Global Reach.
by Richard J. Barnet and Ronald E. Muller.
Simon & Schuster. 507 pp. $11.95.

The subtitle of this book is “The Power of the Multinational Corporations,” and its authors present their work as a serious and significant report on the broad and startlingly rapid growth of companies that operate as producers or sellers or both in a number of different countries. The phenomenon itself is not new, of course: we would not know what Friedrich Engels thought of the condition of the working class in Manchester had not his father sent him to England to be the boss of a German company's English factory. But as telecommunications have improved and cultural differences diminished around the world—as technology has become central to more manufacturing processes and the capital costs of opening a mine or an offshore oil well or a computer factory have soared—giant firms that operate in a number of different places, usually via separate local corporations organized under local law, have become prime movers in oil, automobiles, electronics, metals and minerals, chemicals, agricultural machinery, certain food products, cosmetics and drugs, not to mention services like advertising, banking, and engineering design. The men who head these national subsidiaries of a multinational whole tend to follow career patterns that ship them to the leadership cadres of several different overseas operations, with a limited tour of duty in each. But most of the operating management even on upper levels tends to be local; and increasingly the staff management internationally is recruited by promotion from within the firm with relatively little discrimination by nationality.

It is a fascinating and important matter. The similarities and differences among IBM, Nestle, International Harvester, Unilever, Mitsubishi, First National City Bank, Sears, Exxon, Bayer, Montedison. Ford, etc. would make a subject worthy of the most sophisticated information-gathering techniques and imaginative theorizing. Lines of business, resources employed, nations of origin, historic development, degree of international involvement, extent of competition from domestic producers in different countries—all these elements must enter variously into the operations of all the corporations. Few books that could be written today would make so great a contribution to our understanding as one that really told us about the multinational corporations. Global Reach doesn't even try.

The problem is that the authors, Richard J. Barnet and Ronald E. Müller, have no interest at all in reality; the world they live in and examine seems to be nothing but some statistics and a reification of slogans. Instead of looking at what multinational corporations do, they look at the generalized chamber-of-commerce claims for the contributions of such firms to international peace and prosperity and contrast those claims with equally generalized denunciations by various antagonists. They write about World Managers, a Global Shopping Center, a Global Factory, always capitalized, always contentless. In the end, they conclude with ludicrous solemnity that the “global corporation” is not “compatible with survival.” What they have produced, in short, is a hash of all the dog food the New Left tried to feed us poor folk through the 1960's, dishonestly repackaged as a study of multinational corporations. The fact that the book has been respectfully greeted by a number of presumably serious people argues that our systems for legitimating scholars and scholarship may be as defective as our systems for legitimating political leadership.

Some of the authors' errors of fact are quite important. They apparently do not know that the Glass-Steagall Act forbids American banks to own stock in non-financial corporations, and they treat the entire loan portfolio of the banking system as an owner ship position. They believe that “96 per cent of the entertainment to which 87 per cent of the population is exposed each week is produced by three networks”: in fact, networks have not been permitted to produce shows or own pieces of producing companies for some years. They think United Press International is “part of the Hearst worldwide publishing empire.” Their global corporations are all centered in New York, London, and Paris, which (including their suburbs) are in fact headquarter towns for only 15 of the 50 largest multinational industrial companies. Indeed, it is the dispersion of these behemoths that is interesting: 24 in the United States, according to the Fortune list. 8 in Germany, (6 in Japan, 4.5 in England (Royal Dutch/Shell is the .5), 3 in Italy. 2 in France, 1.5 in Holland, 1 in Switzerland. That sort of simple fact is not to be found in Global Reach.


The longest sequential narrative in the book tells a story to illustrate Raymond Vernon's theory of the product life cycle. (Vernon is credited in a footnote, not in the text, because the authors don't like him; later, they use his name in the text in connection with a study that they wish to blast.) The theory holds that a new product is first manufactured and sold in its home country, then sold for export when imitators drive down profit margins in the home market, then manufactured abroad for the established foreign market to reduce costs, and finally imported from the cheaper foreign factory to the land of origin.1 Barnet and Müller choose as their example the manufacturing of television sets, beginning in 1948 when “100 per cent of all television sets were manufactured in the United States” (which is not true: about 50,000 were manufactured in Britain). And soon, bearing out the theory, the pioneers found it more profitable “to sell TV sets to Frenchmen, Germans, and Italians.” But of course American television sets could never be sold in those countries because they wouldn't work: different line voltages, different numbers of cycles-per-second in the alternating current, different numbers of lines transmitted per frame. The Europeans had to do this one by themselves. The incompatibility of American and European television systems has been not insignificant in various ways on various occasions; more important in terms of this book is the authors' revelation of a complete tin ear for fact that seems to me disabling in social criticism.

But the tin ear is only the beginning. Global Reach is in part a compendium of all the myths ignorant populists believe. Chrysler (poor Chrysler!) knows how to build a pollution-free gas-turbine car but won't do it. . . . “In the last generation, almost 80 per cent of total federal revenues has gone to purchase ‘national security.’” . . . Exxon spent $100 million on its name change. . . . “It is possible . . . to produce a vehicle for $150, a radio receiver for 9 cents, and a $9 one-channel TV set.” . . . Sinister real-estate speculation, not the disastrous and continuing losses of the railroad operation (which Congress now keeps alive only by cash advances of hundreds of millions a year) caused the collapse of the Penn Central. All wrong—and if true, they would be irrelevant.

Sometimes the authors descend to unquestionable idiocy: “The Chilean economist Jorge de Ahumada argues that every dollar spent in Latin America on doctors and hospitals costs a hundred lives—by which he means that if the dollar had been spent on providing safe drinking water a hundred lives could have been saved.” That's tens of billions of deaths a year in Chile from bad drinking water alone—no wonder they have political problems. This one bothers even Barnet and Müller a little: “However arbitrary these figures may be, the basic point is sound.” But the “sound” point here is that the multinational corporations offer a technology “for enhancing private consumption, not for solving social problems.” It is no defense of the multinationals to mention that the social problem of the underdeveloped countries is poverty, which means insufficient private consumption: what the state consumes feeds no babies. Anyway, the authors finally admit that there is no technology for solving social problems: they end their book with a ringing call for “new knowledge.”

That new knowledge cannot rest, however, on the inconsistencies of analysis that make a chain of implausibility through Global Reach. At first the authors speak of “growth” as the fundamental drive of the multinational oligopoly; then they speak of “profit maximization”; and finally they quote a Senate study to the effect that increasing size has tended in recent years to mean below-average increases in profits. The product life-cycle theory they adopt rests on an assumption of marketplace competition, but they insist that the multinationals have killed all markets by purchasing their needs from within the company at artificial prices (like the women of the Hebrides, all the divisions live by taking in each other's washing).

The multinational corporations, they say, have moved capital-intensive production to the underdeveloped countries, which is bad for these countries because they need employment openings and bad for American workers because the export of capital that could be employed at home diminishes their productivity. On the other hand, the corporations have moved labor-intensive production to “export platforms” because wages are low abroad, depriving American workers of jobs; and meanwhile they have put even more Americans out of work by automating the shop (i.e., increasing productivity) at an unparalleled rate. On balance, Global Reach reports, the income we have been receiving from our overseas investments is shamefully greater than our export of capital to other countries, but at the same time we are shamefully exporting the capital resources we need at home. But our condition is really hopeless, because we simultaneously need higher productivity (fewer man-hours per unit of output) and “job-creating rather than job-displacing technology” (more man-hours per unit of output). So long as it looks bad, Barnet and Müller will print it.


The prose is opaque throughout. Sometimes the point is meaningless: “By 1970 the per capita income in poor countries was about one-twentieth of that in rich countries, measured in 1900 dollars (or one-fortieth in 1970 dollars)”—as though a change in the yardstick changed the ratios. More frequently, I fear, the authors are deliberately deceptive: “In the latter half of the 1960's, when the rate of job creation in the entire manufacturing sector registered an 8.3 per cent decline compared to its 1960-65 value, the decline for global corporations was 40 per cent” (emphasis in the original). Only the most careful reader could possibly remember in the face of that italicized onslaught that in the period 1965-70 the rate of domestic job-creation in the “global corporations” continued to be higher than the national average for all corporations.

Enough, though there's lots more. Multinationals have greatly facilitated international trade among the developed countries and improved the average standard of living in all of them through the working out of real comparative advantages. In the poor countries, which are much less important in the corporate scheme of things, they have contributed by giving the local rich and middle class a domestic investment that looks safe (it is disingenuous for Barnet and Müller to say in one place that the poor countries are poor because their elites have consistently invested abroad and in another that the big companies don't help such host countries because they draw most of their local investment capital from local sources). The companies have also—and this is the most important point, not even discussed in Global Reach—trained fairly large numbers of managers and workers from other cultural traditions in the modern procedures that are necessary once the human ecology of tropical countries, the ratio of deaths to births, is disturbed by public health systems and insecticides.


But the corporations are entirely too tough. They cheat on their taxes, and they promote and exploit the systematized bribery that passes for government in the Third World and elsewhere, too, not excluding here. Their “transfer pricing” within the corporate shell, of which Barnet and Müller make much, clearly does victimize the weak. (One thirsts for real examples, with names, dates, and places, but apart from occasional references to published material, Global Reach offers nothing but anonymities and invented percentages.) From the American point of view, some wages have been held down disgracefully, in the consumer electronics, textiles, and clothing industries especially, by the ease of “exporting jobs.” And since the arrival of “floating” exchange rates in the international currency markets, the opportunities for mischief by major international financial organizations have grown too large. Barnet and Müller do not realize it (they would have had an awful lot of fun if they had realized it), but the huge American multinational banks, with their loans and investments abroad denominated in foreign currencies but their profits stated in dollars, stand to gain considerably whenever the dollar is devalued, and that's a most undesirable state of affairs.

Much of what Barnet and Müller want done—especially the reform of the tax laws affecting foreign earnings and the extension of reporting requirements—seems to me worth doing, but this book won't bring the time of its accomlishment a day closer. At bottom, their problem is Wright Patman's—they speak to the people in the hill country who want to see them pour it on, and not to any serious constituency. At one point they quote a Patman paragraph beginning: “One of the favorite pastimes of concentrated financial power is promoting concentration in non-financial industries.” Well, if it's a pastime it can't be very serious. The man who calls it a pastime can't really care about it much. And the man who quotes the man who calls it a pastime is an entertainer by profession. For all the 89 pages of scholarly apparatus at the back, Global Reach is just an entertainment for true believers, and a slapdash example of the genre, at that.


1 Vernon's theory is rather more sophisticated than Barnet and Müller present. He found that corporations moved manufacturing facilities abroad not only to save costs but also because the importing nations, concerned about their balance of trade, were threatening to restrict shipments. This part of Vernon's theory does not suit Barnet and Muller's insistence that the little nation-state is defenseless against the big multinational corporation, and it is therefore omitted.


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