The Multinational Monitor



Runway Shops? Or Export of Capital

In February, the news that Atari Corporation of Sunnyvale, California was laying off one quarter of its U.S. work force and transferring its production of home computers and video games to Hong Kong and Taiwan caused an uproar.

"Judas" cried the Alabama legislature in an unprecedented resolution calling for a boycott of Atari products. "Unfair" said the media, suddenly filled with exposes of the failed promise of high technology. But for the first time in months, the "Atari Democrats" were nowhere to be found.

In many ways the Atari story is fairly typical: faced with a unionization drive and falling profits, the company opted to move overseas, where labor is cheaper and unions weaker than in the U.S.

But what made Atari's move unique was that it was closing its domestic operations at the same time as it was expanding overseas: the classic "runaway shop." Atari was the first major Silicon Valley firm to do this.

But this raises an important question. If Atari's closure was "unique," how common are runaway shops?

I maintain that runaways are, in fact, rare; and believe that the use of this term makes for a misleading political analysis and a confusing political strategy. Rather than focus on runaways, I propose that people concerned about unemployment and the power of multinational corporations concentrate on a more pervasive phenomena: the export of capital from the U.S. in the form of technology, U.S. aid, bank loans and direct foreign investment.

It is this process, rather than individual companies running away, that is responsible for the gradual shift in production work from the U.S. to the Third World.

In the post war period, industries in Japan or places like South Korea or Brazil were not built through direct investments by American firms. Rather they were built with support from banks - in the form of loans - and in purchases of technology from multinational firms: i.e., the export of capital.

The reason these countries have built modern, competitive steel, auto and textile industries is not because American firms have "runaway," but because American corporations and banks have made decisions not to invest in these industries in the U.S., and have encouraged export-oriented development policies overseas.

Take steel. The Japanese industry was completely rebuilt after the war, using American technology and the latest in American management techniques. But while companies like Nippon Steel were growing, expanding and reinvesting, U.S. companies like U.S. Steel were maintaining production by using their dated technology. U.S. Steel didn't close its plants in Youngstown, Ohio and "run to" Japan or Korea; it simply operated them until they were no longer competitive - and reinvested the profits in Marathon Oil. And now one of its subsidiaries is building an office building in Seattle utilizing imported Japanese steel processed in South Korea.

Or take Atari, which purchased a plant in Taiwan in 1981 to manufacture computers and games largely for the Japanese market. When conditions changed in the U.S., it closed down its Silicon Valley plants and expanded in Taiwan. But what made these moves possible was the export of Atari's capital, in turn made possible by the tax concessions, ban on strikes, free trade zones and other incentives that are part of Taiwan's export-oriented development policies.

Thus, while the term "runaway shop" provides graphic symbolism, it is somewhat misleading because it takes attention away from the financial and political apparatus that administers U.S. economic policies abroad: U.S. military aid to regimes that suppress trade unions, U.S. guarantees for bank loans overseas, and loopholes in tax laws that give an incentive to companies to have their assembly work done in offshore locations.

Another problem with the "runaway shop" analysis is its nationalistic overtones. The implication of criticizing single companies is that support should be given to companies that don't move abroad - in essence, a "buy America" campaign. The Alabama legislature's resolution, for example, states that "during a time of such grave economic distress in this country, `Buy American' must become a philosophy of life and we can no longer tolerate American manufacturers who adopt a policy of biting the hand that feeds them."

Such an analysis leads to severe contradictions - supporting the U.S. steel industry, which has refused to re-invest in the U.S. and is now complaining about Japanese imports, encouraging the purchase of American cars with engines built in Japan, transmissions built in Brazil and tires made in Korea, or buying Texas Instruments products rather than Atari when 609/o of TI's employees are overseas.

Instead of focusing our energy on "runaway shops" and "Buy America" campaigns, I believe that the labor and progressive movement in this country could initiate a more effective campaign to place limits on the export of capital. Such a campaign would mean:

  1. control over bank loans overseas. Why should some banks be lending up to 60 percent of their money - which is, after all, wealth produced by American workers - to over-extended governments and economic structures (in Korea, Brazil, Taiwan) that are based on making goods to be sold on the American market?
  2. worker and community participation in decisions about plant closings and other major investments;
  3. reevaluation of institutions like the Export-Import Bank and the Overseas Private Investment Corporation, government institutions which support exports and overseas investments by U.S. multinationals;
  4. controls on U.S. investments within the U.S. and abroad. Key industries like steel should not be allowed to deteriorate as they have;
  5. an end to U.S. economic and military support for regimes that suppress trade unions. With a stronger labor movement, countries like South Korea and Taiwan would no longer be "cheap labor" zones producing goods once made by American workers;
  6. support for self-determination for Third World countries. Many opponents of repressive regimes would prefer an economy that produced goods to be used domestically rather than for export. Such policies would benefit American workers, too.

- T. S.

Table of Contents