27 November 2007

Daniel Hogendoorn

Inviting Transnational Companies (TNC’s) as an Insurance Policy.

In my thesis I will argue that postmodern TNC’s are a force of creating and maintaining a durable stability, while modern TNC’s are ultimately a force of destruction. I use the year 1989 as a symbolic watershed in the role and identity of TNC’s, i.e. between modern and postmodern, because the end of the cold war opened up the path of not aligning the TNC’s identity to one-dimensional interests (protecting capitalism), and new technologies made possible a multidimensional structure of production. In 2007 modern and post-modern TNC’s coexist (as do pre-modern TNC’s: pirates, the Caravan-merchants of the Sahara, the Mafia), are not wholly distinct, and are both holding strong.

I will make use of two illustrative, ideal-typical cases: Mobutu’s repressive regime in Zaire, and post 1989 (and also repressive) Taiwan. Both authoritarian regimes made use of TNC’s, because this made keeping power possible. My definition of a postmodern TNC is: a corporation that manages production-structures or delivers services in at least two countries and has grown beyond national boundaries. The post-modern TNC usually fits into a web of overlapping shareholders and directorships, with multiple branches and lines in different regions, many such sub-groupings comprising corporations in their own right, and truly trans-national in the sense that they stimulate a culture in which employees from different cultures see themselves as a cosmopolitan workforce, uniting the different nations under the company flag.

Force of Destruction

In the field of Political Economy, descriptions usually put a fault line between TNC’s of the ‘long’ 19th-century and the ‘short’ 20th century. In the short 20th century it is often argued that transnational companies brought economic dangers as well as economic opportunities to the host-countries in which they settled; local companies could be out-competed, but often they also learned and adopted from these TNC’s new ways of producing their products and managing logistics; although capital was exported, the countries, in successful cases (like 1950’s Western-Europe), industries became more efficient than they’d been before(Schwartz 2000). In case of failure, local industries could be wiped out, leading to mass unemployment (distribution of Japanese cars in the US, for instance, led to the impoverishment of industrial cities like Pittsburg and Detroit(Walker 2007)). Although workforces and directorships merged, the company could with justification still be considered as a American, British or Dutch corporation (Shell was never Nigerian).In short, it is more a story of changes in wealth and economics, than of security and politics.

However, in this period, states backed and promoted them not only to obtain wealth, but to gain influence in other countries and shield them from ideology. The Belgian-American protection Dictator Mobutu enjoyed in Zaire is a prominent example. For Mobutu, after having been helped by the Belgians to brutally dispose the democratically elected (socialist) government, TNC’s were the best insurance policy for staying in power, because they brought with them international protection and money(Witte 2001). Thus there were aligned interest between modern TNC’s, their home states, and dictators, united in the prisoners dilemma of the cold war. Stability was ensured[1], but in the long run, the presence of TNC’s was extremely destructive. First, because of the one-dimensionality of modern TNC’s: when the cold war glue evaporated after 1989, the shared (but one-dimensional) identity of Mobutu, states and TNC’s disappeared with it; second, because of the one-dimensional structure of the business of the modern TNC[2], the only thing needed was Zaire’s army. This meant that economic activity did not need a civil society; for the people this meant that the only way of escaping poverty, was by having either a career in politics or the army. In turn, this caused a market for, and thus an influx of, weaponry. Such was Zaire’s condition in 1989, created by modern TNC’s and an authoritarian regime. With the socialist threat gone, so was Mobutu’s protection. A divided, uneducated, poor and humiliated culture, stacked with conventional weapons, is hardly Disneyland: after Mobutu, years of social strife took between two and five million Congolese lives.

Force of Stability

The rise of the postmodern comes with the rise of the information age after 1989. This is especially true for the post-modern TNC: not only did better computers, mobile phones, full satellite coverage and the internet make it possible for corporations to fundamentally alter and improve production, logistics, and distribution, a large chunk of post-modern TNC’s make this technology and logistics their business. After 1989, every aspect of the TNC became increasingly fluid and mobile, and the successful companies recognized this in time. There are three things relevant here: first, these possibilities created a very pragmatic identity for the TNC-elites as well as for the workforce: you could be anything, as long as you increased the profit of the company. In the long 19th century, as a capitalist, you had to be lot more: white, rich, male, liberal, and Christian (admittedly the requirements for a worker were more democratic than they are now: you had to be poor, now you have to be educated.). This led to a less exclusive system. This dualism might still hold up for the existing modern TNC’s, for the post-modern TNC the situation is different.[3] The dualism between worker and boss increasingly disappears: even in manufacturing, there are more and more functions that share boss and worker qualities. This leads into the second development: structures become more elaborate and flexible. In a modern company hire and fire means insecurity for the labour force; in a postmodern TNC, flexible contracts means hierarchies don’t have time to crystallize and subordination is temporary and relative. This is connected with the third change: because postmodern TNC’s need other TNC’s to function, industries cluster, so that there is more place for skilled and unskilled labour, and ideas diffuse more easily. Post-modern companies are more horizontal and interdependent because of this.

But why are they, in contrast to the modern TNC, a force of stability? ‘The trouble is,’ to speak with Cooper, ‘that from the middle of the nineteenth century we have been living in a world of nations and national communities. International relations have become a matter of identity as well as interest.’(Cooper 2004) The changes towards the post-modern lead to different values, and values are what keeps nations together - or apart. Recall that Mobutu was forcibly keeping together nations, in a non-nation postcolonial state. Mutual interests for states, TNC’s and Mobutu kept the situation in balance, but because the modern TNC’s did not integrate the premodern tribal nations in the economy, there was no shared identity; TNC’s were perceived (and with justification) by the people, as robbers and repressors.

In contrast, a postmodern TNC is not seen as an alien invasion, because it integrates - and creates - sustainable economies. It might subcontract a local factory, instead of building their own, and let another local company do their logistics, marketing, et cetera. In this way, the civil societies of different countries get involved, capital circulates, and mutual interest sustains itself. This creates common values that transcend one-dimensional interests. Post-modern capitalism brings together people, instead of dividing them. Leaders with a geopolitical problem are learning this as well: bringing in post-modern TNC’s is a better insurance policy, than having a disloyal modern TNC.

For instance, Taiwan - a rock in the sea devoid of natural resources - invited US companies in, for political reasons as well as economic: when US interest were aligned with that of the Republic of China (Taiwan), a Chinese mainland communist annexation could be averted. To get and keep the US protection, they had to industrialize, first by massive manufacturing (which at that point was still modern), and then by moving into high-tech(Walker 2007); as argued above, high-tech is the basis of the post-modern TNC, and the main force in shaping long term shared interest, by ‘gluing’ identities with shared ideas about business, life, and desires. In Taiwan, this has worked brilliantly. In 2007, Apple - an American company - does not produce a single Ipod or Iphone: they are produced by a Taiwanese company called Foxconn, with the Korean and Japanese supplying parts. Around these companies, other companies have emerged, that supply everything: from wholesale materials to flowers on the desks of the directors, cinema’s and restaurants. This has created a sustainable shared identity between US and Taiwanese businesses. The best thing is: Taiwan has actually already surpassed this fase; Foxconn opened its main factory in 1988 in Shenzhen, mainland China, thus exporting capital to Taiwan, and creating economic ties with archenemy China(Clendenin 2007).

In short, I have argued that there is a conceptual distinction between pre-modern, modern and postmodern transnational companies. The first is destructive without stability, the second brings stability when interests are aligned (but does not fortify and integrate these interests), while the third brings long term stability because it transcends interests and merges values. Post-modern TNC’s and globalization don’t erase the role of the state, but they can alter the conception of the nation and reduce polarization.

Clendenin, M. (2007). Apple iPhone fuels speculation on design wins.

Cooper, R. (2004). The Breaking of Nations. London, Atlantic Books.

Schwartz, H. M. (2000). States versus Markets. The Emergence of a Global Economy. New York, Palgrave.

Walker, R. (2007). Economic Geography of the Industrial World, University of Berkely, California.

Witte, L. d. (2001). The assasination of Lumumba, Verso.

[1] Mobutu did not have to financially squeeze the Congolese people with taxes, which would have forced him to improve the country, but could instead buy loyalty with western money.

[2] In Zaire the modern TNC extracted natural resources. They are onedimensional because they are relatively easily mined, moved and distributed: oil needs a protected pipeline, copper and zinc a protected railway or road. In contrast, a manufactured high-tech product needs a plethora of elements to be organized.

[3] CEO’s are now Asian, Hispanic, Black and Caucasian; male and female; atheist, Muslim, Buddhist et cetera. Some CEO’s make it their core business (next to making profit) to improve social conditions or the environment; not just damage control, but pro-active policies. These social entrepreneurs are, of course, still a minority.

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