Structural Revolution in International Business Architecture

Volume 2: Political Economy

Victoria Miroshnik, Dipak Basu

• Publisher: Palgrave Macmillan
• Year: 2016
• ISBN:
  9781137535788
• Topic: Betriebswirtschaft
• Subtopic: Internationale Wirtschaft

Structural Revolution in International Business Architecture Volume 2 fills important gaps in the existing literature of management science by providing new and improved methods of optimal control system modeling. These research methods are applied in a variety of problems of management science and national economic management. Applications are on oil field development, energy system modeling, resource modeling, time varying control of dynamic system of national economy, and investment planning.

1

Implications of Structural Revolution

It is essential to understand the philosophy of ‘globalization’. Globalization signifies the ultimate rights of multinational companies to allocate resources according to their own criteria of efficiency, which may or may not correspond to the national culture of the countries in which they are operating.

During the colonial period, before the Second World War, the relationship between the multinational companies and the corresponding host governments was similar to that between the agents of the oppressor and the oppressed. The doctrine of free trade was used to justify that aim so that host countries would accept domination of their sovereign rights in exchange for economic growth.

This chapter examines the overall trends in structural conditions and their effects related to the international business policy in IMF-supported adjustment programmes during the early days of globalization. Structural reforms, economic reforms and globalizations mean the same thing; they imply a free market system for the world as a whole and for each nation. With a free market system, worldwide production systems can be achieved. This is the ultimate purpose of ‘globalization’. The aim of the IMF, the World Bank and the World Trade Organization (WTO) is to create free market systems for each national economy.

In order to understand the nature of this transformation process, it is essential to understand the philosophy of globalization. An economic system can be successful if it corresponds to the host country’s culture or philosophy of life—otherwise it will die out sooner or later. Thus, it is essential to examine whether the globalization process corresponds to the basic doctrine of life of the people.

From the mid-18th century to the mid-20th century multinational companies from Britain, France, Holland and Belgium achieved globalization; later, during the early 20th century, followed by Japanese and German multinational companies, in their respective colonies. The British East India Company forced Indian farmers to produce indigo and opium for sale to China in order to purchase silk and tea. Britain used to invest their tax revenues from India to build railroads in the USA and industries in Brazil and Argentina. There was a huge mobility of labour too. Indian and Chinese slaves (or indentured labourers) were employed on the sugar plantations in the West Indies and Latin America, in railroad construction in Africa and in mining in Australia and South-East Asia. The European multinational companies, since the 18th century, have created the European empires.

Hudson’s Bay Company in north America, Dutch East India Company in Indonesia, British East India Company in China and India, Cecil Rhodes mining company in Africa and Anglo American Oil Company in the Middle East are some of the examples of multinational companies supporting their respective governments to gain colonies, which are now called the ‘developing countries’. That type of globalization was halted only when, after the Second World War, the Soviet Union became the victorious power in Europe, a large number of colonies became independent and an alternative and very successful strategy of economic development, ‘planned economy’, became the model for the newly independent countries. When the power of the Soviet Union was at its zenith during the 1970s, the developing countries asserted themselves to implement a ‘new international economic order’, so that they could reverse the adverse terms of trade of their exports. This was maintained historically by the developed countries as the source of exploitation.

However, with the destruction of the Soviet Union, the power of the so-called ‘group of 88’ developing countries disappeared and it was possible for the developed countries to impose a very new international business order through three very powerful international organizations: the International Monetary Fund (IMF), the World Bank and the WTO. This so-called ‘new order’ or globalization means re-establishment of the old order that prevailed before 1945. Thus, it should be obvious that a minority will gain while the majority in the developing countries experience great loss, because the world in the 21st century seems to have regressed to the 19th century.

Multinational Companies and National Economies

During the colonial period, before the Second World War, the thesis put forward by Hobson (1902), Bukharin (1917) and Lenin (1917) was that multinational companies seek new markets to increase their profits and enlarge their scope of investments of surplus capital. The doctrine of free trade was a tool to justify that aim. State powers were used to provide security of interests of the multinational companies. The interests of the multinational companies and their governments were identical in exploiting the colonized countries. The effects of these investments on colonial economies were initially great social and economic upheavals, destruction of domestic industries and, in some cases, great famines and catastrophes. At the same time, some parts of the host countries, particularly in the coastal areas, benefited from their subscriptions to the global economy controlled by the colonial powers.

Given that history, it was not surprising that after the Second World War most developing countries considered multinational investments to be instruments of neo-colonialism and have tried to implement a series of regulations to restrict their powers and intrusion in the domestic economies. However, in East Asia and Latin America in particular, the economic interests of the developing countries’ expanding middle classes have a complicity with the international interests of the multinational companies. As a result, gradually developing countries have accepted multinational companies as a source of investments and have started creating hospitable conditions for them.

This tendency has become most prominent since the mid-1980s, due to two major factors. The rapid developments of the East Asian countries, including China, are mainly due to foreign investments. The negotiations of the GATT (General Agreement on Trade and Tariff) and instructions from the IMF and World Bank have created enormous pressures, both intellectual and economic, on the developing countries to accept capitalism and globalization, and to remove obstacles against foreign investment. Individual developed countries also have created economic pressure on the developing countries to facilitate entry of their multinational companies. As a result, now developing countries are competing for foreign investments and are offering the multinational companies much more attractive terms, which they do not even offer to their own domestic companies.

Multinational companies’ activities in the developing world can be characterized in a number of ways. Multinational companies work as protégés, obtaining protection from the home governments (Kudrle, 1991). In several developing countries, European and North American countries intervened militarily to assert the property rights of their multinational companies. Encouragement given by the USA in Chile in 1973 to destroy the government of Salvador Allende, when he nationalized the copper mines, Anglo-French invasion of Egypt in 1956 when Nasser nationalized the Suez canal and the coup organized by Britain and the USA in 1953 to destroy the government of Mossadeg in Iran when he nationalized the oil fields, are some of the examples. Currently, developed countries withhold economic assistance and prohibit economic aid from the multinational agencies if a country does not protect the property rights of the multinationals or create entry barriers.

Multinational companies, particularly in many developing countries, are considered to be the symbol of the modern world. Penetrations of foreign and alien culture can have devastating effects. Examples from Thailand and Latin America show the social and moral destruction that can be caused by the foreign culture that multinational organizations spread (Sunkel, 1972; Cardoso and Faletto, 1979). Multinational companies in the developing countries frequently manipulate not only government decisions but also the broader political process. Corruptions and attempts to shape regulations on environments and tax evasions normally include manipulations of the political system.

Recently, with the emergence of corporate sectors in the developing countries, rivalry between multinational companies and domestic corporate sectors has become an important issue. Host governments, i...

Table of contents

• Cover
• Title
• Copyright
• Contents
• List of Figures and Tables
• Introduction
• 1 Implications of Structural Revolution
• 2 Structural Revolution in Russia
• 3 Chilean Revolution
• 4 Globalization and the Philosophy of Life in India
• 5 Globalization and the Philosophy of Life in Japan
• 6 Aims of the New International Business Order
• 7 Victims of the New International Business Order
• 8 Empire of China
• Conclusion
• References
• Index