by organised labour.
In this connection, Charles Levinson, general secretary of
the International Chemical Workers' Federation has told a fasci
nating tale of how TNCS are becoming increasingly influential in
the eastern "COMMUNIST" economy in his otherwise provocative
title VODKA COLA*. How Itlay's Fiat is planning enormous plants
in Eastern Europe at the cost □fl'talian car-workers’ is self
revealing. Theltalian Commuhist Paruy has no answer to this
phenomenon — th
c.erests of the Fiat .bosses coincide with
those of the communist brotherhood of Italian variety. The TNCs
have made the Arab Sheiks and the Isrca^. ohylocks shake hands and
talk to each other an how to invest more and more in the capital
starving world. The days ore not far when TNCs will make their
presence felt,' ■’f-they have not already done it, even in the
Soviet Union, according to Mr.Levinson. In short the West is
p-.netrating into the East and vice-versa, cutting across
ideological barriers.
1
THE TNCs DISEASE AND
THE WEST
:
The disease that has infected the West is called plant-closure
one firm after another is being sold out involving massive
elimination of jobs. TNCs have such a vast net-work of production
activities .that a few closures in West Germany or in France make
little difference to their average returns. They are always after
tax rebates, more rebates, concessions arid cheap labour.
True, the planned shutdowns are definitely radicalising even
the most "backward" workers of West Germany where they have just
begun to challenge the authority of TNCs -T Churches are coming
forward, in support cf them — but an all-embracing resistance
strategy is yet to emerge. Right' now they are demanding shorter
working hours thereby trying to keep the existing level of job
potential from further sliding down. As they cannot get new plants
under the East-West detente, unofficial though, this seems to be
\
the only way out for creating a few jobs. The flight of capital
from the highly developed ones and rationalisation of,pro duction
process at a pace faster than that the workers can cope with have
created havoc. Here is the latest TIE Bulletin :
"In Germany's Rhine-Main area, there were six vacant jobs
for every unemployed pers'on in 1971. Ten years later, there
is only one vacancy for every four jobless. The forecasts
for the Frankfurt area vacillate, but predictions indicate
a loss of 30,000 to 80,000 jobs by 1985. Eeven if these
forecasts are no mtfre than a projection of old data into
the future .— thus being as questionable as they are
optimistic — thev nonetheless indicate an alarming trend
for employees in factories and offices.
It has become clear, since 1981, that in Frankfurt, a city.
of commerce and banking, declining employment in industry ~
is no longer balanced by growth in the service Sector. On
the contrary, rationalisation in the federal railways and
federal mail, os well, as in trade and in the banks will .
.mean a drastic drop.in the number of employed.”
WOPKER.-S SOLI ?<■‘<T~V' i
.
...
-
-
.
.
LISTED ’•'EST :
•
.
•>.
.
{
\
In a •..•ay i no i a n
j : a ■ to'.-.y rescab.le Europe in reverse. Here
they are migrating
Calcutta t ■ “ang'.lore via Bombay and the
process coupled ' ’
• •_
i a _■ roti
’ :.. atinn invariably increases*
the ■ nup.her <f cm
.
st :. any al alone 399 units had been
closed nd se- en
..
to ether States during the past five
years. Of the olo? ' establishments, 143 will never open, the fate
of the rest still hangs in balance. All other States suffer from
a similar industrial bankruptcy -- only the degree varies from
place to place. Labour neither in Calcutta nor in Bangalore
benefits from this in the leng run. But the industrialists —
have the whole world to win they get subsidies, sometimes they
demand subsidies for a plant that might not take off at all.
Differing State Governments irrespective of their colour bias
are vying with one another in wooing the captains by offering
them a better haven. The situation has reached such a pass that
even some traditional cottage industries, namely, coir and cashew,
are shifting from Kerala to Andhra Pradesh -- an island of low
wages. The Beedi man ufacterers and tobacco merchants in West Bengal^
Went on strike on Au ust 30-31 in protest against the upward
revision of minimum wages long overdue. If the CPM-led Left Front
Government tries to enforce the law which, of course, it does not
— they might down the shutters, rather transfer the operations to
neighbouring Orissa, thorwing-out some 1,50,000 workers, mostly .
women (80%) according to Mr.Chandrakant Patel, President-, Calcutta
Biri Tobacco Merchants Association, an afficiate of FICCI, tfcie
trend-setter. The European.disease seems communicable.
• •
•
Look at GKW, a London-based multi. Its Howrah plant has been
under lock-out since July 12. Some 6000 oddworkars are expe-rienc.irLg
a nightmare for the first time in 12 years during which there had
\
been no large-scale shutdown. Why this lock-out ? The company
did not face any liquidity problem in yesteryears — it. cannot
be a problem for it for -years to come. They blame it on labour.
Asked the established labour leaders who nowadays oppose even a
minor protest demonstration, presumably to appease the barons,
cannot recall such "nasty things” as agitations.
*
But immediately after declaring lock-out of the factory,
the GKW management entered th-e capital market with a bang. They
□renew mopping up resources at lucrative dividends for their
expansion programme in Nasik, Bombay and Bangalore -- if the
situation so demands they. Will start a workshop in Hyderabad too,
it is said. Given the circumstances, the locked-out unit of
Harrah may have to cut back production at least by 60 percent in
the near future, according ..to so-, e ■ insi der.s . This cannot be done
without reducing the existing jobs. So a lockout to gain bargaining
strength.
The quostio > is ha ■ to brave the situation.. If the workers
fail to keep the'r ;c. ~ nt nnt plant, t'.na recruits' at the new plants
created- by ."jy r, ■ *li :
of. capital will have to face similar
-consequences soon.
tbi-y demand reduced . orking hours ? They
need alternative'- - ultern itiv'e slogans, otherwise they will
con ti n ue' to cry. o at
?. thou t - So ends .
VODKA COLA* - By Charles Levinson (£ 4.50) Distributed by Biblias,
Glenside, Partridge Green, Horsham, West Sussex, RH 13
BLD.
Source: Titled : Calcutta Notebook by Timir Basu in Frontier,
! 23rd' September 1 982 pages- 10 to 12.
I.S.I- DOCUMENTATION CENTRE,
P.BOX 4628,
BANGALORE - 560046.
Ilj)I A ...Al®. W 'E MULTINATIONALS
VP.ARYA
There seems to be ar. undercurrent of antipathy
towards foreign investment based on the mistaken
impression that it dominates the country's
economic scene, says the author, who is the
resident director, Union Carbide India Ltd,
New Delhi. This article first appeared in
the December 1577 issue of India Management
published monthly by the All-India Management
Association, New Delhi.
‘
>
The Multinationals are comparatively a new phenomenon (although
as far as India is concerned, the East India Company established
in December 1600, could be called an archetype). They are, more
or less, a post-world war development and have emerged, whether
for good or not, as the one form of international economic organis
ation that seems to survive and prosper ip'spite. of continuous att
acks from homo governments as well as the host countries, the trade
unions, the ILO and other agencies of the UN, as to their role.
Their rise to dominance has be r swift and startling and the enormous
resources of technology, capital, .managerial talent, and man^power
at their command have created suspicion, apprehension, and antagonism
against them. They hive become the subject of acute controversies,
supported by some as an obvious and desirable instrument for transfer
of these resources from development to developing countries, for mutual
benefit, and detracted by others as vehicles of exploitation.
I
GENERALISED DEBATE:
The debate and controversy as to the role, impact and desirability
of multinationals in the Indian economy has been carried on in India
too. But, generally this debate is carried on with vague and gener
alised-statements charged more with emotion than with logic': an
examination of the issues involved factually and dispassionately would,
therefore, be useful.
The first and foremost question is, whether we need foreign
technologic and investment or not. On foreign technology the’answer
would obviously be in the affirmative. There is no country in the
world, including the advanced countries, which is self-sufficient
and does not import technology. In India, given the constraints of
indigenous research, the compulsion to import technology is obvious.
As gegards the need for foreign investment, the answer is, however ,
not so simple.
Foreign capital for
developing country like ours may bo needed
for reasons of balance of payment, and to supplement domestic resources
for investment. In the current India context need of foreign- capital
is no longer that important in view of the more than comfortable
foreign exchange reserve position. But as a supplement to the domestic
savings, investment inflow of foreign capital (by way of grant of soft
loans and private foreign investment) seems to be of great necessity.
2
RB0UIRE1
31.C.'. .GROW1 . h.
In toras of per " tit.:... f/'ccme, India is orc of tho poorest countr
ies- r d has 20 .nil
un; -ployed, Tho Janatha government has stated
removal of p?v;.::ty
v. ’ .1:
:'c-"t in 10 years as one of its objective.
Achi overne” t f U e ; ■ ~ c o: J qv« ir s a rate :f economic growth of
’ ■.
.
:. ’
10 por cunt. But,
, evt-n fur a mc-dest economic
. ’
(
. i’ tiu - domestic savings of 20
gr. -.:t-. of ". y .. x pt v ?U t v. ' G
.:j savings is stated to be
. - C ‘ ■ : ?ruru>. This leaver a gap of
arJ 14 -c •
. ; .
.
? n
s I
Rs. 4,0 0 c
. L
11'.led by inflow of foreign
capital? j.1. - ho
’CuV J. 3...1.W of foreign capital,
comprising forci'. ■ •- .<
■'
■ -tc- fur-oigJ ir--estmeat amounted to
Rs. 1,8000 crores ony vf this roughly Rs 1,200 crores was used for
debt servicing, leuvi j a ■ ;t foreign aid of Re.600 crores) while
total private foreign i?Vestment •-.mounted to an insignificant Rs .30
crores only (i: clu-’ir . reinvestment of retained earnings).
These figures establish the cHcmous capital need of the country,
and that inflow of all forms .f foreign capital should bo welcome. A
section of economists prefer foreign aid by way of grants/soft loans to
private foreign investment for the reason that grant/soft loans are ch
eaper. But wisdom of toe much dependence on grants/soft loans is
doubtful fcr reasons which need not be discussed here. The need for a
substan tial private f reign investment is thus aspects of such a
need, its qualitative aspects cannot be lost signt of bocasue such
investment comes in a package, bringing along with its technology and
management skills. But we seem to have developed psych;?logical in»
hibitions regarding such investment.
STAGGERING SIZE:
The genesis of such inhabitations can be traced to the suspicions'
and apprehensions which multinationals arouse.
What has been alarming
to the developing countries is that the staggering size of these
’economic monsters' and their capacity for misdeeds. For example,
the International Telephone and Telegraphs which has more than 100
subsidiaries and affiliates operating in about 70 countties, is
virtually an empire richer in assets and manpower resources than
some of tho countries in which it operates*
There have been other instances of multinationals1 misdeeds,
particularly in Latin American countries.
Unfortunately, on tho basis of such limited and partial experience'
generalised impressions have boon forme and a marked antipathy has
developed amongst most developing countries towarcs them, To remove
the misgivings about their operations, several multinationals have
developed their own c_dc
of conduct for their transnational operations.
And , in response tc the critical, if nut always hostile, criticism
from business, trade unions,
government, both domestic and-foreign
a code of conduct dealing with .11 tho social, political and economic
aspects is also being do-Vulcpod by tho UN Commission on Transnational
Corporations.
As for as India is .concerned, Wii have a followed a policy of
selective admission of private foreign investment and have sought
tu discipline their operations al through formal and in: ornal regulations
new mostly c-difisd
' .'A. Provisions of FERA op ly to new foreign
inv: ’ Laic-nt as else tc
ign inv.'.tm.?rt already in existence. To
the latter appljr two cv
regulations whose main thrust, alone with
FERA provisions, io awards - ilnti-"- rf foreign equity holding, one
relating extent if dil’.'-ioU to size of approved expansion plans and
the other tc b<rr.wings .'roi financial institutions, RE RS and these
re-gulati hs set tv- 2r m^work for operation of foreign enterprises in
India. They appe. r t
>o, mi.re- or loss, well defined but in their app
lication there •?. have arisen several ureas of uncertainty and ambi
guity, which, unfortunately, the government docs not seem to be in the
great hurry to rem.vc, and which continue to act as irritants to -foreign
investors.
This part, there seems to bo an undercurrent of antipathy, some-r
times obvious and sometimes net so, tow-ends foreign investments, gene
rally based on the mistaken impression that foreign investment domin
ates the country's economic scene and that the financial cost of for
eign investment (by way of remittances back homo) is greater than the
financial benefits. Empirical evidence shows how erroneous is this
impression.
The facie are that .against a total paid up capital of Rs 5,400
crores of all companies registered in India, the total paid up capital
of foreign subsidiaries and minority companies is only Rs260 crores or
less than five per cent, that on an average dividend remittance of
these companies as percentage of their not worth • docs not exceed 3.5
per cent and that the total of their remi-ttances back home by way of
dividend, royalty payment, collaboration fees and ether expenditures,
as a percentage of their foreign exchange earnings averages around
30 per cent. These facts, oven if we omit to take into account a
good many other aspects of foreign investment such as taxes paid
to the government (generally four times the net profits earned),
tcclmology and managerial transfers, employment creating effect, dom
estic purchasing power produced and imports substituted, should belie
those mistaken impressions.
Given India's domecratic set up, political stability, an alert
and vigilant civil service, legal framework for foreign investment,
and past experiences, wo should have no apprehensions as to the
possibility of multinationals dominating the economy of the country
or subverting its economic and political system, and their utility in
the ccmr .ct perspective. Let us not put on ultra—nationalist blinkers
and fail to see what is in the interests of the country. Hard economic
realities should, as a matter of fact, induce and motivate us to seek
out priority inudstrios rather than adopt a passive (sometimes oven
indifferent) attitude tow rds such proposals from foreign investors.
SOURCE' VP Ar y z, Ep 3 t:: rn^ co no mist, February 17,
. pp.292-29~5-
1978.
Those who have Bee: wrestling from day to day with the problem
of India’s development surely "eel perplexed at times by the presence
of TNQs and their linkages ir both the private and the public’sectors.
The main entry of forei;; '"priva.te investments through TNCs in India
has been from the‘U .K. mainly bccasuc of the colonial past. As pointed
out by J. Ade Dy jla'i', t ■: distinctive feature of foreign investment
in underdeveloped m avtries has bee"’ that "the former control^’of poli
tico—economic life, of t cse by the governments of we^ern countries
has not ended, but merely been passed or to the multinational investors"’.
.From the pre-ir.deye^e.ence era to the present,’ the corporations originating
from U.K. have dominated among all corporations in India. The British
companies have been dominating the sectors of public utility, mineral
for British industries, such as juto, tea and rubber. Among public
utilities Railways has beer considered as the British monopoly capital
in-colonial India. The total capital investment in 1938-39, according
to the Statistical Abstract for the British India (published in London
in 1942) was Rs.8,478 million, on which the return was Rs.359.6 million.
In 1943-44, the capital investment was Rs.8,585.3 million and the
profit was double to Rs.852.1 million.
On.June 30, 1948, according to RBI figures, the value to total
foreign business/investment in India in manufacturing, mining, utilities,
transport, trading, financial plantation, and other industries, was
Rs.5,204 million of which Rs.2,501 million (71.9%) were accounted
for British business investment alone, followed by the United States,
Rs. 179.7 million (5.7%). The investment was direct, i.e., financial
as well as portfolios, i.e., p ares.
Between 1968-69, India began to accommodate most of the giant
transnationals in all the sec- tors of its economy. Out of the 22 large
manufacturing enterprises in India in 1968-69, 13 were TNCs.
TABLE II: LARGE FOREIGN MANUFACTURING ENTERPRISES IN INDIA
(Manufacturing firn only)
INfllA
gnpm
-1968-■69
S42 billions *
-•
Rank*-
Industries
Net *
Assets
' 55m
Sales*
$m
Foreign Parent
or Controlling
Company
Oil India
5
xv-trolcum
116.0
34.8
Bur mall (UK)
Hindustan
Aluminium
8
Metals
74.1
34.8
Kaisdr (US)
9 '
Metals
64.1
27.1
Alcan (Canada)
10
Tobacco
' 62.0
76.3
Imperial Tabacco
Firm
India Al
uminium
/
Imperial
Tobacco of
India
-2-
IDIA.
1968-69
ipm . 8-1-2 Billions*
Firm
Rank-
Industry
Net *
A.ssets
S m
Sales
8 m
Foreign Parent or
Controlling
Company
Voltas
11
Engineering
50.0
80.7
12$ UK & Swiss.
Indian
Explosivics
12
Chemicals
49.3
18.5
ICI (UK)-minority
E.I ,D.
13
Chemicals
47.3
37.8
E.I.D., Perry (UK)
Dunlop
Rubber
14
Rubber prod.
46.1
74.1
Dunlop (UK)
Union Ca
rbide In
dia
15
Chemxcals
44.5
40.1
Union Carbide(US)
Guest,Keen
Williams
16
Engineering
44.0
39.0
GKN (UK)
Hindustan
Lever
18
Foodstuff
41 .3
115.3
Unilever (Neth.UK)
Esso
Standard
Refinery
20
Petroleum
39.3
45.1
Standard Oil(US)
Premier
Autos
22
Automotive
37.6
35.7
F
Sourcc:
(iT)-minotfty
The Economic and. Political consequences of
Multinational Enterprises: An Anthrology,
Raymond Vornon, Harvard University,1972. p.138.
Table II, very clcud-ypro jects that by the end of 1970,"the most power
ful TIJCs at the global Icvol had penetrated into the India's major
productive- sectors where the proJit maximization has been proportion
ately high. By the end of the year 1972-73 there were 740 foreign
companies operating in India, of which 536 operated as branches and
202 as subsidiaries of TNCs . Of these, companies belonging to tho
UK had 320 branches and 140 subsidiaries, closely followed by the
United States with 88 branches and 28 subsidiaries. Switzerland,
Japan, West Germany and Sweden had, respectively 21,18,17 and 14
affiliates, i.c., both branches and subs dicrics, respectively. The
total assets of these branches and subsidiaries aggregated to Rs,29,220
million, of which the British companies (subsidiaries and branches)
accounted for Rs.18,180 million, and that of the United States for
Rs.5,420 million.
3
-tIt is interesting
Observe the rapid growth of these transanationaE every year. In India, by the end of June 1976 were 4687 for
eign collaborators ii' Indian industry — the bulk of which were in
Chemicals and drugs (636), electrical equipment, apparatus and component
(638), industrial machinery (other than textiles) (685), and transport
equipment (364). 4s indicated ir Table No.Ill, .out of the 50 largest
transnationals of tJ world, 23 operate in India directly through
branches of subsidiaries, or indirectly through foreign collaboration.
TABLE III:
THE TOP TNCs OPERATING IN INDIA (1974-75)
----------------------------------------------------------------------------------------------------------- ---- World Sales
Operation Branch/
Name of the TNCs
(in bill on dollCollaboration
•vrs)
d-L
OJ
1.
2.
3•
4.
-'5.
6.
7.
8.
9.
10.
11 .
12.
13.
14.
15.
16.
17;
18.
19.
•20.
21 .
22.
23.
EXXON
General Motors
British Petroleum
Unilover
IBM
Gulf Oil
General Electric
ITT
Philips
Hoechot
ENI
BENZ
BASF
Siemens
Bayer
Nestle
ICI
British American Tobacco
Hitachi
Westinghouse
Mitsubishi
Union Carbide
Goodyear Tyro & Rubber
(Note:
Source:
44.86
35.72
17.28
15.01
■ 14.43
14.26
13.39
11 .35
10.74
8.46
8.33
8.19
8.15
7.75
7.72
7.08
6.88
6.14
5.91
5.86
5.69
5 .66
5.45
-Branch
Collaboration
Subsidiary
Sub.& Collaboration
Collaboration
Branch
Subsidiary
Subsidiary
Branch
Subsidiary
Subsidiary
Branch
Collaboration
Subsidiary
Collaboration
Subsidiary
Branch & Subsidiary
Subsidiary
Subsidiary
Branch
Collaboration
Subsidiary
Subsidiary
"
'
*
Vs
w
-
^1
%
'■ %
%
In some cases like Unilever, British American Tabacco, there
has been more than one subsidiary).
Tamina the Giants, V.Gauri Shanker, Vidya Vahini, New
Delhi, 1980. J>.54—55
Thus, nearly half of the 50 world corporate giants are involved
in India. If one takes into account the fact that the total sales of
each of.those TNCs is higher than the annual budget of the Government
of India, for example during 1974-1975 the total outlay of the Govern
ment of India was Rs. 14,196 crores or about 5520 billion - less than
the annual sales of some ^TNCs. Thus one can guagc the power and
strength of those companies in any bargain they may choose to make
for extending or curtailing their activities in India.
4
Apart from thcc comp'.nice, there arc other companies operating
in India which could c. classified under the United Nations definition
as TNCs, with a turnover of or.: billion dollars, and others not yet
qualified as giants o" the basis of the criterion, are nevertheless
opcrati?\g in significant sectors of cur economy.
£OJTCLUSIOU
ThCs arc overwhelmingly oligopolistic in character - that is, they
dominate the world market which is effectively controlled by a few
buyers and sellers, and thus essential characteristics of TNCs (techno
logical innovation, product innovation and differentiation, heavy
advertising and brand identification) arc both a feature of, and nninforce
the oligiopoliotic market structures. Their dynamics and
behavioural pattern (from capital investment to that of end product
and m-cnipulation of the market), Gan be understood within the framework
of oligopolistic competition. They are themselves contributors to, and
products of, technological evolution in so far as developments in the
field of telecommunication, air transport, advanced computers and
dats processing make possible management on a global scale.
The unique features of the TNCs is that they are able to view
the world as a single economic unit and thus plan, organise and
manage on a global seal0'*
As Barnet and Muller put it:
The power of the global corporation derives
from its unique capacity to use finance,
technology and advanced marketing skills
to integrate production on a world scale
and thus to realize the ancient capitalist
dream of One Great Market.
The size, spread and activities of the TNCs in India raises
serious concern about the TNCs and their activities in India. Their*'
capacity to influence political decisions, the pattern of consumption,
the composition of culture, the direction of production and trade,
the structures of class composition and other elements jsopardize
to the people of India.
Source: 4 Thesis By John Johan fiazu, Submit ted to the Senate
of Seramnore Collegc(University) 1934 • pp. 74-80.
The £vltm-J .on ;1 corporation, is an oaoi- ing actor on the
intern.: ti - . 1 t ■ e with the pov.or ana strength often exceeding
of
.
< nation-Statcs.
' -cans- •••_■>. : ’... .■ cc-pore, ions have posed -.any ajor problems in
th.:
: f .pliaical relations, ocor.o.'-.ic independence and
inte.nr.; r-.i..! *:.■■.v. T; esc problems have boon the subject matter
of vicc-.-a.'.'-... g ic ctos among nations and in.-.crnational
conferences.Tin- jotitical interference by the Transnational
Corporations let.dine to the dislodgement of regimes unacceptable
to them,
u economic enslavement of man?/ developing nations,
the distortion i traditional values and cultural patterns, the
fouling of the environment and the- disregard shown to national
rules and regulations hmm c^mncllod the 'world community to
seek ways one means to "tame" these giants.
\,'-.ot follows is an extract from the book "Taming the Giants,
Transnational ear^nrOti^Rg" bv; Dr. V. Gauri.Shankar, it deals
with the functioning of the multinationals in India.
In India, allegations have been made about how foreign firms were
functioning. Vidiya Prakash Dutt, MP, made the following statement
or 14 May 1975 in the Rajya Sabha:
"I should like to draw the attention of the Government.......... to a '
Series of disquieting articles that have appeared in the New
York Times a’o ut the functioning of the US firms abroad. And
I am not co'ncerred with all other countries except my own. I
should like to read what a very responsible journal has said
about now they function in India.
'Forty American companies—"
widely believed that many of them are liaison officexs, who in
turn .pr.,La'.'ly deal with Indian Of:.ic?.ls - made donations to
political parties, spend money to maintain lobbies inside the
Government a: d i" the Parliament and provide other inducements •
such as liquor supplies, entertainment in luxury hotels and
hospitality outside India when officials travel abroad1. Sir,
this is a serious newspaper ard obviously the information has
come from t. e companies themselves, beca.UE:, in* the case of other
countries, even nc-mes have been mentioned of contacts, agents
a^d so on and sc forth. Sir, this has to be read along with another
. article that a.n. e red o^ tae 11th Nay in the New York Times about.
the wide CIA us-; of USA firms overseas. The list reads likewho's who of business ard
eludes such diverse fields as petrroleum, rubber -uoductc, travel, advertising, publishing, public
relations ...nd the import and export trade. I think it is a
serious matter and the G . vernment should institute an inquire
into it and find out which political parties are receiving funds
from the .fo.reig'- companies, what are those lobbies that they na,ve.
mentioned in Parliament and in the Government
offices, and
what machinery is the Government going to establish to keep a tract
of tile hospitality the officials a”d others who go abroad receive. . .•
I Pm also worried about what they have said about the political
financing awed the lobbies in Parliament...So, I do not know how
much- truth is there
"
■
..........2
-2It is significant that this allegation made by an honourable mem
ber was not.contr. di weed in the Rajya Sabha. That there might be
some truth in the alleg;.tior. is borne out by the Report of the Parli
amentary Joi-t Comi.iitces or the Foreign Contribution (Regulation)
Bill, 1973. The Committee specifically brought in the Multinational
Corporations in. tie bill whose activities in the political arena
were examined in gr-,.ter detail at tho-time the evidences were taken
by the Committee. Kulyurirai Chandra,''par and J.Rai, member of the
Committee, observed ir this ccmectio?1:
" The closest ally of th;. CIA is .multinational companies which
used various i;>. ?.ns to couru; t and subvert the independence and
territorial ii.ii gr .t-> and economy- cf the countries where’they
operate. With t. ;.->dou3 financial pow<_r at their’command and
their firm gri;
-aw materials a~d mirerials and other resources
of the Third Wcr.i i c •.'•■n tries, they are continuously trying" to
maintai1' bii>._ r hoi-’. through massive financial support to artidemocratic el
nts and have become states withi" states- Under
covci' of trade <nc business, they at empt to infiltrate’into
every layer oi scci’.-tj- '.nd rose . t to every possible means including
financial as-;ir,tarco "to Influence the politics of the country
were they o-cr te. They are the biggest single meSnace to indep
endence and democrtic forms of government which are trying to
delink themselves from the stranglehold of colonial economy".
A'general fear exists that CIA agents are working through the Mult
inational Corporations covertly under what are know” as commercial
cover agreements.
Recently, two important cases camo to the notice of the Government
of India of Trayjgatioral Corporations operating i' India trying to
influ nee the Government policies and implementation of such policies
by officals by indulging ir corrupt practices. It came to be known
that 11/s .Phillips Petroleum Company of USA and Good Year Tyre (India)
Ltd. were dealing with Government officials and were making illegal pay
ments and political contributions. In the case of Good Year Tyre
(India) Ltd., the Securities and Exchange Commission of the United
States filed before the District Court .in Colombia a case against
the company for such offences. From the statement fija.d by the
Good Year Tyra (India) Ltd., purporting to be a full disclosure, it
is confessed that:
(i)
"The Indian subsidiary of the Company had been maintaint’g
funds which had not been recorded in the books of the
company.
(ii)
Those funds w©re derived largely from rebates from supplies
of raw materials, reflecting ths difference between the min
imum price fixed by the Government and the lower market price;
(iii)
Estimates of the total amount in the fund during its existe
nces over a period of 5 years from 1971 to 1975, varied
from $ 500,000 to S 800,000. "The precise amount at any
particular point of time was not ascertainable;
(iv)
The fund was utilised for a variety of purposes including
payment of minor foreign Government officials to assure
ar1. adequate supply of raw materials, police protection and
Grioo
\oq u
I
C»MMUNHY HaALTHCSLL
(Fhit
St.-Works f.ca;
Bennalore - ES6 001. -
to secure Gove ..'ament business.... .payment to labour officials
to sct'-le labour problems, for political contributions and
for the fir arcing of, amotmg other things, employees’s travel,
school, and moving expenses".
The' disclosure statement further revealed that, out of the secret
fund about $1 CO,OGG w.:o paid during the period 1972-75 to the office
of a low-level Government offical in order to facilitate the supply '
of electric power (provided through a Government agency)to the subcidiary't nanufacturi ■ ■ facility. The, fund w.:S also, ’.-.sod in 1974
and 1975, for payments amounting io 351,000 to a trade association
and others in connection with desired price increase, under circum
stances from which it could be inferred that the funds might be used
to secure the goodwill of Government officials so that the ultimate
use.was.presumed to be contributions to a political party.
As regard Phillips Petrol urn, rcvexlations before a grarid jury in
the United States in September 1976- and earlier disclosures pressed tor
by the US Securities Exchange Commission brought to light the possibility
of one million dollar pay-offs to Indian nationals in connection with
the negotiations and construction of the Ciichin Refinery in the sixties.
Giving details of the judgement of the grr.tid jury at Tulsa, Oklahoma
State, relating to tax ovansion by Phillips Portolcum Co., the report
said that.3440,000 were, paid by Cochin Refinery Limited each year
for the throe years, 1969 to 1971, and Phillips Peiroloeum put this
money in numbered $wiss accounts. This money, the Tulsa Grand Jury
said, was. then transmitted to a Panama subsidiary of Phillips (Petroleum
for"disbursement "to certain foreign associates of the Company and not
properly recorded on the company’s books of financial accounts". The
indictment said that the money was withdrawn for this purpose in March
1969, December 1970 aM January 1973.
These are again not isolated instances. Imperial Chemical Industries
which has affiliates.in India and which dominates the chemical industries
in a statement filed before the Securities and Exchange Commission adm
itted having- made "sojje payments directly or indirectly to Governmeit
officials- in other areas of the world (other then UK, Europe, North
America^.. Austrialia and Japan) . Those payments averaged 3500,000(8300 000)
a year. Maurie. Corina, writing in the Statesman dated 22 September
1 976,. said:"While I .C .1. is-declining to indicate specifically where and to
whom payments
were made there is bourd to be speculations that
the questionable sums were paid out in Southern Europe, Africa,
South.America,- India and the Middle East".
It may not be irrelevant in this connection to mention that Alkah
& Chemical.Corporation of India, a subsidiary of ICI, was a recipient
of duty concession of Rs.240 crores nn its import of Ethyl Alcohol and
its case for duty concession was stated to have been sponsored by the
West Bengal Government and by then Minister for Petroleum and Chemicals
in-the. Govori ment of India'-.
■ The foreign paragraphs would indicate that though the extent of
direct intervention may be smaller as compared to the indirect political
intervention by indulging in corrupt practices or building up pressure'
nevertheless., such political intervention in the internal affairs of
the countryes, where the transnational corporations operate, is seen by
4
Cs
/
'*■—--------------
by the various countries as a threat to their rational sovereignty. The
Group of Eninert Persons in their report unequivocally, cordcmancd the
"subversive political intervention on the part of the multinationals
directed toward' the overthrow and substitution of nost country Governm
ents or to fostering ■■ ; -tj.rnal or international situation
that sti
mulate conditions for . .ich actions". They reenmmended that in such an
eventuality, host countries should impose strict sanations in accordance
with the due processes <,f law of the lost country concerned. The nonaligned nations'a’se wc'Po concerned with this political interference.
At tre Fourth Confoicncb <
the Heads of State of lion—Aligned Countries
the following'doclarati;a.> was issued:
"The Heads of State or Governments denounced before the world
public opinion the upacceptablo practices of transnational
corporations which .inf.-igo the sovereignty of dcvclopming. coun
tries and violate the principles of non-interference and the
right of people." to z- If-dctermination, which are basic pre
requisites for their pel: tical, economic and social progress."
The Charter of EconomJ c Rights, and Du ties of states issued a
clear directive that t
TNCs must not interfere in the internal affairs
of the host State. The programme f action or the establishment of
a new international economic order referred to efforts to formulate,
adopt and implement an international code of conduct for Transnational
Corporations to ;rcvant interference in the internal affairs of the
countries whore they operated. In the areas of concern submitted by
the Group of 77 and the Latin American Group to the Commission of
Transnational Corporations, the ne..d was stressed to direct these Tran
snational Corporations to desist from all interference in the internal
affairs of all states where they operated.
The issue of political contributions is closely allied to the
corrupt practices. The Groups cf ^minent Persons dealing with the
issue of political contribution stated that the financial contribution
of MNCs as well as of others to interested groups should be regulated
and disclosed. The Organisation for Economic Co-operation and
Development (OECD) guidelines' also suggested that unless legally per
missible, enterprices should not make contributions to candidates for
public organisations. As already pointed out, the Indian PartliaEPnfc
was exercised over this and one of the reasons for enacting the For
eign Monies Contributions Act, 1973, was the suspected activities of
TNCs in making secret contributions to individuals, groups and
political parties.
With all these disclosures aJid such an array of recommendations
by international bodies,|here should be no doubt whatsoever that
covert political activities by TNCs should be unequivovally condemned,
However, the Group of Eminent Persons referred to "permisiblc public
activites" of those corporations. They said, "The host countries
should clearly define the permissible public activities of the affili
ated of the MNCs and also prescribe sanctions against infringements".
The OECa guidelines, similarly, called upon these corporations to abstain
from any improper involvement in iocal political activities. These
observations scorn to indicate a kind of. r eservation in the matter
of unequivocal condemnation of political interference. Permissible
public activity^ or improper involvements, would moan that thereK*is.
scope for a proper involvcmnt in local political activity which cn^ia .
bo permitted. Who. thsr involvement in political cii'airs would not
5
itself 1 or so viol--.be the principle of domestic jurisdiction and inter
nal sovereignty of st-.to-. is
-question which docs not appear to have
bothered either the Gropp of Eminent Persons or the OECD.
On 15 Dcccmboi' 1S'75, the General Assembly also adopted a Resolu
tion (Resolution " oF551-i- (XXX)), in viiich it ccndennnd all corrupt
prac-.ic.s, including bribery, by Transnational and other corporations,
their intermediaries
.others involved, in. violation of the laws
and regulations of the host countries, and reaffirmed the right of
any State to adopt 1i. 1atir: and to investigate and take appropriate
legal action, in .-.cc.-ri. r-cc with its practices. The Economic and
Social Council adopted a resolution , in Avgust 1967, entitled "Corrupt
practice, particularly iu-licit payments, in international commercial
transactions"and decided to establish an Ad Hoc Inter-governmental
Working Group to conduct an examination of the problem from all
f^jles. The OECD Buidolin a, the Parlimentrary Assembly of the Council
of Europe and Permanent Council of the OAS have similarly condemned
in most emphatic terms "any act of bribery, illegal payment or offer
of payment by any tram, national enterpriese".
Those Resolutions of the various bodies arc adequate reflections
of the concern of the International Community regarding the activities
of the Transnational Corporations in influencing indirectly the political
and administrative machinery to subserve their interests. It may
be .added that the General Assembly resolutions expressing the political
and juridical conscience of all nations, arc much more than recommend-"'"'
atory. They arc in the twilight Zone of law and refer to the direction
in which international law is progressing, or at least ought to progress
however long it may take.
'
SOURCE =
V.Gauri Shankar
ISI Documentation Centre
P.B.
*+628
Bangalore 560 09-6
1
TAMING THE GIANTS, TRANSNATIONAL CORPORATIONS
IN WORD ARENA",
.
Intellectual book Corner, New Delhi, 1980
pp. 82 to 89Private circulaton only
<
<
.4
<
<
1
1
|
«
Private circulation.Only
LIE
BONDED
CAPITAL
Since the- rc-orr rgenc<** and ascendancy of the Congress (I)
in Lev. Del- 2 in January 1981, the nanoauvro and penetration
of the international finance capital in the Indian Econony
has• be. n », .re .perceptible, rapid and phenomenal.
In a p.eviov- document ( Cfr."India
mortgaged = IMF S 5-7
billion Loe .-1, pp. 22? to 246),It has bco.n explained how
such intern, ti.onal institutions as the I.F play a key
role in facilitating the penetration of international
finance capital into the developing countries.
In the present document the efforts of the French, Gorman,
British, American and Russian capital to penetrate
Indian anor'-my are described. This. is taken from "Frontier"
November 21/81. The material has been edited and condensed
when nocess-'ry. p-woven this one- among the several Maxian
approaches in existence in India today. Regular correspondents
can refer to cure previous document "analysis of Indian society "
THE"PARIS GROUP "
(pp. 49-54)
Representatives of the imperialist "Paris Group" led by Mr. Jean-Jacoues
Servan-Schrc-! bor
a former French Cabinet Minister met Mrs. Indira
Gandhi on January 9, 1980 and she indicated that her new Government would
seriously consider the Group's offer ror a massive French investment pro
gramme in India, covering comnutcrisatio’n of oduca ion, provision of
technological training and promotion of industries such as steel, electro
nics, drugs and pharmaceuticals, textile, fishing, telecomunication ,
chemicals and fertilizers etc. The signing of seven protocols on wide
ranging economic and technical cooperation after four days of intensive
talks between the French President, Mr. Valery Giscar d'Estaing and
the Prime Minister Nrd Indira Gandhi on 28 January,1980 was the logical
culmination of the earlier talks. The protocol.
inter alia, related to
setting up of a Rs. 1000 crore alumina complex in Orissa to be financed
by France, agricultural and rural development, renewable energies petro
chemicals and fertilizers, industrial and commercial ventures and technology
and development of local mining in India. In October 1981, the Govern
ment of India finalized details for the purchase of 150 Mirage-2000
combat aircrafts in a major deal worth an estimated 2o billion Francs
('•? 3
*
billion) by availing the French Government credit line.
,
•
1
I
lb
b
b
b
b
THE MOSCOW PEOPLE
Then came the Moscow people. The Governments of the Soviet Union and India
had cigrced to set up a ioint working group on Indian agriculture and
irrigation. The ambitious rronect will indicate the areas where thq Soviet
side will offer India "assfV.anco" in agriculture in return for Indian
food grains. The Soviet Union will also assist BEEL in developing 200 mw
turbine sets.
<
(
THE GERMANS STEP IN
*
(
------------------------------------------
With the.departure of the Russians,- the Germans stepped in. Dr. Kurt Hansen
leader of the Vest German economic mission reported to the press on November
if, l?80,
the Indian '.W-rmt made so.-t positive steps" in the past to
encourage foreign investment in this conntrv. Consul Herbert Pavel, leader
of the delegation of the Association of ’ycst. Gorman Industry expressed the
confidence that foreign investment climate in India "is very favourable".
According to „he of -icial assurance- of New Delhi, "’ost German industrialists
arc ncnortod to be keen on' a massive investment in India's oil, steel, power
coal and transport sectors. In 4 he beriming of 1981, the Uniop Govern'
ment finalized an agreement for credit purchase of '..ost German submarines.
*
*
.
I
•
THE BRITONS CAME LAIE EU1 DID A BRISK BUSINESS
(
(
(
(
(
The Britons, however, came late but did a brisk business. In December 1980
1
Lord Limerick, the chairman of the British overseas Trade Board and leader
*
of a l^-mcmbor high-level British Industrial Mission to India observed
that India was against imposition of any further import restraints. He further
1
clarified that Britain was now looking for
new markets and India provided
'
"a suitable ground". The Indian and British Prime Ministers signed agreemennts
*
of wide ranging"co-operation" in the key sectors of Industry and trade on
<
16 April 1981. They spelt out broad areas of "indo-British economic coope•
ration" which provided for collaboration and transfer of technology by Britain
’
in such fields as power, coal, railway, ship building, petrochemicals,
1
fertilizers, science and technology and space research. Sir John Thomson.
<
British High Commissioner in India, said in an exclusive interview with
“<
the representative of the 'Financial Express' on April 9, 1981 that there was
(
mark of thc"fundamcntallv warm relations" between India and Britain. Said he
"Britain has always been the largest single foreign investor in India since
(
Independence, and from our side, there is no reason why this should not
continue since the British Government imposes no foreign exchange restrictions
on British business wishing to invest abroad".
It may not be a mere coincidence that a British consortium has recently cap
tured the prestigious contract for construction
of a big steel plant at
Paradeep, Orissa.- Out of the total credit of 1250 million pounds to be
supplied by the U.K. Government for this project, as much as 85O million
pounds will be spent for the purchase of plant and equipment and expertise
from the U.K., France and Germany. This contract has mainly gone in favour
of the Davy , a U.K. firm, solely due to the personal triumph of the
British Pirmo Minister during her recent visit to India, it is said.
The "Financial Express " ( Bombay, November 25, 19ol) editorially noted ‘
"The U.K.'s close relation and association with India is deeply rooted,
and Britain remains the largest single foreign investor in India. For some
time it has also been the largest bilateral and donor to India having given
555 million pounds ( nearly Rs. 1000 crores) over the past five years."
'The old Lion
is still very much here.
»
,
i
I
<
1
•i
i|
j
i
<
A
<
.1
i
LAG_Lj
THE USA
:
oos r
POES NOT LAG-.i-^EHIh'D.
’
✓
The USA also docs' rot lag behind. Mr. Donald V.Ernshaw, the Deputy Assis
tant Secretary o' tic U, $. Commerce Department while addressing a New York
Seminar on"Rus'incss opportunities in India" organised by the Indian
Chamber of Commence on Juno ?6, 1981 said that, in 1980, American exports
to India we 53% .".hove the export level of 1979. Particularly significant
was the fact that "rJia had approved two and half times the number of
collaborations
the USA, it. had approved in 1979. While Mr. Ernshaw -—
expressed satis'tic •• ••■Jt* the ever growing economic relationship with
India, the India" ?m’ ■ .•'adbr, Mr. K.R. Noravona stressed that there were
few devejoning court les which offered a "safer and more profitable" busi
ness atmosphere + :,on .’ .cia.
■ 1 mass p *o duct's
MARX 1S THEORY
■ "rom the cut
The surplus product:on of agricultural mass products and their exchange
with industrial pi ocuct... Marx stressed, "from the outset sots apart th’e
colonial states founded on the basis of the modern world market from those
of earlier, particularly ancfht times. They receive through the world-market
finished products, such as clothing and tools which they would have to
produce themselves under other circumstances.... The division of labour
on the World-market makes this possible" ( Capital ,Vol III, Chapt 39.
Moscow 196b,' p 671).
Given this material condition, it would be clear from the above disquieting
account that, under the existing international division of labour, the same
character of the exchange of commodities predominates in the Indo-West trade
even more characteristically until the present- time and that India is still
a vast colonial market
and thereby
proves that it is not the Indian
capitalists who themselves are developing capitalism in India but the
monopolists of the Western imperialist countries like- USA, U.K., France ,
West Germany and the bureaucratic capitalists of the social imperialist
Russia who arc actually developing capitalism on tho Indian soil. Froft
this' just standpoint, India is essentially a vast colonial market of
Europe and North America, and. the economic development of our country
certainly becomes the product of the modern industry of tho world banker
countries.Every important industrv in India must have a foreign imperialist
collaborator and that has been the official prescription, and, according to
which the whole show is condcutcd. The result I India has-been humbled to
perpetuate a semi-colonial country.
,
EXPORT
EARNINGS FOR FORETS'. LOAN REPAYMENT
Nearly11 fifth of India's present export earnings is set aside for foreiwn^
loan repayment with interest. Over the year 1975-76 to 1978-79, India
paid the Soviet block in debt repayment $ 3^5million more than it.
received in the form of aid. .The total foreiGri private investment in the
country rose to Rs. 19^3 crores at the end of March 197^. Britain accounted
for Rs.689 crores ( 35*5 %)♦ USA Rs. 531 crores(27*3%),Federal Republic
of Germany Rs. 181 crores (9.3 %) and France Rs. ^+9*7 crores (2.5%) • in
other words, those four big world banker countries together account for 75
per cent of foreign private investment in India.
CURRENT PROBLEMS EAVE VERT REJI CC-LONIAL ROOTS
*
A random survey of about 3C foremen equity companies indicates that ther»
•
are as many as 50 foreign nationals holding controlling positions as
q
managing directors or directors. Similarly remittances on account of dividents, royalty, teei'inr.cal know-how fees and interest actually made by
the foreign companies operating in India sharply increased over the years
from Rs. '>■?..crores in 10S5-<6' to ps. ?48.5 crores in 1977-78. Moreover,
““
the total outstanding foreign debt of the Government of India rose to
’
*
an astounding figure of Rs. lcG00 crores
as on December J1,198O
and the •’ *
total interest paid for this up to that, time amounted to Rs. 33O7-.5 crores.
*
■ — official
- r r - _ - „ i account, more
.
j. i
.
-r3yC
-- z-v crores are «being annually drained
Cn
than
Ps.
out of India as tribute to international capital, thanks to' industrialisation *
The problems have been so acute and burning in the present day world that
®
oven the newspaper like."The Statesman" (Calcutta) had to acknowledge
fi
editorially on 17/1/80 : "The very real colonial roots of many of the
£
current problems of international trade have made the standard Marxist denun<*
ciation of Western attitudes plausible and easy to merge with the third
<
world ' attacks".
That the Indian bourgeoisie cannot even think of its sustenance,save
progress, without aligning itself more and more
with the foreign imperia
list capital is beyond dispute* No sooner
the present administration
caitoc to power that the Indian Chamber of Commerce, Calcutta, on January
24, 1980-, urged the Union Government to create favourable conditions for
foreign investments. In this regard what Mrs. Gandhi sai d in tho Third
General ' Conference of the United Nations Industrial Development Organisation in January 1980 is interesting .' "If we seefe°^Pit is not as charity
but rather as part of a process to undo the injustice of ages". The Vice
President, Mr. Hidaytullah openly camo out in favour of the operation of
multinationals in Tncia while inaugurating the World- Marketing Congress
in February ,1980,
CANCUM CONFERENCE AND THE IDEA OF "GLOBAL COMPACT"
The more rapturous bellicosity of the Indian bourgeoisie was exposed in the
recently concluded Cancum Conference who'o the Indian Prime Minister meekly
‘ advocated for a "global comnact" that would ensure the "development" of the
poorer countries along with tho prosperity of the developed nations in con
ditions of international peace and security.
What is the result in fact of the past pious wishes of the world rich in
this score ? Nothing except slavery and^ciitution of the weak nations of
the world. Just as there is the minority’ number of millionaires and con
sequently tho overwhelming majority poor in tho population of the less
developed country, so in tho world, under tho ^.domination of capital, there is
bound to be a handful of rich banker notions and a large number of -poor,
chronically debtor and feudatory countries. This is-the absolute la- of
capitalism and more especially of monopoly capitalism. It is the Communist
Manifesto which had pointed out : "The modem labourer on the contrary,
instead of rising with tho progress of industry, sinks deeper and deeper below
the conditions of existence of his own class. Ho becomes a pauper and
pauperism develops more rapidly than population and wealth". The presperity
.
(
<
<
<
1
1
of the developer.1 n • I ions. the imperialist countries to be exact, essentiall1—
means perpetual de
< co • nd the very colonial market character of a
large number of b-e- ■-. ■6 countries in the mid.
Motor tally spe- '.i.
t
~ vision of "glotal u-moact"
as espoused at
Oancum actually sc;
thing hut more alliance and greoment between the
ruining classes of «..
c< vrit’-ics in rhe cr, it-.It t — arid, the whole brunt
of which has all 1 c .r ’opr
borne by the toi.'c-re of the world. In firm
complicity with
the I ri : c .Minister >* Ir.'ia preached sermon that
the backward .cc .•nt r s h<-"1-j rol y more on or..voroign investment*.
”V.'o are trying r..?
c
rl'
• r-eeo-.o self-reliant .-n ■ steerid on our two feet".
SPEAKING "SELF T:'££_r_ ■-■L
!'-•< rM ENC<
Reinn- drowned eve ■ herd and
rr, in debt -n the irnoriulist countries, how
enn the weaker nations .-‘a-i nr. their two feet? If the so called help really
aids us to become "sei
bl i.;nt" - hv and how docs the contract like the buil
ding of the Paradeep stool pl-nt, roes in favour of a British Multinational
even after thirty years of planning r- In their curious dialectics, selfreliance stands for dorendcnco -- ab'oet dependence on imperialism.
Under the changed circumstances this design is being accomplished, strange
ly enough, with the visit of a delegation op Indian capitalists led by
no less a person than Mr. Nov-1 T.-t; to Moscow in September, 1981, for
collaboration between the USSR -rd th.o- Indian . corporate world ;and Krnml in
was found jubilant over the '.nt,a nle.r. Put at the same time the Union Finance
Minister, Mr. R. Venkata roman stated >n October 1, 1981, that India "intends"
to seek a if 2 billion loan from the Asian Development Bank for a five-year
period beginning in 1983 at 9 to 10 % interest rate per annum. This much more
climaxed when he enthusiastically pleads for availing of a huge new loan
of I? 5-6 billion /“now granted_7 from the IMF even after acknowledging that
"most of the low-income countries face a grim situation. Their terms of
trade deteriorated sharply at a time when their export markets are stagnant
and protectionism has increased. Their combined current
account deficit has
risen from H 57 billion in early 1970s to 84 billion in 1980. And this has
happened when financing has become much more difficult. A.id flows are
stagnant, and
in some cases declining, while commercial borrowing
has been, made prohibitively expensive". Despite all this, the Government
of India is said to be planning substantial borrowings from the world
capital markets at relatively high rates of interest to "finance" what they
call development porjects.
THE EXAMPLE OF THE"GRINDLAYS BANK "
Meanwhile
the,Grindlays bank's involvement as a lead manager of foreign
currency loans for different proiects in India is likely to be of the order
of ft 400 million in the next couple of years. Disclosing this information 'in
October 1981, Mr. I.A.W. Evans, managing director of the Bank's Asia
Pacific Division,
said that nearlv 80 per cent of the amount would be in
energy sector including oil exploration, development of coal mines and ins
tallation of power plants, followed hv shipping steel imports, engineering,
automotive-industry and plantation. Mr. Evan described the Union Government's
change in attitude towards foreign financing as "radical and fascinating",
and observed that Inm • 's credit rating- in the world money market was very
high --"topiro.-. t o”C.-.
c p'hird V'or] d countries”. This was al o evident
from the sharp rise in -tie's fon'im borrowing from a meagre 100 million
a few years back c.
art two thousand million dollars now. Mr. Evans indie
tod that at this c; ■c th? figure might be much higher shortly.
,’HAT TQ CvhCL'.DE ?
how can one vic-. ,t) ■
t.; o_dy state of affairs daily surcharged with new
dove] c events.•'
; " . a Manifesto which r d said !
" The cheap prices
o' it
co-.;.mo 15 io
■ o heavy artillery with which it (bourgeoisie)
bitters d- -r all Chi ■
ails, wit-- -hich it forces the "barbarians'inton■■ o ,s--in J.o
'■ trcir no■:. ‘o cam.tulatc. It compells all nations
or
..i cp c
j.n .
n,
~ adert bourgeois mode of production• . . Just as it
has made to cou- -•> >?■ -r ent on the towns, so it has made'barbarian and
semi-barbarian' ccm.t : c _• dependent on the civilised ones, nations of
peasants on nation: of tevrreois, the East on the West". This operates
at large in the world market now dominated by the monopoly pnd finance
capital. The weak, flabby Indian P-o-irFOoisie having little power to contest
gradually capitulates to the International finance capital more and more.
The hard facts of economic materialism in the present time confirm that
it has almost completely cnnitnlatcd before the monster.
Source = "The Bonded Capital", bv an Observer, in Frontier, November 21/81
pp. J to 7 •
Private circulation only
,7C
i-: COLLABORATION ; THE FACTS
(Technological dependence for ever ? )
In matter of foreign collaboration the crucial point is
whether technology is being mastered and digested, leading
°n to
sclf-rufficiency in technology, or a reproduction
xs occur?.; ~ <••• the origib'^rolations of technological
done - Ac »■,c< .
A quick glimpse i.ii.o technology imnort into a few key sectors
of the Indicr industry during the last three years will
reveal what the situation is in this respect.
STEEL
More than 20 years after steel plants wore commissioned at Bhilai,
Rourkela and Durgapur (1959), foreign technical know-how has again been
sought for their expansion and modernisation (the third plan saw the fi
round of expansion with the help of the original collaborators).
In the mean time, mid-way in 1969, the Bokaro Steel Plant came on
stream with Russian assistance. But all these years have not been suffi
cicnt, it appears, for a policy of self-reliance to have developed in.
this core sector.
Bhilai's capacity is being increased from 2 L/2 million tonnes to 4 ai
5 million tonnes, and the older units are being'modernised', relying <
technical collaboration with the origi"»l Russian designers and suppli'
of equipment. For the expansion of Bokaro's capacity to 6 million tonn
and for updating its technology, the Russians are once again the techn
collaborators, though Wean United of the USA has bagged the contract I
for the five-stand tandem cold rolling mill, in the teeth of oppositid
by the Russian lobby.
I
The Overseas Service of the British Steel Corporation has prepared thl
scheme for doubling the existing 1 million tonne capacity of Durgaptr
and 'modernising' the technology hero by substituting the 'bottom-blc
process for the existing onen hearth one.
The Rourkela plant is also being expanded. A silicon steel plant is
to be added in collaboration with- ARMCO of the -USA
■ The new plants offer no exception. The cold rolling stainless steely
mill at Salem was supplied by Hitachi of Japan. The technical know-—
was obtained from Peugeot, the steel and automobile manufacturers
France. The 1 1/2- 3 million tonne Paradip plant will be set up
turn-key basis by Drrj McKee, a British firm which was one of 14 Be=:
companies which participated in the original construction at Durg
Dary will supply equipment for the blast furnace and enrol Semag o—.
West Germany for the rolling mills. 55-60 % of the finance is to brr
raised through'aid' from EEC countries and soft loans from the Eu^^
currency market. The 3 million tonne Vizag project will also be oZZZ
and observed that InJi;'s credit rating in the world money market was very
high —"topmo.-.t urcr. v c '"bird World countries". This was al o evident
from the sharp rise in
die1 s foreign borrowing from a meagre 100 million
a few years back c; c.’.:nvt two thousand million dollars now. Mr. Evans indie
ted that at this rt-te th? figure might be much higher shortly.
'HAT TO CvhCLTDE ?
How can one vic' .th'' s’.o_dy state of affairs daily surcharged with new
developments ,,v oin' ■ ■’'-'a Manifesto which had said
" The cheap prices
o ' !+-■ commol? i
';<? heavy artillery with which it (bourgeoisie)
b; : tors dem all Cd
nils, with which it forces the "barbarians'inten■■ costin .to
t^rcirno::; to capitulate. It. compells all nations
on pr ,.i c" c
xii .1
n, t-- adopt bourgeois mode of production.. .Just as it
has made :.e com ry ■>?• ••-idcnt on the towns, so it has made'barbarian and
semi-barbarian' count ••fc-s dependent on the civilised ones, nations of
peasants on nation;, of 1--evrreois, the East on the West". This operates
at large in the world market now dominated by the monopoly pnd finance
capital. The weak, flabby Indian Po-irgeoisie having little power to contest
gradually capitulates to the International finance capital more and more.
The hard facts of economic materialism in the present time confirm that
it has almost completely capitulated before the monster.
Source = "The Bonded Capital", bv an Observer, in Frontier, November 21/81
pp. J to 7 .
Private circulation only
■ • ■ (g)
FORE^.'K COLLABORATION ; THE FACTS
(Technological dependence for ever ? )
In matter of foreign collaboration the crucial point is
whether technology is being mastered and digested, leading
on to.
sol f-ruf fici-ency in technology, or a reproduction
-s occurir.g r' the origiN^jrelations of technological
dcnc -^c i-cc.
A quick glimpse into technology imnort into a few key sectors
of the Ir.dicr industry during the last three years will
reveal .what the situation is in this respect.
STEEL
More than 20 years after steel plants wore commissioned at Bhilai,
Rourkela and Durgapur (1959), foreign technical know-how has again been
sought for their expansion and modernisation (the third plan saw the fir
round of expansion with the help of the original collaborators).
In the mean time, mid-way in 1969, the Bokaro Steel Plant came on
stream with Russian assistance. But all these years have not been suffix
cicnt, it appears, for a policy of self-reliance to have developed in.
this core sector.
'/H
Bhilai's capacity is being increased from .2 1/2 million tonnes to 4 ar ;
5 million tonnes, and the older units are being'modernised', relying
technical collaboration with the orig2-nl Russian designers and suppLimf
of equipment. For the expansion of Bokaro's capacity to 6 million tonn
and for updating its technology, the Russians are once again the techri.
collaborators, though Wean United of the USA has bagged the contractfor the five-stand tandem cold rolling mill, in the teeth of opposite
by the Russian lobby.
The Overseas Service of the British Steel Corporation has prepared th
scheme for doubling the existing 1 million tonne capacity of Durgapb’
and 'modernising' the technology hero by substituting the 'bottom-blc
process for the existing onen hearthone.
The Rourkela plant is also being expanded. A silicon steel plant is
to be added in collaboration with- ARMCO of the USA
■ The new plants offer no exception. The cold rolling stainless steel
mill at Salam was supplied by Hitachi of Japan. The technical know-1
was obtained from Peugeot, the steel and automobile manufacturers
France. The 1 1/2- 5 million tonne Paradip plant will be set up o.
turn-key basis by Dewy McKee, a British firm which was one of 14 Br
companies which participated in the original, construction at Durgc
Dary will supply equipment for the blast furnace and enrol Semag o.
' West Germany for the rolling mills. 55-60 % o.f the finance is to M
raised through'aid' from EEC•countries and soft loans from the Eur
currency market. The 5 million tonne Vizag project will also be a
turn-kov project ftr
Russians. Thov will also supply Rs.196 crores
worth of equipment
-;C’ vHii an-'car os credit granted by the Russians.
Russian experts arc •h-c ''"•enuring the feasibility report on the
expansuion of 11 SC I , t i; ' re-over ’-•f the onon-hoarth furnaces of IISCO to
the toxy-rofining sy; lorn is to be entrusted to Korf of the USA, an
associate of Korf-St' .'L of . Germany. Disjpromoxport of Russia is to
prepare a ' modernise t.-.or ' study for the Bumpore works.
The private sector ,tco, continues dependence on foreign capital. The
1ISCO plant, :hc
.--t in the‘co’untry, is being' modernised•' . More than
a quarter cl the
:c • .xs being raised from t.hc IMF, the IFC and British
sources.
Ire- ;
Si..: el Works sot up in 1937, is undergoing
'expansion ■?.r.d n> . „
• •
usiny technical help from Japan, France and .
Russia.
AUTOMOBILES
Indian capital entered this field in a big way from 1953, when foreign
companies were prohibited from assembling motor parts in the country.
However every manufacturer started off in collaboration with a foreign
partner. Reproduction of ‘•heso relations
is proceeding with clock
work precision.
Hindustan Motors of
^irl.ao
was set up in 19^+2 and proceeded to manu
facture automobiles from 195^ in collaboration with British Motor Corpo
ration. Nov/ they arc launching a new passenger car. Technical assistance,
designs, drawings and cm j. tai goods are being imported from Vauxhall
Motors of the UK, a subsidiary of General Motors of the USA.
Premier Automobiles of the Walchand group , set up in 19^,- was the other
big company producing passenger ca’s. Fiat was the collaborators. Premier
is now embarking on a new car rromrammc, once again in collaboration with
a foreign company. This time the collaborator is SEAT of Spain, asubsidiary of Fiat of Italy. SUNRISE Auto of Bangalore has also boon allowed
to import know-rhow for the engine of a passenger car. Maruti, too, was never
conceived as indigenous product , as advertised. The Sanjay Gandhi scheme
envisaged 50% import equipment. Freeh talks on Maruti have been held with
several prospective foreign collaborators. The Latest in the running is
Nissan of Japan, the .
• makers of Datsun.
Mahindra and ffahindra, the manufacturers of jeeps and tractors, are going
for enlarged and modernised production of jeeps, tractors and light commercic,
Vehicles. One"sixth of the finance is being met by a loan from IFC/(Washing
ton) , and' the. engine is to. be built in technical collaboration with Peugeot
of France.
In the field of commercial vehicles, the star Indian company,
TATA's TELCO, is still bxeing run in collaboration with Daimler-Benz’ of
W. Germany who retainseven now 13 1/2 % of the total paid-up capital.
In the case of ASHOK LEYLAND, 51% of the total paid up capital is still
held by British Leyland. It is now undergoing expansion with the help
of its British parent. HINDUSTAN MOTORS is to give up its Bedford model
and manufacture a new truck in collaboration with Vauxhall, somewhere in
IS TO UPDATE AND MODERNISE ITS TRUCKS in technical CO'
Gujarat . PREMIER
Italy, a subsidiary of Fiat.
llaboratior. with 1’Oco ofI Italy
cturors
Not only arc the manufac..-.
----- looking abroad .for the second time but they
are found tc be
ration the firs
1nt more or loss the same which offered collabot :■ me .
Light vehicles
into a collator.
API is now shopping
ji
option. Automobiles"'Products of iYrdiu.-ha'd-entered
?Tb. Lambre\t.a of .Ita.lv for the manufacture of scooters
’ir abound fof foreign know-how especially in. Japan.
MINING
The mining of coal ■•.nd Iron have boon well established, industries- in•• the-c-vntry. It has now been discovered that the existing base of technology
cannot be broadened and strengthened with indigenous .efforts of its own
ingineers and scion'
In the sixties, th
ns sot up three mines at Korba and a washery at .
Kathara. More than
thc.fi u cccado later,they have entered with new technology in
the design of largo open cast mine projects and washories, as well as in
underground mining. The Russians are preparing a master-plan for the Talchei
and y Karanpura coal fields,
■
olds , •while
the master plan for the Singrauli
coal—fields, prepared with their collaboration,, iis already being implemented.
At Nighal (Singrauli) and Jhara, 1
’
they
are to develop large open cast mines. ■
Long—wall mining in tnc Jhanjnra block in Ranigunj and open—cut mini ng in
the Ramgarh coal-fii ds are also in their hands.
Underground mining is being modernised and.developed mainly with British
help. The British are supplying' the latest technology for the exU-action
of the massive coal pillars of the existing mines, and are assisting
in the mechanisation of the present pillar and board method of mining
as well as introduction of fully-mechanised long-wall mining. The Russians
are .also helping -at the Suoamdih deep-shaft mine and the Russians and the
French arc helping in the extraction of nillars in coal-fields near Ranchi.
Seventeen years
after lignite mining commenced at Neyveli with foreign
assistance, collaboration agreements have again been signed for lignite
mining, this time with the East Germans.
Kudrcmukh is’the major addition in the Iron ore industry. In this .case,
the apt'cal to foreign know-how, has been Justified on the ground of
"concentration''' and "pelletisation" of the ore. Rumania has bagged both
contracts. In the case of Pelletisation, the Rumanian Uzine Export qpd
Import Co, will itself import the process from Lurgi of W.Germany•
ALUMINIUM
Five companies are producing aluminium at,present. Each has a separate
technological collaboration agreement with some foreign company. The two
largest companies, INLAL, affiliated to Alcan of N. America, and HINDALCO
of the Birlds, set up in collaboration with Kaiser of the USA, so far
.
dominated the industry, which had an effective smelter capacity of 551,000.
tons. A complete complex is'now coming'up in Orissa in the public sec or>
under the National Aluminium Co Ltd., which will produce 800,000 tonnes of
aluminium. The know-how has again been imported , this time■from Alumi
nium Pochinoy of Franco. Apart from this, the Russians are helping °
build a 600,000 ton alumina complex at Visakhpatnam. Technology, equip
and material will flow from Russia.
Foreign finance accompanies foreign technology. The NALCO-Pechiney col
laboration will bring forth the largest al w nn-cum-al.nma.naum project m
Asia, with an outlay of Rs.1242 crores.Of this 5 400 million worth of soft
loans will come from France and $ 680 trillion worth of Euro-currency will
bci lent by a consortium of Europcnn banks.
(
(
(
1
FERTILIZERS
----------------------
.
<
In mid 1964, half Of the licensed capacity was occupied- by foreign<
controlled firms, while the other half, which included public sector
I
participation,had foreign technical co11abo^rtion. The commissioning of
(
Sindri plant started the dove"! moment of indigenous technology. The
<
-Fertiliser Planning and level ormetnt Division ( ".’I I) .
which-grew * <
out of the Planning and level ooment livision of Sindri, succeeded in
«. (
evolving a wide range of catalvsts and substit ■ • . ing fuel oil and coal for
naphta as fertiliser base. FPDI designed the gi--.rt fertiliser plant at
*
Rourkela.
- *
However the "expansion” of Nangal and the 'modernisation' of Sindri were (
awarded to West Germans. Italian and Japanese fcr t-j.. Trombay, Phulpur and <
Gujarat plants.
Ten now fertiliser plants arc to come up on the basis of Bombay
High gas. The seven urea-based plants at Th l-’.'.-.ishct and Hajira have
been handed over to SRarn Progctti of Italy, who arc to be the consultants
for all urea-based plants. The ammonia-based plant coming up at Thal-Vaishe1
has as consultant Haldor Topsoe, a' Danish firm, in which Spam Progretti
has a ?0 % share-holding. Technical collaboration and consultancy for all
ammonia-based plants, using Bombay high foodstock, arc to be
awarded
either to Haldor 'Topsoe or Kellogg. The Bongaigaon petro-chemical complex .
is being set up with know-how and basic engineering from French, American-,----'
British and W. German firms. The Broach fertiliser project has obtaine.d
assistance from the
Gorman firm of Linde.
At Goa, the Birlas arc setting un the Zuari agro-chemical plant jointly
with the Government. The Government is in favour of the import of Italian
technology while the Birlas arc nrcssing for technology from Toyo of Japan,j
which again obtained it from Kellogg .
BASIC CHEMICALS
,
Indian explosives of Gomia (ICI and Government) was for.long the main
producer of- explosive and nitric acid. Recent entrants into the field are
again importing technology. To take two examples, one may look at Chowgules,:
who are setting up an explosive plant with know-how from Dupon of the USA,
and Narendra Explosives, which is importing Swiss technology. Hindustan
Organic Chemicals are building a 'modern'nitric acid plant with tech
nology from Iff. Germany and the Netherlands.
Even a
sulphuric acid plant in the joint sector (East Coast ’Fertilise;
and Chemical Ltd) is using know-how from Monsant oChemicals of the USA,
although . sulphuric acid has been produced in the country for a long
time now. Two other such basic chemicals arc soda-ash and ammonium chloride*.'
For these two common chemicals, Tuticorin Alkali Chemicals and Fertilisers.
has imported know-how-and machinery from Hitochi Zoser of Japan.
----- Oil exploration and drilling was for long a foreign preserve'. ONGC -promise
a breakthrough xn ihi ,■ domain1, and till 1930, car -ioci cut off-chore
diilling without any 'orcign collaboration in der>th, although foreign
contradtors and drill-ships had to be relied on. Mazagon Docks are in
a position now even to supply off-shore drilling platforms and drilling
rings. In 1978 BHEL supplied ONGC the first Indian-made on-shore dril
ling ring. Clearly, there was a strong case for self reliance on this
base. Yet, from 1981, foreign technology has been welcomed with open arms.
blocks, 15 on-shore and 17 off-shore, arc to be offered to foreign
companies for exploration. A 20-ycar oil exploration plan drawn up by ONGC
on its own is being supplanted by grafting on to it a' 10-year master
plan for on-shore exploration, drawn up with Russain collaboration. The
Russians have started drilling in Tripura, re-activating sick wells in
Gujarat and planning exploration in W. Bengal.
For off-shore work, intensive negotiations arc under way with Western
firms. CtF of Frame has been awarded a "-vear contract for increasing
production at Bombay High, South and ?Ratnagiri, and assisting in future
exploration. A U.S./. firm is conducting surveys in off-shore West Bengal.
Chevron of the USA has been' alloted an off-shore block in Saurahstra for
exploration and development.
TRACTION
The first steam locomotive came out from the Chittarajan works in 1957.
The first DC electric locomotives were produced here in 1961-62. Diesel
engine manufacture commenced in 1966-67 in collaboration with MAK of
W. Germany. Even the difficult AC locomotives have been manufactured at
Chittarajan. Yet, the Rs.600 crore loan now being negotiated with the
World Bank for the railways, envisages import of 15 prototype locomotives
one of which is to bo chosen for manufacture under a foreign technical
collaboration agreement, possibly with U.S. firms.
. .
Durgapur CMERI evolved the indigenous 20 HP "Swaraj" tractor.But this
was shelved , and tractor manufacture continued in
technical collabo
ration with foreign companies (tractor manufacture was started in the
country in 1962 by the Masscy-Fcrgusson organisations). Hindustan
Machine Tools , in the public sector, started manufacturing ’Zetpor* trac
tors with Czech collaboration. As late as 1972, there was a fresh entry
of technology, when Harsha Tractors started .manufccturc__with_Russian~--^__^
assistance.
Bharat Earth Movers, in the public sector, had considerable unitilised
capacity y caused by deficient demand. Yet, it entered into a new colla
boration agreement for the manufacture of mining trucks with Westinghouse
of the USA in 1978, and in 1979 entered into contracts for equipment
worth Rs. 27 crores with firms in the UK.
TOOLS AND MACHINERY
Heavy engineering Corporation, Ranchi, was setup with Czech and
Russian assistance. After a decade of operation,it was deciaed to set up
a design institute'of its own' with technical collaboration from Russia
the USA and W.’ Germany.
Hindustan Machine Tools r . r.rtod with Swiss collaboration (Ocrlikons) in'19^^‘
In the early sixties, it entered into collaboration with the West Germans, *
the French and the Italians. Now it is pressing a number of applications
<
.-for further collaborations with West Germans.
(
Instrumentation LTd, of Kota, was set up with Russian collaboration.
To 'update ' its ■roc’Uct range, it has switched over to George Kent
of the UK.
1
1
,
This is a short ucc< un1-. of some of the major sectors of industry. In
1
numerous other spetors, jhe same feature oi a ronewcal of technology by
import can be demonstrated in the same detail. The available information
'
relates to cemoAt, tyres,paper, photographic filrs, ophtalmic glass,
*
antibiotics and even roc)incry for cotton, woollen and Jute goods, although *
in the field of textiles manufacture has been continuing on end with Indian*
capital.
i
'
'
■ if
CONSUMER GOODS
!
"
However the account, will remain incomplete if no example is offered of
the extension of ,!the trend even' into the manufacture of consumers goods.
One turns ,therefore, to blades. 7R% of the razor blade output Of the countr$
was accounted for till recently b--- three units owned by the Malhotras, who *
had a collaboration
goinp: on with Wilkinsons Sword of the UK. There were <
four other indi^pnous units. Gillette has now moved into the picture to col <
laborate with trie Poddars, and Wilkinsons have entered into technical
<
collaboration w{th a joint sector company in Karnataka, promoted by Goenka 4
of Duncans. Centron, another manufacturer, imports know-how from Perma
4
Sharp of Australia. It is now being wooed by Brook Bond. Hindustan Lever
(
and Escorts own; Sharpedge, which has recently felt the need of direct
<
import of new (technology and has approached T. Gibbs of France for this
purpose.
!
RELATIONS OF TECHljOLOGICAL DEPENDENCE ARE REPRODUCED
. .
However the Mid deals, the Jaguar deal, the Rs.1300 crore Russain 'aid'
4
package , the Mirage talsk and the purchase of new models of tanks, aircraft^
submarines and! helicopters are all poointers in the same direction. Technical
kmow-how is imported for the basic equipment and process of industry, and
«
instead of consolidating a self-reliant base on this know-how, new
technology is (imported in the name of 'expansion' ,'modernisation' ,
*
and'.updating' {after a few years. Relations of technological dependence
are reproduced.
j
SOURCE =
Dippnjan Rai Chowdhury, "Forcing Collaboration"
' in {Frontier, Feb. 13,198? p. 1? to 13
f
Feb. ?0, 198?,- p. 6 to 9
<
4
4
Private circulation only
1* ROM
CORPORATIONS TO CCNGjuOMEPaTes/
REVIEW OF MULTINATIONALS
The size of multinationals has increased dramatically
over the last two decades.Revenues of the top 200 firms
have jumped 10-fold, from around $ 200 billion to
over # 2 trillion.
Over the past 20 years, Multinational corporations'
have oecor'.c the dominant force in the World economy.
But they no longer take the same form nr operate in
the same way as they did back in i960.
Five basic changes have occured in the structure of
multinational enterprise.
conglomarates and OLIGOPOLIES
For all the talk of a "free market" and "free competition", the world
economy over the past two decades has increasingly been run by giant com
panies that exercise control by virtue of their oligopolistic or conglo
merate strength.
.
An oligopoly refers to a handful of firms that dominate the market by
various collusive' practices, such as predatory pricing or erecting
barriers to entry.
•
International oligopolies have become paramount over the past decade
in automobiles, ' migroporcessors, seeds, and numerous primary commodities
such as coffee and cotton. Meanwhile, the ranks of the older 'oligopolies
have been thinned in industries like petroleum and cigarettes.
With the growth of the international oligopolies, their ability.co
control prices and wipe out competition has correspondingly increased.
Equally striking has been the rise of the conglomerates, companies ■
....
whose subsidiaries engage in unrelated economic activities. Conglomerates
have expanded through mergers and take-overs in a series of waves cresting
in the 6o's and 70-s and into the 8O'.s.
Certain conglomerates even straddle agriculture, industry, and service.
A good example is the maker of Winston cigarettes, R.J. Reynolds, which has
the following subsidiaries : Del Monte (fruit), Heublein(alcohol),
Sealand Services (shipping), Kentucky Fried Chicken (food retailing)
and -Aminoil (petroleum).
By their nature, conglomerates have the ability to undermine their
competitors .As different markets expand anc contract, the conglomarates
can shift resources into whatever sector is most profitable at any given time
Moreover Conglcmari. tes often engage in a practice called cross-subsidi- f
zation,' whereby they shift profits from one product line to subsidize
another. This is an ideal marketing device which enhance the company's
market share by underpricing competitors.
For instance,.Marlboro Cigarettes creator, Philip Morris, revolutionized
the U.S, beer market in the 1970's by buying up a small regional brewer,
®
Miller, and transforming it into the second largest beer producer in the
world. Philip Morris pulled this off largely by low pricing and massive
«
advertising, subsidized by Malboro's tobacco profits. Coca-Cola, through
4
its acquisition of T’aylor Wines, is in the process of doing the same to
4
the U.S. wine sector.
DECLINE OF U,s. Multinationals
The 'size of multinationals has increased dramatically over the past two
decades. Revenues of the top 200 firms have jumped 10-fold, from around
H200 billion to over $ 2trillion,
,3
But amidst this overall growth, the position of U.S, firms has fallen.
of
In I960, the top 200 multinational companies, 127 were U.S.-based J
These companies accounted for 72.7 % of the group's revenues. By 1980,
*
however , .U.S. firms numbered only 91 out of 200m their revenue share.
having, fallen to 50.1 % of the total (see chart).
‘
As U.S. firms have lost some of their, commanding load, other companies
based in foreign countries - particularly France and Japan - have gained
ground. The number of France's multinationals in the top
200 has jumped 4
from 7 to 15, with sales skyrocketing from
billion Dollars to $ 161
billion.
1
No less dramatic is Japan's steep ascent, with 20 companies now in the,.
top 200, as opposed to only five in i960.Revenues of these Japanes compa- 4
nies hav« zoomed up from $2.9 billion in i960 to 3 155 billion in 1980.
4
(The figures for Japanese companies do not include the Sogo Soshas, the
Japan's general trading companies. Led by Mitsui and Mitsubishi, there are 4
nine giant sogo Shcshas, whose 1981 aggregate revenues exceeded S 357
4
billion.)
Over the past two decades, multinationals have altered their •
approach to the control of production. In general the giant firms have
|
given up direct ownership of primary commodity output, while greatly
<
increasing the»ir- control over processing, marketing and distribution.
In response to internal political shifts in many developing countries
*
since independence, multinationals have sought to preserve friendly
relations with segments of local oligarchies by formally transferring
mine and plantation ownership over to them. Crucial, however, in this
1
entire process has been the retention by the multinationals of effective - q
control Over output. They achieve this result by various menas, including 4
contract farming in agricultural production.
1
Firms like Del Monte, Castle & Cooke(Dole) and oven Gallo are often
1
the sole buyers of agricultural products in a region. With total control
5
•
, i
■ 1
o/cr prices, product size and quality, they are able to squueze 1 oc.nl
farmers to workk for ’Eh'eih on their terms- Peasants and farmers who don't
like the arrangements have no place to sell their goods.
.if’
the realm of marketing and distribution, multinationals have come to
. .dorunate world trade. Japan's nine Sogo Shoshas, for instance^ handle over
half of their nation 's international trade, as well as a good deal of
domestic trade.
.. -FRAGMENTATION Or PRODUCTION
«
-
The production lino is now global, as companies manufacture parts of one
good in one country, assemble it somewhere else, ana put on the finishing
tenches in yet another. Multinationals have achieved this globilization
of production by means of joint ventures, licensing'and subcontracting
agreements-, the burgeoning free trade and export processing zones.
Engineered by companies seeking out the cheapest labour and most profitabl
concessions, this change in production has nirted Third World governments
against one another . Developing, nations now compoteamong themselves for
the distinction of granting the greatest incentives to multinationals.
And the global production line enabled multinationals not only to
cheapen labour power, but also to neutralize the strike weapon. When
workers try to demand higher wages, multinationals can cither null out and
move to another country boasting cheaper labour, or simply threaten to
pull out. Either tactic yields the same result s diminishing
the
force of the labour movement
RISE OF THE BIG BANKS
,
»
' *
INTERNATIONAL FINANCE- IS NO LONGER BEING PERFORiiED PRIMARILY BY THE
WORLD BANK AND THE INTERNATIONAL MONETARY F UND . Over the past decade ,
commercial banks have taken over-this function, providing more than 50 %
of. the loarls to developing countries.
During this period , thcassets of the major banks have scaled awesome
heights j the top 100 banks have combined assets of A-.4 trillion Dollars,
equivalent to half the .global gross domestic product. Big Japanese and
U.S,banks together control two-fifths of tie top 100's total assets with
24 Japanese banks holding over a quarter of total assets.
"
The rapid ascent of private commercial finance has placed the banks in
conflict, at times, with multinational corporations. Although the relation
ship between the two is generally harmonious in period of growth, during
the current global recession, tensions have arisen.
Multinational banks arc increasingly concerned about the ability of
their country clients to repay loans. Thus in the past three' years, the
bf-nks have dccelarated their lending to developing countries. This is
' an unpopular-move with multinational corporations which, in their desire
to increase world
to provide developing..<#ua~
tries with the foreign exvn)ftn^y to buy WesrtP^i^wfoods.
1
$
By and large ,the combined impact of these five structural changes
has been to increase the power and influence of multinationals. In partig
cular , the flexibility of multinationals to shift resources accross
g
economic sectors and 'national boundaries has boon greatly enhance; over•the^
past two decades.This ma: -ouvravility expands the companies economic power A
as they can move re; di?.-- :. o -he most pr~fii —Me arens.lt also al^pws-.them
*
to dodge political acc-ji ntobility, for vhene zor an entity - be it a govern- 4
. ment, labour union, c
>n.-j.'.v group - a--;te;.pt.c t . -:gulate the companies, 4
they can simply pull up - ..y r -.taker"end find a -or. ..oscitable host.
„ <
While becoming be ;: :•
"pnl ?
are only beginning t -. K-v. .'.on t’ a
“counter such power anu fl. xibile.t
im ; ;ny ccr
■•;.< • .gio-',
-s, -erkers and peasants
Mix-, and ability to
*
fl
4
THE RETURN OF BARTER
Odd as it may seem, mul tinnticnals in the last ■. cc.-c have reintroduced
4
the oldest form of trade : barter. Unlike cor.---;-', ionol transactions based
4
on foreign exchange, in barter deals (some times cM’.ed counterheads or '
4
buy-backs), purchases of one item are pegged to the selling of another.
4
Prices of goods exchanged may or may not bear ary relationship to prevailing 4
world market prices.
4
For instance, Levi Strauss, one of the
world’s leading apparel
*
manufacturers, entered into a counter-trade agreement with the Hungarian.
government in 1978. Hungary received’equipment and expertise in exchange for
three-fifths of pant's annyal output, now amounting to round one million
pairs of jeans a year, wh ch Levi Strauss merchandises in Western Europe
4
and Africa.
,
Levi Straus is • not alone in this practice. Other giant multinationals, <
like General Motors and General Electric, have engaged so extensively in
«
counter trade that special corporate departments have been set up to develop <
markets in countries whdre cash deals or capital investments are not fea<
sible. With these trades, a company can increase its market share in an
*
economy that would otherwise be difficult to penetrate and can avoid
1
taxes and-tariffs in addition. Also, a multinational often can barter
<
products at highly favourable terms, due to pressing financial needs of its 1
trading partners.
4
Centrally planned economies and Third World economies engage in such trades’
out of convenience or desperation : the countries simply donk't hav# enough *
foreign exchange to buy all the goods they want. As debt levels increase in
these countries, the lure of barter looks all the more attractive.
According to General Electric, the global barter market accounted for
S550 billion in 1979, or a fifth of the world trade. As the global economic
recession has deepenond over the past three years, countor-trade transactions'.
have risen as high as 25-30 % of world trade.
127
20
..
*■ r
On
1;' -1'
C. 3 -
2^
7 .
5
. J
19.6
•5
?. 9
6,4'
21
16 /2
1.8
Italy
3
Canada
5
1,9
2,6.
USA
frg
U.K.
_ France
J ap'an
Netherlands
3 >9
- “5
> • c.
0,9
15
20
2
4/2
' ,000.4
50.1
209,0
9.7
9.2
7‘. 5
7.2
4,2
199.5
161-.0
155'. 2
8>,6
•
69,5
3-2
32.. 5
1,5
31.9
14.5
11.0
10.0
91.1
1-.5
0.7
0.5
0.5
4.2
Switzerland
2
Belgium
1
Sweden
i
Rep. of Korea Others
2
Total
Excl. USA
73
2.0
o.5
0.4
—
1.1
0,2
0.2
■—
0.5
> *
4
2
. 2
2
12
54.4
27-3
109
1,074.8
49.9
Total
199.0
100.0
200
2,155.2
100.00
200
Source s
1,3
l-<6
Calculated from "Fortune'1 s Listingsi'of leasing Induatrial corporation
Next page see
top 100 Commercial Banks by country
a
Q
4
4
i
4
i
TOP 100 COIuiLRClAL BANKS BY COUNTRY
N6i"of narijis. . Ass^rbs ..... .
As s © "t s
'Japan
"USA
France,
.ERG
U.K.
I tai y
Canada
Ne therlands
Swi tze rland
Belgium
Spain
Brazil
Sweden
Australia
Hong Kong
Iran
Ihdia
Isreal.
Mexico
Austria
24
12
8
11
5
8
■■
1,097.6
850. 7'"
50. .2
164.5
544.5
258. 1
5
4
5
4
5
1
5
5
1
1
1
1
1
1
14. 9
11.'6
TO. I
7.9
5.9
5.5
5. 7
5.22.3
240. 6
160.4 ■
141.9 ■
100.2 ..
67.5
65. 1
64.6
60.0
52. 1
25.9
20.5
19.2 18. 4
IB. 2
,
t
% of ;
Total .
(Dollars) . - Profits
88. 4
91.2
55. 3
45.9
42. 1
, 29.6
1.5'
1.51.5
1.4
1.2-'
0.6
0.5
0.4
0.4
0.4
54.5
2.5
12. 8
12.2
6. 7
5.5
5. 1
7. 1
■„
1.1
1.9
4.2
4
4
1
4
1
1
4
20.8
21.4
8.4
10.8
9.9
6. 7
8. 1
0.6
5.0
2.9
1.6
1.2
0. 7
■T.7
—
——
0.5
0.5
1. 0
—
1.7
0.4
4
«
4
4
4
4
4
4
4I
4
4
4
I
4
4
<
I
'4
4
-4
4
I
4
(
(
t
4
■SOURCE: Computed from "BANKER" , June 1982
Source of the article = John Cavanagh and Frederick F. C1airmont e,
i.-^E.2J!!:-Qorporation_to_Con^lomarates_^__A Review_o_f_M_ultiin 'The Otherside', May 1985, p.29 to 52.
oooooooooooooooooooooooooooooooo
o
2
P
Q
g '
g
O'
3
ISi "BOCUiiENTATiON CENTRE
Post Box 4628,
Bangalore-560 046.
'' §
§
g
5
SoOOOOOOOOOOOOOOOOOOOoOOOCOOOOOO
I
t
I
I
1
4
I
CURRENT PROBLEMS SERIES/
■'
3 .Foreign Aid and MultiNational Corporations.
??gKEIGN AID .MULTINATIONAL CCRP<HATIONS(MNC):
A BLESSING OR A CURSE ?
The problem of Foreign Aid as well as the
investment by the Multi-national Corporations
(MNCs) is very much on the forefront these
days. We ?iave gathered here facts and figures,■
which can be of help for information and
study concerning Foreign Aid and MNCs. Ref- crences for these facts and figures have been*?
indicated £-fter each paragraphs. .
;
INTRODUCTION
Private foreign investment and foreign aid in India has been a matter of
high.concern to us. As in the case of every other developing and under-deve
loped countries cf the World, the concern has been on the side effects of
such investment.
India’s desire for rapid industrialization in the absence of measures to
strengthen tao structural base that can sustain the increased tempo of deve
lopment, has given a new impetus to the demand for foreign capital and technologv; and the investors u'-v..,- taken full advantage of such knowledge.
The total, assets ;• ? MNCs in India, with 538 branches and 202 Indian
.subsidiaries tool at l.s-2-5"5,20. crores, according to the latest study by the
government. The 'P3t bvlz of these ccmpwnies were British and the US, the
study revealed, reports T-Tfl'k Source: Economic Tir es, 23/5/75) •
According ho the above, study-the foreign ccmpuiies remitted abroad as
profits or as dividends c. srui of Rs.71_.46 crores in the two years,1971—72 and
1972-73( Source: Economic Times,23/5/75).
As regards foreign trade. the.ye-’ r 1970-71 was characterised by high
exports and lowering imports.- Exports rose by S.@j and amounted to Rs^-t.5^00
million. Expansion of national production led to a reduction of imports to
Rs.1,62,00 million. The trade deficit in 1970-71 was Rs.976 million, the low
est in 15 years.( Source: Soviet View of India 1957—75,Edited by Zafar Imam,
Kalyani Publication, 1977,Page 150).
As for the foreign aid, it is a reality that the amount of real help
from overseas has b?en declining annually. It is a reality that an increasing_amount of foreign aid is not given fa? but lent. The governments of the poorhave no options out to accept these leans. But their debts are slovfly_jprua±fying their economies. For the accumulation of repayments onjirivate loans
raised, and on aid loans, is fast becoming'7lmpG'ssihJ^---to ae'et.( Source: New
Internationalist,No.35,January 1976, Page,-26).
THE EXTENT CF SUCH CONTROL
At this stage, it woulclxbe;interesting to know the extent of such a in
vestment . Foreign investment and control which began with the British East
India -Company? has peri'etrated inio^eaiJyh.uver.v_industry - private and public
- through the" eo-callod collaboration agregnents_..JThese agreements which
amounted "to lust 50 in .1.947, ha<> reached, 4.244. by Oc tober 19.74 and are_increa.
sing till today (RBI Study, June 1974)They inyoite not only Tata ,Birla~and"
-other monopoly houses, but also the naHonalxseo inuusv.-ies. For example,HMT
which is
.supposed to bn -i?-.- enows is.-J’-v. .m x.. re
s than 15 collabo-
and Japan. As Tot our gaint public sector undertakings like Bhilai,Bokaro
Steel Plants,IDEL etc., they are all Russian collaborations. In short, the **
hold'of foreign firns and investment, whether through loans cr through direct®*
investment, in big industries, mining, plantations, banking, is particularly 1*
powerful.
( See Economic Times, 1-lay 25, 1977?.
m
To look into the exit:.'
lable with us:
of suoh control,
us lock into the data aval-.
" From 1951 to 1974,.. - fing.tb-t 4710 f'~r~!-gn collaborations have been
approved. Oct of tint. 1274 xk~!
je_U4 --ld 729 from the USA and the
USA. collaborn.tior.* ■.o now happc? Ing in a quicker fshion. On the 31st
March, 1974, t/wx. voie, according jo a . ■ cation answered in this .
House, 540 branches of foreign companies wore operating in India of
i*.
which the UK hid 2 319 and the USA 88. As on 31 I-’arch, 1974, 188
Indian subsidiaries cf foreign companies were operating in India. The
total assets of the MJCs in 1972-73 were Rs.2,921.8 crores.... The
Span Magazine of 1J70 refers that these MNCs have their gross sales
(annual) which are larger than these of most of the soverign states
of the world... only 22 countries in the vorld bad a larger GNF than
’General Motors' . The top 50 MNCs had total sales of $ 538.3 Billion.
This would amount pp Rs, 500,000 crores. The total GNP of all developing countries, according to World Bank Atlas, as of January 1975, £,
was only $ 509 Billion.11
( Source: Lok SabhaDebates,Vol.LX No.25,April 15, 1976,Page 200;
r
While answering a question Mr.HN Mukerjee.MP was telling
these farts).
*
"In for a penny, in for a pound" sums up the steadily increasing flow
of private investment into the developing world. In 1974, it was $ 12.000
million and, near as or equalled, all the aid programmes put together.
(.Source: New Internationalist, January 1976,Page 26 ) .
®
•
41
- 4
At present al/o, the official policy is clearly in favour of offering
to foreign private iayi,tal greater scope ! This is indicated by the refine
ments and modifications in the Foreign Exchange Regulation Act (FERA) and
the flexibility obsjrted in its application. Liberalisation of the industrial
policy and easing of restrictions on the growth of the private sector also
provide expanded o/ppo'tunities for mutually profitable collaborations deals
between Indian an$ fo.’eign business interests. The foreign investor is not
reconciled to di?;tinc;ions between priority and nor.-priority sectors andgoes
by profitability alom. The collaborations agreements approved in the past
year ( in 1975/) stil, covers items like shoes, pnrcelain, table-wares,
squash racket^ and hoiels, and have not extended to areas that are of high
' priority to~?ndia.( Saurce: Indian Express, October 26, 1976 ).
®
®
®
4
4
4
STRANGLEHOLD CF DEBTS
4
‘
us now see bow much the foreign aid helps us. Theoretically, aid
loans pre given insteal of grants to ensure that the money is spent wisely.
But E/ny of the development plans which the loans finance don't have commercial, but social returns. For the building of schools, clinics or clean water
wells greatly helps the ordinary people but doesn't provide the wherewithal
to pay off the loans .
'
By the end of 1974, it was calculated by the World Bank, the developing 4
world was having to send $ 12,462 nil lion in scarce foreign exchange to the
4
Western, world to service its debts. That Vane year, official aid in the other . 4
dJreg.4J,pn .amounted to $ 11,300 million. This means that despite the aid pro4
gy^mL'ieb, more money was flowing back to The rich world than was leaving it,
These repayments amount to approximately a third of all the money earWhil’d world from their exports. Small wonder that some of the most
indebted countries are beginning to sink beueo+h the Durden. To keep afloat
aid-giving countries and the international banks have
.xliowinc short-
I
tern postponements of national ropaynents. The reported 'rescheduling' of
del':- builds up the obligations of the debtor country to its creditors.
( Source; New Internationalist, January, 1976, Page 26 ).
In.via is one such country which apart from iiviting foreign private
investment, invites other countries to lend huge if suns of money to run tfcm
economy of the country, Thi- stranglehold of forign loans and investment
have hindered our dcv-'lopront. And this perhaps 1- He reason that we are
unable to have ary say. when the money thus pourir; into India, happens to
be utilised for n on-priori-1;/ rector.
some iK-mas-Tiy; facts
*
Luring tie lecad : iJ. th i _le.,w-_-ye_',i_ c endue ted a sur
vey of xorcigA financin'.
cec'. nxca colletr.di. .1 -x. Indian Industry.
This appea±ed _.n the JL31 _Lt'll■ - tfiLJSX__ v-'■' V'7. _ The .indy confirms that
Indifc. hen been a ‘net looser'. The net cutflov of foreign exchange during
the" perl’t'i 196‘.~70 qi has
jen Rs.891 crores, beaus? imports by these com
panies far exceeded exports. According to Fro:. Lieb:: ol Miuron,"during 194861. the, forei-:n.inves-r<rs as a whole b'd taka. out ~f th- country's reser
ves three tf: :es ,s much
-ev directly cont.-j b_ '■ ted. This .situation has not
changed one bit Ln the 70s",
*
The then M.nister for Industry ( Mr .Id bi ) agreed to a question in
the parliament (the question raised by Mr .CI Chandrappan,M .P .) that in the
tooth paste indrtry, the I-ipCs control a pro ortionntoly larger share. The
Minister also sood that in the organised seror, except one manufacturer,
the remaining companies have substantial fcrijgn equity ranging from 45% to
IQQzk—.
(Source: Lok fabha Debates,Vol.LXIV, No.11, .ugust 25, 1976, page 77 ).
*
According the Minister (Deputy) of LawJustice and Company Affairs^ in
answer to(Nr.CK Chandrappan,MP1 s question) ihe paid up capital of MNCs in
India in 1974. AtL-K.one up from Rs.129 to 144.6 crores, even though the gove
rnment bad go-’ only 63 balance sheets out 13' Indian subsidiaries of MNCs.
( Source: Lo‘ Sabha Debates,Vol.LX,April 6, 976,Page 22 ).
* ,The_''JcarCQla Export Corporation Charges the 22 bottling plants a ro
yalty fee -’f 7 paise per bottle of ccea-cola, The present rate of production
is about
crores bottles per annur. The ful. capacity of the plants anounh
to arour- 130 crore bottles per year. The royalties now earned annually by
the cor oration works out to about Rs.3.5 cror?s of which certain per centage is Allowed to be repatriated. ( Source: Indian Express .April 25, 1975).
■»
TMet.otal
fhreign investments in the wjrld has more than doubled
fren^ 20.7 billion to 3 64.7 billion in 9 years from January 1 ,1960 to
JaniAry 1 , 1969.
(Source: The Challenge th US Douinance of the International Corporations,
Riiner Hellman,Cambridge Univ.Press .Dunellen,N .T .1 970,Page 3 ).
’ According to the newly published World Bank Atlas the annual per capita
GN1 of the industrialised countries of West aversget $ 4550; production
grex at over 4% and population at less than 1% Per vuoTj Per capita GNP
grev at a steady dip of 3%, i.e. and increase of almost 3 150 per- person per
year. In the developing countries per capita GN? averaged g 116 a year.The
average rode from S 102 10 3 120 between 1960 end 1970, but in 1975 it was
clos 0 to•3 116.
( Source: Foreign Aid to India.Brojendra N .Banerjee,Agan Prakashan,Delhi
±S 1977,Page 1?).
|
* The biggest single misconception about foreign aid programme is that we
send non»y. Wo don11, .Foraiiin_ai.d consists, of American equipment., raw mate,rinj.s_,_ ex nor t_SBxyiC£iS-.a-n'l- f 0.0a-all-—provided .,£n£_‘?_£exm£m—uevel opment pro
ject which ''Q ou-selvp.G-ff'Ni^A; .51 *■-- lurncve. -3/-> cu ATT ■fund.s are sjpeiit dire
ctly in the 11 J \
' '■ ■r?f’ ‘‘•nerican firms ■ j
t
ana 50 states rec? ?ved 1 .5 million dollars in A..D funds fjj, ,
“
'
•*•'•
4T
lied at. pi-.-j 0
?--.d ore ramne(Source-Il -. und.A-mmls-x.. tp- -,.n
US'-'.gency fcr International Developmen--, c’i'?ted b\
ri.t.- :‘ . '.'id as instability factor* in Im■.‘act. J- v < ,-Gep t 1 5 , .
T.
"
»•
•"
Tl.e T. has oa.’ ■u; ? >.jd in
-cl o"v, Ov’intri-s increased their
export volume by '
.c
”
rt■ u'.t.'.n:; ea'nings rose only
®*
by 13$. Du-.i: . '-bi sa> - _
th yico trd x for imports manufacturers
frcr:. rich -c: .r;
e ' _•*. ' ; !.-■ ■■■.. .. term- ) by Ifh. it is therefore evident ®»
that 1. .‘ar?
1,'f
.
?■ ciio-r v' o:.”’ volume did not ompensate for
the In.':.'- .an
'ce . .-.
"■.Jo.4- ; countries ha I to ay for imported
goods. L’.J_'.52
’’ku’ ■ ■- 1" t-.- trac tors. 7Q$ of the world’s^
r.pon?.e :-i' e
_ . _/d.
. kl ,ustr;-.vi pu1ioa_vj 95 of the industrial^
output
•■■ ■'..
'
of th ' :.or..d population-. in 1 70 average return
Q.'k_U:-_.-k .?-■ 1 . 'tr tr- ' r
elopkig countries was 21$, twice the rate of inves-^"
traent in th: developed countries.(Source: Soviet View of India 1957-75,
Edited bv ’./afar Imam.Kalyani Pub ., 1 977,Page 149-150).
• <»■
•*
. '.-.'.’.i‘g ■'c’t5: German Private Investment in India incmased by Rs.1.89
mlllicr.. Since ?957, altogether Rs.676.14 million have ben invested by the^R
German 1'rivate Industry in India,apart from re-investment, which is not
included. Ihb major part of the investment have been in th branches of
4^
machine building induetry, chemical and pharmaceutical ind stry and automobile industry.
(Source: Eastern Economist, May 15, 1977,Page 908)..
*“
<f
MICs are also known to cheat India in various cases fowd during the
contzio of investigation. For example Philips India Ltd., had their licenc-'’ capacity of manufacturing 8 million lamps and chat they wire quietly
manufacturing over 20 million lamps, which probably the government has
regularised. They startei manufacturing over 20 million lamps without the
government’s permission.
(Source: Economic Times, May 7, 1975 )
*
It is stated that 2 5 of the sales of pharmaceuticals in India goes tc^_
24 foreign companies operating in this country and they cor.tro, 80$ of the
sales of vitamins preparations and 84$ of the sales of antibiotics.
(Source: Economic Times, l-nrch 51, 1975 )•
Referring to the crofits made by the trans-national, the Rnorma (GDR^R
y says that between 1969 and 1975 direct •iJivest-<^
feature ser.-ico) comm
ment by u3 monopolios in -.ho developing countries totalled S 9,100 rui 11-i
The profits sent, back tc ~ho T:F totalled about $. 19.4QQ mil lien - norp. thaa^
d niihl o , ,
( Source:. Economic T:i
s. November 15, 1975 )•
i
For the third world, ‘iied: aid generally means having to pay between
2C$ uo 5Cf> mere for the gccco than the competitive world market level. If
8C$ of all country to o
7?y aid-giving was tied in 1974 this brings a
reduction in real value cd '>.2,100 nillion( 2-curce:Neu internationalist,
January, 1976).
■1;C foods
aid—giving budgets at tin- ■oi‘' icit ? market value. 3ut the value of surplus
goods or food to the ei>_-1‘iV’r is nothing like this sun. For giving away <
_ihis excess food economises on storage costs. And if vhe mountain of sur-«
plus food had been sold normally, the market value would have dropped
,
dramatically. Because cf this, the real cost of aid flows should be redu-,
ced by a further 1C$ of the net total.
<
(Source: New Internationalist, 2 January 1976 ).
t
WET DO TJIEY COLLABORATE
ken investment in India so attractive to the fore
x
* -J" ' ' ■ *?’■' -
•
■ .■ '
" ’.
t
the favourable returns in India as con pared to that in most other developed
con.; tries like Uli'etc., where' the# get only 7$ as against ‘ 17.5/^ in develop
ing countries like India,
(Source: Economic Tinos, Decenber 5, 1975 ).
India also offers enorrous untapped resources - with a fairly developed
infra-structure, and of course vast, and low cost man-power (cheap labour ).
Not only docs India supply rua material resources tn be exploited by foreign
know-how, but also big? pr<■ '' tV'lo narrow market th-, can be manipulated and
controlled with the!.’ f. / blf ;iccted advertising. (Source: The Rally ,Dec.1 976).
An e-rcoll&u:; detni. -dy 1.7 the -l.lted 13.tic.-~- Gcnference on Trade
and Devc.l'n-:pnt pv.u tn■ '
11-1 mi.grcr. 5?developing world
to -vhp Wa, in 1970
'J./... l.vAin_-'Luhin--.' aprovide, .the
USA wit]- the equivalent-..vi.. '
In_t-;_jf_ —.-•.yvi'.r. developaent
assistance from Washing ~q-' wo: .- 5>."5.5-X> million. Since then, the amount of
American,aid .had-gone down, and the number of migrants increased. Prom this
it is reasonable to maintain that r through the export of the cream of
skilled personnel the Third dr'ld provides more real, hid- to the West than
all the aid put together.(Source: .lev Tnt.rnaticualist,Jaunary 1976).
TO —
SUM IT UP—
-----
’
'" ' '
. :
t
- •
■
— Today MHCs like ShejLl,Id,'IBM,Cblgate-Polnolive etc., are one of the
nos-t basic ,and powerful barriers. $o world justice.
,
— They concentrate wealth dthin. the..,rich sections' of nations like USA,UK,
USSR, while impoverishing countries' of Africa,Asia and Latin America,
which-are ' poor.
— For thesKNMNCs the ’third world'’ including India' is merely asource of
ra.w materials, cheap-labour and. protected markets-to earn huge profits.
— Their average(MNCs) rate of- profit in the third world., is higher than in
developed capitalist countries. The ration of the bulk of profits to the
balance capital ebst obtained by the US MNCs in the developed countries
is 7.9^ and in the developing countries 17.5^.
— Being interested only in maximising profits, which they can do only at
the expense of poor peasants and workers in these countries.
— Thus when poor nations require a highly labour intensive rural based
technology,' the MNCs offer only capital intensive labour-saving know
how, which yeild enormous profits but leaving the people of third world
poorer and poorer.
— Not content with industries, they also invade agricultural sector/agricultural universities of poor nations by way of offering modernization,
development etc. Thus the famous ’green revolution* was backed by Rocke
feller and Ford Foundations. These two transnationals include'ESSO,
Caltex,Gpod Year, Colgate and IBM. They then tighten control by combi
ning food production with processing of hybird produce,baby foods etc.
— Their combined total sales exceed the GNP of every country except the US
and USSR and few more countries.
— Throughout the poor countries, they market the same dreams through their
well oiled machinery of mass-media.
— MNCs cater to the taste of the^fewjrich and hoodwink t heXpoor but manage
to reap more and mord profits.
■'■SIUJGiL'aiQlJ.
To conclude, the 'Trojan Horse* of foreign capital and know-how brought
inside our- country by the Indian collaborators, makes an unholy alliance
with the Bullock Cart - our backward rural economy dominated by the landed
aristocracy ... thus holding- the country in its constrictive grip. By the very:
logic -f th:‘unholy - 3 ." ■■
' ■
--is -wt to be a process
6 of pai’asitio '
that is ^^zked by jjr-oduotion BY
THE FEW FOR’ THE FEW, with no regard for^fehe g§aaB& neecte’jrf the ms sea.
And to quote Ranjit K.Snu," No ono is in. a mood to disturb this equilibr
ium except the impoverished peasants, agsriCHitura 1 labourers, industrial
workers and the multitftde of unemployed and underemployed 1 shadow of
human beings'.
***** *****
yr
FU-R-'T
H E.R.
MS M
MV MV MV M•
—
.R. E A— • —J r ’■ G :
«■
••
1. Computers - Inconclusive Tussle, Eco.& Pol.Wkly, July 5, 1975’-
2. American Multinationals in the USSR : Trends and Implications, Eoo. and
• Fol.Wkly, July 19, 1975.
3. Destruction and Creation of Development Alternatives, Pter O'Brien,
Eoo, and Pol. Wkly, August 2, 1975.
4. Behind the Facade,RS Ganapnthy,Eco.& Pol.Wkly.,Sept.6,1976.
, • . 5. Multinational Mischief ,3co.&Pol.Wkly,March 24,1973.
6. Spurious Solution^,Eco.& Pol.Wkly., Oct,13,1973.
7. Futility of Monopolies Commission,AN Oza,Eco.& Pol.Wkly,Jan,6, 1973.
8. Unaccountability,Ralph Nader,Seminar 179, July 1974.
9. Foreign Investments in India,Michael Kidron, Oxford Univ»Pre0Sf 1965•
10.Aid As Imperialism,Teresa Hayter,Pelican, 1971.
11.The Arms Trade with the Third World,Pelican Books, 1975.
pOG w
Centre
ATVOHJ
When one speaks of-multinational
corporations ono often has in mind
the-big industrial or financial
concerns. A good many people nay
not be aware that some of the
biggest and most powerful multi
nationals are operating in the
food sector. The present article
gives ar overall view of the
domination exorcised by a handful
of corporations in this particular
field of economic activity.
85 Per Cent OF WORLD FOOD SUPILY CONTROLLED BY 5 PRIVATELY OWNED COMPANIES;
The World-Trade of Grain — The Most Important Raw Material for food
supply in the world — is controlled to 85 per cent by five privately owned
companies. Four of them are American based. One'of those is alone controlling
more than 50 percent. Those companies have their own world-stocks and world
wide distribution systems. They have close links with the American adminis
tration, for example by exchanging of top adminstrators with the United States
agriculture department. NASA does regular analyses of the earthcru's.t by
their satellite system and can because of that tell the companies, how the
harvest will be in the different parts of the world, in the Soviet Union,
as well as in the third world, which is'very useful when they plan their
production and set their prices.
'
, •
One of the American grain companies - Cargill - has close links with the
Chase Manhattan Bank, one of the big international loan givers* The bank is
dominated by the Rockfeller family and David Rockfeller himself.
He is also the founder of the Trilateral Commission, consisting of 250
of the economically most powerful persons in USA, Japan and Europe. Members
of the Trilateral have also kept important seats in the last American Adminstrations.
ROCKEFELLER FOUNDATION'S LINK WITH THE BIGGEST COMPANIES ;
Rockfeller Foundation is one of the main forces heind the "green
revolution" which is the TNC strategy for food production all over the world
in the future. One of the biggest oil companies in tho world, Exxon, belomgs
to the Rockfeller group. Oil is of course one of the most important products
for creating the so called "green reolution"-, as a raw material for pesticide
and fertilizer, and as energy for the machines and agricultutre and food
processing factories.
And this Exxon is ir itself the biggast producer in the world of,
pesticide and fertiliser.- .-JS&siues, RockfclK-r Foundation and Ford Foundation
havo close contacts with producers tractors anc other machines for agric
ulture .
TEE ROLE OF FAO ;
FAO cooperates in a s.c Fcsticidc-group with a number of cj-cmical
companies, for example British Portoleum and Shell, Ciba-Geigy, BASF, Bayer,
Borden, Cianawid, FL'C, Hicchst, Hoffman, LaRochc, Imperial Chemical, Phillips®^
and Sandoz. There also exists an organisation called International Cooperative
Program, consisting of about one hundred private companies in connection - WF
with food-production. Eoi'f man-LaRocho is a member even there, but also NostleiiF
and the Swedish company Alfa Laval, with processing technics and Tetra Pak_,
one of the biggest companies in the world production of prepacking material.
FOOD MANUFACTURING AND MARKETING DOMINATED BY A FEW COMPANIES LIKE UN3XEVER
AND NESTLE -
*
In food manufacturing and marketing a group of very big international
companies dominates as 'well. The 150 biggest food processing companies in the^,
world had one third of all industrial processing outside the socialist states^
states already in 1976. 58 per cont from the 86 US-based companies, 27 percen^
from a relatively small Igroup of English companies, 6 percent from twelve
Japanese and four percent from two Swiss companies, and so on. Unilever, hallo*
English and half Netherlands-based, is the biggest of these companies with *
500 daughter-companies in 75 countries, with their own plantations, transport^
and fishing fleets, plants and land distribution systems, marketing systems
and so on; totally more tian 300,000 employed. Unilever control 40 percent 4m
of world trade in the important vegetable fats and oils.
-
The second biggest company is Nestle, the Swiss company, Unilever and
Nestle cooperate close by. They own together the originally Swedish trade- mark of Findus. In West Germany and Itlay they own factories together. In.
Norway, Unilever's Northsea-navy transports fish to Nestle's canning factories
In countries where Unilever is big, Nestle is small, and the opposite. All
signs say that they share markets and avoid competition.
The food'sector in all is maybe the most important sector in the world, %
if we also count the metal and machine industry, chemical industry and energy
sector, which are involved in food production. In the centre of this sector
s^tand the five big grain companies and about one hundred big companies in
processing and marketing. They are all linked with the international banks,
which more and more direct the economic development pf the world.
THE LANDOWNERS OF Ul'i'lihRDL'-ELOPLD Ac.L DEVELOPED COUNTRIES ARE LINKED
TOGETHER ;
By the highly technological production of food, the landowners in
underdeveloped and developed countries are linked up with the international
capitalists; the landowners who traditionally are a ppwerful political
and financial pressure group with great power over the individuals. For
instance, 45 million people are in fact migrant workers and unemployed,
underfed, starving inside their own country in Brazil, because of the land
reforms in the interest if the capitalists. Coordination and concentration
of power is not less in other sectors, however. Only thirteen aompani’es
control more than 98 per cent of the computer production in the world. All
these companies have cooperation agreements with each other. Some of these
companies do only produce copies of IBI.-.'iacl.iiios. IBM itscl produces more
Than 60’percent of all computers, that means the hardware.
IBM is also now expanding rapidly in the soft-ware sector. Computers
and electronics is the most strategic sector for the industrial development
in the future. It deals with information and knowledge as such. In this
sector world monopoly is already established in practice.
The luquidity of the biggest transnational is about ten billion US
dollars. If they think that the course of the adminstration into a very
difficult situation just by some telephone calls. Evon the financially
strongest administration in the world has difficulties with the international
flexibility of capital.
AN OVERALL PICTURE = A NSW ELITE IS EMERGING IRRESPECTIVE OF CAPITALIST
(OR) SOCIALIST' COUNTRIES ;
The total picture is this : 200 of the biggest transnational today
produce one third of the total production in the world. About 1000 companies
control half of the world-trade. And there exists about 1000 agreements
of cooperation between transnational companies. (These figures derive from
a Swedish expert working for chemical workers union in Sweden, Lennart
Nystorm).
And novi we are talking about single companies. But to an increasing
extent we can regard the management and the capital owners behind the trans
nationals as a cooperating economical elite. Which increasingly gets c-ommon
interests with the bureaucratic elite in communist states.
This international elite also gets increasingly possibilities to dictate
the resource allocation in the world, allocation between developing r.mmtr-inn
and industrial countries and between different groups of people inside these
countries.
less important issues ; c?\crc is uf course competition in a lot of
different ways, in difi’r .’ent sectors of the market, and in different
parts of the world, But m the rain and important principle issues, they
do cooperate or at lea.'-t work in th - sem; direction. Host of all, this
is the case on the nee ; ■e.sic issue of all; the issue of the resource
allocation. BcSicallj
are fightin.. fur aras unjust allocation as
possible. Nowadays this striving is cupressca in the new and very advanced
ideological touc'cnc-,
;• jinc-s callc-c. new conservatisi;, sometimes called
new liberalise.
This very advance’ idbologica.1 tend; oj _. created. by the TNCs. In
Sweden they wore or? u. ■. nru dir. ■ 1> i: . •-! .u : in election campaign '76
and '79 through ti 3
. c ui-'s
:.cit?ie'i;'.
There was a period than semu u:'.' v.s ?
-It th a ; the transnational
companies should die as th ■ dinosaurus did ' -afore icetime, because they
- *
became unable to control their extremities, tentacles. But science and
technological advancements and even bchavoire psychological advancements have#
made it possible to manipulate the tentacles of these big, privately
*
owned, plan economical units very efficiently.
I consciously use the expression " Plan Economical ". Because that is
what it is. They have reduced the influence of the free market to a marginal „
ex tent.
*
THE EXTRAORDINARY PO'-'lih OF TEESE NEW ELITES :
World-Trade statistics are based on the trade between countries. These •
statistics soy nothing about the.- trade inside transnational companies bctween<B
their daughter—companies and so on. k series of future studios in Sweden
’ .<1
about " a new economic order” tried to come to an answer about the influence
of the transnationals, but failed because of lack of statistics. The figures.
I have used here tire of course inactual and insufficient. The transnationals
have — I am sure — even more power than these figures describe.
■
And what I have described is just power by ownership. But the transnationals also built up power with adminstrative moans. Intcrnatiional
Organisation of Employees (lOE) and International Chamber of Commerce (ICC)
arc examples of that, as for example the Trilateral Commission I mentioned
before, which is probably the most important example of existing informal
organisations. IOE-have member organisations in 83 countries. ICC in 101
countries, US employers are of course dominating these international
organisations. Among the I’lemhors we can also find enmployers associations
from South Africa, Chile, The Philippines, Indonesia, Taiwan and son on —
associates who are probably not more humanistically oruented than the
dictators who rule their hone countries* A ranificatiow of the US Chamber
of Commerce in Gautdmala, which very clearly expressed its support of the
■reckless killing of all oppositional persons in Guatemala, even hitting
•- the right wing opposition inside the former Christian, Democratic party.
■■ Fred Sherwood, the former president of the US Chamber of Commerce in
Guatemala said in September 1980 to an American Journalist :
-
«
v
fl
fl
4
4
4
~
fl
fl
fl
4
fl
4
fl
fl
fl
fl
*
fl
fl
fl
fl
1
"Why should .--r. ’ j : rri'•
o v. t'v. I .ath squads ? They are
bumping of:"
com-:icr. oux c. o: ios. I would give then more
power. Hell, I wo\ id yc. some cartridges if I could and everyone
else would too... Why should ,we critizc them ? The death squad ?
I am for it.
In this man's factory, four union leaders have been murdered by death
dquads. The death squads are — according the Amcnsty International —
organized directly by the president's security guard, Romeo Gracia Lucas.
Keith Parker, the vice president of the Guatemala Bank of America,
said to an American journalist on the Sth of September, 198C :
"What they should do is to declare martial law. Then you catch
somebody, they go to a military court, 3 colonels are sitting
there, you are guilty, you acre shot. It works very well,"
Thomas Mooney, the actual president of the US Chamber of Commerce,
said to a group of managers in Kew York, in April, 1980 :
" The State Bepartment (under the Carter adminstration) opposed
the use of violence as a weapon to subdue the leftish orientated
groups which seek to depose Guatemala's government.. There is
another point of view that contends that the only feasible way to
stop comminism is to destroy it quickly. Argentina and Chile have
demonstrated themselves as nations, which use this approach with
considerable effectiveness and have gone on to become Latin
America's most stable and successful countries.
One of the members of this US Chambers of Commerce in Guatemala is
Nestle. And any question to lir .Phillippe de Week, as a. members of the board
of Nestle, was : Arc you prepared immediately to demand Nestle's withdrawal
from membership in this organisation, and do it publicly by advertisements in
the Guatemala press declaring that the compnay is withdrawing because US
Chamber of Commerce is supporting assassinations of union leaders ? I Got
No Answer. He promised to inquire the circumstances and come back with an
answer. So the question remains. IUF and its members organisation all over
the world are waiting for the answer.
In the global power concentration we find the basic reason for injustice
underfeeding and starvation. Here wo also find the basic reason of the
economical crisis in today's world, in developing countries as well as in
industrial countries, in the east as well as in the west.
SOME MORE CONSEQUENCES OF THIS POWER CONCENTRATION :
Power concentration moans that they who have power and capital, collect
more and more capital and power. They use their power to press the product
ivity up and the wages down. Then the demand is reduced. The investments
decline. Unemployment, suffering, underfeeding and starvation in the world
is enhancing. At the same time super abundance is becoming more and more
bizarre.
*
•*-W
In every covntrj they try tc reo.uta coses or weg s end incrcaso the A
productivity. Ths result is ••. her .'ar unu hr.rdor fight for the export markets.
The fight for expert markets, the social r&stlos■•ness ai-d the growing clfra
contradiction load io protectionism, trade war end weaponry war. The armament:.
is increasing tho suffcrin., and contradictions between social classes and
nations nad taken us faster a.id faster in direction of tho war. A war which
will be the catastrophy cf tho cilivization, a period of horrer and dosporation, under the clove.-; from the nuclear coion:.tions.
WHAT IS THE SOLUTION ? LAV-;. FH.I7ATE. AG^C.ILS A ROLE _?
The only way cut cf this devilish circle is an international union
and political struggle S'cr fairer deal, He must make it impossible for
the financial elite of the world to separate the wage earners in different
countries from each other, to put . up the. people in < efferent countries
against each other,. We must make it impossible io move employment between
countries' just in order to exploit cheap labour. The international division
of labour must be nosed on rational ground. The poor'people must gain the
strength to produce for their own needs. New demands must be created amoung
the poor people in developing countries, as well as in tho industrialized
countries, in tho east and in tho west.
’
The democraatically chosen national governments are a. minority of the
countries in the world, and the super national bodies, which are built up
with much difficulties, are insufficient instruments.
Only broad movements sr.oulig tho people itself, unions, roligious and
politxcalmovomonts and .00 on, can counter balance the financial elite,.
World counci., of churches, the catholic church, Amnesty International
and other movements can play an important role. It is, however, the international movement of the workers which has tho crucial fate, in its hand.First
of all, the international movement of the unions. .
'}
We must go together in
international struggle in order, tc froce a more
fair deal from the production, inside nations i-.rd between nations, in the cast
and in the west. But in that struggle wo have :■ cooperate much more with other
movements. In the Coca-Cola-acticn in 1280, 1
cooperated very closely with
Christian groups in the USA. Wc have noticed «hs very important role of the
Catholic church in Folan: and in. Latin America.
The first stop must bo to broaden tho union right to negotiate, in countries
-where they de not exist, and in dcmocractic countries where they today, in fact
aro threatened by reactioncr? political regimes under th.:- ideological parachute
of now liberalism and new conf .rvatism. The only accurate method is tho old
classic one : strikes, blockades and boycotts, but on an international level.
That us what we, inside IUF have mounted, in our congress, last hay in Munich, and whet we have already practised, for example in the case of Coca-Cola in
Guatemala. The action involved 70 unions in more than 30 countries. More than
fourteen unions were prepared to stop production of Coca Cola, when tho company
suddenly gave up its resistance, bought the- license factory and stopped the
murdering.
0
0
—
®
•
fl
*
®
*
fl
<4
fl
fl
g
’’
4
d
*
*
c
*
(
,
(
i
1
1
1
CAN WE FIND INSPIRATION: li
THE SWEDISH LODEL ? :
I am convinced that the financial elite must bo forced to accept
effective formulas for international negotiations with a strong inter
national union movement. That is the only way out of the world's crisis
today and in the future.
This difficult process will bo easier if human and idealistically
oriented■ persense insic.’. the financial elite can obtain a broader insight.
That can be what's needed to avoid the catastrcyhy.
What I am talk.me ?.bcv.t is what — of ter cutside Sweden — is called
the Swedish Model, pr.ciscd c: ar. international level. This model did not
cone to us by itself, tut it was not unaffected by our Christian human
tradition and the will to talk to each ether t.r. Niuman beings.
This model cam to us after half a century of hard struggle, strikes
and class conflicts. It come to us when the financial elite in Sweden realizes
that the unions and tl.o workers movement was so strong that it couldn't bo
beaten. But there wore also persons in the financial elite who had idealistic
views. And when this model was established, it became the basis for social
and economic progress without example. Noir, however, the international
financial elite has for great influence in Sweden. And the employers —
during ^vet five years of bourgcoiso governing — seem to have forgotten the
the experiences from the long period of balance of power in Sweden. Because
of that we in 1980 have got our first big conflict at the labour market
after many decades, laid now unemployment is also rising to the level of the
second world war period — however it is still not more than between 3 and
4 percent.
Because of that we now are dependent on the struggle for example in
Brazil, Philippines, South Africa, USA and'son on. We are now standing in
front of the fact that problems cannot bo solved at national level.
SOURCE: Power Concentration and The World Economic Crisis by Bror Pejrus,
The author is a functionary of the International Union of Food
Allied Workers' Association (lUF) headquartered in Genevia.
I S I Documentation Centre,
P .Box 4628
BANGALORE - 560 046.
Private circulation only.
THE CONCRETE EUNCTTONNING OF A MULTINATIONAL
--------------------------------------------
A CAbE STUDY
•
> ' NESTLfi.
e
4
<
4
4
4
<
1
<
4
A TURNOVER GREATER THAN TEE GROSS NATIONAL PRODUCT OF $1 OF THE
DEVELOPING
COUNTRIES OF BLACK AFRICA.
----------------------------------------------J
Nestle is the. most profitable food industry on earth. Bigger than any of
U.S. food giants it-ranks
second only to Unilever in magnitude of
turnover. It manages, however, to be 'more efficient than the other food
multinationals. ( In 1976 it' netted 4.6% profit, compared with UniSever's
3.3 %, General Food's J.82).
It is one of the largest companies on earth, employing over 146,000
people with a turnover (1978) of 19,538 million Swiss Francs' (approximately
£ 5700 million), a trading profit of Sw.Fr. 1556 million (£ 4-55 million)
and ..a net profit of Sw.Fr. 759 million (£ 215 million). To give an idea
of the scale of"operation it is interesting to note that Nestle advertising
costs alone exceed the entire worldwide budget of the World Health
. Organisation.
Nestle
jg the world's • biggest milk processor -handling over 7,500,000
TONNES OF MILK PER YEAR. It is also the world's largest buyer of Coffee
and cocoa and, operating almost 300 factories and 97 administrative centres
in some 51 countries' « it really deserves its title of the "most multi
national of multinationals". Less than 5% of its employees are based in
the home country, Switzerland.
Nestle is. particular^active in the U.S. (whore sales topped S 2000 million)
in Germany (where it is the largest food concern representing some 3% of.
food spending), in France (where it controls 50% of the frozen food market),
in Spain (where it is the largest food concern), in Latin America — par- .
ticularly Argentina, Brazil, Chile, Columbia and Mexico, and of course in
Britain.
Nestle turnover is relatively stagnant in Europe since the company pre
fers to concentrate in the countries with political climate which facili
tates. rapid corporate growth - such as those of Latin. America.
In the Western world Nestle particularly favours the U.S. since, as the
Chairman, Mr. Furer explained, "The U.S. seems likely to continue along the
path .of economic freedom, while Europe risks going in a more socialist
direction". Factories are closing,then, in Europe while new ones are opening
in the Third world and U.S.A.. By 1982 U.S. sales are projected at
S
billion.
Nestje 1s turnover is greater than the Gross National Product of 51
of the 53 developing countries of Black Africa and is, indeed, greater than
the budget of the Zwitzerland Government in its home country.
*
*
I
4
”
<
<
<
<
(
(
(
(
(
IMPRESSIVE GROWTH RECORD
Nestlo's impressive growth record (15% per year increase in sales from
1969 to,19.75)' far- exceeds the growth rate- of most countries on earth and,
indeed,is artificially lowered by the increasing value of the’ Swiss Franc.
Profits, too, arc increasing rapidly. Sharedamongst the 80,000 shareholders
profits for the average investor eoual half the average Nestle worker's wage
And that excludes increase in company assets due to inflation.
WHAT NESTLE PRODUCES
ARD SETLS
Nestle - founded by a German and an American e-.s the Anglo-swiss D»iry
Company - was initially
dairy concern. Out of its P.eading role in
milk drying (discovered by Henri Nestle in 1867) stemmed, in 1950, Nestifs
discovery of instant coffee (using the same drying equipment). In 194-7 it
acquired Maggi, in I960 Crosse and Blackwell and, in 1962, Findus.In merging
with Ur sin a-Fr afik in 197? it became Switzerland largest company.
In more recent years, Nestle has acquired Libby's, a leading share of
Chambourcy,- 49% of I'Orcal ( Franco's. largest perfume and cosmetic combine)
- Author of Ambre Sola'ird ') and Alcon - the World's largest producer of
opthalmological products (contact lenses and products for their maintenance).
Nestle
now markets over 14,000 different products
Some of the leading brand names-are *
'
.
•
Nestle, Nescafe, ideal milk, Milk Maid, Lactogen, Mix-o-Choc, Maggi stocks,.
Crosse and Blackwell, Branston Pickle, Waistline, Chambourcy, Findus,
Le Parfiat, 'Frigor, Swiss Knight, Highland Toffee, Oreal Cosmetic, Club,
Quick, Nesquick, Decaf, Sweeheart , Flair, Brite, Chef and Savoury , etc.
Nestle also has vast interests in hotles, caterings (especially fast-food
restaurants) mineral water, wines and essences.
20.7% of Nestle turnover (1977) is dairy and refrigerated-products, 7.5%
infant foods aid dicrotic products, 55*7% beverage (soluble teas,coffees etc)
9-5% chocolate and confectionery,. 7.5 % Frozen foods and ice cream and the
restx 19.5%.culinary, products.
L'Oreal - France's largest cosmetics industry - is Nestle's most significant
non-food subsidiary and it is highly lucrative. From 1977 to 1978 profits
rose 50% to 200 million francs. Next - at a cost of 270 million dollars comes Alcon which has factories manufacturing: pharmaceutical products in
Brazil, Argentina and subsidiaries in Chile and Philippines.
Nestle has 50% share(with the BELgian-Freic'h International Sleeping Car
and Tourist Co.) of the Eurcst Catering jnd restaurant group which, with
a turnover of S 189 million (1977) ,claims to be the largest restaurant
chain in Europe, serving over a Quarter of a million meals daily .
Nestle - a pioneer of convenience and svn'.hetic foods - jumped a big step
ahead of
-its competitors in 1Q7C when it entered into'collaboration with
a very large oil company ' (Chalr__.ian' s v’ords) to produce petro-protcins
(guaranteed to contain no natural ingredients).
HOW TO AVOID TAXES
'
Nestle has a currous capital structure. It has a Panamanian sister
company , Unilac, which is a holding company for key operations in the
Western Hemisphci'c. It also has Canadian and Bahaaan holding companies.
Nestlda says this has nothing to
with avoidant’ tax. The company, however,
is remarkably successful at keeping de.a its tar dills. For instance,
with a 20 billion Swiss f? arc t'rn.'ver ii 1 ■ • 7 t ■ xes came just to over half
a billion - nine years ~ -vjv ever 300 -*3 Ilion francs tax was paid on
a turnover oi less 1'ian j ' irl::
francs. Ge ntries such as Switzerland
Panama and the sou: ’.•■.'j a:
low ex zones. ?.t is, of course, illegal to
"cook the books'1 by trans.- ?r pricing an order co declare profits where
taxes arc lover but, irnirg holding companies, there are some effective legal
dodges.
Even the business world of Now York and London is suspicious of the
secrecy and intricacies of this giant company. According to Business Week
(in 1973) Nestle is not allowed on to those stock exchanges for these reasons.
Many US stock exchange investors had their fingers burnt when^Nestle acquired
Libby's. When it first acquired a majority shareholding Nestle was investi
gated by the Federal Trade Commission for possible Anti-Trust violation. For
the next two or three
years Libby's lost money. The board of directors
was dominated by Nestle employees who, against the advice of much of
the Business world, closed down some of the loss-mfe.ng sectors - especially
its frozen foodsc- ncerns. (At that time Nestle's wholly owned subsidiary
Stoaffer was doing very well in the frozen foods scene). The shares of Libby’s,
plummeted and, in 1975, Nestle bought up the remaining shares.
Not surprsingly .many investors felt that Nestle had siphoned off Libby's
profits so that they could engineer a cheap takeover. The International
Labour Movement is also cautious about Nestle - so much so that, in 1972,
a permanent international committee of Nestle trade unionist was formed.
MOVING OVERSEAS, TO DEVELOPING COUNTRIES ;
"FAVOURABLE" WAGE BILL.
An increasing volume of Nestle activity is located in Africa, Asia and
Latin America. In 1974 this accounted for 21 % of turnover - by 1977 it had
risen to 30»l % (Africa 4.9 %, Latin America 12.3 %, Asia 12.4 % ) compared
with Europe 45.4 %, North America 22.2 % and Oceania 2.3 %). Though
only 67.6 % of turnover is in Europe and North America
90 % of capital
rests there . The Third World, then, brings in a much healthier return.
The preference for overseas operation can best be understood by a look
at Nestle's wage bill accross the world. In 1974, when the average
Nestle worker in the developed world received • 8101/year, the worker:
in their Indian factories received % 683/year.On top of this. .. the absence
or powerlessness of trade unions in most Third' World countries means that
labour is often temporary and without security.
Worldwide Nestle salaries represent 15.72 % of turnover (1974) whereas in
Africa the figure is 1.6% and in Asia 2.8 %. On average the Third World
wage bill is probably 26-43% that of the developed countries. So the European
workforce of Nestle iiPsuffering in many ways. First, there is a preference
►
8*3
within the rich world. For ths corporate safety of U.S.. Then there
there is the transfer c-f interests to the Third World, and also a
move towards automatic” . In 1975, then, there was a drop in workforce
of 2.3% in spite of <.
increase in turnover.
Substantial expansion of operation in the Ivory Coast, for instance,
increased the capacity cf a Nescafe factory by over 56% and introduced
Maggi Bouillon and coo . m.'.nufactiv'e, threatening the future of 2 big
French plants.
The inventiveness and diversity of Nestle operations in the Third World
are no less impressiv than those in the Western World. They have
developed a wide range of cheap convenience foods using indigenous
inputs; ,such as instant noodles in Asia. They have built up an
enormous market for ice cream in Latin America and Africa and ;-ive
also developed e sizeable market for cosmetic and perfumes. The.’r
catering subsidiary has landed contracts with Saudi Arabia which
entails providing 300,000 school meals per day. In Senegal they
produced groundnut oil ( which is much cheaper than milk's own
oil — butter). They arc alsoi planning a condensed milk venture there.
In Ivory Coast they use local millet and again, skimmed milk powder
tp produce ceroal, 11 CERELAC ", In Brazil, they have combined forces
with the US Firm " ARCHER DANIELS MIDLAND & CO " to produce soya-seed
vegetable protien ( mainly for export — in a country where over 40%
of the population are malnourished).
NESTLE /.ND COMMODITY DEALING :
Since Ntcsle is such a powerful trader of commodities (loading
handler of milk, coffee and cocoa) it is in a very strong bargaining
position. It can woo local authorities into generous concessions under
threat of pulling out of that country altogether. Nestle itself
recognises that " the volume of our purchases of coffee and cocoa are
so vast that it influences the market for these commodities". When
prices start to rise Nestle stockpiles and strongly resists multi
lateral action to regulate proccs. At other times- especially when
prices seem to be at a stable high, Nestle calls urgently for
international commodity agreements. Generally, then Nestle with
.
relatively secure investment and a very low wage bill is able t make
high profits out of Third World Commodities trading.
In the Ivory Coast, for instance, Nestle is by a very long way 'e
biggest customer for coffee. Of 2494 tonnes of soluable coffee.
exported, 2200 tonnes is exported by Nestle. In 1974 Nestle pai the
Ivory Coast 3 395 ( poi’ tonne ) for the raw coffee compared wit . an
average world price of 3 1500 per tonnes - four times higher.
Likewise, in that year, Nestle paid Ghana 3 1135 far cocoa
compared to a world price of 3 2163 per tonne and woxldwide paid
only 57/6 of the average world price for sugar. Monopoly buying
positions, long term conti’acts and the desperation of poor countries
to gain foreign exchange make them vulnerable to powerful traders
such as Nestle. Few peasants or poor farmers would have sympathy with
tho Nestle view that theix- u presence in the Third World is based on
common interests "•
Few, on realising Nestlo-s strength in comn'odity trading, can muster
much sympathy for that comoa'nv's chairman who laments that " a further
unwelcome development is +hc tendency of some countries to use raw mate
rials as a weapon by marinuTatinr prices and threatening boycotts".
And can we really believe him when ho savs " a company as multinational
as ours undoubtedly contributes to the economical equilibrium of the
countries in which we operate" (nhrhens he means "keeps them at rock
bottom".)
By 19',’6 Nestle was ')• ol'cd in operations in 12 African countries making
*
instant coffee, ov< y.r. ' <•>■ arc
condensed lilks, powedered milk, dietPti^
products, bovcrm.os, infant cereals, soups, condiments, refrigerated deserts^
and frozen foods. In Couth Africa it has 10 factories producing JOO products^
and holds 6O-8j % of the S. African market in condensed milk, full cream
•!
powder and instant coffee. Wages there often fall well below the poverty
datum line.
•
«
PLAYING SAFE AND TAKING FULL ADVANTAGE OF ALL OPPORTUNITIES
•
Nestle is no gambling concern. They always prefer safety. Even though they
are one of the largest handlers of agricultural produce in the world today
they themselves have very little farmland. They own not a single cow
in the world, nor a single acre of coffee or cocoa land . They prefer
•to let the local farmers take the risk -- they can then sell their produce
to Nestle. Nestle - b_y b_ping a monopoly or near, monopoly buying
position - is able to control production without needing to own the land.
—
®
In Brazil, then, Nestle’s experimental research station develops the seeds '
for the local farmers' pasture and provides loans for purchase of the
|
variety of cattle, fodder , vaccins, machinery, etc. that Nestle thinks shouldbe used. Nestle will buy farmers' milk and deducts, loan repayments from
the price of that milk. Even, in this way, Nestle loans arc safe.
In some countries Nestle is even able to pick up development grants to make
its operation
even more lucrative. In Nicaragua, then, the government
and the interumcrican Bevclopment Bank have both nelpod out Nestle by
building roads from its plant to the milk-producing areas.
In Mexico, Nestle succeeded in persuading many farmers to switch fdom
their traditional crops to producing milk by offering fodder at. greatly
reduced prices and providing free silos for animal feed storage. Nestle,
likewise, ^as built up milk production in Peru and Columbia. In many parts
Nestle has monopoly milk buying position and so, in 1977, when they cut
back in milk purchase (powdered milk being so cheap on the international
market) the result was the throwing away of huge quantities of unsaleable
milk.
|
*
<
-
*
*
*
<
BABY FOODS
Nestle is the larger manufacturer of. baby milks (infant formulas) in the
world and is most criticised for-its- sales methods in the Thjid World,
Papua Nev/ Guinea, Guinea Bisau and Sv'cded have all banned direct baby
food advertising -largely as a reaction to Nestle methods. In Colombia,
|
4
<
«
<
1
<
4
f
4
4
4
4
(
I
Nestle powdered milks were banned after bacteria contaainatiem.caused
the death of 25 babies.
The criticism of Nestle for its baby foods marketing led to a Swiss pressure
group being sued for libel. Two days before the end of the trial Nestle
withdrew three of the four charges concerning immoral sales methods,using
sales girls dressed as nurses and its responsibility for thousands of
infant deaths or injuries as a conscr-ucnce of its practices. Presumably ,
even Nestle found-the ■ •vidence too convincing.
Obvpusly the Swiss cj"rt (ano ;subse''v.ontlv .n'-n- critics from the medical
world) have boon unconvinced
Metric ’s claim t' at " we ourselves made
every effort to er v: ye r.o;ir '.n1?nt milks are only used as a supplement
or substitute if mother’s milk is lackinc or the mother cannot, for various
reasons,
fccd her baby.
It is now widely accepted that widespread use of baby milk in the Third
World makes a major contribution to infant malnourishment and death. It is
then, extremely disturbing
that the EEC,, through its Common Agricultural
policy, supports directly or indirectly exports of dairy produce -including
baby milks.This, as Nesle
themselves say , helps their export no end.
"It is worth mentionning here the considerable support given by the
Common Market Agricultural Policy , which consists ,inter alia, in the gran
ting of export subsidies on dairy products".
FINALLY ....
A Swiss consumers’review showed that Nestle's white chocolate (Galak)
(which advertised itself as "a delicacy excellent for health") has no right
even to call itself a chocolate. Its ingredients are only 2^% cocoa butter,
compared with ^+5% sugar and 31% powdered milk plus s nthetic flavourings 1
Source =
John Clark ! "Milking Whom ?
(International Coalition for Development Action,
London , ‘’979), n. 59 to 66.
** * * ******.** -HHe***
*
*
’Private’'Circulation Only-
* OPERATION FLOOD t
•X-V******************
(L Caso Study of Dairy Aid)
■
.
■
,
. ' •
‘r
-V •
•
■ . .
Operation Flood is. comparable with the Green
Revolution. Both depend on extensive national
and international funding, Loth use western
technology -nd advanced genetic science, both
use auxiliary inputs ( Tbs green revolution
uses fertilisers,' tractors and pesticides, the
White Revolution uses animal feeds, pasture
festilisers and veterinary services)
W.hnt follows is an asressnent of the "White
Revolution".
•
•
• ’
< .’■
■
■ •
•■ _
■ INTRODUCTION :
/
India's 180 pillion cattle and 60 million buffalo constitute sone
18^ of the world's bovine population, yet India produces a mere 2 to 3%
of the world's milk. The "aninal feeds" section explains how, in part,
this is not inefficiency but a reflection on the alternative uses for
cattle that have been developed in India (notably for draft). Never-.
theless, Indian dairying, particularly in the cities, can be justifiably,
accused of wastefulness.
Every year in India 10 million cattle die of starvation (the city sralves
which are too expensive to keep, the cows which have dried up, efc)(l)
In Bombay, for instance, sone 100,000 buffaloes and their claves are
brought into the city every year. The calf keeps the mother in milk until
the owner has developed a market for the milk — then it it allowed-to die.
One hundred thousand buffalo calves are lost this way each yeir in. Bombay
alone (2). After 8 to 9 months the buffalo cow's milk dries up. Many can<*t
afford to take their cows back to the countryside for breeding and so they
sell the cot to a slaughter house. With what little they receive there,
plus nny savings they have, they buy another cow with a newborn calf in
the rural, areas and start over again. Nearly half the cows brought into
Bombay are slaughtered at the end of their first city lactation.
This story is repeated in every city in India with the exception that,
in many cities, cattle, not buffalo cows are used. In Many states (for
instance Haryana and Punjab) the law forbids the slaughter cf useful
cows (cattle) and so it is commonplace for the owner to cripple her so ’
severely that the state officers declare her to be of no useful service
so that she can be slaughtered .(2)
In the cities, anim 1 feed (imported from the villages) is expensive,
consequently the nilk is cos.tly (and often diluted by the seller). The
milk is' marketed under unhygienic conditions and sc is a major carrier of
disease. The urban pol'utibn caused by cattle manure, etc; is also a
major health hazard.
In the countrysi, Lh< ilk trade also leaves much to be desired. Tracts
itionally, the i
sell to ' •1'.loren (there being no. way..of direct
marketing in the c i+y she. s-lve.- ). Tho : iddl-men. .who are also the
village n-neyler .< re..
; a. "r-..ck b. t+<.r'' price, they then dilute the nilk
for .ta’Vnsportn 1:'on
nhygionic conditions ■,< the cities.
In the light of ti.c ■ .’..iiy-’ienic -?iu inefficient nature of traditional
Indian dairying (.cry similar to British dairying of the 19th century)
and, indeed, of the domination of the dairy product precessing industry
by Western multi ho ti nil corporations (notably) Blaxo, Unilever and Nestlfe
(?), much attention las been given in recent years to revolutionising tfe
dairy sector.
•
. .
Inspired by some of the successes of the "green revolution", but sadly
unhindered'by the pertaining failures, agricultural development planners
have looked to the Western World for the keys to dramatic dairy reform —
the 'White Revolution". This chapter is a description (not an assessment—
the research being to cursory for definitive criticism) of the resulting
programme — Operation Flood —.the larges t, dairy, de velopment programme in
the world and largely the brain child of orLe'man.
THE WHITE REVOLUTION ;
Operation Flood is - in many details comparable with the Green Revolution.
Both depend on extensive national and international funding, both use
western technology and advanced genetic science (in one for developing
hybrid wheats, in the other for breeding high milk yielding cows), both
use auxiliary inputs (the Green Revolution uses fertilisers, tractors
and pesticides, the White Revolution uses animal feeds, pas'tur'e fertilLeems
and veterinary services).
As with the Green'Ro volution, Operation Flood is a very expensive programme.
From 1951 to 1956 the Indian Government spent 78 million rupees on dairy
development. In' 1974-79 this had rocketed tc Rs 4479 million (4). With
both "revolutions" this expenditure tends to increase the power of the
landlord over the peasant. Only the relatively rich can afford tc buy (or
borrow money on reasonable ten^-to buy) the high yielding cows and
required feed. Although 9C^ef India's milk derives from holdings smiler
than 5 acres, it is mostly"the wealthier farmers who are participating in
Flood and there is a danger’ that the green revolution's displacement of
small farmers from the land might be repeated hero.
(54)
more detailed criticisms of 1 lead will follow an account of its aims
Sbjoctivod and slice, s •’.••.- Even aj; present, however, one could begin
to challenge the yerl •
'..nk's self-eulogy that, by funding Flood,
they arc "Hclpiiy:. to xriteohnoloyy most appropriate to Indian
Condition"
.IM.
M
,111—ll« — ■■■
The principle of ^'lo.o ■ 2- t. ■ co..., c ’
«f .ilk powder and butter
under the est.rri
' ,od .'1 ■ rcgr.v.no, sc reconstitute these into
liquid :.-.ilk in' pur pt .
;.ilt -..oderr c • iri .s ~’.d to sell the resulting
milk in a med ,-rr, hygcuic diet ubution network in 11 . ajjor towns and
cities. The proc .eds fr.om such sales (plus aid conations and loans from
the west) would b. u_cw t build nori dairies, extend the distribution
network (ichisation plants «_tc.) -nd to help resettle the traditional
urban dairyman, who, in theory, is squozed out of business by the modern
urban dairies. The cities would rocievo a steady sjxpplu if hygenic milk,
the producers would , by being organised into marketing cooperatives,
receive good prices, city slaughtering of cows would bo greatly reduced,
a.nd a "National Grid" modern distribution system would evolve.
The ambitious @550 million dairy development programme is estimated to
embrace 10 million producer families and supply milk to 1'42 towns and
cities by 1980 (6). The demand for ari efficient dairy system— though
perhaps inappropriate to India's poor— is perhaps beat described in a
ten—year old Hindustab Times article: " Talk to a.ny middle class urban
housewife for 5 minutes and she will complain about the milk situation"(7)
Today she will not complain so vccifenusly. The long qu ues have been
greatly whittled away and she no longer needs a milk card. Docs this
concern for the middle class housewife warrant, though, the BBC.’s
impassioned praise that Flood is " the most spectacular project of
this kind" (8).
A-SHORT HISTORY:
In the 1940’s dairy cooperatives started to develop in the rural areas
(particularly of Gujarat State) in response to the mercenary practices of
the dairy middle-men. A particularly active union formed in Kaira district
Gujarat, under the leadership of S.Patel (late Home Minister, Morarji
Desg.i (ex-Prino Minister) and the loading Gandhian, T.Patel. A few years
later a young engineer, called Varghese Kurion, joined the team of the
dairy in Anand, Kaira District, which processed the cooperatives' milk.
This nan was to be the7 leader of India's dairy revolution. His techni
cal skills and innovation led to the expansion of the AMUL dairy into
what is now one of the top 30 industries in India. It was the first
dairy in the world to over tc dry buffalo milk and to make other
buffalo’dairy produce. In the late 50's (aided by UNICE?) it diversified
into condensed milk, baby foods and cheese — using some 55/^ of the
milk output of the Kaira district cooperatives, covering an area, simi
lar to Scotland's whose population was 25 million (9).
Aided and advised by Kurien the nilk cooperatives reproduced rapidly
throughout Kaira. Veterinary services, fodder seeds and animal feeds were
provided and by 1966 there were 540 cooperative socities in the district
and the dairy shipped 100000 litres of nilk daily to Bombay, 265 miles away.
Kaira district was a model for the rest of India.
An ambitious animal feed mixing plant was opened in Anand in 1964 (with
the help of a £ 108,00 grant from Oxfan -- the largest ever single grant).
which helped to bring the Kaira milk yield upto twice the national average,
using largely vegetable waste materials .(9)
In the 60's Kurien was called on t<: sort cut the problens of the ailing,
inefficient Delhi d'irj . His experience and siccess there led him to set
up the National Dairy Development Board (NDDB) -- an all- India advisory
service to de feasibility studies, design and build dairies nnd iron out
dairying problems. By 1970 this had a staff of 26 professionals and appre
ntices and a two million rupees campus in Anand.
In the early 70's, Kurien spearheaded a widespread programme of improving
the diary stock and building compound cattle feed plants. The Jersey bulls
received as "AID" from Europe turned cut to be cf poor genetic origin,
however, and the improvement programme was held up while the project
imported their own. By 1976, 18 new Anand pattern dairy plants had been
completed and ^aira district boasted 830 village, cooperatives, 233,000
member families (1O). The NDDB had designed and built its own read and rail
tankers and many sophisticated pieces cf dairy equipment. In 1975 it even
had to employ a Western marketing consultant (previously marketing nilk
was unheard of — nilk ration cards had to be issued). The lucrative
dairy processing market in India had presvously been the preserve of the
Western multinational dairy corporations. The meteoric rise of the AMUL
dairy was, in part, a response to this monopoly,
Kurien describes" we
were a bit peeved to think that in a poor country, the Indian Subsidiary
of a foreign company was iaking so much profit that it could delcare
90-11
dividend". (11). The multinationals tried — on realising the
success of AMUL --to muscle in.
One such firm triend unsuccessfully to coax, then into not making baby food
but collaborating with then, saying "with our brand name-you srsn charge
one rupee extra. You take half the rupee." (12). A "famous Swiss multi
national corporation" was asked tc collaborate in the building up cf a - •
..condensed nilk Operation but it insisted on having European Management.
, urien refused and. a successful all-Indian condensed nilk factory resulted.
bp until.the nid 70's the development of the nilk cooperatives and of AMtfL
dairies had been a gradual "organic" process. The transition into the •
largest dairy development schene on Earth cane about as an ironic twist of
the EEC food aid programme.
When Kurien heard of the EEC plans to give away surplus nilk powder
and "butter he was very alarmed. The hinted at 20.000 tonnes of 1
destined for India would wipe out AMUL’s.market and the nilk powder,
likewise, would cut heavily into their market. The AMUL schene and Kaira
cooperatives could be killed, ^urien dreamt up Operation Flood as a
somewhat desperate gargantuan bid to save AMUL (1O). Rather than a
gradual growth of tho Kaira pattern, the dairy aid could bo converted
into nilk, sold, ara' the funds used to boost rhe Kaira and AMUL model
throughout India. T
Lori Feed -rcj-.aai’u (agents for a large portion
of' EEC dairy aid) a... ■ to. Zurich's proposals and the first leg of
Operation Flood c>r; • .1? id with £ 50 ni.li n ir -rant.
Operation Flood I c. 1 tre.i or the lev .Ic-pnont of “
rn dairy distribution
systems in the four :-i . citic-' (. Ihi. I ——Jr’but’ta, Madras ) with
the construction oi f
lor ..- tries nd. colt and
plants,etc> in
the adjacent rur; 1 -.r
. I't-is sober-. , t.lough sh-jwor to build up than
envisaged, was the WrrlA’.d largest dairy de.velopuoi.t programme, though
itself dwarfed by th-. ? 550 .i ilion scc-n-d stage - Operation Flood II.
By 1978 there wore 1C District cooperatives' unions modelled on the Kaira- .
union (15), and a plethora of political dignitcrioo (including Judith Hart
and James Cailacghar.) flocked to visit the heart of Indian dairying
.development in Anand . By this time, the income of ..p proximately one million
producer families has increased by an estimated 50 - 10C$ and AMUL was one
of. the top 50. Indian businesses. Many agricultural -lovel opnent experts,
then describe Flood as a shining example to be followed by the rest of the
Third World and the EEC is delighted (here is a country which actually
seems to.be making use of the embarrassing dairy aid).
Even Unilever has Bestowed repeated praise on the project (l4)(though
whather its international involvement in the animal feed industry is a
vested interest leading to this enthusiasm for modern dairy development
in the Third World is not clear).
THE OTHER SIDE OF THE COIN : .
The progress of Flood has not always been easy and the project is not
without criticism. This section constians an account of some of the major
problems and criticisms that Flood have encountered. These are not intended
to prove that the project is worthless. The present research is far too
cursory to make such bold statements and in any event sone of the dramatic
achievements of the scheme (described above) must go unchalleneged.
However, the intention is to show that there must be grave doubts as to
those appropriateness of at least sone aspects of Flood -- particularly
those stemming from the use of EEC dairy aid.
Operation Flood depends vary heavily on aid. It has received help from
Britain,. Canada, Sweden, New- Zealand, the EEC and from the World Food
Programme, Food and Agricultural Organisation and UNICEF (of the United
Nations).
11— .
'
1
r-- z
*
<
I
<
(
<
(
<
*
" - *
•
’
The S 550 million needed to provide the support for Operation Flood. II
derives 56% from World Bank loan, 497" fror the sales of EEC dairy aid
( 186,000 tonnes of rill: powder and 76,000 tonnes butter over 6 years)
and 15 proceeds fror. Fl,.cd I. With most such "AID" there are, of course
strings attached, r'.
■■ nstanco, countries 'ive-not cash but credit for
'■1 hen. such an aid agreement is made the
the pruchase of dairy equipment. Who?dairy equipment suppliers all in med lately bump-up the export price of
their machinery — m. devalue.in.-; the aid. (11).
In early days of EFE '-try " id. support, Flood was a convenient dumping
ground for EEC’s sc,., •
aro mil-' t.jder
butter (in the first year
25% and 25% resj. co • ivnlg h-.d to be di-r.pci — it was unfit for human
consumption( 11 '..
"pcr.nclj, I'c-of aid i r lisec simply did not
arrive. The "orli f ■
Pr. T'-.-nc wh. i. approached appeared uninterested and
merely suggested t.’.rt they rmll have to : uy ■... the -world market (15).
The appropriateness of certain aid allocation must in particular be
criticised. UNICEF — the UN agency for aiding the world s most deprived
children -- for instance, provided the cash for India's first ever automatic
chilled milk dispensing units ( machines which, because of their expense
and high running cost?, are not in use in many western countries). It is
unlikely that a single child in the category UNICEF purports to support has
ever used one of these machines — but thousands of them ( those who
depnnded for a living on selling milk) will have lost their source of
income.
On big source of criticism is that riood is failing to meet its targets
by a very long way. The four big city dairies are only working at 65%
capacity (16) and what milk they produce is not marketed efficiently
according to the Committee on Public Undertakings (17). The biggest
shortfall, however, is in the production of raw milk. While the throughput
of locally produced milk at the four major city dairies was more or less
stagnant at 0.84 million litres (10). Very little reliable information
appears to be available but there is some disturbing- evidence which shows
that indigenous production of milk has actually fallen in the Delhi scheme
by 4C% in a single year '1976 to 1977) (^5). The ouput of milk from the
dairies nay be increasing but this results from reconstitution of import
ed ingredients, not from local production. Only 5 out of the projected
17 cattke feed plants are ready and none of the 18 Anand pattern cooper
atives appear to-be func tioning properly, according*, to the Indian Minister
of State of Agriculture in his criticism of the lack of emphasis on the
promotion of loco.l production.(19' • Flood, he concluded, offered very
little incentive to the small farmer.
This failing to meet targets means a heavy dependence on imported mi 1k
powder and butter, (the value of total imports —> rather than falling as
indigenous production develops — actually rose from 250 million rupees
in 1974 - 75 to 590 million rupees in 1976-77 (15).
This dependence has already transcended the limits of Western. Aid and
has forced then to bu;. h>. xly on the Western Market. A dream of the
European dairy manufactuj. s could well cone true then — the dairy
aid develops a taste for • - *ry products in the Third World which can,
in the Ion.; tern, only be net by buying fron then on the connercial
market. If this new de,-.and continues to rise the days of dairy aid
are numbered . C'hy ■: 5' c way what you can well I ).
The dairy revolution in :..>dia is not just le -diu ■ to a dependence on
imported raw in...red; it . Ph er a is . Ise a dr'. er <? .’.jC ' on imported
J
. Tor instance, one
technology for the ic-phl . hi ;■'■ i r il.F
•i’.i c< r ■
~ plant
. i ..orted from
entire seven s t or ■?, .
... ',1'0; a1 1
Britirh i'll oc-r outers have been
Switzerland in i '■<. si
installed at the o" ' c; 2< '.'.il.J.ion rupees (iJ,.
Swedish Tetrapack
plant is to be built.
Operation Flood has n<,t achieved its goal as fas as its relevance to the
rural poor is concerned. Even in Kaira only 1 Qb of tile cooperative members
are landless.(11) The deep-rooted indebtedness of the rural milk producers
to the middle men, restricting then to sales in this private, exploitative
section, remains unbroken and is a major factor in the failure of Flood
as far as the rural poor is concerned .(21 )
Even if the targets were being net, tnere was no growing dependence on
Western imports and the programme embraced mainly poor, producers , there
would still be strong criticism of Flood on the grounds of its nutritional
irrelevance to the poor consumer and that it diverts agricultural land into
the less efficient dairy sector.
Development experts have oft praised Flood for the bringing of a highly
nutritious food stuff, milk, to a country of chronic malnourishment. The
irony, however, as even the FAO agrees, is that at some 2 rupees per litre,
milk is priced well out of the reach of .the poor. Perhaps this is just as
well — there is much nutritional evidence that shows how inappropriate
milk actually is in the diet of very many socities un-accustoned to
dairy produce. It should also be stressed that,in general, India's problem
is not one of malnourishment but undernourishment. The theories of the
60’s that protein deficiency was the poor world's main problem is now
known to be faise and studies in Calcutta, for instance,have shown that
the poor in general consume a very balance diet, but that is contains
less than half of the required levels of most nutrients (23). Milk
would both imbalance this diet and be some 3 or 4 times as expencdve
as the traditional diet. Certainly to the poor (Which fron 1971-72 to
1974-75 has actually fallen by more than 1 Qo to 374 grammes cereals ■
and 42 grammes of'pulses per day) though it has made available' foods
such as- cheese,Chocolate,ice cream and Italian Mozzarella - previously
unknown or rare in India. While malnourishment in India worsens, India
develops its own dairy surplus (over 300 million rupees worth in 1975(24)
and sone of the surplus has to be converted into ice cream (25). Even
in Gujarat (centre of India's dairy revolution) the greater availability
of nilk is more or less irrelevant to the poor and the per capits con
sumption in. that state has hardly changed since 1963 (26) (and is ■
t
amongst the lowest in India).
Flood has also failed in its other commitmentto the poor — that of
resettling the traditional urban milk sellers, Originally, it was intended
that these would be put out of business by the heavily subsidised sales
fron the modern dairies, a nd that counterpart funds would be used for
their resettling. Ul.-other Flood has failed to displace significant numbers
of milk sellers, -.•/-j-athuz those displcjd don't want to be forced to move to
the rural areas, i. rot l-.'r, '-ut ••’b t ir a parent of Flood have simply
changed their ?.iin< ■ i ' r t cl J., but what i. a parent from official
records (lj) is -•
t’
of the tot 1 • < -?
•.-•inally intended for
reset! 1ont h ••
litiled
. ;•<. The funds have been
diverted into ot ex.
;rc:
gi:■. .
Although catil?
n . , ;nd often -re, fed on /c ;e table, waste material
(and so could ideal, (.«■> -uitel to the landless labourer), increased demand
for milk and milk products can lead to the use of core and more concent
rated (high protien and calory) animal feed. One observer has commented
on the extensive transfer of land once used for cultivating pulses and
other human foods to growing fodder far cows. (27). He also warns of-.the
danger of chronic over-grazing in sone areas .
The development of dairy cooperatives in parts of Gujarat state has been
truly remarkable — more so for the relative absence of external funding
until recent years — but it seems that this phenomen is not to be
repeated elsewhere in India for a variety of factors (Gujarati farmers
suffered less indebtedness, they have a ready market -- Bombay, they are
relatively literate, communication is easy etc) consequently by 1976
Gujarat had a total of 2400 village cooperatives socities but the whole
• of the rest of India had only 1540 such, socities (10) .
CONCLUSIONS AND C CTL ENTS
/
Dairy development can undoubtedly be a good idea for countries where niik
and meat are traditional parts of the diet (e.g in parts of South America)
and where, perhaps, arable farming is suffering declining yields (e.g. in
the slash and burn regions of Bolivia). The argument that the dairying
diverts scarce agricultural resources into'the less efficient and, there
fore, less appropriate leivestock sector is only partially true, since
food shortage is now generally regarded to be a problem of distribution,
not of production. An enormous amount of land w ould have to be shifted -in-hp
the livestock sector’ on order to so affect the price of pulses,-etc; that
food availability to the poor is reduce? -- hence the keeping of a certain
number of cows should not worsen the distribution problem.
Whether or not dairy development is helped by food aid is another question.
^t undoubtedly "primes the pump" for a new dairy and helps it establish
a market, and in that the dairy aid is. reconstituted and sold, it is
equivalent, in sone ways, to financial aid. however, milk is a food of the
elites, it is a dubious value to the poor end nay be harmful (due to lactose
intolerance, etc and, in that it it a baby food ingredient, can contribute
to infant main our ishrient) .
QOOJ"
J
-
The resettling o£ traditional milk sellers has not been tackled, and
India is courting a dangerous dependence on Western Dairy products and
machinery.
A main criticism of i .•cd aid in other countries has been that it depresses
prices and discourages local production — tins seems to be true in the
case of Flood. Also true is the general comment That food aid is difficult
to handle ( due tc stora v problens, transport hold-ups, etc). The successes
for Flood quoted in Guj rat (incomes up >0 to 190^) disguise the disprop
ortionate effect a.cce
be tn« richer fr.rr ers and, indeed, that it is
in general the rich, .r ."Ila-.?? that benefit ic.-'t.
It would not be tec ..yr..e..l tc s y that Operc icn Flood benefits the EEC
( in providing "
'I;' for 1 5.3
ins p li....) m t -c-stern multinationals
(in providing outlet;-, l or their equipment . r.: expertise) more than ths
Indian poor.
*
<
<
.4
’
While it would bo unf ir tc dismiss the entire Flood programme as in-appropriate it roust be accepted tnat there are .rt.vc and valid criticism of
sone aspects of it. Very little reliable data is at present available for
full analysis .but it is evident that a complete investigation should be made
if the EEC, Mrrid Feed Fro -ranne and World Bank are to continue both
funding this scheme and actively promoting its adoption by other Third
World countries.
SOURCE:
John Clark, " MILKING WHOM ? ", in Interna.tional.C oali tion for
Development Action, London, 1979, P 43 to 50.
REFERENCES :
(1) Middle East Econonis Digest - 17/11/78 (Dairy Industries, August 1976
(2) Science Today (India) - September 1973 (18) Dairy Industries, Nov,1976
(19) Dairy Industries,July 1976
(5) Sunday Tines - 4/1/76
Ph.D .Thesis - Atul’Tad, IT .W .University pf Illinois, 1 978
(5) Private Communication with Chief of News Unity - 5/3/79
’
‘
University
(6) "Operation Flood II", Landelijke India Verkgroep, 0Groningan
(7) Hindustan Tines (New Delhi) - 18/12/78 (21) Dairy Industries ,Feb, 1 976
EEC Background Report, "Operation Flood", 1l/s/78
(24)
Dairy Industries,. Nov.,1975
(
9) <Oxfam files on Anand Dairy
. Project.
.
10)"0peration Flood"
I" - a study"- NDDB Anand,
Anand 1976
,1l)Dairy Industry, November 1974 (12) Sunday Standard (Delhi), 1/12/74
1J)NDDB Annual Report, 1977/78
(25) Dairy Industries, June 1971
14)a.Joint paper by Unilever & the Dutch Dairy Producer’s Council.
b.Chairman’s speech at 1978 AGM . (26) Dairy Industries, Jan, 1976
15)Ec onomic & Pol’ weekly (Bombay) XIII, No 23, July 25, 1978.
16^Indian Dairy Corporation Annual Report, 1977/78
20>estern Times-Ahmedabad 27/10/68 (27) Ray Crotty in the Times; 6/5/77
22)"Operation Flood",George Dors'ey (Ceres),FAO
23 ) "Dairy Development in India'NIogens Jul,Director of Danish Meat
Products Laboratory, 1976.
I S I documentation centre
P.BOX NO.4628
BANGALORE 560 O46
4
4
4
4
4
4
4
4
<
<
.
’
<
<
<
<
(
<
r
<
(
* (
(
(
I
PR TV AT E CIRC ULnT ION ONLY
THE ROLE
OF
INTERNATIONAL
FOUNDATIONS
The Rockefeller and Ford Foundations
One characteristic of capitalism is that it likes
to present itself under a smiling and benevolent face.
Foundations, like the Ford and Rockefeller Foundations,
arc examples of such deceptive appearances of capita
list institutions. Under an outward pretence of huma
nitarian and social concern, they arc, in fact, tools
of crafty domination of the capitalists.
What follows is a factual description-of the functionning
of two of the most powerful foundations, known all over
the world namely, the Ford and the Rockefeller Foundations.
As will be seen from a short appendix, the activity of
such Foundations extends to the whole world, including
India. One example is Indian Agriculture.
WHEN "CHARITY" BECGmeS EXCEPTIONALLY GOOD BUSINESS
Twenty five thousand foundations are in existence in the USA with a
total capital of more than 20 billion dollars, entirely exonerated from
taxes. The income of the 596 most important foundations is worth more
than double the net profit of the first 50 commcrcial-banks . The actual
income of the Ford Foundations alone is bigger than the income of the
largest international F'-rnk ’
■
The functionning of the“Foundations rests upon an ambiguous legis
lation and upon the connivance of the Administration. Some explanation
will make things clearer!
1.' The Foundations in USA oan use their assets to borrow money or
to buy business.
2. The income thus acquired can be kept by the family.
J. The legatee appoints the person who operates and exercises control
over the foundation and its investments. Anv company is authorised to
deduce 20 per cent of'its income (?0 % charity deduction) by giving
funds or transferring air
important portion of its property to a
foundation. This permits the companies to escape the taxes levied on
profits-.
In this way, Henry Ford has transferred 90 per cent of the shares of
the Ford company to his foundation without any loss of economic power
Gr-loo
com.m'JNi f y heal
St.
r;< cell
•’
which such transfer might have imnli-od. Thus also r.in-tenths of the assets
of the thir.ri biggest corrranv in + ho world were not taxable. Through this
.".wise measure" the heirs of the Detroit Empire could avoid paying inheri
tance duties.
In line with the present legislation, Ford could increase his portfolio
by lending, selling or investing 92,7 million of shares belonging to the
Ford Motor Company, involving a total of k billion dollars. Thus for
instance he bought shares of "Time Inc.", 'Mr.gr.ovox General Mills", "Pepsi
Cola "."American Mover.-", Exxon", "Gulf Oil", "ISM", "Lokhocd" ,"Dow
Chemical", ETC.
cv on 1950 and 1962, bo 1-i more than JOO million
dollars to various <;.■ crci.- 1
.-■■ari*s. Al
. through his Foundation.
Ford Fouraat.i n,
i1! .... notice.-, i■■
■->.•. is..t ion whose charter
proscribes * r.rt ' ; . it *•
c :ties must hj-*c: '• -cr. so to charitable
goals an i nc.h.-.n* -.-I. c ■
r-.n .j
ha<- used ci • ■ ••■’Ilion shares of the
.Ford Mote-s to buy m>< -i-crb "Fhilcp Corporation", nndcr-evluating each
share by 4 dollars i l.c the fi-.rkc* rate. Since
market rate was twice
higher than the valve c.r^erocl by the Forndati-u m its account books, the
Foundation, in fact* more ..han doubled its pro.fits in the transaction.
These profits, it should be remembered, are not taxable.
WHEN FOUNDATIONS ARE USED AS TOOLS TO BYPASS AHTI-KONOPOLT LEGISLATION
The Rockefellers dispipy no less aptitudes to break through the -juridical
niceties in order to keen intact rro-'crtv, power end control.
The Rockefeller Foundation was started in 1915 with the main ob
jective of consolidating and perpetuating the control of the family over
its oil empire which hod been cu^ down into seven new and distinc compa
nies two years earlier, when a judgement of the Supreme Court dismembered
'the Standard Oil for monopoly activities. But today, the Foundation is the
biggest holder of Standard Oil Company (Exxon) of New Jersey, having
4 JOO 000 of its shares worth several hundred of millions of dollars.
The Foundation also owns 2 million shares of Standard Oil of California,
JOO 000 shares
of the Mobil Oil and JOO 000 shares of Continental Oil.
Some other branches of the Foundation, less important, also owns J million
shares of Exxon, JOO 000 shares of Mobil Oil and 4J0 000 shares of Stan
dard of Ohio.
The total assets of fthc above companies arc worth more than JO billion
dollars!
Among other Rockefeller's interests one should mention Chase Mahattan Bank
(the third largest international bank), Metropolitan and Equitable
(2nd and Jrd most important Insurance Companies) etc.
■ a HIDDEN HAND IN PUBLIC AND SOCIAL AFFAIRS
————EIn rcality thc Rockfeller and Ford Foundations exercise a determining
influence in public and social affairs, control and modify, if need be, the
evolution of habits, ideas, valves and institutions. These private agencies
become substitutes to the Government and to public collectivities and
constitute a parallel administration whoso moans of pressure and
capabilities for influencing public opinion are immense. Thc tolerance
of political circles towards them is all the more explicable because they
are actually the emanation of true power. Since 195^, there is hardly
any political dignitary in the USA who was not, at one moment or an
other, been employee’ .nd rcrumcratod by one of those two foundations.
More Hi an the Mol 'ors <
the 1?- fonts, the Rockefellers keep and
strengthen the myth
their ’ •■••nt j float ion with the American power. The
entire fortune of 1 :e fe'-'.ly is distributed among '.orc than 200 companies.
They include six .--mong tl •• first ten induotrial cotj.anies, five among the
top 10 insurance c■
, '-i t f< • The jg-ets of those twenty
companies c---.itr« ?' ■••' v the '■nokot ello“s'“”ai.-""unt to 640 billion dollars.
Apart from tnc.c '
:J‘o activities", inc charitable activity of
Rockefeller ircl'..;- . . sices t.:o ‘ ockc' l-.T f .•
L . ••s _£und, the Rockefel
ler University, : ;.e n. k *. J'c I or C"ertr», tic
, ^.-.l ilximasburg, the
Rockefeller fa I
- •. J. the 1 ;■ ?eu-. oi secern •„ . j primitive art of New Yorkz
and the Chicago Iliversiiy.
Among ether rocipiorts of the Rockefeller's '’generosity" one should .
also mention the U.N. and the Organisation of the A.merican States. The
persons who are pr-plintod, at times as experts, the sums that'are granted,
the study-programmes which arc elaborated in collaboration with the
various services of those organisations and the Foundation of the Universities
give to Rockefeller an important influence in those institutions.
Among the recipients is also the Republican Party. The Rockefeller family
wipes out every deficit of the Partv and Nelson Rockefeller keeps per
manently in his pocket a small niece of blue paper which reminds him in
precise figures the details of the sums which the Party has costed to
him and to his family in the course of the years.
The Rockefeller Brothers F xnd also finance the advisory board for Inter
national relations, a true executive of the American policy, whoso president,
David Rockefeller is also director of the Chase Manhattan • Bank..
WHERE THE COORDINATION TAKES PLACE AND DECISIONS ON jnALF CD THE WORLD ARE TAKEN
The coordination of those various organisations takes place in the
Council For International Relations whore all the foundations regularly
meet.The Council is a true Pantheon of the Business World, of finances, of
Universities and of the Mass Media.There is no important decision in the
American politico which has not been elaborated and suggested by the
Council, actually presided over by David Rockefeller and financed jointly •
by the Rockefeller Brothers 'Fund, the Ford Foundation and the Canergie
Foundation. One thousand four hundred persons belong to this kind of
Assembly. More than half cf them have been seating in that assembly
since 1946.
Some more details will show the influence of this Council. Out of 82 persons
selected by John Kenedy for the State Department, 64 wore members of the
Council, Republicans and Democrats irrespective of their political
all.-giance. John F. Kenedy's State Secretary, Dean Rusk (democrat) and
his Finance Minister, Douglas Dillon (Republican) both belonged to the
Council and to the Rockefeller Foundation.
THE FOUNDATIONS BUYING THE UNIVERSITY ESTABLISHMENT - C.I.A. CONNECTIONS
In 1975, 107 out of 191 most important intellectual centres in the U.S.A.
were essentially depending for their finances on the Ford Foundation.
.18 arc financially controlled bv the Rockefeller Foundation. 11 out of the
1? most prestigious universities which have institutes of International
studios exist only through the oenorositv of the Ford Foundation. They'are
Columbia, Harvard,Chicago , Berkeley, U.C.L.A., Cornell, Indiana, the
Massachusetts Inst, it .t: o-r Technology, the Michigan State University
Stanford and Wisconsin. Trorc insiitu-ions have among themselves 95 centres
of research out c.-f v ich 8? arc financed bv Ford and 5 by the Canergie Founds
tion. This university s^t up is t>o.-alncc of predilection where intellectual
military non and business peon’e meet and operate
symbiosis.
In 199-5, the R r cko’f j'. ? or Found.-’ in created and financed in Colombia the
first institute ■ n ucs.'. an Stu dos. Inis Institute is ~
directly
attached to the military school and to the Centre of Sea Warfare of the Uni
versity, whose Director, Schyler iVallace occupied, seme years later,
the post of Executive of the Ford Foundation. The man who started the
Institute and who was to become his first Director is Ge"aid Robinson, Chief
of the branch "Research and analysis" of the Soviet Section in the O.S.S.,
the ancestor of the C.I.A. Soon, Joseph Willits, Director of social
Sciences at the RockS'cllor Foundation, made a donation of 1 250 COO dollars
to the Institute, spread over five years.Wilits, like Robinson and Schyler
Wallace, is a member of the Council
‘ for International Relations.The
Objective of the Russian Institute is to train students for technical
posts and for posts of direction in those Government Agencies which
entertain activity abroad. In I960, some students of the Institute have
published a pamphlet intitled "Job opportunities for students trained for
International Affairs" . The jobs most frequently enumerated, in their
order of priority are : the C.I.A., the State Department, the Interna
tional Agency for Development , American Information Agency , the National
Affoncy for security. Then followed the Chase Manhattan Bank, the First
National City Ean.k, Standard Oil of Now Jersey etc.
In 1997, the creation of another centre of Russian Studies was initiated
by Harvard University. The spirit behind the move was John Gardner, a
graduate of the 0.s.S....Ffhnce was assured by the Canergie Foundation which
granted a donation of 750 000 dollars spread over five years. In 1953,
Ford Foundation joined in the financing and contributed its share towards
the expenses of the Centre. In 199-9, the Centre inaugurated a vast study
project
‘ on1 the social system of the U.s.S.R. , known under the
name of "Refugee interview Project". The information collected was
destined for the Pantagone, the C.I.A. and for feeding anti-communist
propaganda. Members from the Navy, the Army, Air Force, from the War
College and from the Industry arc working at the Russian Centre as pro
fessors and experts.
From 1959, Kissinger, a product of Harvard, directs an International
Seminar entirely financed by the C.I.A. and in which personalities like
Raymond A- ->n, Bertram Russel, the Turkish socialist leader Bulont
Ecevit , and many others, innocently participated....
The German Philosopher Herbert Marcus, well known for his revolutio
nary options, wrote his book " L'Homme Unidimensional", a disgusted analy
sis of the Capitalist system and culture. Few knov.’ that the cook was .
entirely financed by the Rockefeller Foundation. To criticise the American
state or the Capitalist system in abstract analysis, in fact reinforces the
J.
’ -
real
the 1 power whicn hides itself behind those abstract concepts and bonevolcntly-smiles at the whole process.
The importance and the diversity of the Rockefeller Empire explains why
Nelson Rockefeller has regularly been associated -- under all the administrations - with the important discussions concerning the problem of
espionage. Under the Nixon regime, Nelson Rockefeller was seating with the
Foreign Intelligence Acvisory Board, created to watch over and to evaluate
the impact of the various para-diplomatic activities of the C.I.A. and of
the National Security Agency. His assistant for t..ese questions was Nancy
Maginness, who became in 1973, the second wife o-f Kissinger....
Translated and .•.•erpreo from the French,
Charles Levinson, " edka-Cola", Stock,
1977, r>p. P03 to 2^ .
APPENDIX : FC-D
FOUNDATION AND INDIAN AGRICULTURE
The Foundations do not restrict their"human!tarian" activity
to the country whore thev originated. They spread their
"benevolent aid" to all countries all over the world. One such
instance is the activity of the Ford Foundation to promote
the "green revolution" in India.
" The successive Five Year Plans in India focussed their attention on
the acceleration of food production, and for seeking advice of experts, the
Government of India ( the Ministry of Food and Agriculture) invited
Ford Foundation to review India's agricultural policies and offer suggestions
to improve production.
The Ford Foundation set up a Team of American Experts under the leadership
of Dr. Sherman E. Johnson and its Report on "India's Food Crisis and Steps
to meet it" was submitted to the Government of India in 1959. The
’Ford
Foundation Team suggested that a few districts for "intensive Agricultural
Development" should bo selected for applying new technology based on new
varieties of seeds and fertilizers. ---- One of the major recommendations
of the Team was that India should develop fertilizer industry for in
creasing agricultural output.
Consequently under the Ford Foundation inspired experiment of intensive
agricultural development programme, the use and production of fertilizers,
as a very important component of the "Green Revolution" assumed high
priority among the Indian nlanners. The.World Bank and its affiliates,
the Consortium countries, and the "International Oil Giants" were willing
to develop the fertilizer industry in India for several reasons :
1. To encourage fertilizer Production,
industries, including several
industries crucial to agriculture, such as power-driven pumps, sprayers,
and mixed foi'tiliaors, wore exempted in 1966-67 from licensing provisions
of the Industries (Development and Regulation ) /let of 1951. And these
exempted industries could establish new units or substantially expand the
existing units without bureaucratic controls us envisaged under the Act
of 19512. The Annual Ectm Me .survey of t>c. Govc-nment of India for 1967-68 stated
that, the use of ver -uc < bei.'icr.l rerti-’ ? rers ’/ad increased during 1967-68)
by more than 20G per cert since 1° ^-'5. ic stated that the value of ferti
lizer imports increased from 5 ',r mil* ion in 1960-61 to 190 million in
1966-67 and was ex-.cctc l t > roach 5 P65 million in 1967-68. With the
implementation of -new ..cchnolop-y" fertilizer production was becoming a
profitable rterprisc jn India.
3. The established Oil Companies in the United States had great incentive
to get into fertilizer business in .India because the price of fertilizers
charged to farmers was highest in the world, c-.g. in 1961-62, for a ton of
ammonium sulphate the price paid by farmers "at farm gate" was S 376 in India
S278 in Japan, and ?• 2^0 in Thailand.
The interest of Oil Companies in India.was concretized by a visit of
28 top U.S. Businessmen in 196^t "to look at investment possibilities in
oil refining, Chemical machinery manufacture, and other industries"
A revealing Comment was made by the New York Times on an agreement in
1966 between the Government of India and Amcric-an International Oil
Company ( a subsidiary of Standard Oil of Indiana) for setting up a
fertilizer plant at Madrasi
Much of what is happening now is the result of steady pressure from
the United States and the International Bank for Reconstruction-and
Development, which for the last year have been urging a substantial
freeing of the Indian economy and a mrcater scope for private enterprise".
The way had been opened by the Ford Foundation experts.
Condensed from CP Bhambhri, "World Bank
and India", Vik’as Publishing House, 1980.
pp. 105 to 111.
ISI Documentation Centre
Post Box ^628
Bangalore 56O 0^6
Global economic power lies not in the hands
of governments but of corporations- Brian
Bolton argues that if trade unions don't
take on the mul tinationalsno-one else will-
and explains just how multinational
unionism can work.
trade
A SMALL GROUP OF i mini o ran t workers in a garment factory in New
Mexico are struggling in appalling conditions-and want to get
their union regognised. Where can they turn to; ?
They do have one advantage. The company they work for,
Farah Jeans, is, like many of the textile- corporations, a multi
national. It is not one of the bigger ones-a Coats Patons, a
Burlington or a Volkhart Brothers with branches in every corner
of the globe. But it does have factories in other countries and
J;he workers there could be a source of help.
But first their request goes to Be.lgium-to the forth floor
of a building in Maroles-one of the few quarters of central
Brussels that has not been razed to the ground by the bulldozers
to make way for the Eurocrafts or international businessmen.
This is an international headquarters too- but one for 'workers
the International Textile, Leather and Garment Workers
Federation. Popular mythology would> no doubt, have union activity
across international frontiers being orfanised by 'tightly-knit
groups of politically motivated men meeting in smoke-filled
rooms'. But in fact the surroundings here look neither sinister
nor conspiritorial.
The Federation is one of what are called International
Trade Secretariats; organizations set up originally under the
league of Nations and then continued under the UN. Their job is
to coordinate trade unions working in the same industry but in
different countries.
Like most of the ^ecretarists , the Garment Workers Federa
tionkeeps copies files on all major companies and is .always ready
to'respond to requests for help and information. These arrive
continuallyby letter, by cable or telephone call.
I tn the case of Farah there was a lot of basic information
to gather together. Who are they? What do they make and where?
And, most important of all, what unions are involved?
Farah, it was discovered, had another plant in Sweden. And
that rang a bell wiebhe of the officials: 'what about that Swedish
trade union secretary that we mot
in that congress in Madrid? Let's
give him a ring and see if he's got members in the Farah plant'.
And that was how a group of Swedish workers came to launch a I.boycott and mount an effective campaign to win_Jxas-ic- union
rights for a group of workers they had never seen. But for
the action like this happen at all 'tie workers must, of course
KNOW that they are nart of a multinational-and that is not
always &he case. People are usually most aware of the nature
of the company when they can see that the management is o
foreign or when t;iey are working in the home base of the
company concerned.
>
'Wide ning the dispute' is common enough within national
boundaries; there night be sympathetic strike action or a
ban on strike-bound goods being moved. But the same tacties
can work Just as well within multtinationl companies on an
international basis. When Fiat workers in Brazil were in
dispute in 1981 it only needed a one-day strike at the Italian
plant in Turin to bring the management back around the
negotiating table.
When workers in another country are asking for a basic right
like union recoganiieon then there will bea pretty straight
forward case for international support. Wages claims, how
ever, are more 'relative' matter and it is rare for a union to ; .
call for international action unless the situation is desperate
the dispute has been going for some time and something is
needed to break relocations by transnationals, however, are
not to the Third world bu to other countries (industrialised).
The tendency is merely to move dhere investment and tax
advantages are better.
When companies move to the Third World they sometime give
the impression that more Jobs are going to be created as a result.
And you might think that since labour is cheaperm they would
employ more people. In fact the reverse is true; companies
\
usually become more capital intensive when they are setting up a \
new plant-having been attracted by the massive capital subsidies
and tax write-offs available at the new site.
'
When Canadian multinational, Bata Shoe, moved to Rufisque
in Senegal, Jobs were lost in three Western countries. But even
more Jobs were lost in the local shoe making industry when the
capital-intensive company moved, in. Similarly, when Japanese
textile companies moved in to Indonesia, rural unemployment in the
industry as a whole rose by 5000,000. Allowing the multinationals
a free rein is not doing anyone any favours.
But trade union does not have to beconcerned Just with
production. Trade is an equally important issue. Multinationals
control half the world's manufacturing but they also control
an even greater propordion of the trade is no slacker now that
they have divested themselves of many of their tropical
plantations.
The companies are amoung the leading proponents of free
trade in the sense that they mean has never existed in the
history of this planet.
Even the malachite traders of Ana tolia in the third mi 11 enium BC had their cartel.
So it is legitimate for the unions too
t/) G
to be concerned with issues like import penetration when they
v_
see this to be affecting' the interests of their members.
The fact is that the world economy is controlled not by
governments, legal or. o therwise, but by companies.
^nd itis
the r ealisation of this that has encouraged a hardening
attitudes amongst workers- particularly in the devdeloped
countries.
They know that it is only the unions who havethe
power to take on the multinationals.
The companies know this too, as do the governments that
they support. And the Third World is littered with examples
of co 1 labo ratio.n be twe en. governments and multinationals like
Co ca—Cola, United Brands, ITT and Union Miniere where lives
have been lost as well as jobs.
We are challenging the multinationals' right to run the
world.
They are taking decisions that can.have a profound
effect on all of us-whe ther it is Bluebell Jeans moving from
Belgium to Tunisia or ITT teleprinters from the UK to the far
East—and there has to be a response.
If trade unions don't
act no one- else will.
SOURCE:
NEW INTERNATIONALIST, November 1982. Page No.
14 to 15-
<
<
<
(
<
(
<
C®£ A
C
f ola5
TZ=r^r.. -z - -—-.-^
The Hard Company^Behind The_Soft_Drink
-----
(kjho
fo bettor with Ccca-nola, the bearding f
have been -'creaming all these years, ever since
the first Coke bottle popped in Sardar aohan Singh's
new Delhi bottling plant in 1958. But they are
going anything but better right now, with threat
of eznulsion-lcok, stock and bottles-from the
country, unless the company sign on the dotted
line by April 1978.
The Government is playing it cool, as well it night, with the prospect
of the entire Rs. 100— crore bottling business landing in its lap, cpriplote
with a oountry-widc production and marketing network of 22 bottling plants
a.nd over 2000,000 retail outlets. To all appearances, it is well sot to
Substitute 7—X, the- Coca-Cola' company’s secret ingrediet, izith’
seven—sovon, which sounds like a typing mistake, but it is in fact a new
cola-typo concentrate developed by the state-owned -antral Food and
Technological Research nstitutc (CFTRl), Mysore. This indigenous Cola
is to bo manufactured and marketed by modern Bakeries, also a state—owned
undertaken. The only person to have gained materially from the dispute
so far in Hari Vishnu Kamath, the Janata MP, who has received a Rs.10,000
prize for suggesting the name Scvcn-SQvcn, but who, it is learnt,
prefers beer to Coca-Cola.
Although Industry Minister George Fernandes has referred to Coca-Cola’s
fantastic profit-nearly Rs.10 crores remitted abroad so far oh an initial
investment.of Ifc.6.6 lakhs- this is not what actually bothers the Govt.
It’s case, seemingly cast-iron, rests on two provisions of the 1973
Foreign Exchange Regulation -^ct (FERZ) under which (l) foreign companies
engaged in low-priority, low-technology industry have to transfer 60 per
cent of the equity share to Indians; and (2) also fully transfer techni
cal know-how to^the Indian company within a fixed time limit. The
Rcorvc ®ank of . ndia. issued orders under FERA last April asking CCEC to
comply with the1two provisions, and it is now for the company to
decide, says the ministry, whether to comply with the requirements or
just pack up and loavc. The officials handling the Coca-Cola case in
the ministry give the impression that they would be happy to sec tho
last of Coca-Cola. "One multi-national loss t_ deal with", says a
harried Officer in UuyOg Bhavan and his colleagues agree.
On its part, tho Coca-Cola parent company which operates hero through
a fully owned baranch of the Coca-Cola Export Corporation, is un£crstandably sore at tho cavalier treatment which they are receiving at tho
government’s hands . " If tho government has dicided tc clcso down Coke
in ^ndia, they should have given us a fair warning", Chranjit Singh,
director of one of the major bottlers (Pure Drinks Pvt. Ltd.,) and a son
of tho founder, complained tc INDIA TODAY in an"interview last week.
" I still don’t understand their reasoning behind this drastic action",
ho" said, nurnuring all the tine about the 2,800-odd workers he employs
and their uncertain future, following thv closure. His business is
down to a.bout 3000 crates a. day (as against 6,500 crates last year) and
nay soon have to fold up.
-2-
The ca3o with ether bottlers - 22 of then - is no different. They purchase
their concentrate (about Rs.50 per i:g) from the CCEC which makes it in its
own nodern plant at Fmribad, according to a formula which contains s
societ ingredient calle’ 7-X. The ingr^dient-the main cause of all the
rumpus-constitutes only four per cent of the concentrate,but it is imported
all the way fron Atlant Georgia, the parent company's headquarters in
the US, against inport licences that arc carefully doled out ov.ry
quarter. The last licence was received in D.jccnber 1976 but when it
camoup for renewal in April this year, a. new government had taken
over at the Centre and the ninistors concerned - industry and commercerefused to oblige, until tic’Reserve ■bank of ‘-dia had cleared the
case under FERA. The licence is wort h about Rs. 8 lakhs, a flcabito
actually in terns of foreign exchange, but worth its weight in gold,
for the 22 bottling plants which, between then sell 30 lakhs bottles a day,
or a cool one thousand r’illion bottles a year. * or then, as for the
CCEC, it is the real tiling.
According to Risen Hohta,vice-president and area manager of CCEC until
Juno this year, there is really no dispute. "We have d. ne cur best to
comply with the FERA previsions and agreed to dilute the wquity but wo
have asked for a quality control coll to supervise the blending of the
concentrate so that wo can preserve the world wide integrity of tho pro
duct which sells in 140 countries including Soviet Union" ho told INDIA
TODAY, adding almost as an afterthought,
that it was tho company's
fundamental policy not to divulge the secret formula. "Secret or not
secret" sneered a government official, "surely they can't expect us to"
change our laws to suit their convenience." The Reserve Bank has turnnod
down tho company's proposal for a quality control and liaison cell —
which would continue to be directly under tho control of the parent com
pany - on the grounds that this would reduce the proposed Indian unit
to operating as a selling agent. "Wo want the Indian company," George
Fernandes told the Lok Sabha, "to bo in complete charge of tho operations,
including manufacturing and know-how." His officials say that no company
has been permitted, to import know-how and pay for it in foreign exchange
in perpetuity. Tata's , stopped using tho Mercedes-Benz trade mark after
20 years, and so hSve Premier Automobiles. The officials suspect that the
profits and head offices costs remitted to tho parent company - around
rupees one crore annually - include a hefty element of royalty but the
CCEC denies this.
However, these are minor grouses. Tho main point is that the Coca-Cola
people who a re such experienced wheeler—dealers when it comes to dealing
with governments seen to have grossly miscalculated their political clout
with tho Janata administration. Coca-Cola is a highly politicised organi
sation used to dealing with governments at tho highest level. In India,
ties of kinship and language have boon traditionally used to snoothen
tho way through the corridors of power but Coca-Cola seems to have over
done it. Kisan Mehta, until recently Coca-Cola's tep man, in India, is
related to Hitendra Desai (their nothors being sisters), former Chief
Minister of Gujarat and a close associate of Prime Minister Moraji Desai
until ho defected to Indira Gandhi in June 1975. Bipin Patel, the no. 2
nan, is Sardar Patel's grandson and also close to the Desai household.
During and sone years before tho Emergency, when Moraji Desai was in the
dumps, Coca-Cola is said to have established a’cosy relationship with the
"caucus" through Charanjit Singh who controls nearly 50 par cent of tho
bottling capacity in tho country and has a na.jor stake in the Coca-Cola
franchise. Tho conpa.ny cpcro.tcd mainly tnrough the Prime Minister's
secretariat, with R.K.Dhawah and Yashpal Kapoor pushing tho files tlir&ngh
the controller of imports and exports a.nd tho Reserve Bank, (ihis is one
reason why the FERA notice was net served on the company until April
1977, after the new government camo into power). Charanj.it Singh's companv
bought shares in Maruti worth Rs 2.25 lakhs (it. Ik TOi-.J April 16^0, 1977)
""d nlso v'v >ri
ara: .
-iio-■
•
"
''•’'ngee. to secure
--i-
(MX)
a Congress ticket fr
South Dcllii for the Lok Sabha elections against
Vijay Kumar. Kalhotr^, 1 -r. ■ r chief executive councillor of Delhi, but was
badly mauled.
"It io. a pure and si.;rl« ; litical vendetta;’’ roar.. Singh. "They are just
taking it out on
i’ 1 'hout the Emerone;
Coca-Cola virtually ignored.
the industry ni-is k.’„. .-.. ch, as the f.rur ■.’.irirtcr T.A.Pai confessed at the
AICC .looting, wr.c., i.
• as-., run an San jay Gandhi's private fief.
On March 23, .v ...•jtb:.
' .0., but Z- c;-.-Cchi fs'believed that they
could pontinuo u
c.
the
Prii .
ic '. '.'.office, and
particularly thru
senior ;. Pi'iciale. whv c-aincd to have been
close to Sardar Prt-A. '
r.lrc;,t the firs. ii.i' - h raji Desai did was
to dc.ccntrr.liao decis
stain ...'. the 'unending novonont of.files
to his office. When the Me .-Cola chiefs approached the industry ministry
for ro commending an import. ’.'iconcc, they wore not by surly officials who
said that nothing Cvuld m • (leno v.rtil th.. FERA affair was over. Cohncrcc
Minister Mohan Dharia also put his foot down, although he could have obliged
with an interim licence.
At the height of the crisis, there were.rum us that US President Carter,who
also hails from’Georgia’and h.-s close links with the COCA-COLA organisation
had expressed interest in an early solution. Coca-Cola chairman J.Paul
Austin, is a confidante of Carter and so is Charles Kribo, his closest
political adviser and Coca-Cola's attorney, Charles Duncan, who until
recently headed CCEC is now under-secretary of state for defence in Carter's
administration. At one time, there wore strong reports of a link between the
US administration's reluctance to supply enriched uranium and the Coca-Cola
crisis, but Embassy officilahs have denied any pressure.
A sore point with the industry ministry's hawk-eyed officials is the alleged
reluctance on the part of Coca-Cola to cone clean with their sales and profit
figures. George Fernandos' claim that the concentrates were sdd to Indian
bottlers with a very.high_profit margin around 400 per cent is disputed by
the company but it is nonetheless true, according to available figures, that
the company's not profit before tax averages between 55 and 60 per cent of
sales, an extraordinarily high
profit rate that is not matched by any
other company of that size in India. In 1974, the latest year for which
results aro officially available, the company made a net profit before tax
of Rb 2.62 crores on sales of 4.36 crores. The remittances to head office
and head office expenses in foreign currency that year exceeded Rs 1 croro and all this on an initial investment of loss than Rs 7 lakhs.
There arc many, including George Fernandes, who suspect that it is tho high
profit margins - Coca-Cola is a gold mine, said an agitated official - and
not tho secret formula that is at the root cf the company's reluctance to go
Indian. Another factor is the sharp drop - t something like Rs 2 lakhs in
1976-77 from a high of Rs 1.56 crores in 1971 - in exports which has virtually
crippled tho company's capacity to import tho ingredients There is even now
a feeling in tho industry ministry that if the company goes public under
FERA and pushes up its exports to Rs 2 to 3 crores annually, a way can be
found to import 7-X, but the company doesn't seen to be took kon on.exports
right now.
Gcorgo Fernandes was very categorical in his last Lok Sabha statement. "Wo
can't allow a foreign multinational to destroy our soft drinks industry,"
he declared, and there the matter apparently stands.
How Gcorgo Fernandes deals with this particular multinational dragon - and
there are already others watching' the fight - will depend, as much on the
dragon as George himself. A delegation of Coca-Cola workers which called
on him, was- assured that nothing could be done that would harm their
interests. The delegation camo away wondering what-exactly he meant.
COCOA-COLA
.EXPQIiT CORPORATION
"Statistics
of Indian
LIMITED
Brancli”
"It is the Real Thing," says the Coca-C: la advertising blurb. But one
look at the balance sheet of Coca-Cola and it is easy tc see that in fact
"Monoy is the Real Thing". By internationally peddling their soft drink
this company h-s grown into a gigantic multinational which has recently
been ranked 69th by Fortuno magazine (the US businessmen's bible) in their
latest list' of the top 500 corporations in the USA. The Coca-Cola parent
company has total sales cf 35.05 billion (Rs2,575 crores) and total assets
worth 31 >90 billion (Rs1,615 crores). The secret of its success lies in
two basic facts: creation of a near m .nopcly product an.’ application of
sophisticated mass-marks ting techniques. INDIA TODAY'S special investiga
tive team reports on Coca-Cola's financial operations in India.
Coca-Cola discovered its pot of gold in India almost immediately after' the
introduction of its well-known marketing techniques. The Indian branch o
office of the Coca-Cola Export Corporation (CCEC) was established on Sept
ember, 15 1958, with a modest capital of o. few thousand rupees. In its
second'year of business the company netted a profit (before tax) of
Rs 5,97 lakhs on a comparatively lew turnoevor of Rs 12.88 lakhs. Since then
tho company's fortunes have boon a rapidly rising graph in sales and profits
to reach a record profit - before taxation - of Ps’5.54 croros in 1971 on a
turnover of Rs 6.57 crores. Such high profit figures in India arc normally
associated with companies cf a much larger capital base and turnover.
Tho operations of the Coca-Cola branch in India, as probably in other
countries, arc- of a close circuited nature. Not only dees Coca-Cola not
disclose the ingredients of its much-vaunted formula but it also zealously
guards the costing and pricing structure cf its vital product - tho con
centrate. Tho concentrate- is locally ma- ufmatured by Coca-Cola and supplied
to franchise holders. These h Iders arc completely at the mercy of the
branch office since their entire business depends upon receiving the supply
of concentrate. There is no available substitute for the concentrate. There
fore thercis no question cf bargaining for tho price which coca-cola charges.
And there are no complaints since there is enough money to be made all
round.
Besides, Coca-Cola's Indian branch experts mainly tc the parent Coca-Cola
company in tho US and also imports directly from it. Coca-Cola's business
circle is c.mplete. There is n. way for an outsider to check on the inter
national price of Coca Cola concentrate (as there is for steel, coffee,
etc.) since there is no equivalent for ihc product.
However, Coca-Cola's operations in Indio, ore but 0. miniscule proportion of
international" business of the parent company. The Indian Branch's sale
constitutes only 0.2 per cent of the parent company's sales and the net
profit from India constitutes only C.25 per cent of.tho total profits of
tho parent company which arc 3285 million (fis256 crores). Although by closing
their Indian branch they may lose a foothold in a growing market, the clo
sure of the Indian branch could -hardly be expected to cause o.ny loss of
sleep for tho Coca-Cola chiefs based in Atlanta, USA.
Points to note on tho Accounts:
SALES: Tho total sales of the Indian branch have declined by 50 per cent
between 1971 (p.s657.78 lakhs) and 1974 (Rs456.84). Also tho exports between
1971 (Rs156.14 lakhs) and 1974 (Rs100.50 lakhs) have dropped by almost 55
per cc-nt. It appears that since the import qu> ta for new material was
reduced in 1971, the c mpnny's sales have steadily declined.
Return on capital: The capital of the company has been for many years
stZtionwey nt Rs6.61 lakhs. The returns on tho capital have been a pheno
menal 800-1200 percent. This nigh rate of capital clearly indicates the
non-.poly olonont prevalent i tho sclUn " of Cccm-Cula.
"5 ■
Qlej)
Profit margin; The profit margin for the Indian branch after taking into
account all expanses except tax, is in the region of 55-60 per cent. This
is far above the average profit margin of 15-25 per cent far ccnsumor
products in India.
Export Earnings and expenditure in foreign currency: With the <•' c dining
trend of exports, thb t. tai exports for the years 1973 anl 74 were Rs 234.71
lakhs against expenditure in foreign currency, co nting of profits, head
office expenses, head office service changes and. import of raw materials,
which were Rs 442.55 laldis.
Amount payable to Ar.aric.--n C.:,i..pqny (he \ office): As .,-n 31-12-1974 the
total aUount that was payable to the head office (net ■ aiding into account
remittances already and... n .;;ragated Rs 450.12 lakhs.
As a counterpart £:r .thin 1. ability, the Indian branch has set aside in
fixed deposits with banks a sum f Rs 319 lakhs (1974). Unlike the other
company recently in the rows, liaruti Limited, the CCEC’s Indian branch is
obviously flushed with cash. In the event of any emergency it is in a posi
tion to immediately remit a major amount pay.'.bio to the head office. Keep
ing this fixed deposit in the bank almost equivalent to the current account
payable to the head office scons to have boon a regular practice.
Taxation; The Indian branch has paid income tax fcr the last five years
amounting to Rs 11.40 crores which represents about 75 per cent of its
profits. The government will have to tako into account loss of this revenue
plus revenue from other sources such ns
excise, sales tax, octroi, in
the event of Coca-Cola closing operations in India.
SOURCE:
India Today
September 1 - 15, 1977.
(for private circulation only)
SEEDS
_0F
THE
E
A
R
T
H
(Private Circulalatton Only)
Over the past decade a handful of
multinational corporations have
quietly gained control of the
first and most vital link in the
food chain — the production and
marketing of- seeds.Pat Roy Mooney
investigates this new corporate
concern and raises some tough
questiops about'*'6ur future food
sjecurt ty.
Seeds are the beginning of food, the first link in the food chain. Con
trol seeds.and you control food. Yet, take a stroll through any of
the N~orthT~s super marts and the threat of such control seems patently
absurd. The cornucopia of fruits', vegetables and canned goods 1 -i n-i ng
th« shopping aisles may total an average of 11,000 spperate food pro
ducts. Another 7,000 products are test-marketed each year. Such abun
dance and diversity makes any thought of food monopolies seem ridi
culous.
SUPER SEEDS: Paving the Way to Disaster
In fact the North's food choices are narrowing and food quality decli
ning. We now eat less fresh fruit and vegetables than ? we did in the
comparatively dismal days following World War II. Today's diet contains
a quarter of the apples our grandparents ate and consumption of garden
'greens' and.beans in North American has been declining since the
1950s. U.S. Government surveys show only nine vegetables make a sigri-i ficant nutritional contribution tothe American
diet.
North America and Western Europe are 'meat 'n potatoes' country. We
occasionally dabble in exotic foodies from some small corner of Mother
Nature's pantry. But our overwhelming vegetable choices boil down to maize (corn), peas and carrots.
In fact diversity has never been a strong suit in the North's agricul
tural system. Ninety-five per cent of all human nutrition is from only
basic-, crop.. There My be 300,OOo”potLtX17ooa'’blJ't<'!rtV'"’"’ froni eUht
Virtually every major .food
•■ ted in, the Third. World. In
mere con-tinue to cultivate
all plant breeding and our
P an in the industrialised countries originaAsia, Africa and Latin America traditional far
seeds and crops that forja the genetic base for
entire food system.
After more than 10.million of selection by.nature and by farmers, the plantt
-- genetic diversity of the Third World unkes it the ’mother lode’ of raw
materials for modern plant breeding. Northern agronomists must return to
the Third World regularly in order t« find new genes (the building blocks
• of plant.breeding)•to insert into crops in the North. We may he grain-rich
but we’'are gene—poor.
The problem'is ./the genetic base of our major food crops in. the Third World _r
is being wiped.out. As go these old seeds so goes our food secuirty. As
new 'Green Revolution' varieties spread around the Third World, farmers
eat the old seed and plant the new. Geneticist Garrison Wilkes describes
the effect of this phenomena, as ’building the roof with stones from the
f ouniation' .
Events in the early 1970s-iserved to accelerate the destruction of our
food base and -make the control of seeds possible. Shell Oil noted then
that two major changes had affected the seed industry: the Green Revolu
tion and Plant Breeders' Rights' .
For companies the size of Shell, the success of the new ’-super—seede^-ahowed
that the North's aid agencies were ready to underwrite a global seed indus
try. Third World governments would, have the funds to subsidize seed prices—
and world markets could, be found for new commercial seeds. In the same
year that Norman.Borlaug picked up the Nobel Peace Prize for leading the
Green Revolution, the United States adored plant patent legislation.
In one stroke the global market far patented seeds tripled. With patents,
companies could look to exclusive monopoly control over a new plant variety.
This monopoly.provision (Plnat Breeders' Rights') would allow big companies
to vertically—integrate from breeding to seed retailing* The threat of
patent litigation would bar small family—based seed companies from the
competition.
'
From a s-.anding start in 1970, Shell Oil now. markets seeds through atle a st
60 companies in; Europe, -North America, Latin America and Africa. It is by
far the Large st.. seed enterprise, in the w-orld-,
..
Close behixd are the two Swiss chesical twins, Sandoz and' liiba^Geigy with 22 an< -gQ-qpnpftnies respectively. Other European majors - none of
whom appear V) have been in the seed business a decade ago - are Sweden s
Kema Nobel and lardo; France’s Elf Aquitaine and Rohne - Poulenc., and
Q251
Hollandes -Suiker-—Unie-.._Acrona- the_“p<>nd-the -American s- caught" on fast;
dominant companies now include Ffizer, Upjohn, Olin, Occidental Petroleum^
Stauffer Chemicals/ Atlantic-Richfield and ^iperidr■ Oil.
It appears more than 400 firms hate been bought up or .chased out over the
past ten years.
The effect in ;the marketplace has been astonishing. For the first?Srinre
ever U.S. seed .prices broke their traditional link tcfarmer commodity
prices to rise at a rate exceeding all other agricultural input coits including petroleum products. Seed prices in the United States doubled and
doubled again in the course of a decade.. One forage crop, alfalfa, jumped
from just over $22 a sack in 1967 to 811.1 in 1976.
;‘
At the same time multinationals moved to consolidate their\ control of both
patents and the market. In a land of seed companies dating 'back to Crom
well’s day, ‘three multinationals took over England’s packet 'seed (vegetable :
and flowers) j;rade. Shell Oil, Kema Nobel and Cardo now have ’(S per cent
of the retail business after buying out Ipcal firms.
\
'
.■
•
**
V s'
Seed industry sources in the UK claim Shell accounts for 40 per cent of all .
plant-patent royalties in that country. Of'en the same companies,.exert--the
same patent 'influence around^4Jae.^indusimialised worlxL-.fr.cm .Sreden to ■
New Zealand.
.
v
WHO CONTROLS- THE AGRIBUSINESS
.‘
'
Farmers and consumers in many countries are particularly concerned that the
■world's new seedsmen are almost exclusively from the chemicals side' of agri
business. Since seeds flow through the same marketing channels as crop
chemicals this is hardly surprising, but analysts are worried that chemi
cal giants may reap special advantages from the dove-tailing of their plant
breeding and crop protection work. Certainly, the possibility exists that
companies may offer farmers- a 'package deal' ofx seeds and chemicals.
New work in seed pelleting is increasing the mar ret far clay-wrapped seed
complete with chemical inoculants - thus making nae farmer an offer he
can't refuse.'
Ciba-Geigy .has recently come up with .the perfect seeds and chemicals pack- ‘
age. With its patented sorghum varieties, the -c-ornjany now offers a trio
of chemical seed 'safeners'. Two combat pests in the soil while the third
protects the seeds from Ciba-Geigy’.s leading herbicide spray, '’Dual',which
might otherwise harm the seed. This is known as the -Clint Eastwood'
approach to plant breeding (' Any-which-way-you-can') .
•
Of still greater concern is the potential for seed/chelical companies to
profit by simply doing nothing if and when a disease"'^7tacks a crop.
Rather than find an 'organic' way of combating a now disease with an im
proved variety, the company may merely refer farmers to th6 chemicals
already on the .shelf.
As disturbing as the coporate trend is in the North, it is reaching crisis
proportions in the South. Overly-aggressive marketing of genetic erosion
beyond the capacity of geneplasm. The big companies are only interested in
the large seaieage crops, often export crops. These tend to take over tradi
tional poor people's crops or move into climatic zones and soils inapprp^
priate to the commercial variety.
This 'commerciogenic wipe-out' has led to intense efforts to collect and
store endangered germplasm.Through the International Board for Plant Gene
tic Resources (iBPGR) a campaign to establish a system of global gene banks
■ for storage of crop material is now eight years old. Of the more than 30
crops for which base collections have been established, virtually every c '
• crop of economic importance has been assigned to the North - to countries
with Plant Breeders' 'Rights' monopolies.
, It is estimated that 75r-9O per cent of all Third World plant genetic
resources in storage are banked in the North.
Many Third World scientists are infuriated by Plant Breeders' 'Rights' pro- •
visions that allow someone to simply 'discover' a new variety and obtain
exclusive rights. Such a loose provision leads to the direct rip—off of
Thihd World treasures. A case in point is U.S. patent No. 551 awarded
some years ago to Quincy McKeen. McKeen found the- rare flowers on a
stroll in Guatemala. He scooped up all -he could find and hot-footed it
back to his New England home where he grew out the seeds - kept the best
and destroyed tie rest of the natural diversity to avoid competition.
Third World governments are not anxious to be any further indebted to
multinational corporations. As one diplomat said at the FAO conference in
Rome last November, 'give us this day our daily bread' should not be a
prayer to Shell Oil.,
- Pat Roy Mooney is a Canadian writer and
author of 'SERDS OF THE EARTH', availa
ble from ICDA, Rue des BolTandis tes 22,
Brussels, Belgium. £J.OO / $7.50
courtesy
New Internationalist - February 1982.
/$-REGULA TION OF DRUG ■MULTINATIONALS IN INDIA
£
.$30 j J J J j'-jO J O J J J J •> v J J j ; j - J - j - J J J-------
In order to bring the operation of the multi
national drug companies in line with national
needs and priorities, the Government outlined
its policy towards the foreign companies, with
equity participation exceeding 40%, in the New
Drug Policy announced in March 1978 following the
report of the Hathi Committee submitted in April
1975 •
go uernmgnt
-°ki-9.il
Some of the key feature of this policy towards the foreign companies are
as .follows-;
(1)
* Foreign companies engaged only in the manufacture of formulations must
be directed to bring down their foreign equity forthwith to 40?° . i.e.
become 1 ^ndi^n' companies.
* Foreign companies engaged in the manufacture of bulk drugs not using
Ugh technology (see the following para for a discussion on what constitu
tes "high. Technology") must also reduce- their foreign equity to 40%.
* Foreign -companies manufacturing bulk drugs involvijg high technology
will be allowed to retain foreign
equity exceeding 40^6 upto a maxium of
74% depending upon the proper tion of - the total turnover from such high
technology drugs and activities related to Appendix I or the "core
sector" of the Industrial Licensing Policy, 1975
*
* The Government, vide Article 14 of the new drug policy, redefined 'drug
and pharmaceuticals 1 listed in Appendix I to rcan ;
A. drugs intermediates from the basic stage for production of high
technology bulk drugs, and
B, High technology bulk drugs from the basic stage and formulations
based thereon with an overall ratio of bulk drug consii^tion from own
manufacture to formulation from all sources of 1:5«
* A list of bulk drugs was also drawn up reserving 25 bulk drugs for
the public sector and 25 drug for the Indian sector (Public and Private)
No foreign companies will be given a licence for these reserved bulk drugs
* In future, foreign companies will be given new licence-, including capa
city expansion licences, only for high-technology bulk drugs and formula
tions linked to them, subject to the condition that they supply 50% of
their bulk drugs production to non-associated formula! rs. They must also
maintain the ratio of 1:5 between their bulk drugs consd^tion (from
own manufacturs) and formulations production (from all sources).
* With regard to regular: sation of production in excess of the licensed
quantities, tho highest production achieved in any year during the 5 year
preceding 51 March, 1977 will be the basic rogulr. ‘intion. In the case
of foreign companies, this will be further subject to their supplying 5’0%
of total bulk drugs production (including regularised excess production)
to non-associated formula! s , end maintaining the 1:5 ratio between
bulk drugs and' formulations production. No reffularisation will be permi
tted to foreign companies for excess production in
.•••Vid remedies.
WHAT _IS J__HIGH_TECHrOLOGi
It was in the context of this now policy i.w-r ...
multinational that
the Government appointed tl.i K. ' .Ram-hat/
c ui-tec ir 1978 to identify
the foreign drug companies .'ngaged in the pre notion of ,ne or more bulk
drugs using high sjochnolbgy. The report r-s ■; omit ••rd in October 1979.
The Committee divided the bulk drugs produced into 1 categories: (2)
1) Bulk drugs based on fermentation through microbicl gieal processes.
2) Those produced through synthetic chemical processes.
5) Those extracted from plant or animal sources.
4) Those thatdo not cane under any of the above 3 categories.
For the first category, the Committee decided that the development of
high-potency strains of microbes used for the production cf antibiotic
bulk drugs and the extraction and purification processes invloves "very
intricate technology and maintenance of well-controlled operation
parameters, which would qualify such products as involving high-technolo
gy in case these are produced from the bae’ic stage."
For the Seco’.nd category, technology involving continuous sequential syn
thesis resulting in reduced costs, better quality, leeser pollution of
specific drugs without involving selective separation would also qualify
as high technology.
For the/ca^e^ory, only the special processes used to extract active ingre
dients conforming to strict specifications or to increase their yields
would qualify as high technolgy.
For une fourth category, products like catguts,Sutures, etc. produced
from animal or plant materials would qualify as high technology drugs
only if the production processes involve very intricate techniques and
operations .
The committee studied the operation of the 45 foreign drug firms with
foreign equity exceeding 40% in 1978-79. The Committee found that out
of these 45 firns, only 22 were producing bulk drugs involving high
technology in varying proportions to their total turnover.(j) (see Table
on the following page giving the full list of these 22 companies.) The
rest were pure formulators :7 or did not make any bulk drugs involving
high technology: 16. The Committee had studied the bulk drugs production
processes of 24 companies in great detail involving 207 bulk drugs. It
found that only 127 of these bulk drugs involved high technology. Out of
these 24 firms, Richardson Hindustan Ltd., and Whiffen India Ltd., with
foreign equities of 55.97% and 50% respectively, were not foui.d to
producing any high technology bulk drugs. (j)
As can be seen in the Tabic, the foreign equity participation carti.es
widely for the 22 companies from 100% for Burroughs Wellcome & Co., to
75% for Pfizer tc 50% for Hoechst and 45% for Geoffrey Manners.
Few of the 22 companies listed above have a. high proportion of high
technology bulk drugs in their total prcduct»mix
of bulk drugs.
Pfizer has 10 such drugs in their total product c t of 11, Wyeth Laborato
ries 25 out cf 28, ^andoz 8 out of 10, Hoechst 9 cut of 20 and Glaxo 11
out of 54. (3) Also, very few companies have a large portion of their value
of production contributed by high technology bulk drugs.
diluting government policy
The 7 foreign drug companies, involved in purely formulation activities,
were directed by the Government to dilute their foreign oqt^y to 4C% in
1978 itself., By Auguct 1°81 . all these cc.-, i. r - Hi oh; 1 ..a of In'dia (
(l0l"50 T- . - B'".
’ 'S .
'1
.
•. d C-rtor
Wallace (49.46%) -had diluted their foreign holdings to 40%. SKF took the
longest to comply with the gcvernmcn -,’s order after protracted
"negotiations" for over 3 years.(5)
But regerding the 21 foreign conpanics
*
nuking at least one or nore high
technology bulk drugs which comprise the most important segment of the
foreign secto’-, the government has yet to order their ^juity dilution.
According to the strict criteria being applied by the FERA Committee, a
foreign company can retain a maximum of 74% foreign eqj-ty only if not less
than 75% of its total turnover is from high technology activities and
exports and 51?° it not less than 6C% of the total turnover is from such
activity. (?) It is expected that only 2 out of the 21 companies viz. '
Roche Products (89$) and Parke-Davis (83.3$) will be able to retain their
foreign equity at 74%. Most of the 12 companies with foreign equity of
60% and above (sec Table II) will have to reduce it to between 50% and 60%.
For example, through Glaxo manufactures a turnover is accounted for by
inessential, consumer products e.g baby food.
^t
**
is expected that glaxo
may haveto dilute its foreign equity from 75% to 51%,.(6)
LIST OF 22 FOREIGN COMPANIES EMPLOYING HIGH TECHNOLOGY ACCORDING
TO THE RAMAN ATI! AN COMMI'TJEE
COMPANY
EQUITY (%)
Foreign Equity 41% to 49%
1 . Geoffrey Manners & Co. Ltd.
2. Suhrid Geigy
3. Organon (India) Ltd.
4. Uni-Sankyo Ltd.
45 <
47.5
49
49'
£or£i,gn Equity 50% - 59%
5. Hoechst Pharmaceuticals Ltd.
6. Warner-Hindustan Ltd.
7. Alkali & Chemical Corp, of India Dtd
8. Bayer (India) Ltd,
9. Boots Company (India) Ltd.
lO.Cyanamid India Ltd.
5C
50
56.15
51.37
53
55
Foreign Equity 60% - 10C%
1 1.E.Merck (India)Pvt. Ltd.
12.Merck Sharp & Dohme of India Ltd.
13,May & Baker (India) Ltd.
14.Sandoz (India) Ltd.
15.Ciba-Geigy of India Ltd.
16.Wyeth Laboratories Ltd.
17.Johnson & Johnson Ltd.
18.Glaxo Laboratories (India) Ltd.
19.Pfizer Ltd.
20.Parke-Davis (India) Ltd.
21.Roch Products ^td.
22. Burroughs Wellcome & Co. (India) Pvt. Ltd.
60
60
60
60
66
74 ■
75
75
75
83.33
89
100
*
Out of the 22 high technology companies identified by the Rananathan
Committee, Suhrid Gegy Producing 8 bulk drugs of high technology has
completely withdrawn its foreign equity and is now a 100% Indian Company,
** For a break-up of' t- c dugs a.ud non-drugs sales of the 22 cr ir.nies listed
in the Table
To ascertain how much of the turnover if the concerned, companies arises
iron high technology activities and exports, the Government had asked
then to subnit detailed data. According to sone.-repots in August 1981, •"
the companies have already submitted the data tv the Government "nany
months ago". But the Government had net yet taken any action.(5)
tjhy has the Government been dragging its feet on the dilution issue over
mre than 3 years after taking a policy decision in March 1978 and almost
2 years after the high technology committee submitted its report in
October 1979? It is highly probable that the 'row' created by the nultina
tionals against the strict norms tc be applied, for equity dilution h, r
been successful. These companies have challenged the competence of the
Rananathan Committee to decide on what constitute high technology. They
have even questioned the 'jurisd ication' of the Committee to identify
companies engaged in high, technology bull: drugs manufacture, when it was
appointed to identify only those companies not engaged in high -technology
manufacture! (7)
According to the FERA Committee, only Article 14 of the New Drug Policy
of 1978 wheih redefined the tern 'drugs and Fi r.maceuticals' appearing
in Appendix I of Industrial Licensing Policy 1975 should be considered for
deciding the permissible limit of foreign equity for all foreign companies
According to the foreign companies, only Article 17 of the 1978 policy
should be used to decide on the equity limit of existing foreign companies
Article 17 states: "In respect of foreign drug companies currently’engaged
in Appendix I activity on drugs and formulations, the value of turnover
which will be considered as such Appendix I Activity will consist of (a)
the value of bulk drugs sold by them to non-asscciated formulations,
plus (b) the value of formulation not exceeding 5 tines the value of
their total bulk drug production."(1)
In other word, the turnover relating to Appendix I i.e. the core sector
activity, should not be computed on the basis of high technology bulk
drugs but all bulk drugs. The FERA committee dismissed tills :.rgument of •
the multinationals as "ridiculous" because the principle that only high
technology product should be included in the core sector applies to
all industries.
The following items appearing in The Economic Times, March 12,1981 ably
suns up the essence of the controversy!
"Take two companies manufacturing 20 items each. One makes 19 high-tech
nology items and i low-technology item. The other makes 19 low-technology
itensand 1 high-technology item. "Can both these companies be treated.on
a par for the p-fijipose of equity dilution? Ho, asserts the FERA committee.
The foreign drug companies contend that even if a company makes only one
high technology item among its total products its total turnover should
be treated as Appendix I (See first.page) activity.
The FERA committee says the principle that high technology items alone
form the core sector activity which is applicable to all 'industries cannot
be diluted in favour of the-drug industry.
/
"Foreign drug industry hint at the possibility of certain companies
challenging the FERA committee's decision if it seriously affects their
equity positions." (7)
According to reports apnearrrg in April 1981, the Government was reported
to be "Contemplating a Change in the norms of foreign equity in the
pharmaceutical industry1'. Following protests from the companies, the
"Current thinking" of the Government is that "the recEmendations of the
J £3
high technology committee nceds^not be the solo basic for decicCng the
extent of foreign' equity." (g) After 2 years of non-ir.;plementation of its
policy decisions made 3 yc-: rs e&o, now the Government has descovcred that
in "Quite a .few cases" the conclusions of the high-technology Committee
do not conform to
"the realities of the situation". (8) The Technolog/deal
'realities' of drug production or the political 'realities' of the Indian
Economy ?
government help ing hjind
Unauthorised installation of capacity in excess of licenced capacity has
been going on for years in the drugs industry as in many other
industries. The Tariff Commission which went into this question extensively
in the •. 1960s found that the drug companies had made a mockery of the indu
strial licensing policy of the government and there was no relationship
between licensed and installed capacities.(9) Many units had installed
capacities farin excess of licensed capacities-in certain cases 10 times ■
the licensed capacity and many had not installed any capacity for years
after having obtained the necessary licences. What is worse, the Commi
ttee found that no penal action was taken against any firm. (9) Tip
manner in which the D.G.T.D. has handled these natteis is vividly
portrayed in the following examples furnished by th Tariff Commission:
1) VIAMIN B—12 AND VITAMIN B-12(B)
" The tot-1 licensed capacity is 25kg. while the installed capacity is 6413.
in the case of Merck Sharp and Dohmo. When the unit approached Government
for thereSulariaation of its increased capacity it was informed that this
could be done only if it was prepared to reduce the price, Since the unit
was not prepared to reduce the price no regularisetion of tho^capacity
was made. As against the licensed capacity of 25fas for the drufs, the unit
manufactured 53.6 lys. in the year 1967. It appears that no restrictions
were placed in the way of the unit producing more than its licensed capaci
ty. The refusal to recognise the fait accompli was therefore inconsequen
tial so for as production was concerned,Had the unit been subjected to
restrictions which would have resulted in its not exceeding the capacity
for which it is licensed or at the most 25^ over and above the licensed
capacity, that is a total of 31.25 kg., it could be considered that Govern
ment 'sbisinclination to increase the capacity owing to the intransigence
of the unit in the natter of reduction of price, bore fruit, but in the
present case it was not possible to descern any advantage that nay have
resulted from this approach." (9)
2) penicillin-
"Alembic Chemical clainend an instakked capacity if 50 HMU as against a
licensed capacity of 20MMU. The .D.G.T.D. has mentioned that the producion
of penicillino by this unit was woll above the licensed capacity and this
was. helpful in meeting the increasing demand. Notwithstanding this, the
partywas told that kcooing in view the total capacity of the manufacturer
and the fact that licenses were held both in the public and private sector
against tequirnents by the end of the Fourth -Plan period., in regard to
the prepress of the licensed units, it was not possible to regularise the
additional capacity.Government would ’
however have no objection to the
additional - production over and above the licensed capacity being export
ed.This presents certain very complicated issues with regards t.. the licen
sing pf capacities. On the one hand it is-recognised that the installed
capacity foe the unit was higher than that licensed; it is also stated that
this noddubt proved to be helpful in meeting the increasing demand. But,
it has been simultaneously stated that it was not possible to recognise
this fact."(9)
5) CHLORPROPAMIDE
1^4
"Pfizer produced 12.21 tonnes of this product in 1966. It claims an
installed capacity of 5 tonnes and the licensed capacity is cnly 1.5 ton
nes . The cJ arification received from Government on this discrepancy was
that the proposal of the unit for expansion a>f its capacity for manufacture
was not approved as its output was not up to the licensed capacity, and
it was suggested to it that it can submit its proposal for expansion •
after it had been able to fully utilise the licensed capacity for at least
a period of one year. This: introduces a new feature in the natter ' of
lie:.using of capacities. While the D.G.T.D. recognised that the proposal
was for expansion or capacity for the sane product, it mentioned that such
expansion, is allowed only if it becomes fait accd^li and the performance
justifies the expansion. "This would meal1- that if the unit is allowed to
increase the capacity and show higher production and then is asked to
cone up to Government for the reGularisation of its higher capacity,
Government than has the choice to reccganise it or refuse recognition, subject
tc the diverse criteria adopted by Government in such natters. If the ex
pansion is refused, the unit does not stand to lose anything. It Goos on
producing at the higher rate and most probably it continues tc Get the
necessary foreign exchange for few raw material. Licensing of unit for
capacities is thus likely to be rendered unfructuous. On the ether hahd,
if Government were to deter the unit
from increasing its production, the
outlay on expansion would be a dead loss." (9)
These example need no comments.
Let us now move tc early 1980. With the cornin'" to power of the Indira
Gandhi Government, the Organisation of Pharmaceutical Produceres of India
(OPPl), which represents the- intrusts of the large foreign companies,*
Isanched a Rs. 2 lakhs advertising campaign spread over 15 publications ■
critising the previous Government’s drug policy. The main target wps the
1978 decision to freeze the output of drug ccmpanise at the highest level
achieved in any year during the 3 years preceding 51 March, 1977. The main
argument (or was it a threat ?) of the OPPI was tht this deci Jion would
load to a 25?J fall in the output of bulk drugs as well as formulations at
a time when many drugs were in short supply due to inadequate indigenous
production. (lO)
"OPPI Media Blitzkrieg", a report appearing in Business India (February
18 - March 2, 1980; correctly predicted that "the publicity campaign
lanched by OPPI is certain tc sway of-icial opinion, already somewhat
sympathetic—thanks to the minister in charge of pharmaceuticals, P.O.Sethi
—in its favour."
(10)
In August 1980, the industry ministry, announced an excess capacity
reGularisation scheme for 34 industries including drugs and pharma.ceuticals which
neccgnised installed capacities as on 1 September,1980
as the basis for reGularisation.(11) This was in clear contradiction to the
March 1978 drug policy of the petroleum and chemicais ministry which
stipulated reGularisation of excess production over the licensed capacity
on the basis &f the higher production achieved in any year during the 3
years preceding 31 March, 1977.
In May 1981, the Depatnent of Chemicals and Fertilisers was reported to
have designed a ‘new’ reGularisation scheme. "The new Scheme proposes to
regularise installed capacity as licensed capacity in the case of compa-"nies which have achieved 60 per cent and above capacitty utilisation in
any of the three years preceding 1980.
* including companies with foreign equity less than 4Q- of total equity.
Iii the case of other with less than 60 per cent capacity utilisation, the
licensed capacity will be the hi''host production achived during the
three years preceding 1980." (12) And this is precisely what the OPPI
desired: "If there is to be
freeze on our output at all, it should be
at the highest annual output produced in the triennium prior to 1980,
not 1977",(10)
Other elements of the earlier policy, suck r.s supply part cf the bulk
drugs output t o npn-associ .ted f crrulators and restricting f rmulati:-ns
to bulk drugs output at certain stipulated ratios, rare, however,retained.
Out of 139 drug units asked to furnish capacity and production date for
reGularisation, 114 units have applied till now. (12) But the Government
has yet to identify their excess production, nore than 3 years
after
the policy was first announced in March 19*8* Meanwhile the :
companies
Go on producing as they like in excess of licensed capacities, with the
Government engaged in bureaucratic exercises tc lc"itinise, ex-pcste, the
violation of its own basic, economic policies.
OOOOGGGOOOO
REFERENCES:
1. "Text of Now Drug Policy Statement", Financial Express,31 March 1978.
2. "New Gritieria for High Technology", Financial Express,4 August, 1978.
3. "Regulation of Foreign Drug Firns" by C .V .fopalakrishnan,The Hindu.
April 1980.
4. "Equity DilutionjSelective Exemption for Dru£ Companies" The Economic
Simes, 10 August 1981.
5. "Equity Dilution of Drug Firms" by P.A.Francis, The Economic Times
10 August 1981.
6. "74 p.c.Perch Only for Roche and Parke Davis ",R-Sgasankar, The Economic
Times, 7 March 1981.
7. "Alien Drug Cos,.Raise A Row Over Equity Dilution Norms", R.Sosankar,
The Economic Times,12 March 1981.
8.""Dilution Norm In For Change", Business Standard,9 April 1981.
9. Report on_The Fair Selling_Pricos of_DruSs And Pharmaceuticals,
Vol,1.1968. Tariff Commission,Govt. of India.
10."OPPI Media Blitxkrinn", BuaXaeae In4ia. February 18 - March 2, 1980.
11."ReGularisation Excess Drug CapacityjNcw Norm BciGn Worked Out",
The Economic Timos, f ’ 13 February 1981.
12. "New Scheme To Regularise Excess
The Economic Times, 24 May 1981
drug Production". R .SesaiKlftn,
0000000000000000000
Source: Mukarram BhaGat,
'Aspects of the Drug Industry in India,CED Publi
cation, Battery Street, Bcbbay-400 039-
i
cQ£iw/ijTiuffs
i
l
( Case of Bristol Myers Company in
!
I
Netherlands)
L
! 11.' ! i i i! i i 11 •' j! i i i : j i • < j > r j ■' j ! ■ < > i j i i ! j < ; i / / / / 7
Bristol Myers Company belong to the largest
Multinational Corporation in the Norld. The
Company has operations in more than 80
Countries.
Me '
r«j>ro4uo« th\9 article /row
Mainstream, August 4, 1984, pp 20-24. The
author of this article is connected with
the Centre for Development Education and
Third World Centre,Univer si ty Of Nijimegen,
the Netherlands.
The Economic crisis has been belt in Nijmegen (population 150,000), a city
in theeastern part of the Netherlands, more than in any other area of the
European Economic Community. While 18 per cent of the total employable
population in the Netherlands in Uneployed, unofficial estimates consider
the actual unemployment rate amount" the work afed population of NijmeCen
to be nearing 40 per cent.
These are nearly unique figures fox1 the SL.-callcd European Welfare States.
According to the new Guidelines sot by the European Commision, the executive
committee of the European Cmmmunity, the NijmeGen area is one of the
nost depressed regions in the community.
Multinational Corporation (mKCs1) and sudivisi’ons of larCe Duch concerns
provide nearly half of all jobs in the NijmeGen area without creating
any significant backward- or forward linkages. The lack of an integrated
industiral infrastrucure is the single most serious problem in the area.
Together with the (centre and ri"ht wine) national Government, the local
Government of Njjmei'en is attempting to improve the employment situation
in the area. One of their methords is to offer considerable subsidies to
potential investors, up to 50 per cent of the total investment costs. AS
a result of promotion campaign in the United States and Japan a number
of American multinationals have been attracted to the ^ijmeGen area, in
cluding recently the foods division of the Bristol Myers Company (BMC),
Mead Johnson (1-IIj). This last company plans to export, amount other
products, milk substitute for breast feeding of babies to r. number of
Third World Countries.
AsR04-C0HP0RATIQNS
In the last decade food has increasingly become sales Goods for larGe
corporations. The do-called multinationals, especially,try to earn
maximum profits with this trade. Companies such as Unilever,Cartill,
Nestle,United Brands, Carnation and Oetker are not the only ones in the
foodstuffs sector. Other companies whose origins have notling to do with
agriculture are now, via take-overs and mergers, actively involved in
thisarea. For example, Volkswagen and Mitsubishi have set up a ranch in
Brazil, ITT has purchased seeds companies, and Sholl and the Pharmaceuticompany C1BA GaiGy have also larte interests in the seed industry. 1
This process is very clearly visible in the Nijmegen area in the
Netherlands. Large corporations are active in the meat processing
industry (Homburg, Hendrix Meat, NCB, Corda) in the General foods
sector (Heinz, Home Juice Holland, CSIi-HoniE) and in the dairy
industry. The most important dairy companies in the Nijmegen
region are Coberco (located in Arnhem, 15
from Nijmegen) and
Nutricia. Following extensive debates during three meetings of
the Nijmegen city council in 1982 it was decided to offer Bristol
Myers Company a location in NijemJen. The factory will produce a
number of food products for children and adults. The products are
meant to be exported to developing countries in South East Asia
and Latin America, where BMC has already markets.2
BRISTOL MYERS COMPANY
Bristol Myres Company belongs to the largest multinational
corporations in the world. The company has operations in more
than 80 countries. Its European offices are in Italy, Spain,
France, ^reat Britain, and the Netherlands. In the Third World
the company has subsidiaries in among others the Philippines,
Peru, Mexico, Ecuador, Venezuela, Jamaica and Malaysia. With
3 3.5 billion sales, this company is rated 135 on the 1982 Fortune
list of the world’s 500 largest industries. These sales figures
are larger than the ^ross National Product of such developing
countries as Angola, Nicaragua and Jamaica.
The 1983 gross profits of Bristol Myers were 18 per cent of the
company's total turn over. "Despite the poor international and
internal American economic situation, Bristol Myers has",
according to the Office of the Mayor and Aidermen of Nijmegen,
"a healthy and solid financial structure" .
According to investment guides and journals BMC has "an unbroken
30-year string of sales and growth" and hence the company has
"a healthy earning strend" and "ranks near the top in profitability'^.
This is also apparent from the increasing annual profits of BMC,
consistently higher than those of competing companies in the same
sector
The company has about 35,000 employees world-wide. These figures
have remained more or loss constant over the last few years. The
organisation is divided into four main sections, consumer,
pharmaceuticals, health core, and food products, which are
directly under the responsibilities of the board of directors.
BMC is originally a pharmaceutical company and production of
medicines and medical products is still the most important
activity of the company, accounting for 39 per cent of the total
earnings in 1983. The Nijmegen factory belongs to the food
products division called Mead Johnson.
nijmegen plant
The company plans to produce in Nijmegen Mead Johnson's whole
range of nutritional products including infant formulas as
substitute for mother milk and diet foods for adults. The
production will bo made by the so-called "spray-dry procedure"
for which tall powder towers must be built. Thie is to bo the
first BMC factory to use this technique and the first BMC
(-IfS
dairy investment in the European Economic Community (EEC). The
production in Nijmo-on is mainly meant for export outside the
EEC and Europe (Far East and Latin America), and will bo shipped
from the Rotterdam harbour. The raw materials for the production
(milk, soybeans, etc.) can be purchased in the Netherlands. The
factory will have an annual capacity of 7 million kilos of milk
powder. Regional farmers will deliver 50,000 liters of milk daily
to the factory.
The first phase of the Head Johnson plant should be in operation
in late this year, and will offer employment to about maximum
80-100 people. The factory, including the machinepart, will cost
about 3 20 million to build. Upto now the company had to rely
on third parties or a BMC-plant in Canada for finishing raw Soods
Manufacturing capability is now "in-houso".
Bristol Myers’ final decision to settle in Nijmegen was based on
three factors namely export subsidies, traind workers and
investment subsidies, ' *
Export Subsidies
The milk production in the EEC has increased enormously in the
last years due to increases in scale and automatisation. Between
1950 and 1980 the butter production in Holland increased by 92
per cent, the condenced milk production by 208 per cent, the
powered milk production by 700 per cent and the raw milk
production by 104 per cent. The milk production in general
has increased markedly since 1950, as can be seen from these
figures. The supply of milk to the factories in this period has
increased from more than 5 million tons to nearly 11 1/2 million
tons. The number of milk cows has increased from 1.5 to 2.5
million; the milk production per cow has also increased. In
contrast, the number of dairy farms and the number of dairy
processing factories has decreased during this period.
The increase in production has load to large surpluses. These
have become an interest characteristic of European agriculture,
as is apparent from the fact that the Dutch government estimates
the total dairy production to bo approximately 120 per cent of the
national demand. Port of the surplus is used for feeding animals,
and part is exported to countries outside the EEC. Between 1950
and 1980 the export of butter increased 280 per cent, the export
of condensed milk increased 207 per cent, and the export of
powered milk increased by a giant 1981. Some of this surplus is
sent as "development aid" to a number of Third World Countries
including in India (Operation Flood). 5
To prevent excessive dairy surpluses, the EEC subsidises the export
of dairy products to other foreign countries. Because of the
high costs for dairy production in the EEC, the exporters would
not normally be able to complete with other world producers of
dairy products. However, the member states of the EEC have
decided to bridge this difference in price levels with tho socalled "export restitution". The exact amount for this is
determined monthly. Exporters and producers of milk products
who export at a lower price than the minimum price guaranteed by
the EEC are reimbursed for tho difference by this restitution
policy. This fact that BMC con also continue to profit by these
subsidies was one of the main reasons to open the now European
factory.
^rained Workers
A second important rc-;-..n for BMC to decide to build in Nijmegen
was the fact that there ar many highly trained workers available in
the ‘area. Until recently Nijmegen had a local dairy plant.
Because the production equipment wasoutdated, the factory, which
couid]1£lVG -bccn renovated for loss than one million dollars, was
closed. The formers frori Nijmegen factory and the surrounding
area now deliver their milk directly to the Ccberco factory in
Arnhem (15 ion from Nijme°on). The employees of the Nijmegen
factory were offered the choice of accepting work in Coheres
factories in other cities, or of being discharged. The majority
chose tc work, and now commute between the two cities.
Considering the fact that Ccberco in Arnhem has an excess of
employees, it can be expected that a number of those will be
available for work in the Bristol Myers plant. This is especially
so since BMC will probably si®n a sales contract with Cobcrco and
will need trained persongl. This moans that, at least for the
time being, the net number of nevi jobs actually created will be
less that planned. BMC creates with the aid of investment subsidies
(see following section)- now jobs, while employment is diminished
in other cities.
Investment Subsisice
A third important factor for the choice of Bristol Myers for
Nijmegen was the investment subsidies ’which were offered by the "*
Netherlands government. While 18 per cent of the total employable
population in the Netherlands is unemployed, the percentage in
the Nijme®en area is much higher, 28 per cc-nt. This unemployment
has increased greatly in the last few years; in 1979 only 9 per
cent of the employment rote for mon under 25 in the Nijmo®on areas
is at present 48 per cent and for women of the same a®e ®rcup,
38 per cent.
These, for European standards very hi®h figures, are still
underestimated. Older workers are often legally considered to be
medically unfit for work, not because of physical or mental
illness, but simply because of the work situation. Many people,
especially youths and women, no longer register by the local
employment offices for a variety of reasons. Unofficial estimates
consider the actual unemployment rate among the work a®ed population
of Nijmegen than also to be nearing 40 per cent.
The city government, together with the national provincial
governments, is trying, to combat this unemployment. The- city
has attempted via an active acquisition policy tc attract foreign
concerns to the Nijmegen area. The inducements included
"investment options" (in accordance With the_lo®al investment regula
tions) for estimated 3 10 million half of the total investment
needed. These would be paid by the nati nal government.
The municipal council voted to allow BMC to buy considerably
moro land than is normally permitted, an extra 5-58 has more
than is normally be expected to be needed for the purposes. In
addition"in the negotiations... based on the competing bids to
the concern from other foreign cities... a price was decided upon
which was less than the official price". This was a direct
subsidy of about
<-0.000 for BMC. "The industrial area requested
by the BMC was so larse that the municipality was unable to offer
this as a single site" according to the city ®cvcrnmont. It was
therefore decided to reroute a road, at a cost of another 3102.000
for the city. In addition BMC was ivon a special exemption
from the public hindrance law sc th ,t the 'ii®h powder towers
could bo built.
However there arc curtain negative aspects t. . A number of
councilmen, as well as a lar®o numbe- of people and "roups in
Nijmegen city, have raised Xijr.c"cn. These objections to the set
up of the BMC factory in Nijmegen. Those objections are related to
the WHO-codc and employment effects.
WHO-code
Experts are unanimous in their agreement that mother's milk
cannot bo improved upon. This is because: it "ives protection
against infections diseases; the quality of the milk is not affected
by the time and place of the feedin®; it favourably affects the
bond between the mother and child; and breast-feeding lowers the
chance cfhht the nursing mother a®ain becomes pregnant. Moreover
mother's milk is very cheap in relation to manufactured infant
formulas. Breast feedin® is without any doubt the best for
infants in developin'® countries, where local conditions are
often unsuited for the responsible use of artifivial formulas.
Clean water, ®ocd hygiene, and sufficient family income are often
lacking.6 Despite this, breast feeding has rapidly been loosin®
®round to imported formulas in many Third World Countries. This
is due to social and economic changes, changes in the position
of women and in health care activities. The often aggressive
advertising campaigns used by the baby food industry have
contributed to the Growin® unpopularity of the excellent mothers
milk.7
Each year 120 million children in the world are exposed to the
devastating effects of malnutrition. More than 10 million annually
die because of the direct or indirect effects of dificiencies.
The infant mortality rate in the Third World is, then, ton times
greater than that in industrial countries. Malnutrition umon®
children is increasing. Scientific research has proven that
bottle feeding is developing countries leads to hi®her rates of
infant disease and death. For example, a study in rural areas
of Chili showed that the mortality rate of babies which wore
bottle fed was three times higher than that of breast-fed babies.
Numerous other scientific studios reach the same conclusions.8
These facts led to the ratification of the "inter-national Code
of marketing of Breast-Milk substitutes" by the WH0(World Health
Organisation) of the United Nations in May 19&1• This code
limits the- advertising with, and the sale of, artificial formula
in both Third World and developed countries.9 The code is an
important bruaktlirou®li, but is poorly observed since it is only
a recommendation. Still, a lar®e number cf Governments in the
^hird World as well as developed countries, have agreed to implement
the code in their national laws. Sri Lanka and India are among
the few contries, that have actually dene so.10 Moreover the indiancode is less unambiguous as the WHO code, which is basically a
compromise between governments, the infant food industry and action
Groups.
Publications shew that companies continue to violate the code, both
nationally and internationally. In Pay 1982 the International
Baby Food Action Network (IBFA.H) published a list of 2259
violations of the WT.0 code by 57 camp-'.nics in 37 countries. 11
The companies Nutrioio, CCF, beetle, Hoad Johnsen and ^bot Ross,
Wyeth wore often
--■aied, amende,there .
From information of IBFAN, the Rational Coalition far the promotion
of Breast Feeding (Manila, the Philippines), the Interfaith Center
on Corporate Responsibility (New York;, and from a court case
between the sisters of the^Procioup Blood and the BMC, it is clear
that this company’s tactics for the marketing and sale of baby
food products arc, at least up to now, not in accordance with
the WHO code.12
The company itself was not embarrased to admit
this. According to a spokesman of the compant;
"The Medical
premise underlying the code is fundamentally faulty... the WHO's
proposed code contains many unwarranted restrictions and
prohibitions that arc unconstitutional and represent a dangerous
precedent... wo believe that the United States should vote "no"
on the proposed code" 13. The company issued'.a brochure, in which
it is stated: "The’ present code proposed ... is not acceptable
to infant formula manufactures .... many (provisions) contained
in the document.... collectively reprusc-nt an attempt to
arbitrarily prohibit legitimate commerce in the name of health...
while the purpose of the WHO code is obstcnsible health promotion,
its real motivation is clearly political... it is clear the result
could be disastrous" . 14
In a letter sent to the New York Tines in 1981 R .L . ®leb.
Chairman of BMC, added to this by stating "the courageous decision
by the US Government to vote "no" on the World Health Organisation
marketing code for infant formula this week is one all Americans
should be proud of " (italics added).15
Durine council debates concerning the proposed establishment
of a BMC plant in Nijmogon, a minority proposed that the office
of Mayor and Aidermen of Nijmengen request BMC to "comply with
the WHO Code". The mayor however, ignored all evidence when
he answered that the company already obeyed the WHO code.
EMPLOYMENT
A more ®eneral point of dispute can bo added to the abovementioned objections. The world market for dairy products is a
typo of "dump market" where surplus products arc unloaded with
subsidies. This unstable market with a low price level often
has negative effects cn the local milk productions in developing
countries. Studios in Suriname, Peru, and India, among other
countries, show that it is often cheaper for those countries to
import powdered milk than to stimulate the local dairy industry.
The Ion® tora effects -f this arc an increase in the already high
unemployment rate and
continuance of the international
dependency relations.
As was already indicated, it is doubtful whether the now BMC
factory will have any favourable effects on the employment
situation in the Netherlands since the employment in ether local
companies will decrease, and secondly a one-time subsidj>-of
approximately 0 0.1.5 million per job created has been givon, as well
as permanent EEC agriculture subsidied for the export product
itself- all with public funds, which could have been better used.
In the last few years the so-called Action Plan Employment Nijmegen,
a coalition of the largest Dutch labour unions with local
environmental, Third World, and other action groups,
prepared
and carried out a number of employment proposals to slow the loss
of jobs in tho region. The experience of this srcup is that with
relatively small amounts of subsidy small-scale, labour-intensive
and environmentally sound industries can be created and integrated
into the regional infrastructure using only a fraction of the
®igantic subsidy needed by BMC. Those groups therefore find it
unacceptable that tho Office at tho Mayor and Aldoraon of
Nijmegen has decided to ®ive such laree sums of money to BMC,
especially considering that the first multinational corporations
which were attracted to tho Nijmegen area with comparably
^onerous investment subsidies have already loft the area.
RESISTANCE
During the city Council debates over BMC only the throe small
left-win® parties wc-rc against the now plans. Tho spokesman for
these parties held a well-documented speech, which, however, was
summarily dismissed by the Mayor and Aldermen, who wore interested
in only higly visible and spectacular short-term successes. Tho
minority in tho City Council could do little more than vote against
the proposal. At the close of the debate they started, however:
"Wo shall seek ways other than via this council to force the
company - when it has arrived - to obey the WHO code".
Tho situation remained fairly quiet after the debate. An employee
of the Center for Development Education (COS)^ a small independent
foundation for development education in Nijmo^on, started in tho
moantime to research the various aspects of the BMC establishment
in Nijmescn. The results of this research formed the basis of a
widely publicised information day over "Infant formula in
Nijmegen", organised for tho World Food Day in October 1983.
Various Third World, women, and church groups, as well as tho
largest Dutch labour unions, participated in this Day. Lectures
slide shows, and aspects related to the production, export, and
consumption of mother's milk substitutes.
Despite the fact that at tho last minute representatives of BMC
and the Nijmegen city Government declined to participate, the
day was a hu^c success. About 100 people attended the various
mootings and actively participated in the workgroups. Tho
. 'powder "mill:" issu.^,
■ 'WHO code.
th-... 'ant- ;?■. ,t • EMC. dees 'Pot^obey the
.
. . I-' i ' -•
’
A permanent c«,<aj.itic-n cf tap.vari ug acti.n "r-ups emerged early
•A 1984 ds'u result cf.'thir: infb.r; i-ption d.ay, The ^rcup-is ‘-awaro of
the fact that-.despite frequent attempts to .rais-_> oth<ir impressions,
it is the plain truck tl ,.t multinational corp .rations such- as BMC
operate from the siqpia doctrine . that "busin„ -.a .fa 'liusinbss'"*.
Companies JLirdt^thoir. O' ci'al responsibilities, to, s-ft/’uar'din® their
• ’'.4 erfn existence/ ^rb'w.tli,. .an?., chakccs to .make -optimal profits. The
•: responsibility for :thl; bodi.al .cffvc/ts- qf the jxsp of baby food,
gSpocially in th'o Thi’r"'. World - is seen t be the task crf the
- o'vornmbnts. It-is. accofdin°~tc' the “-roup p.n illusion to assume
’■ ' that the business w .rid in 2
3*Sen.cral, and the BMC- nana8cnont in this
case,-• acknowlodgcnont its own-"social responsibilities"-v • •"
. : " .
......
■ •
c .
U.
I;
. I
r
.. ..
“o actions cannpt.be limited, ip appeals to a company1 s'-'ethican
..'■r. '‘responsibilities, s'lnpe accompany is only, willin".j to change'its
policy when therb is'daH°cr of a decrease in the profits.16
Therefore the 1;>rcup tries to involve not only so-called "middle
roup" (church, Third World group, etc.) in the actions but alsm
organisations of employees of.' tho oompany "(in tho 'developed and
underdeveloped world) itself.,
•
■’ '.- _• ’ •' •." ■' -a i
’ •- / ‘
‘'
The primary ®oal of this' coalition is maintain -.a dialcuSc'with the
BMC management, in -the. hope ■ that tho company willurovoal more of its
operations in the developed and- Third ’World", and that it eventually
will aerco.tc obey the- WHO Cede in all countries of tho world.
Where necessary the °rcup is prepared to organise and caxry out
actions a°ains.t the company..
.
■' ' ■' .
fT
er
■ The second oal of tho -'roup is to stimulate in the Netherlands
development education activities. Tho programmes use.thp example
of Bristol Myers Company to direct attention to such subjects
as international development policies, international division of '.
labour, the role of multinational corporations in theso, and the
possibility for intornaticnal solidarity with tho oppressed .
Sroups in the. Third World.- Far tho BMC-caso cannot' bo considered
as nn isolated example.
notes
1. For a description of these' developments see for instance:
R .Burbach & P. Flynn, Agribusiness in the Americas, New York
(Monthly Review), 1981; F .F . Clairmc-nte, United States Food
Multinationals: Lessens from the Third World, Journal of
Contemporary Asia, vol 11. no 1, 1981, pp 62-90, and various
publications uf e.e. Ernest Feder.
2. Data obtained tlirou?h interviews^with representatives of
the BMC- management in August 1984 ( onc-va, Switzerland). See
also the Annual Reports of the company.
3. Sec". Thomas Jaffe, when opportunity khc cks; why is Bristol
Myers consistently more profitible than n-.-st of its competitors?
In: Forbes October 13, 1980; and E. San°Or, Just what tho doctor
ordered; R& D is
Barren's, Docenter 1.
4. See Jaffe,
. ■
consistently
In; ForbesOct .b :■*
1 Ny.r's pr. o cri y t? c ■’ 1 r the torowth, in;
...
>.
i.ty ’.n
- t..blj th a •. •. j
■
■
■
. ri'etol Myers
e ,r <titers?
4. SQC Jaffe, 1$IC .
j. ;.!in.ess JoUc:r- re ' ile/.’ly published
"Corporate Sc. robe r-.id" <
5. Research Team Centre for Education and documentation, Operation
Flood; Development of Dependence?, Bombay (Cite publication) 1982.
6. For more detailed information r<_ 'ardin'° the "infant food issue"
see the-very useful so-called "IBFAN Action Packet": IBFAN,
Breast is best: From Policy to Practise, Minneapolis/eneva, n.d.
7. See for instance: Michael B. Bader, Breast-Foedin6; The Role
of Multinational Corporations in Latin America. in; V.Navarro (cd)
Imperialism, Health and Medicine, London (Pluto Press) 1982, pp
235-253.
8.
See note 6.
9. World Health Or®anisaticg, International Cede of Marketing
of Breast-milk Substitutes, eneva 1981.
The United States was the only country which voted aDainst the
Code. During the^May 1984 World Health Assembly (WHA) a resolution
"Infant and youn^ child nufriction" that widens the scope of the
WHOfCode considerably was accepted. The resolution draws attention
tc the health hazards associated with the promotion draws attention
to' the Health hazards associated with the promotion of the foods
unsuitable for infant feodin0.and the too early introduction of
somcr-infant foods. It callsg for an examination of this situation
and for a report rccomncndin measures to deal with it. The
US- dclcsatc at the WHA protested against the resolution which
is. an "...example of WHO interfering with private enterprise".
A.. Chetleyof IBFAN reacted differently^"The action ur■ ed by the
WHA is a timely response to this^rewin0 front to infant health"
(Source: IBFAN -press, release, eneva, 17 May 1984). For more
information see: A Allain, Not jCst formula, in: Health now ( eneva)
11 May 1984.
’
,g . .
10, Government of India (Ministry of Social Welfare,Now Delhi),
Indian National code for protection and promotion of breastfoedinb’,Ncw Delhi, 1983.
1 l£..See:IBFAN?Breakin the rules: An IBFAN investigation into the
a .ressive promotion of artificial infant feedin , eneva etc 1982
and recent violations:IBFAN NowS (Minneapolis) Various issues, and
the recently published "Freaking the rules 1984". Moreover a number
rf groups in the Third World, like the Manila-based "National Coali
tions for the promotion of breast-feeding" report countless violations.
12, Recently the company has announced that from June 1983 onwards the
WHO!Code will bo followed for ^ovelopin*?' countries",defined as those
countries having a per capita income less than US S4,000 and having
an infant Ecrtality ±atc- higher than 20 per 1,000.BMC has however
not publicly released .?n implementation plan and schedule for policy
change; The various groups have decided to keep on, penitoring BMCpractics in the dovc-lcpcd and.under developed world, (information
obtained through interviews (see note 2) and from :IBFaR naWS,April 1984
, x-rc cess,Provisions
15. 1' OH ■
lj•■ ■
" Cor o;- tactics" see: A.Allain
■ar"... In :intGrnati'.n.-;l Coalition for
Tr,-.■-■sii.-,tie ■>ais, An:! how Transnationals.
o- selr, 19<35.
Dcvcloptio t A:
react t. tlui'
*
*
«• *
******
* * *
SOURCE : Fons Van Dor Vcldcn, Challenging Multinational
Corporations ’
trcan, _Au^ust_4,1_984i_Pg20-_24 .
BIBLIOGRAPHY
/'books/
line, Jul id De Santa ( ed)
Bhagwati, Jagdish N ( ed)
Ipsoards a Chur on of the Poor
Geneva: CCPDTuCC, 1977.
Scopomics and i.'orld Order from
The ~1970s to the 1990s, NewQelhi
~rie nt “Longman L td. "77972.
Colman,David and Fredrick Nixon, Economics of Change in Less
De* vcioped Countries, ^el hi ; BR
Publishing Corp. , 1930.
CHURCHES and The TNCs, Geneva:
7Cc~i9&3.----------------Dick so n,Richard.
Eliott, Charles.
PPLER, Erhard
Gruber, Pamela (ed)
Sheddo,Piero
Gupta, N. S
Mcginnia, James B.
McKenzie, John L.
Paul, Thomas (ed)
Sadhan, Anand, et. al
Shankar, Gauri V.
Singer,Hans and Javed Ansari
Tugendha t, Chris to ph er.
Tillich, Paul
Vernon,Raymo nd.
Line and Pl ummeit, Geneva: ffCC
1973. ~
Poor,Yet Making Sang Rich
Ge ne va: IVC'C., 198 j
The Development debate, London:
S.C.M. Press, 1971.
Not Much Time For the Third
Upr_ld,Londo n:0 swald .<olf Ltd
Fe tiers of Injustice.Geneva/
i/CC. , 1970.
.thy is the Third J Jr Id Poor?
New York:Orbis Books, 1973*
Mui tinatio nal w Sorgo ra tionS
Meerut:Pragati Prakashani, 978.
Bread and Justice___
New York;Paulist Press, 1979.
Oic ti on gri[_gf_the_B idler ,
Bangalore:AsianTradtng Corpration
1983Justice and Development in The
Tndian Co'n text, Romel Pontific al
Institute Publications, 1976.
HenP-ce of Hultina tiona 1 s
New Delhi, Peo pl e ' Publication, 1977.
Taming The Giants, New Delhi
Vidya Vahini, 1980.
Rich and Poor Countr ies,London:
George Allen & Unwin (du ilishers)
Ltd., 1971.
The Lui tunationals,Middlesex
Penguin Books Ltd., 1977
Lo ve, Power and Justice, New Yo rk
Oxford University 1ress, 1954.
The Economic and Political Conse
quences o f Mui ting tional dntet2Ci?_S• An Anthology. Bo s ton:Harvard
University,1972.
/articles-/
Marcos, Arruda,
Nalden Bello
Sue Buanl ford & Bernard
Amrita Chhachi
Dipanjan Rat Chowdhury
.4 Correspondent
No Kwon Ping,
Rameshwar
Dexter Tirani,
. .........
V.C.
Vora,
Peter Be Vries,
Ed itorial
Jayne Ell wood,
: 1 "The Challenge of t'.e Coffee
System",The 0 then side (Sept'82)
pp-51-53.
"Clearing Farmers From the Land",
New Inter nationlist, No. 10S, Feb ' 82.
pp.25-27
"Both sides Low", New International_isgt,No.37 (Jar ch, T976) , pp. 14-15
"Serving it up-Coats Paton Multi
national'. Practices" The Other
side (sent'82) pp. 57-58.
"Foreign Collaboration",Frontier
Vol, 14, No27 (Feb’20, 1982), pp. 7-9.
"Economic Salvation through Multi
nationals", Eco nomi c_ Pol itical
Ueekly, Vol.XV No.12 (March 22,
1980) pp. 585"Free Trade Mones", New Internationalist, No. 85 (march 1980)
pp.12-14"MNCs and Direct Foreign Invest
ment", Eastern Economist, Vol 78,
No. 24 (June 20, 1982), pp. 13631369*The Footloose Phase of Capitalism'
New Internationalist, No. 37, (March
19 76), pp. 5-5
"Multinations-Brand New I/orld",
- New -Internationalist, No. 85,
(march '30), pp. 7-9
"The Problem", Seminar,No-190,
June 1975), no. 10-12.
" Shopfloor International", Th e
Other side, (No v 1982) , pp. 3-14 •
new Internationalist, No.37 (March,
1976}
p.2.
New Internqtionali st, "D~'Ug Jargon",
No. 50 (“pril 1977~), p- 10.
"Pepsi Goes to war on coke", A3 ta^
we ek, (Aug'11, 1978) , pp.31-33
"Field Day for MNCs",L ink (Aug. 26,
1979.), p-23New I nt er ng tionalist, No 85,(March
1950J,pp. 22-23"MNCs Fatten, Indians die: The
profit s courge: Scandalous Methods
Link, Vol.23, No.51 (Aug' 2, 1931),
pp. 10-16.
"MNCs Grip", Link, ( Aug 19,1982),
pp. 31-32.
"Feast,Famine and Farming",NewInternationalist, Io. 108 (Feb'82)
Edi to rial
"The acts on Agribusines s", Hew
Internatdonal 1st, No . 108, (Feb ’82)
~pp. 10-11.
Susan George,
" Nestle A lime nt ana BA: The
Limits to Public Relations",
Economic & Political Weekly,
Vol. XII, No. 57, ( Sept. 16, 197&)
pp. 1591-1602.
"Do-it Yourself Electronics",
New Inter national 1st, No. 85
(.-arch 1930),p. 15.
Hawkins, Bob,
•
_
-j
h.Michael Heffner,
Bjore Hette,
"New Perspectives for MNCs",
Eastern Economi s t, Vo 1. 78, No. 6,
(February 12, 1982), p.588.
" Development Theory and the
Third Borld", Ideas and Action,
No, 149/1982/6. pp. 19-24.'
/nebs PAPERS/
The Blits . (Independence Special Number) August 15, 1985.
The Economic Times.-(Bombay) August 26, 1981.
The Times \f India (Bombay) March 17,. 1981.
/reports/
Economic Survey 1974-75, Govt, of India Pub’ll cation,
1975, p. 24.
Algiers, (Septenber 6,1975), Bovt.
of India Publication 1975.
NORTH-SOUTH: A PROGRAMME FOR SURVIVAL} pne Report
D
------------------------------------------------------------------of the
Independent Commission on inter
national Development Issues, under
the Chairmanship of Silly Brandt,
London, Pan Books Ltd., 1930.
REPORT OF THE ALL INDIA Christian Consultation on Development,
Hunger and Justice;New Delhi,Feb '
25-27, 19?0, Christian Agency for
Social Action.
* * *
- Media
1092.pdf
Position: 1184 (7 views)