JANUARY 1983 - VOLUME 4 - NUMBER 1
The Multinationals' Year in Review
by Matthew Rothschild
Despite the all-out support of the Reagan Administration, 1982 was no bonanza for the multinationals. The severe world recession dragged down profits, and dampened the friendship between the companies and some traditionally sympathetic right wing governments. Significant labor, consumer and church actions - some on a global scale - added to the pressures on the giant corporations.
Above all loomed the threat of an international financial collapse. The world's largest commercial banks had billions of loans out to Third World countries who had no ability to repay. When Mexico, the most indebted developing nation in the world, announced in late August that it would not be able to service its debts, jitters were felt in bank board rooms the world over. Although Mexico's difficulties were temporarily papered over, at year's end the banking crisis remained the overriding concern in international business circles.
But hold back your tears. 1982 wasn't a catastrophic year for the global companies. No new international or regional regulations were imposed on their activities. No major, precipitous nationalizations occurred to disrupt their planning. And multinationals could rest assured that the Reagan Administration would champion their cause during the difficult economic times everyone was facing.
I. Host Countries: Even the Dictatorships Were Scared
Critics of multinational corporations often maintain that the global companies favor dictatorships over progressive governments. This theory won support from the corporate executives themselves when they admitted as much at a private meeting sponsored by the Chamber of Commerce and the Council of the America's this past spring.
But as the recession worsened, even such hospitable dictatorships as Chile, the Philippines, South Korea and Guatemala had difficulties enticing multinational investors.
Chile, perhaps, is the best example. When General Augusto Pinochet overthrew the popularly-elected socialist government of Salvador Allende in 1973, U. S. investors poured their money in. But not this year.
"Why invest in 1982," asks one U.S. Commerce Department official specializing in Chile. "A lot of new investments have been approved" by the Pinochet government, "but not much has materialized," the official notes, citing the affects of the recession within and outside of Chile. For instance a new, favorable mining law failed to draw any additional investment, with Exxon putting its giant copper mining project in the deep freeze.
South Korea had it worse. It couldn't even hold its traditional foreign investors, much less attract new ones. U.S. investment in Korea in 1982 is "lower" than in the past, "reflecting the pull out of Dow Chemical and Control Data," says the Commerce Department's South Korea desk officer. Dow was the leading U. S. investor in the country, but pulled out in the fall after a prolonged dispute with its local Korean partners. And Control Data packed its bags following a violent labor dispute at its Seoul factory.
The alliance between multinationals and right wing governments frayed at the other end as well. Some allegedly receptive Third World governments adopted policies that adversely affected the global companies.
Bangladesh's martial law leader, Lt. General H.M. Ershad, for instance, instituted a ban on 1700 pharmaceutical products. This measure was extremely unpopular with foreign drug manufacturers, including Pfizer and Squibb, that dominate the market.
Indonesia, another country not know for its liberal government, tightened up its policy towards foreign oil companies, insisting that the firms employ more Indonesian workers.
And Colombia, under its new maverick conservative president, Belisario Bentancur, sued Marathon Oil, a subsidiary of U.S. Steel, for breach of contract.
What is more, the overall economic policy of rightist Third World governments came under increasing criticism, not only from workers, but also from disaffected local businesspeople.
Under the tutelage of University of Chicago economist Milton Friedman and the International Monetary Fund, these Third World countries have been pursuing a "free market," export-led economic strategy. But now, under the recession, their export goods are in less demand and Western markets are less open. As a result, their economies are in disastrous shape, and domestic criticism mounts.
Chile, again, illustrates the trend. Pinochet's governement is coming under increasing pressure to change or at least modify its economic policies. Bankruptcies are at a record high, and the local business sector is clamoring for an end to the rule of University of Chicago-style economics.
"Ni Chicago, ni Moscu" ("Not Chicago, not Moscow") is the motto of the domestic business class, the New York Times reported in December. Pinochet has reshuffled his cabinet twice this year-a rare move by the dictator-but the criticism of his economic policy only grows louder.
A similar reaction to Friedman-style economics occurred in Peru. Prime Minister and economy minister Manuel Ulloa was forced to resign in December after his program of slashing state spending and opening the country to foreign companies created widespread popular unrest.
These tentative shifts away from free market economic strategies are reminiscent of the 1930's, when many Latin American countries erected trade barriers and concentrated on building their local economies.
Socialist governments handled multinationals in a variety of ways over the past year. Zimbabwe established a minerals marketing board, a move which initially antagonized foreign firms-until the government of Robert Mugabe appointed an officer of Union Carbide as a member of the regulatory agency. Zimbabwe's conciliatory approach to foreign investment became all the more clear when the government allowed Heinz to buy out a local Zimbabwean firm-despite severe criticism from nationalists in the country.
Nicaragua also is trying to attract multinationals, and has adopted a new foreign investment law with generous incentives for the companies. This may be more a political than an economic strategy: the Sandinistas apparently believe that by inviting foreign companies in, the U.S. will be less inclined to destabilize the regime.
The companies, however, don't seem in the mood to cooperate. Corporate officials have said that they would welcome the overthrow of the Sandinista government, and in October, Castle & Cooke, the marketer of Nicaragua's bananas, abruptly pulled out of the country, a move that caused hardship to Nicaragua.
Ghana's government took more of a hard-line on the issue of foreign investment. Jerry Rawlings, who came to power in a coup on December 31, 1981, has been bargaining hard with the Kaiser Aluminum company, the largest investor in the country. In addition, Rawlings has announced the creation of a new national oil company and energy board to compete with and regulate foreign oil firms.
All in all, it was an odd year in the history of multinational corporate Third World relations. The companies did not respond favorably to some right wing dictators, and some conservative governments returned the snub by adopting policies against the companies. On the left, governments were split between taking a strong nationalist approach and cozying up to the very companies they had previously denounced.
A harsh recession, mixed with volatile domestic conditions, can produce a peculiar brew.
II. Activists: Workers and Consumers Fight Back
1982 was a big year for the activists who are trying to influence multinational corporate behavior. Workers, consumers, and church groups all took a high profile and many enjoyed varying degrees of success.
On the labor front, the most significant events involved militancy by black workers in South Africa and women workers in Asia.
South Africa's black auto workers went out on strike against GM, Ford, and Volkswagen in a coordinated move this past July. Fifteen thousand workers participated in this unprecedented industrial action, which may foreshadow increasing conflict between black workers and multinational corporations in South Africa.
Multinationals operating in Asia over the past 10 years have relied primarily on women workers, suspecting that they make for a docile labor force. This prevailing assumption was proven faulty in 1982.
At Control Data, Korea, six women union members demanded better pay for the 300 women in the plant. When Control Data fired the activists, the rest of the workers engaged in a strike and then a work slowdown. The plant never again operated at full capacity. In late July, the women workers were beaten up by their male supervisors. After the incident Control Data pulled out of the country.
Companies in the Philippines also awoke to defiant women workers. At the Bataan Export Processing Zone this June more than 10,000 women walked out on strike, shutting down the zone for three days. The women were protesting the arrest of 54 employees at one of the zone's factories. The Philippine government settled the dispute by meeting the demands of the strikers in full.
These incidents of labor assertiveness, however, took place at at time when much of the labor movement around the world - and, particularly in the U.S. - was in a process of retrenchment. The one labor initiative that might have brought positive change was the Vredeling proposal before the European Community, which would require corporations operating in the member countries to inform and consult with workers regarding their plans and financial situations - but multinationals have succeeded in tabling the proposal.
One international challenge to the power of the global companies did come into full view in 1982: the burgeoning worldwide consumer movement.
Over the past year, two new groups were set up to act as a check against multinational corporate abuse.
The first is Consumer Interpol, which was launched by the International Organization of Consumers Unions, an umbrella group for some 50 national consumer groups. The Consumer Interpol is an alert system that notifies all member consumer groups about any hazardous products, processes or wastes that are being exported from one country to another.
The other new group is the Pesticide Action Network, a coalition of environmental, consumer, and development organizations. The network seeks to end the widespread use of toxic pesticides.
With Health Action International, which was formed in 1981 to oppose the marketing of dangerous drugs, these new groups provide an institutional structure for continued campaigns to curb abuses by multinationals.
The international consumer movement takes as its model the Infant Formula Action Coalition (INFACT), which has spearheaded the highly publicized Nestle boycott. INFACT in 1982 pressured Nestle into making a number of changes in its marketing of breast milk substitutes,. but the reforms so far are inadequate says INFACT, so the boycott continues.
Church stockholders in multinational companies also were active this year, focusing much of their attention on the role corporations play in the repression ravaging Central America.
One church campaign, centering on Western Airlines, ended in a success. Western Airlines had been transporting Salvadoran refugees out of the U.S. and back to El Salvador, as the carrier for the U.S. Immigration and Naturalization Service, which deemed the Salvadorans to be illegal immigrants. Church stockholders objected to Western's practice, claiming that Western was exposing the refugees to possible torture and death upon their return to El Salvador.
After drawing attention to the issue at Western's annual meeting in July, church representatives began to organize pickets at the Los Angeles and Denver airports, protesting Western's involvement in the so-called "death flights." On September 2, Western gave in to the protestors and cancelled its deportation flights.
Bank of America also was the target of a major church shareholder campaign this year.
Led by the United Church Board for World Ministries, a number of church and religious groups expressed concern over Bank of America's lending policy in Guatemala. The bank has lent money to a number of businesses run by notorious death squad supporters.
The shareholders requested that the bank issue a report on its Guatemala policy, which the bank did in September. But apparently dissatisfied with the report and the policy, the church shareholders have filed a shareholder resolution with the bank.
The new resolution "asks for a policy change" that would require "no further lending to the government and its agencies; ending lending to the military; and prohibiting lending to private individuals and corporations that have been involved in serious human rights violations," says Audrey Smock, of the United Church Board.
"I have some hopes that this year" the bank might change its policy, Smock says.
III. Reagan Going All Out for Big Business
The Reagan Administration makes no bones about its policy of supporting "free-enterprise" and multinational corporations. A number of the Administration's foreign policy measures in 1982 were designed primarily to serve the interests of the giant American firms.
Ironically, the Reagan position split the U.S. corporations that have investments in mining the seabed. U.S. Steel and Sun Oil, on one side, strongly supported the Reagan line, pushing for a "no" vote on the Law of the Sea. But Lockheed and Standard Oil were of a different mind; they urged the acceptance of the treaty, with reservations.
In addition to these three new foreign policy moves, the Reagan Administration has curried favor with U.S. multinationals by turning America's embassies into support systems for U.S. corporate subsidiaries.
This transformation was best embodied by Herman Nickel, Reagan's appointment as ambassador to South Africa. Nickel, former Washington editor of Fortune magazine, was eminently qualified for the Reagan task: Nickel had made a career of attacking corporate critics and glorifying U.S. companies that do business in South Africa.
For all its explicit support for U.S. multinationals, however, the Reagan Administration took one position in 1982 that drew a great deal of criticism from the companies. That policy was the Soviet pipeline sanctions, which would have cost General Electric, Dresser Industries and Caterpillar Tractor millions of dollars.
The sanctions policy represents a paradox: Reagan's pro-multinational government adopting an antimultinational stance. In this specific case, Reagan's anti-communisim ideology triumphed over his probusiness sentiments, at least for a time.
But once Reagan appointed George Shultz as secretary of state, the Administration quickly ended the sanctions policy. Bechtel's president-turned-statesman sees no instance where interests of U.S. multinationals diverge from the concerns of the U.S. government. His rise to prominence within the Administration securely establishes U.S. multinationals at the heart of Reagan's foreign policy.
As Bechtel's Shultz steered U.S. foreign policy along a path favored by the corporations, Merrill Lynch's Donald Regan pushed U.S. international economic policy in a direction that pleased the banks.
Threatened by the insolvency of Mexico, Argentina and Brazil, U.S. banks faced a severe crisis - unless action was taken by the U.S. government to shore up their loans. To the rescue came Regan and Reagan, doling out billions of dollars from the U.S. treasury to Mexico and Brazil, and boosting the resources of the International Monetary Fund.
While Regan's moves may reflect a sensible desire to stave off world economic collapse, at the same time it actually bails out U.S. commercial banks, who have yet to take a loss on their excessive lending. For all the aid the Reagan Administration is giving the banks, the U.S. government is imposing no new regulations on the banks so as to prevent the kind of careless lending that has brought the world to the brink of financial disaster.
As the years of the Reagan Administration wear on, one central feature becomes all the more clear: with regard to government assistance, U.S. corporations and banks have never had it so good.