Photos Courtesy of Frank Church Papers Boise State University
The decadent international but individualistic capitalism, in the hands of which we found ourselves after the war, is not a success. It is not intelligent, it is not beautiful, it is not just, it is not virtuous – and it doesn’t deliver the goods. In short, we dislike it, and we are beginning to despise it . . . John Maynard Keynes
- “We have to invent new wisdom for a new age. And in the meantime we must, if we are to do any good, appear unorthodox, troublesome, dangerous, and disobedient to them who begat us.” Stephen Hymer
- The multinational corporation is a relatively new phenomenon. It has only recently become a part of the American public consciousness, despite the fact that American overseas investment has had an explosive growth in the year following World War II – Senator Frank Church.
“In the last analysis, markets come out of the barrel of a gun, and to establish an integrated world economy on capitalist lines requires the international mobilization of political power.” This was the powerful conclusion of radical industrial economist Stephen Hymer in a seminal essay that appeared in 1972. Hymer’s utterance was a small piece of a general cultural explosion in the United States after 1968 connected to the dramatic increase in the size, reach and awareness of multinational corporations. These corporations appeared to be new phenomena, though they had existed in nascent form in the immediate postwar period, especially with foreign direct investment in Europe by American firms through the Marshall Plan. However, by the 1970s American companies had grown large and influential enough, and had moved into new postcolonial territories in Africa, Asia and South America, to suddenly seem strange, complex and ungovernable. Few people understood them or their role in society. The “multinational turn” in the 1970s underscored a change in scale and scope of the corporations’ reach, and an attendant alteration in the depth of popular, scholarly, legal and political awareness. Whereas multinational corporate activities in the immediate postwar period evoked little popular excitement or policy attention, by the 1970s the rapid expansion of corporate investments, growth and productive capacity triggered near-panic reactions on all levels of society. This broad cultural investigation of American multinational corporations prefigured debates in later decades about globalization.
This essay contends that the intense focus on multinational corporations represented a transformation in capitalism’s development after World War II, ultimately reaching mass popular suffusion in the 1970s. The period was defined by great anxiety about multinational corporations (MNCs), as well as hopes for the future and visions of world peace from every point on the political spectrum. This cultural roil comprised scholarly and popular articles, books, television shows, and constant coverage in multiple newspapers and magazines. Most powerfully, politicians at all levels of government attempted to grapple with the MNC phenomenon, especially members of Congress in the form of multiyear investigations in the Senate Foreign Relations Committee and the Senate Finance Committee.
The United States government published thousands of pages on multinational corporations in the 1970s. This paper addresses these publications to argue that the period after 1968 and before 1981 – the long Seventies – was a time of globalization awareness, a period of transformed consciousness. This intellectual moment, though, also reflected underlying structural shifts in the economy and in greater society. Examining the cultural effects of multinational corporations helps answer several substantial questions. What was the relationship between the American state and corporations, especially during a period of increased anxiety about global capitalism, the energy crisis, inflation, and unemployment? Further, what was the role of corporate social responsibility? The multinational moment helps scholars visualize the labor-capital dialectic, the workings of civil society and international institutions during a period of rapid change and rupture.
Examining the cultures of the multinational moment provides insight into a pivotal period in capitalist development and, therefore, American society, politics and culture. There were profound similarities to other periods, such as the Gilded Age and the Progressive Era, and therefore this paper follows the lead of scholars who have studied these periods, such as Alan Trachtenberg, Sven Beckert and Martin Sklar. Trachtenberg wrote about the consolidation of bourgeoisie and the rise of middle class culture in Gilded Age America, a tale of culture reflecting the structural changes that occurred with the rise of the corporate capitalism. The Gilded Age produced a cultural explosion that included early muckraking efforts such as Frank Norris’s The Octopus, an anti-railroad tract. But as Beckert showed, the second half of the nineteenth century also was a time when capitalist elites created strong cultural identities in the face of contingent battles with an increasingly self-aware working class.
Ultimately, however, American culture as a whole reflected the sentiment and values of the bourgeoisie. These cultural values were constructed upon the foundation of a new political economy. Additionally, as Sklar highlighted, the changes that occurred during America’s Progressive Era – a period of “corporate reconstruction” – wrought incredible struggle between civil society, law and politics, often played out in Congressional hearings similar to those discussed for the 1970s. The Progressive Era also produced some of America’s most famous writers in the muckraking tradition, most notably Upton Sinclair’s The Jungle. Progressives worked to eradicate the evils they perceived in society, giving rise to the American antitrust legacy that played a role during the multinational moment, when lawmakers argued about applying similar legislation across national boundaries in an effort to control the global corporations. In each of the above cases, anxiety about a new and unknown phenomenon was the principal cause of the cultural and political spasms. The multinational moment mirrored this profoundly American dynamic. Capitalism does not simply work under the radar; it is the radar.
Stephen Hymer, a Canadian industrial economist educated at M.I.T., illuminated the structural shifts in late twentieth-century capitalism. Fundamental to our understanding, multinationals were preceded in the 1880s and 1890s by the “national corporation created . . . when American capitalism developed a multicity continent-wide marketing and manufacturing strategy.” The national corporation, as described by Alfred Chandler and others, became elaborately structured and rationalized, giving rise to an administrative managerial class that organized “mass production and mass marketing in geographically dispersed branch plants and sales outlets.” American national corporations, structured similarly to and literally riding the backs of the railroads, facilitated the division of labor and the highly specialized modes of production that helped American capitalism outpace European corporations. Hymer, as had Mira Wilkins and other economic historians, pointed out that American corporations quickly began international movements. But it was not until after 1960, and Hymer’s dissertation, that “the term multinational came to prominence.” In fact, a cursory examination of JSTOR holdings for the phrase “multinational corporation” for the decade of 1958-1967 yielded only fourteen results, whereas the next decade located over 2700 results, and the decade after that over 4000 books, articles and reviews covering multinationals in the social scientific and humanities fields. These findings at the very least indicate an expansion that deserves further investigation.
Hymer helped define and study the structural changes reflected and brought about by multinational corporations. He emphasized that a spatial vision was necessary to begin understanding these firms. “National firms,” he wrote, “think in terms of the national market; multinational firms see the whole world as their market and plan manufacturing and marketing on a global scale.” Scholars, businessmen and politicians throughout the 1970s debated this definition of MNCs, but Hymer indicated that his definition should be thought of as fluid, as showing “a direction of change” in this new global landscape. For the purposes of this paper, multinational corporations are understood to be private institutions or firms that organize their operations across multiple countries with a centralized headquarters based in a major metropolitan center.
A report issued by the Senate Finance Committee in 1973 indicated the structural transformation occurring with the rise of MNCs. The report offered the following history: “Book value of U.S. direct investments more than doubled, rising from $32 billion in 1960 to $78 billion in 1970. The bulk of this investment was accounted for by direct investments by U.S.-based multinational corporations. Total long-term private investments, direct and other, rose from $49 billion to $120 billion over this period.” With the transformation from a feudal economy to the industrial revolution, Hymer noted, capitalism moved with a “steady increase in the size of manufacturing firms from the workshop to the factory to the national corporation to the multidivisional corporation and now to the multinational corporation.” Within this historical trajectory there were constant struggles over the terms and direction of society and the economy, especially concerning the contingent and contentious relationship between labor and capital. These continuing battles were strongly evident during the multinational moment, when politicians, labor unions, capitalists and the larger population began to ask questions about the role of MNCs in society. These political and cultural inquiries explored potential legislation and regulation, and the position of capital in an increasingly globalized world – what began in the 1970s as an acute period of global consciousness.
Scholars in the 1960s and 1970s exposed the evolution of the multinational moment and helped explain the transformation that led to globalization awareness. “Globalization awareness,” in the context of this paper, defines a cultural moment wherein American society reached a nascent, well-settled apprehension of the global integration of markets, information, technologies, commodities and ideas that helped illuminate America’s hegemonic role in the world and the changing structures of a new political economy. These processes had been occurring since the early postwar period. But by the late 1960s and early 1970s these changes could no longer be ignored or viewed as natural. Reflecting this newly-arrived consciousness, Hymer indicated that transportation and communications advancements – as they had during the market revolution of the early nineteenth century – contributed to the expansion of U.S. companies. Especially conspicuous were advances in commercial air travel and electronics, which dramatically increased global connectivity. Further material alterations occurred in postwar Europe, where the European Economic Community (EEC) and its Common Market, coupled with the rapid expansion of the economy and European corporations, threatened American corporate dominance. American companies responded to this direct threat by investing directly in Europe with production facilities and subsidiaries, thereby retaining “their world market share” and their “base for future growth.” American corporate incursions led to profound anxieties about the current epoch, which impelled a cultural explosion that covered everything from literature, politics, social justice movements, consumer advocacy agitation and continuous coverage by popular punditry.
Given rising unemployment, a stagnant economy, the Watergate fiasco, the end of the Vietnam war, OPEC and the energy crisis, American anxieties about MNC dominance and loss of jobs reached a fever during the 1970s. Much of the multinational moment characterized a cultural expression of collective angst. Hymer demonstrated that there were “signs of strain in the system and a wave of reexamination and reconsideration of its basic framework,” especially in “light of emerging contradictions and crises, national and international.” He noted that there was “a certain unease” pulsing through many societies, especially in the West. Some of the researchers who had worked with Hymer at the Yale Economic Growth Center conintued to express specific American disquietude after Hymer’s death in 1974. Activist Leah Margulies, whom Hymer hired in 1969, carried forward their investigations into global corporations. Their collaborations eventually surfaced in work by scholars, writers and politicians during the long-running Senate hearings on multinational corporations.
Margulies, one of the founders of the global boycott against the Nestle Corporation (1974-1981) over its infant formula marketing practices, worked for Hymer as a researcher at the Yale Economic Growth Center. Following the group’s interests in capitalist exploitation in Ghana and the West Indies, Margulies complied information on the effects of investments in developing countries by huge multinationals. She noted that their research group was thinking of corporations as the “new economic, social and political structure” of the world. This insight was vital for an understanding of the multinational debate, namely that MNCs were more than a mere reflection of capitalist investment opportunities. Rather, they represented a profound restructuring of social and cultural relations that affected almost everyone.
Margulies began researching global corporations in the Pacific rim. She emphasized that this was “during the Vietnam War” and activists pursued a theory that American corporations would Americanize the world. Her research initiated a long career as a professional activist and “turned her head around.” With colleagues she also formed what they called International Business Information, or IBI, that acted as a countervailing force to BI – Business International – a think tank assembled by “huge corporations” in order to figure out where to invest in the world. BI was doggedly “taking the temperature of the political climate for foreign investment.” The work Margulies engaged at IBI educated her about transnational corporations.
The researchers at the Yale Economic Growth Center created a reader that presented the developing evolution of the modern multinational corporation. The reader organized business training manuals, memos, pamphlets, articles from business magazines, and speeches that “in their own words” showed how multinationals were working to infiltrate the globe. The research group at Yale called the unpublished reader Managing Social Change, “which describes four dimensions of multinational corporations in business literature articles.” The corporate language was uninhibited, according to Margulies, because “they didn’t yet know to be cautious.” Corporate caution certainly arrived with the Nestle boycott and the 1970s, as focused attention on MNCs exploded during the multinational moment. The reader also showed, at least to the activists, that business planned to “replace the nation state” – an evolution that was quite similar to the rise of city states and their power during the medieval and Renaissance periods. A favorite phrase of the multinationals at the time was “the sun never sets on the global corporation.” There were fears that global corporations would “transcend the nation and not be subject to national laws,” which ultimately would be a profound subversion of democracy. Corporations underwent fervid efforts at globalizing management, and would “no longer be loyal to the United States.” Eventually the reader became a 900-page book, which Margulies and her research group attempted to publish. Richard Barnet at the Institute for Policy Studies in Washington showed interest. He “took all the research,” as Margulies related it, and used it as a basis for his book Global Reach (1974). Barnet and his co-author Ronald Muller contributed to the multinational moment not only through their bestseller, but also through multiple newspaper articles, talks around the country, and, especially, testimony during the series of Senate hearings on MNCs.
The literary explosion that influenced popular awareness, and which led directly to a string of Senate hearings, began with the 1968 international bestseller The American Challenge, by French journalist Jean-Jacque Servan-Schreiber. He wrote the book because of his own, and France’s, political frustration. Europe in 1968 was wealthy and jockeying for global influence, but lacked U.S. innovation and “know-how,” a term used ad infinitum in the Church subcommittee hearings. Economist C. P. Kindleberger wrote that the principal argument of The American Challenge was that “the United States is ahead of Europe in space-technology, computers, nuclear energy, aviation and electronics, so that Europe is condemned to second place.” Servan-Shreiber worried that Europe would go the way of “Arab civilization.” The international bestseller kept people talking into the 1970s, and along with Hymer’s collective set the stage for American awareness of the multinational moment. The American Challenge also argued that the European Economic Community (ECC), set up to compete with monolithic America, actually created space for American multinationals to manipulate markets in and around European nations on the perennial search for cheap labor and exploitable resources.
The dislocations of global capitalism described in The American Challenge included cultural events that brought planetary capital movements to the public’s consciousness. One fundamental material result evinced “the massive influx of American capital into Europe, especially into the Common Market countries.” In very real ways European firms reacted and adjusted to the American invasion, principally by merging companies into larger ones and organizing firms along the vertically integrated, managerial style. According to a Senate Finance Committee report, the Europeans “became potent competitors of the United States,” as foreign direct investment entered the U.S. in larger numbers, and massive European firms competed with American multinationals on the continent. This transatlantic activity, and the perceived threat of the American giants, led scholars and American politicians to offer immediate critique, especially since Servan-Shreiber underestimated European multinational power. According to multiple business organizations, Fortune magazine, and the Senate Finance Committee report, Servan-Shreiber ignored the might of European firms, but also “that not only U.S. business but business everywhere is outgrowing national boundaries; an economic infrastructure is evolving which is laying the basis for a world economic and political community.” In addition to the bestsellers The American Challenge and Global Reach, one of America’s foremost muckraking journalists investigated particular scandals precipitated by MNCs. Jack Anderson, who led a small team of investigative journalists, wrote a syndicated column for many decades and led a crusade for accountability in Washington. During the multinational moment, Anderson labored to uncover and report illegal behavior by capitalists, corporations and politicians in everything from telecommunications to the petroleum industry. He especially strove to reveal how the state worked in conjunction with corporations to exploit poor nations, influence their local politics, and increase the hegemony of the American Way.
Anderson’s revelations of secret dealings between corporations and the CIA and FBI created public outcry and calls for action. Anderson, a famous leftwing Mormon journalist who won a Pulitzer Prize for his work, was known for creating havoc in the power centers in Washington. His The Anderson Papers generated an outcry in the press on the Left and Right, revealing connections between the International Telephone & Telegraph Company and the CIA in Chile, which led directly to Senator Frank Church’s Senate Subcommittee on Multinational Corporations. “These allegations,” Church announced in his opening statements for the multiyear hearings, “arose out of the publication of a number of articles by Jack Anderson, the syndicated columnist, and others, based upon purported letters and memoranda written by various executives of ITT.” Anderson’s column in the Washington Merry-Go-Round was reported to reach 50 million readers at the height of his fame.
The language of popular culture, political debate in various congressional committees, and scholarly discourse centered around the impressive growth of foreign direct investments in the postwar period up to the early 1970s. Most of the commentary concluded that the word “multinational corporation” did not appear until after 1968. Senator Frank Church, who spent years investigating multinational corporations after the disclosures of Jack Anderson, and who admired Barnet and Muller’s book Global Reach, said it best in a review of the book in the Washington Post. “In the 25 years between 1948 and 1973,” he wrote, “U.S. corporate investment abroad increased from $9 billion to an estimated $107 billion in book value, but the term ‘multinational corporation’ (MNC) did not become imprinted on the public consciousness until the late 1960s and early 1970s.” He outlined multiple factors that led to this new and extremely broad global awareness. From 1968’s The American Challenge through the ITT allegations revealed by Jack Anderson, including Barnet and Muller’s Global Reach, the anxious cultural murmuring and cries for political direction inspired Congress to begin a series of inquiries that lasted throughout most of the 1970s.
The literary production that proliferated during the multinational moment, born of fundamental questions and cultural anxieties about the new rate and increased global penetration of MNC activities, mirrored America’s Gilded Age and Progressive Era muckraking tradition – and reflected, too, their political and social contests. Because of the particular cultural and social awareness of the structural transformations occurring in the 1970s, Congress, as had national and state politicians in America’s historical past, was inspired into action. Senator Church, a senior member of the Senate Foreign Relations Committee, and chair of the subcommittee on multinational corporations, directed the political inquest into global capitalist activities, raising many questions in the process and probing whether or not to instigate international regulatory procedures to curb MNCs and their increasingly feared presence in the world.
“The More You Eat the More You Want”: The Senate Subcommittee on Multinational Corporations and Foreign Policy
Studying the literary and cultural expressions governing multinational corporations helps illuminate many of the theoretical issues at stake during this era. But a close inquiry into political and legal reactions on the federal level, complete with thousands of pages of testimony, internal corporate memoranda, and social scientific quantifications in the form of precise economic analyses, helps scholars understand the material manifestations of this latest stage of capitalist development. Furthermore, as historian Martin Sklar accomplished with the corporate reconstruction of American society during the late nineteenth century, a close reading of Frank Church’s attempts to grapple with the newness of MNCs and their influence on United States foreign policy provides a foundation for comprehending our current globalization landscape, and its accompanying politics. This politics governed everything from federal policies to grassroots social activism, especially vital as this activism often took the form of professionalized, transnational nongovernmental organizations that directly addressed their energies toward global capital. Frank Church, as a leading liberal in the Senate and vocal critic the Vietnam War, acted as a sympathetic voice for many social justice agitators concerned with the exponential rise, and increasingly ominous presence, of the multinationals.
Senator Church initiated the proceedings on March 20, 1973 with an opening statement that demanded of his fellow congressmen, and of Americans more generally, to finally achieve some understanding of this new entity called the multinational corporation. In May 1972 the Senate Foreign Relations Committee, chaired by Senator Fulbright, decided to react to prevailing popular turmoil over multinational activities and open a multiyear inquiry into the role of multinationals and United States foreign policy. Their first hearings investigated allegations that the International Telephone & Telegraph Company (ITT) improperly influenced both the federal government, internal politics in Chile, and the CIA in order to protect their interests against expropriation. Dr. Salvador Allende Gossens, presidential candidate and ultimate victor during the era, repeatedly declared during Chilean elections that he was going to nationalize industry and utilities. ITT tried to influence the elections. After Allende’s victory, he began his expropriation agenda, and still ITT worked to block his efforts, and accomplish whatever they could to protect their investments, including ensure they could collect from U.S.-government-backed insurance against expropriation or war in foreign countries.
On March 18, 1976, after the multinational subcommittee completed its investigations and had been “watered down,” Church ran for President, along with Jimmy Carter, Walter Mondale, Ronald Reagan and a host of other candidates. The senator criticized multinational corporate activities at a time when they were little understood and had yet to enter mainstream consciousness. Church’s subcommittee work, and the proliferation of academic and popular texts on multinationals in the 1970s, educated Americans about global corporations and the multiple critiques of activists who followed in the corporate wake. In his many speeches, Church claimed that, as president, he would “stop stimulating the movement of American capital to foreign lands.” He went on to build a new kind of narrative about American life. “During the past two decades,” he charged, “American multinational corporations have invested $200 billion abroad, in the most modern manufacturing plants that American technology can design. In the process, older plants in our own country have been displaced, at an annual average loss of 150,000 jobs a year. It is no accident that the United States is presently victimized by unemployment twice as high as that of any other industrial nation.” The now-familiar story of jobs going overseas at the expense of American workers, from a labor or anti-globalization perspective, began at this time.
Economic stagflation in the middle of the decade, a postindustrial landscape in American cities such as Trenton and Detroit, and the threat of domestic workers being replaced by cheap labor overseas, exposed a new world and generated a reaction to this world. This nascent political, cultural and economic landscape played a central role in uncovering a new globalization awareness in the realm of consciousness. These globalizing elements Church referred to were only partly explained by public policy. Rather, they were the concrete manifestations of the capitalist/corporate imperative. The 1970s represented a moment when the American nation began to apprehend the global, a new perspective that began in the postwar period and reached massive suffusion by 1976, the year of the Bicentennial. Americans asked fresh questions about nationhood as they prepared to celebrate their civic birthday, and many of their answers evinced a demise of American political power in the world and a more integrated worldspace in which the United States was but one piece to a complex puzzle.
The chair of the Foreign Relations Committee at the time, J. William Fulbright, Democrat from Arkansas, appointed Church’s subcommittee. He and Secretary of State William P. Rogers agreed that the Senate should investigate the issue. Church had chaired the Senate’s Subcommittee on Latin America, and when the ITT allegations surfaced, he appeared to be the natural leader for the project on multinationals. Journalist Jack Anderson’s disclosures of ITT activities in Chile induced Church to remark that the allegations were “very disturbing.” Anderson’s release of secret information prompted the Senate hearings, and created a stir throughout the United Sates. The Washington Post quoted Church as saying that multinational corporations were a “relatively new phenomenon” and that United States policy is often the “handmaiden of their policies.” Church went on to argue that no “serious inquiry ever has been made into these activities.” The subcommittee began with the ITT case, and then proceeded through a long list of corporations and political activities that filled seventeen volumes. Republicans were not interested in Anderson’s revelations, nor in any investigation into multinational corporations. Fulbright claimed that multinational corporations were “generally beneficial,” and that any indiscretions were simply “bad business.” The tone of conversations about multinationals indicate a nascence, a phenomenon that was little known, not much contemplated, and taken for granted. Most talk of multinationals by politicians fell under “free enterprise” rubric. Republicans chimed that if there were to be investigations into the role of multinationals in foreign policy, any such committee should discuss the beneficial aspects of corporate engagements overseas, and that any Senate probe should not be seen as “anti-business.”
The GOP and conservative press aggressively reacted against the multinational subcommittee’s work. The Wall Street Journal lauded former Attorney General John Mitchell and ITT President Harold Geneen for not giving “even a fraction of an inch to Senate Democrats” on the multinational subcommittee. The committee, in addition to probing ITT actions in Chile, looked at links between the Republican Party and government settlements of antitrust cases against the company. Conservatives pointed out, in the press and before the Senate Judiciary Committee, that Democrats routinely accepted cash from large corporations after settling antitrust cases out of court. Corporations and their conservative allies intensively lobbied the government in order to influence politicians and policy on all sides of the ideological spectrum. One such group was the Council of the Americas, founded in 1965 by David Rockefeller, which foreshadowed President Clinton’s 1990s neoliberal NAFTA era by pursuing free trade and democracy throughout the Western Hemisphere. The collective response of conservative and capitalist elites during this period indicated the difficulties of achieving their agenda, and the nature of the conditional political battles that raged through the country and the region. The unforeseeable results of such struggles played out in politics, markets, legal and civil spheres, and in broader society.
Jose de Cubas, President of the Council of the Americas during the 1970s, wrote Salvador Allende an impassioned letter that provides insight into corporate interpretations of the multinational moment. His effort was but one piece of the continual, fretful assault on Allende’s Socialist government. Capitalist elites believed this was a necessary assault because of Allende’s own political power and ability to challenge the terms of debate – a struggle he would eventually lose, at least in the short term, as capital rapidly consolidated its hegemonic position. “Enlightened private enterprise,” de Cubas wrote, “working in close cooperation with an enlightened government is today the best . . . method for development. There are many examples around the world today to prove that this cooperative effort of private sector and government will be even more essential in the future.” The multinational corporations, Cubas continued, will only serve to help host countries prosper. MNCs are “outward-looking and export-minded,” he wrote, and any national success hinges upon cooperation with private enterprise. The multinational corporation is “trying hard to learn to become a good corporate citizen throughout the world. Due to the dynamic competitive society which it supports, it knows that if it fails in this very important task, others are there to take its place. In addition, its fundamental belief in a competitive philosophy results in its accepting pluralistic situations in private/public economies without undue fear of being overwhelmed.” As the Council of Americas pursued its particular position, Church and his colleagues, after proving ties between a desperate ITT and the CIA in overthrowing Allende, addressed the oil crisis through a probe of major oil companies.
The subcommittee continued with its work, interrogating the relationship between multinational petroleum companies and U.S. foreign policy. Senator Church opened these sessions of early 1974 by asking whether “and to what extent this relationship has contributed to the energy crisis with which we are all so familiar.” Church presented a litany of familiar scenes from the oil embargo, of long auto lines at gas pumps, lack of trenchancy from government officials, OPEC’s Arab states colluding with American and British oil companies. “Above all,” Church continued, “there is a pervasive suspicion among the American people” of all multinationals at this time, especially the oil companies, and businessmen or officials who have “anything to do with the decisions which affect international oil is today suspect in the public mind.”
A brief history of the petroleum reserve corporation emerged from the hearings, which demonstrated both the partnership between state and corporation, but also the free hand many multinationals enjoyed when cultivating their own sovereignty and prerogatives. During the 1930s, the Secretary of the Interior argued for greater control of oil relations, especially if they related to engagements with Saudi Arabia and if oil was to be vital to American security and interests. President Roosevelt formed the Petroleum Reserve Corporation in order to protect government interests in oil company dealings. The government’s line of reasoning was that the U.S. government “ought to have a strong presence and policy influence over the company which administered the concession.” However, the companies successfully blocked government attempts at direct influence. Senator Church summed up this brief history with the observation “thus was woven the basic pattern which has since that time, formed the basis of Government-industry relations – the Government to provide the diplomatic and financial support for the industry in its operations abroad, but denuded of any institutional capability to formulate a policy of its own or to oversee the operations of the American petroleum industry abroad.” The subcommittee was particularly concerned about state-corporate relations in the petroleum industry, of course, but also in many other areas that involved foreign policy, including American enterprise behind the Iron Curtain.
The multinational moment was also about calculators. After several hearings on petroleum companies, the subcommittee shifted its focus to American businessmen opening up economic pathways in communist countries. The Soviet Union sessions investigated the role of American business and trade relationship with the eastern bloc and detente, a topic that was a key transformational aspect of the multinational moment. Calculators, for J. Fred Bucy, Executive Vice President of Texas Instruments, represented incredible technological advances for American consumers, but also integrated circuit technology for other uses, especially advanced weaponry. The Texas Instruments executive warned the committee about potential Soviet applications of calculator technology. Bucy expressed his concerns about Soviets playing one corporation off another with the lure of exclusive access to the Soviet market, primarily in order to gain the “know-how” necessary for advanced operations of the technology. The members of the committee agreed with him, murmuring their collective incredulity that Americans could sell technological know-how to the communists. Yet, a thriving business continued between the “opposing blocs,” transcending that era of heightened ideological rhetoric, including that of Bucy’s Texas Instruments.
In addition to expressions of caution about doing business in the Eastern Bloc, corporate executives presented visions of international consumerism as world peace. Donald Kendall of the Pepsi Company and other businessmen were constantly worried about losing enterprise opportunities to the Europeans, and this justified their excursions. Senator Percy contributed his own insights “on this whole phenomenon, consumerism sweeping the Eastern European countries. I think Crackerjack has the slogan, ‘The more you eat, the more you want.’ Isn’t that almost a phenomenon we have seen worldwide. It is not restricted to any nationality or religious faith, belief, or background, once they start seeing what consumer goods can do in bringing a better way of life.” Kendall continued to speak of the benefits of Pepsi in communist countries, and their marketing campaigns in places like Poland and Russia. Percy asked Kendall whether he saw this spectacle as a “continuing trend,” and whether there will be “more of that because that will help create the consumer-oriented economy?” Kendall of course answered in the affirmative, both senators and businessmen engaging in prescient theorizing about real-world conditions in the economic sphere that would eventually explain Berlin in 1989. The subcommittee also included documentation on the USA-USSR Trade and Economic Council, which segued to Professor Zbigniew Brzezinski of Columbia University and soon-to-be President Jimmy Carter’s National Security Advisor.
Brzezinski’s testimony detailed his conceptions of the global community. He declared his opposition to politicians clinging to ideological differences despite the multiple variables and actualities of detente. In other words, the world was changing, becoming more globally integrated, yet in the minds of the participants there were declarations to maintain ideological differences, references to historical development, and “winning” the rhetorical war of ideas. All the while real economic changes occurred on the ground, indicative of a new materiality that scholars saw as a maturing world market structure. Brzezinski spoke of “the kind of a global community which is emerging, a community of increasing interdependence, increasing contacts between societies, increasing movements of peoples and ideas . . . if we don’t get that kind of a global community, given the stage of our historical technological development, the other alternative is increasing global anarchy, global chaos.” This comment from the witness evinced a nascent and rising consciousness that was illustrative of America’s multinational moment, an era of great change that contemporaneous participants viewed as entirely strange. This strangeness required constant analysis and immediate investigation from many segments of society, including the critique of corporate activities offered by the authors of Global Reach.
On May 17, 1975, Senator Church welcomed Global Reach authors Richard Barnet and Ronald Muller to the hearings on political contributions to foreign governments. “From time to time,” Church began, “in the course of this subcommittee’s investigation of multinational corporations it has been our custom to hold what we call a seminar-type hearing.” He introduced the two authors with evident admiration, both of their work under consideration and of the views contained within, especially the politics inherent in their critical stance relating to the multinational phenomenon. Barnet was the founder and codirector of the Institute for Policy Studies, the group that had used research from Stephen Hymer, Leah Margulies and the Yale Economic Growth Center in their pathbreaking, controversial book. Barnet opened with a statement that revealed the political and cultural atmosphere at the time. Americans possessed, he asserted, an “insufficiently underdeveloped” understanding of “the rise of multinational corporations,” which explained in part the success of their book as energetically they attempted to redress some of those insufficiencies.
Barnet’s testimony moved away from pointing fingers or detailing the crimes of multinationals, something the subcommittee had been doing for a few years. Yes, there were many illegal activities of MNCs, chronicled by the senate subcommittee, the authors themselves in their book, and many other studies of the period. But overtly illegal activities should not be the focus of an investigation or a discussion of MNC activity in the world. The issues “raised by the global corporation transcend the question of criminal behavior,” and crimes themselves should not be the center of attraction, as much as they might excite the public. Rather, the authors maintained that the real issues were “the effects of ordinary business practice of multinational corporations, because these practices in our view are bringing about a revolution in the world economy which is having profound implications for all the Americans.” The two authors went on to suggest that MNCs far outpaced theory and “the lag of our political institutions,” and controlled everything from capital, new technologies and natural resources, and acted directly upon the continuing division of labor. Furthermore, principally as social institutions, corporations impacted social relations on every level, from worker relations to consumer choices, and they forcefully integrated entire nations into a world market economy whether they wanted to be or not.
Americans endeavored to provide meaning during an increasingly chaotic time. Meaning was often understood by attempts at control and order, but also by expressions of hope, togetherness and world peace – enunciated by capitalists and social activists alike. Ronald Muller, Professor of economics at American University and Burnet’s co-author, testified that the “visible process of growing national economic instability that has been plaguing this country since the middle 1960s” could partly be blamed on struggles between corporate and national sovereignty. Here once again was the pervasive repetition of anxiety, a theme of apprehension in the 1970s that furnished cultural expressions tentatively hopeful yet riddled with fears.
As Americans searched for meaning during the 1970s, they engaged contingent struggles over the directions and very definitions of their society, especially as it related the wider world. And as multiple pundits came to view oligopoly as the principal characteristic of new global economic structures, so too did many radicals, liberals and conservatives see the relationship between capital and labor as inextricably changed. How was the labor movement affected by the focused internationalization of corporate capitalism? Were multinationals responsible for the loss of American jobs? Was there an expanding global capitalist class, and a hierarchy between trade unionized labor in the West and the “reserve army” of severely marginal laborers that capital exploited in underdeveloped countries? The Church subcommittee attempted to answer these questions, as did many scholars and journalists. The following section locates how some capitalists viewed these problems, and how organized labor responded to international capital, and struggled to set the agenda and the terms. For labor during the multinational moment, their efforts increasingly grew desperate. Tensions between capitalists and labor activists were on the surface of many political battles, but so were strains between national and international labor that resulted from the pressures of the new paradigm.
Globalization Awareness and the Labor-Capital Dialectic: The Corporate Vision and Labor’s Nightmare During the Multinational Moment
Frank Church announced in a speech before the Center for Studies of Democratic Institutions in Houston early in 1973 that the integration of the global economy in general and MNCs in particular, was not “a new phenomenon.” He mentioned companies such as IBM, Shell and Unilever as extending their global reach, to which historian Mira Wilkins added hundreds of other companies for the nineteenth and twentieth centuries. However, Church informed his audience that, in the postwar period, during the explosion of American economic activity and the rise of a society based on hyper consumption, “the multinational corporation has come to loom so large in international economics, and . . . its importance has penetrated the broad spectrum of American public opinion.” This pronounced attention was markedly evident in capitalists’ impressions of their role in the world economy, and the labor movement’s apprehension of the dangers workers faced.
Church revealed strains of early anti-globalization sentiment in his Houston speech, especially as he addressed labor concerns. He mentioned that the AFL-CIO “demands restrictions on these corporations,” in a vigorous, and hopeful, attempt to utilize traditional national pressures in the international context. He quoted the labor movement’s Executive Council, which called for “a prompt full dress Congressional investigation of American corporations and banks which sell their country short in order to enhance their profits.” Directly engaging the capital-labor dialectic, Church then presented the other side in the debate. He pointed out that corporations, and their representatives in government, “see themselves as the wave of the future, a powerful force for good, which, if left alone, will integrate the world’s economy for the mutual benefit of mankind.” By integrating the global economy, capitalists hoped to harmonize international labor, and create interdependency between nation-states, without workers able to challenge corporate prerogatives.
In fact, whereas the international sphere enhanced the protection of private property, it made life more difficult for unions, as they required the local power of states to regulate the workplace. In his speech examining this peculiar tension, Church groped to locate a social role for MNCs. “Is the multinational corporation,” he conjectured, “the device which will bring the barriers down, integrate the economy of the world, and usher in a new order? Is this, indeed, to be the age of the multinational corporation?” Would MNCs be boon or bane for American workers, and how could labor organize if capital proved a unique ability to move from one region to the next, something that workers, with homes, families, social networks, could accomplish less easily.
This particular interpretation was substantiated and enriched by the Senate Finance Committee, another congressional arm investigating MNCs. Hymer’s interpretation of the oligopoly imperatives of global corporations, and the competitive pressures they faced from China, Western Europe and Japan, supplied capitalist justification for seeking cheaper labor markets. The Senate Finance Committee concluded that, “in general, U.S.-based multinationals went offshore when it was necessary to protect an existing foreign market which it could no longer serve economically with exports from the United States.” By seeking to protect market position, capital viewed the world as a borderless expanse in which to seek profits and grow ever larger. According to the logic of the multinational, labor could no longer be protected by national imperative. Thus, the concerns of American workers about unemployment and jobs stealing away overseas were no longer significant issues for the corporation. The Church subcommittee, in fact, located how some capitalists interpreted the realm of possibility for preemption and defensive investment when it grilled Gulf Oil in an extensive testimony, which provides insight into one specific element of the corporate vision.
Gulf Oil decided that its best strategy in the hearings was to admit that it offered and delivered bribes in many countries around the world, numbering in the millions of dollars. It argued that ethical standards vary around the world, that there “is no universal standard,” and that they were “forced” to make contributions, in many cases against their will. Gulf begged the senate subcommittee to “enact legislation” that would help them avoid such pitfalls in the future. Legislation prohibiting foreign contributions would help companies like Gulf Oil resist foreign pressures to make such donations. Gulf shifted the blame to the foreign context of doing business in other countries, and then requested that Congress help them fight this global practice. Under the pressures of a public hearing, the strategy of begging forgiveness was the Gulf plan from the outset, as revealed in internal memoranda before their turn before the Senate. The senators loved Gulf’s genuflection, and cried that Americans must fix this most pressing problem. “Senator Symington and myself have spent many, many years in industry,” claimed senator Percy, and so they understood the necessities of Gulf’s position negotiating the new global economy. Senator Percy claimed that the issue of the day was not illegality, but the impact of political “donations” on foreign policy. The chairman of Gulf Oil, B. R. Dorsey, included one of his speeches for the public record. Society in the 1970s has changed, he claimed. “Today, society is a world concept . . . today we see the entirety of our world.” Dorsey claimed that business must take the “central role in improving society’s problems,” and this included impressive rhetoric of social responsibility and the necessity of properly tending to labor issues.
The Senate Finance Committee ran its own hearings into the perceived problems and benefits of multinational corporations. On Jun 1, 1972 the Subcommittee on International Trade issued a press release calling for papers that dealt with this new, perplexing issue – a meaningful attempt to first define, analyze, then locate society’s safe path through the strange, complex era. The collected papers represented a majority of business viewpoints, but also included a report from the AFL-CIO titled “An American Trade Union’s View of International Trade and Investment,” in which the mainstream labor point of view was articulated. Leaving aside the Marxist international class interpretation presented by Hymer, the AFL-CIO perception represented the dominant American labor perspective. Hymer showed how trade unions, by their very modus, could not compete in the newly complex and expanded international capitalist regime. Thus, perhaps viscerally and tacitly recognizing this fact, trade unions in the United States expanded their desperate agitation during the 1970s. Increasingly, they appealed to the state, lobbying Congress for protective legislation, rather than to the corporations themselves.
The labor movement possessed colossal problems in the expanded world market economy, and it struggled to adapt to the changing structural conditions. In an earlier stage of capitalism, workers achieved a collective consciousness through an inherent contradiction in capitalist organization. Namely, competition between capitalists led to greater concentration in factories and corporations, “unified at the political level by the state.” Conversely, as capital aggregated, so too the workers, who labored together in centralized locations, lived in urban neighborhoods with fellow wage employees, and found a common identity against the capitalist class. As E. P. Thompson argued so persuasively in The Making of the Working Class, workers achieved a collective consciousness through the strength and organization of the opposition, and then began to act politically in their own interests.
However, the ever-increasing mobility of capital fractured this traditional alignment, and American labor unions in the 1970s struggled to negotiate the new terrain. As many scholars, capitalists and authors argued during the multinational moment before the Senate subcommittee, the global era frayed national sovereignty. The “quest for profit,” Hymer noted, “led capital to shed its national character,” but it also increased the pressure on labor and “undermined its traditional organization and strategy.” Crucially, Hymer’s analysis provided evidence that the millions of laborers in underdeveloped regions, and in poorer sections of advanced nations like the Sunbelt in the United States, diminished the bargaining position of trade unionism. Capital explored the world’s margins and left American labor organizations behind.
In the early 1970s, these particular labor-capital aspects were exotic and unfamiliar, and labor’s critical voice was potent enough to be a part of the conversation. Further, labor reasoned that, with government intervention and supervision, national governments could stem the tide of multinational activity. Labor critics “focused on the massive outflows of investment capital” and “blamed ‘runaway’ plants” in Mexico, Hong Kong, Taiwan and Korea that operated with cheap labor and efficient American technology for the “export of jobs,” that in turn led to both profound job losses and diminution of American labor’s standard of living. The above factors led labor’s call for “restrictive trade and investment measures.” Muller, before the Church subcommittee, testified that “American companies offset declines in domestic and export markets shared by a remarkable mobility in transferring their production operations to ‘export platform’ facilities in underdeveloped countries.” These export platform facilities, replete with favorable state direction, allowed Wal-Mart to become the behemoth that it is today. Further, by being able to hopscotch the globe, unlike workers, the globalization of capital hurt organized labor and complicated relations between the state and unions. Legislation introduced at the urging of the AFL-CIO leadership (S. 2592, “The Foreign Trade and Investment Act of 1972,” introduced on September 28, 1971 by Senator Hartke) called for “stringent controls on all direct investment activities, withdrawal of certain tax privileges, and also advocated strict regulation on transfers of U.S. technology to U.S.-owned subsidiaries and non-affiliated companies abroad.” These measures mirrored Barnet and Muller’s prescriptions, those ideas of the senate investigators, and the ideal proscriptions that labor set forward to the Senate Finance Committee.
The report prepared by the AFL-CIO for the Senate Finance Committee began with a critique of neoclassical economics and its use of antiquated definitions to describe a hyper-integrated, complex world. The theory of comparative advantage was “an elegantly logical theory” but it did not work in practice in a world economy. It should be noted here that one common thread between liberal, radical and conservative interpretations of the multinational moment – besides expressions of anxiety – was a sharp disjuncture between theory and practice. The structural shifts, and the manner corporations had both adapted to them and brought them into being, had far outpaced theoretical and policy models that attempted to deal with this transformative epoch. In fact, the central thrust of the multinational moment was the need felt by most sides of the debate to close the gap between practice and theory. The AFL-CIO report claimed that comparative advantage theories dealt with “the production of such products as wine, nails and lace, the industrial world of the early 1800s.” These theories could not account for the oligopolistic behavior of mega-companies that defended market share by moving subsidiaries and productive capacity around the world, and that could move to benefit from cheap pools of labor. Additionally, when a corporation was well-settled in a region and its labor force began to achieve certain wage benefits and collective power, and thus profit margins began to dwindle, the company sought new terrain for exploitation and increasing profits. Hymer explained these movements in his theory of uneven development, which cohered more with contemporary global realities than the comparative advantage theories against which organized labor complained vigorously, if ineffectively.
The trade union report’s critique continued along lines that were denied by the United States Chamber of Commerce and other business entities. The unions condemned the theory of comparative advantage that “assumes that international trade is arm’s length transactions between nationals of one country with nationals of another, in markets that involve price, as well as product competition.” As corporations shifted production overseas, business rhetoric assumed equality of contract and freedom of workers to migrate – while capital evinced fluidity, so could people pick up their families and move around the world, following job opportunities, negotiating with employers, leaving a situation if they found it unfavorable. Finance executives and managers might be able to engage in transnational shifts, but the “mobility of workers” across oceans, uprooted from families and community, simply was not realistic. Therefore classical economic theory “serves no useful purpose for American policy makers . . . in the 1970s.” Meanwhile, shifting hierarchical structures of global labor mimicked the organization of the corporation, whereby command existed in key leading cities, and the bulk of poorly paid wage laborers lived in the Third World. In other words, Hymer saw a new, postwar “world hierarchy of cities” that went along with “the international hierarchy of labor.” As long as trade unions legitimated capitalist prerogatives, and were centered in leading capitalist cities, then workers in those locations enjoyed benefits that marginal labor employed in production tasks dictated by multinational capital could not. Workers in the United States began to fear a structurally increased marginalization during the multinational moment.
A fundamental insight that Hymer and others involved in the Church investigations brought to both orthodox and Marxist economics was research on this relationship between international labor and multinational capital. As scholar Rhys Jenkins understood it, Hymer’s focus on an international capitalist class and its exploitation of labor in less developed countries (LDCs) was one of his principal contributions to modern social thought. Hymer saw the world structured according to a hierarchical arrangement with MNCs “reproducing the world in its own image.” He studied capitalist heirarchies within MNCs and noticed how corporate structure modeled the world with centralized power in key elite cities and laborers in “the less developed countries at the base of the pyramid of control.” He observed what people in 2010 take for granted: the expanding separation between rich countries and poor, with poor regions of the Third World performing most of the world’s labor and productive energy in factory islands and sweatshops.
The hierarchical scheme of global capital and labor mimicked the vertical integration of the firms themselves. International capitalism and the effectiveness of multinational corporations required a “latent surplus-population in the underdeveloped countries and backward sectors of the advanced countries” which can be disciplined in a system that demands an impoverished population “to work at the bottom of the ladder.” The marginalized laborers of the global south formed “the lowest sediments which dwell in the sphere of pauperism, thus forming an incredible pool of wasted human beings in the slums, ghettos, and rural hinterlands of the capitalist economy,” Hymer wrote. This insight moved beyond orthodox Marxism’s fixation with the “proletarianization” of the workforce and transitioned into an even farther removed periphery of slum dwellers, refugees, and ghetto inhabitants, often people not even participants in the labor equation or in the disciplines of capitalism or consumerism. He noticed before anybody the global realities of the “uneven development of capitalism, accumulating wealth at one pole” in the elite urban centers and “misery at the other” in the underdeveloped and exploited regions of the world. The heart of the matter was captured by Washington Post writer Dan Morgan in 1973. He wrote that organized labor argued that multinationals outsourced American jobs, and yet “corporate leaders” maintained they created many other jobs because of their success abroad. Here was the nature of the conflict between labor and capital as it moved beyond the national to the international sphere. But the corporate-labor dialectic existed on a plane that probed much more deeply than this standard surface rhetoric.
Morgan’s article in the Washington Post touched upon most of the informational and policy battles within the various hearings of Congress, and encapsulated the divide between capital and labor. As the Church subcommittee hearings exhibited in one of its hearings, American oil companies helped OPEC with its embargo. The oil companies claimed that they had no choice because they would either be nationalized or the business would go to Britain or other foreign countries. Hymer often made special note of this particular tendency of multinationals, in keeping with oligopoly theory – if they don’t do it, somebody else will. During this era of a nascent globalization awareness, because of multinational phenomena and the anxieties they provoked when finally noticed, the U.S. government and international organizations such as the United Nations enacted comprehensive, multiyear investigations. Morgan mentioned that “the U.N., the Organization for Economic Cooperation and Development (OECD), the European Common Market Commission, the U.S. Tariff Commission, the Senate Finance Committee” and Senator Frank Church’s subcommittee were just some of the organizations probing the relationships between multinationals, laborers, and national governments. He also revealed that Ralph Nader entered the fray, in addition to national and international labor.
Morgan, and many other contemporaneous writers, explained diverse aspects of the multinational moment. In addition to many of the complex elements uncovered by the Church hearings, he detailed labor complaints of job losses, and the shocking ways that corporations avoided paying taxes. Major multinationals began to appear less and less American at this juncture, and many of them already earned over half of their profits overseas. The ability of multinationals to set up their own banks offshore, to register oil tankers in “havens” such as Liberia, Panama and the Bahamas, and the fact that many large global corporations – ITT was a prime example – paid between one and two percent on their taxes to the U.S. government, were criticisms levied by organized labor throughout the 1970s. The Church subcommittee, activist-researchers inspired by newly-apparent contingencies, and books such as Barnet and Muller’s Global Reach and Raymond Vernon’s Sovereignty At Bay, detailed these many revelations for the first time in American history.
Yet it was not clear what policymakers would do about the structural transformations, and the cultural, political and social consequences. Frank Church often claimed that the momentum was already so great, and international cooperation close to impossible, that there was nothing that could be done to corral the multinationals. These global corporations had already constructed the world and the rest had to adjust. Morgan concluded his summative essay with the insightful yet dire fact that nation-states “have only begun to examine the impact of the giant supranational structures on their own policies and the outlook for extensive new controls seems bleak. The global thinking of the multinational executives is running far ahead of the narrower outlook of the men who govern the world’s countries.” Business, as evidenced in the subcommittee hearings on the communist bloc, far outpaced national politics, foreign policy, and their respective rhetorical and regulatory regimes. Hymer was the first to admit that the MNCs raised “more questions than economic theory can answer.” Yet he was adamant that activists, workers, and scholars had to challenge the fact that “markets come out of the barrel of a gun” by organizing the global, grassroots, socially-conscious imperatives of collective political power.