The Multinational Monitor



Book Reviews

Multinationals In Latin America:
The Politics of Nationalization

by Paul E. Sigomund
University of Wisconsin Press
426 pages, $U.S. 22.50, cloth, $6.50 paper

In his 1977 book the Overthrow of Allende, Paul Sigmund argued that President Salvadore Allende took the Chilean economy on a suicidal course. High inflation, critical shortages, labor strikes and a massive international debt in Sigmund's view at that time brought on the bloody military coup. The covert activities of the U.S. government and American multinationals played an important but clearly secondary role.

For Sigmund, the death of democracy in Chile was almost inevitable. Allende's rush to create a socialist state by nationalizing foreign investment was destined to provoke a rightwing takeover. With no little sympathy, Sigmund recalls the words of Lord Acton: "the passion for equality makes vain the hope of freedom."

The dilemma posed by Allende's experience reappears as a central theme in Sigmund's latest book, Multinationals In Latin America: The Politics of Nationalization. Reducing the influence of multinationals by nationalizing their assets, Sigmund asserts, may give a government greater command over economic development. But the price for nationalization includes loss of overseas markets and essential technology, Sigmund tells us, as well as a reduction in foreign credit, hostile foreign governments and a bloated inefficient bureaucracy. Ultimately, Sigmund suggests direct state involvement in the economy is inconsistent with political liberty, citing authoritarian rule in Cuba and authoritarian reaction in Chile.

Sigmund, professor of politics at Princeton, surveys the nationalization policies of five states: Mexico, Cuba, Chile, Peru, and Venezuela. He draws several lessons from these case studies. First, wholesale expropriation of the kind that took place in Cuba, or to a lesser extent, in Chile, is disastrous. Second, even if nationalization is limited to a country's natural resources-as in Mexico or Peru-the result can be a monstrous bureaucratic nightmare. Third, the U.S, government's demand for prompt, immediate and effective compensation is totally unrealistic, especially when agencies and foreign banks shut down lines of credit to the expropriating country.

In contrast to the disasters in Cuba and Chile, Venezuela's 1976 takeover of foreign oil companies is a model nationalization. For many years, the Venezuelan government had wrung concessions from the multinationals; by 1974, the government took 95 percent of the profit on every barrel of oil. The final takeover took place smoothly, with the Venezuelan government, paying over $1 billion in compensation in cash and long-term bonds. The U.S. government-reluctant to interfere with an ally, and an OPEC founder-only feebly protested that the compensation was not "prompt, adequate and effective."

As Sigmund acknowledges, Venezuela may be unique. The government's bargaining position was strengthened because the world economy (and the oil companies) needed the Venezuelan crude oil. On the other hand, when Chile appropriated copper holdings, the companies easily shifted to alternate world supplies. And Venezuela's oil wealth enabled it to compensate the companies.

The important lesson to take from Venezuela, urges Sigmund, is the government's constructive cooperation with the multinationals' expertise and access to foreign customers. When Mexico nationalized American oil interests in 1938, the companies successfully boycotted Mexican crude, inhibiting the country's exports. Both Cuba and Chile greatly suffered because of the loss of managerial and technical expertise.

Latin American governments, concludes Sigmund, have begun to recognize the high costs of nationalization. The future will see fewer nationalizations and more state-multinational joint ventures. "In the new stages of Latin American nationalism, the foreigner may be squeezed, taxed and regulated, but it is less likely that he will be expropriated."

Sigmund delineates the truly precarious path of nationalization. Even without resorting to covert support of military uprisings-as did ITT in Chile and United Fruit in Guatemala-a multinational can exert a great deal of pressure to derail the plans of a nationalizing government. When the U.S. government. backs the companies with threats of aid cutoffs and international lending institutions threaten to withhold loans, the pressure can be almost unbearable.

Sigmund adds to the costs of nationalization the creation of inefficient industry. Certainly, inefficiency has accompanied many nationalizations. But it is incurred not necessarily because the companies are multinationals. Still, the book's inclusion of this consideration is essential, for it goes to the roots of Sigmund's objections to government intervention in the free market.

Yet the book fails to make a convincing argument about the economic consequences of state-run industry. Analyzing the history of nationalization in five countries is a major task. Add to that an assessment of the performance of the nationalized industries and an examination of U.S. policies, and task becomes almost impossible.

Having set up such a large project, Sigmund ignores some important aspects of the countries' experiences with multinationals. For example, though Sigmund describes how international institutions (such as the InterAmerican Development Bank) and U.S. agencies (such as the Export-Import Bank) cut off loans to Allende, he fails to relate how international assistance skyrocketed after the military coup. In his study of Cuba, scant attention is paid to the history of American agribusiness interests there.

Even the book's value as a survey is diminished because Sigmund's purpose is unclear. Though most of the book is devoted to historical narration, it ends with a general analysis of the U.S. government's policy toward multinationals. This final section recounts the familiar arguments and glibly concludes: "Differences between the North and South on the virtues of the free market and the role of the multinational corporation are not likely to disappear."

Sigmund's method of comparing nationalization policies of several countries does yield some important insights. But it remains for others to put this method to its most effective use.

- by George Riley

Agribusiness in the Americas
by Roger Burbach and Patricia Flynn
Monthly Review Press
North American Congress on Latin America
314 pages, U.S. $6.50 (paper)

This well-written primer provides a comparative assessment of the growth-and consequences-of large-scale agribusiness in the United States and Latin America. Like many other analysts, the authors argue that development patterns, rather than absolute scarcity, accounts for world food shortages: "Contemporary food shortages exist only because of the way food is distributed in the capitalist world economy.... "

Though the authors make clear the different factors in the decline of the U.S. family farm and the Latin American "minifundos," they emphasize the similarities between production in the two regions today. "In the Bajio Valley of Mexico, the Cauca Valley of Colombia and the Salinas Valley of California we saw fruit and vegetable growers who employed similar production techniques," they wrote. "They were financed by the same banks and sold to the same multinational corporations."

What makes the book particularly valuable is its wealth of detail on the development and current status of agribusiness in individual Latin American countries, with a particular emphasis on the role of multinationals.

The book concludes with an extensive case study of the Del Monte Corporation's history and operations in the Pacific, Mexico, and Guatemala. The authors also offer an overview of the international grain companies' operations in the region. An appendix lists the investments of the 60 largest U.S. agribusiness corporations in Latin America.

The Geopolitics of Information: How
Western Culture Dominates the World

by Anthony Smith
Oxford University Press, 1980
191 pages, U.S. $13.95

Smith, the author of Goodbye Gutenberg, a study of the changing newspaper world, turns his attention here, with excellent results, to the increasingly bitter information conflict between the major western news sources and the Third World. Smith is a bright, concise writer, and a sharp analyst. The book is punctuated by incisive looks at the arguments used by both sides in the debate.

Smith sees the current world information order as a shadow of the world economic order, propelled by the same forces of international capitalism. "For capitalism was an information system, as well as a financial and production system; its development necessitated bringing one unexploited part of the world after another into a single market in which social classes, companies, transportation methods and stock markets became inextricably combined into a single, complicated and variegated, ever-growing and interdependent system. At the heart of it there had to be information. . . the information network was a fundamental support for the development of international capitalism itself," he writes.

Smith's book draws heavily on the UNESCO research of the past few years, but free from the enervating pressures of an international panel, offers more pointed analysis and more provocative conclusions. It makes a sturdy and invigorating contribution to a debate that-as Smith notes-is sure to escalate in the coming years. "The newspapers and media empires of the West are a luxury of capital which perhaps it can no longer afford," Smith writes, "in the sense that their profitability has been built, in part, upon journalistic practices and priorities which are open to severe charges but which have long been protected against significant criticism."

Food for War-Food for Peace
by Mitchel B. Wallerstein
The MIT press, 1980
262 pages, U.S. $30.00

Wallerstein investigates international food aid with an eye toward its political implications. He focuses his study on the United States' role as a food donor since 1945, when the U.S. first inaugurated a formal foreign assistance program.

At that time Western Europe was preoccupied with its own reconstruction, so the burden of aiding the developing Third World became U.S. property. Foreign aid itself became a political tool, ". .. an instrument for meeting the `Communist challenge' and for promoting the global security interests of the `free world' . . ." The book examines what happened when the global order changed in the seventies and -food aid became an obligation rather than a "political" gift.


Money Chasing Money

One Sky, a Canadian group, has published this report as a "preview of a selection of materials which will appear in a kit now in the final stages of production." The kit-like the report-"Attempts to break away from a tendency to look at multinational corporations as a solely academic area of interest.

The report is a compendium of articles-both originals and reprints, including one from the Multinational Monitor. Several pieces look at the activities of multinationals in Canada, and there are several valuable charts listing, for example, the largest corporations doing business in Canada.

Bulk orders are available for 75 cents (50 cents each for orders over 10) from:

One Sky
134-Avenue F South
Saskatoon, S7M1S8


Southern Africa Media Center

Part of California Newsreel, an alternative film supplier, the Center offers several documentary films on Southern Africa including movies treating Namibia, Angola, and South Africa. Two recent, and highly-acclaimed films, Generations of Resistance, and Crossroads / South Africa, look at life in modern-day South Africa and resistance over the years to apartheid.

To accompany the films, the Center offers a handbook on "Using Films On South Africa," that provides a series of complementary learning projects centered on foreign investment in South Africa.

California Newsreel's Media at Work project also offers films on economic subjects including Controlling Interest, a documentary on multinationals, and The Detroit Model, about the changing auto industry.

Order films at least three weeks in advance. A complete catalogue of films is available, as are discounts for church or civic groups unable to afford the rental price. For more information write or call:

Southern African Media Center
California Newsreel
630 Natoma Street
San Francisco, CA 94103


Caribbean Basin Report

This new periodical is essentially a compilation of news clippings from other sources. In a note to the introductory issue, the editors explain that the magazine "will consist mainly of newspaper and magazine clippings in a bi-monthly (6 times per year) tabloid format and will include several articles of analysis and opinion per issue." They promise to provide "an overview of regional news from a progressive perspective, from a range of sources not normally available in one place."

The report will primarily cover the English speaking Caribbean, but will devote attention to related issues, such as Central American affairs. The first issue, dated October, contained reprints of an article from the New York Times on the Jamaican election, the Jamaica Daily News on a U.S. ' "destabilisation plan" for Jamaica, the Washington Post on new U.S. policies toward the Caribbean, and the Guardian on violence in Guatemala.

Annual subscriptions are U.S. $9 for all countries, except Canada, where the cost is Cdn. $9. Exchange subscriptions are invited from groups in the Caribbean and elsewhere that publish information of regional interest. The newspaper is published by the Caribbean Basin Report collective, described in the issue as "a small group of West Indians and Canadians in Ottawa."

For more information, write:

Caribbean Basin Report
P.O. Box 1323, Station B
Ottawa, Ontario
Canada, KIP 5R4

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