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Interrelationship of Business Enterprise and Political Development

Published online by Cambridge University Press:  24 July 2012

Richard D. Robinson
Richard D. Robinson
Affiliation:
Lecturer on International Business, Massachusetts Institute of Technology, Lecturer on Turkish History, Harvard University
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Abstract

Merely by existing, the United States and the Western world as a whole bring to bear … a constant cultural pressure. But even though the idea of industrialization, expanded consumption, and political egalitarianism may pour forth equally for all … countries, what is absorbed varies widely from one to another. How and why and toward what ends each nation moves is conditioned by its own traditions and appreciations as well as by the historical course of its particular set of involvements with the industrially advanced nations.

Type
Research Article
Information
Business History Review , Volume 36 , Issue 3 , Autumn 1962 , pp. 287 - 324
Copyright
Copyright © The President and Fellows of Harvard College 1962

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References

1 Silvert, K. H., “Political Change in Latin America,” in The United States and Latin America (New York, 1959), p. 59.Google Scholar

2 This typology of political culture and political change is adapted from Almond, Gabriel A., “A Functional Approach to Comparative Politics,” in The Politics of Developing Areas (Princeton, 1960), pp. 3–64.Google Scholar

3 Davis, K. G., The Royal African Company (London, 1957), p. 18.Google Scholar

4 Allen, G. C. and Donnithorne, Audrey G., Western Enterprise in Indonesia and Malaya (London, 1957), p. 18.Google Scholar

5 Davis, Royal African Co., p. 103.

6 Neumark, S. Daniel, “The Character and Potential of African Economics,”in The United States and Africa (New York, 1958), p. 94.Google Scholar

7 Myron Weiner, “The Politics of South Asia,” in The Politics of Developing Areas, p. 164.

8 Lucian W. Pye, “The Politics of Southeast Asia,” ibid., p. 84.

9 Allen and Donnithorne, Indonesia and Malaya, p. 50.

10 Allen, G. C. and Donnithorne, Audrey G., Western Enterprise in Far Eastern Economic Development (New York, 1954), p. 185.Google Scholar

11 Ibid.

12 Neumark, S. Daniel, “The Character and Potential of African Economies,” in The United States and Africa (New York, 1958), p. 94.Google Scholar

13 Allen and Donnithorne, Far Eastern Development, p. 96.

14 Allen and Donnithorne, Indonesia and Malaya, pp. 23–24.

15 Wilson, Charles M., Empire in Green and Gold (New York, 1947), pp. 255–256.Google Scholar

16 Neumark, “African Economies,” p. 100. One scholar of African affairs has observed, “The economic development over most of Africa in modern times can best be understood as the result of two migrations: (1) the migration of European traders, officials, settlers and entrepreneurs into Africa, carrying with them capital, equipment, skills, and governmental and economic organization; and (2) the migration of the African tribesmen out of their subsistence economy into the new money economy created by the Europeans.” (Andrew M. Kamarck, “The African Economy and International Trade,” in The United States and Africa, p. 127.)

17 Wilson, Charles, The History of Unilever (London, 1954), vol. 1, p. 176.Google Scholar

18 Wilson, Empire in Green and Gold, p. 39.

19 Hall, D.G.E., Burma (London, 1956), p. 142.Google Scholar

20 Furnivall, J. S., Colonial Policy and Practice, A Comparative of Burmas and Netherlands Indies (Cambridge, Eng., 1948), p. 135.Google Scholar

21 Knox, E. R. (ed.), South Pacific Enterprise (Sydney, 1956), p. 23.Google Scholar

22 Allen and Donnithorne, Indonesia and Malaya, p. 181.

23 Ibid., p. 119.

24 Ibid., p. 120.

25 The foreign-dominated financial institutions in China at times discharged responsibilities on behalf of the Chinese government “normally restricted to central or official banks.” For many years “they supplied China with financial machinery necessary for coping with the financial problems associated with the modernizing of her economy.” Foreign banks supplied China with a significant portion of her currency, a right that “did not proceed from the Chinese government, but from charters which (the banks) … had received from their home governments.” At times, upon request of Chinese authorities, they even held public revenues so as to prevent them from falling into the hands of “unauthorized political and military groups.’ As the funds at their disposal increased and the pressure for new markets heightened, these institutions began to offer long-term industrial finance as well as short-term commercial credit. Their penetration into the life of China correspondingly increased. (Allen and Donnithorne, Far Eastern Development, pp. 102, 112, 114, 115.) Foreign institutions, principally the Ottoman Bank, performed similar quasi-political functions within the Ottoman Empire and constituted the organizational vehicle for Western penetration, political and otherwise.

26 Allen and Donnithorne, Far Eastern Development, p. 149.

27 Ibid., p. 134.

28 Ibid.

29 In this case, the foreign owners actually collected taxes in the districts through which the lines passed. (Blaisdell, D. C., European Financial Control in the Ottoman Empire [New York, 1929] p. 128.)Google Scholar

30 Allen and Donnithorne, Far Eastern Development, p. 192.

31 The Japanese were able to contain Western enterprise, even after Japan was opened to international commerce in 1865, because the Japanese political authority had resolved to provide a large part of the ancillary services itself. Foreign experts were employed directly by the Japanese government. It undertook to organize an adequate banking system, modern industry, and interior transport.

32 Norman, E. H., Japan's Emergence as a Modern State (New York, 1940), p. 118.Google Scholar In fact, there is considerable evidence that interest in Western ways had appeared prior to the unequal treaties, although the latter tended to intensify that interest.

33 Allen and Donnithorne, Far Eastern Development, p. 224. ‘In Japan, where order was firmly maintained and where the Government was intent upon modernizing the country's institutions, the privileged status of the foreigners did not remain an essential condition for foreign enterprise, as for many years it did in China. Indeed by 1899 when the privileges were surrendered, they had probably become a handicap to foreign enterprise inasmuch as they tended to embitter relations between the Japanese and foreigners.’ (Ibid., p. 195.)

34 James S. Coleman, ‘The Character and Viability of African Political Systems,’ The United States and Africa, p. 43.

35 There is indication that by the early 1900's some colonial authorities, notably the British, had become sensitive to the interests of the people whom they governed — or at least, to what the Westerner conceived these interests to be. In certaininstances, the British refused to grant long-term concessions to Western enterprise. Wilson wrote in his History of Unilever (p. 167), ‘It was settled policy of the Colonial Office that the native population in West Africa under British rule should in general have secured to them rights to hold their ancestral soil without disturbance, to cultivate it as they would, and to do with its produce what they thought fit.’ Among others, Sir William Lever attempted to secure long-term concessions in British West Africa for plantation development, and was refused. Shortly thereafter, in 1911, a Lever concession in the Congo was ratified by the Belgian Parliament. The company was thereby authorized to build railroads, canals, telephone and telegraph lines and other means of communications necessary for the development of palm oil production. It was further directed to improve the conditions of the people in proximity of its operations and to establish medical and education facilities, which, insofar as the company's business permitted, were to be available — upon payment — to the general public. The natives were to be granted a minimum daily rate of pay, exclusive of rations, and the company was to encourage the circulation of money ‘the value and use of which were as yet imperfectly understood.’ (Ibid., p. 172.) Thus, a strongly paternalistic relationship was envisioned. The concession was also viewed as a vehicle for modernization and political consolidation under foreign authority.

36 See May, Stacy and Plaza, Galo, The United Fruit Company in Latin America (Washington, D. C., 1958).Google Scholar

37 United States Business and Labor in Latin America (University of Chicago Research Center in Economic Development and Cultural Change, Committee on Foreign Relations, United States Senate, 86th Cong., 2d Sess., Jan., 1960), p. 50.

38 Lippitt, R., Polansky, N. and Rosen, S., ‘The Dynamics of Power,’ Human Relations, vol. 5 (1952), pp. 44–50.CrossRefGoogle Scholar

39 Presthus, Robert V., ‘Authority in Organization,’ Public Administration Review, vol. XX (Spring, 1960).Google Scholar

40 Fforde, J. S., An International Trade in Managerial Skill (Oxford, 1957), p. 23.Google Scholar

41 United States Business and Labor in Latin America, p. 50.

42 ‘Europe also has been transformed and transformed in a way that has conspicuously lessened her capacity to export entrepreneurs and pioneers, although not, of course, bureaucrats and economic advisors. Europeans are now ‘state-broken’ (to use Schumpeter's term) and are therefore not to be stirred, as were their fathers, by the excitement of commercial adventures overseas, adventures which in any case their savings are becoming insufficient to finance. According to this view, the Asian rejection of European economic leadership appears to have coincided with the decline in the capacity of the former donors to supply it. On the other hand, it may be argued that the change of temper among Europeans has at least the merit of opening the way to a peaceful transition to self-government in those Asian territories which are determined to repudiate Western rule. This may be of real benefit to all parties’ (Allen and Donnithorne, Indonesia and Malaya, p. 285.)

43 Fforde, International Trade, p. 137.

44 The Arabian-American Oil Company, though an extractive venture operating under a concession, was an example of such an effort.

45 As the oil administrator in Saudi Arabia commented, the possible operation of U. S. antitrust laws against the oil companies participating in Aramco was not Arabia's concern and would not be considered in Arabia's demands on Aramco. (Nolte, Richard H., ‘A Tale of Three Cities III: Jedda and the Oil Company,’ American Universities Field Staff, Inc. [New York, 1958], p. 13.)Google Scholar

46 It was reported, for example, that: “Following 1954, the [United Fruiti company … developed a new approach with respect to its relations to Latin American national governments. In general this might be described as a ‘partnership’ relationship, as reflected by the statement of one of the national presidents who said: ‘We feel that we are now in partnership with the United Fruit Company’ Ecuadoris the one country [as of 1958] in which the United Fruit Company is operating without a general contract agreement with the central government. This not only reflects United Fruit's confidence in the political stability and good faith of Ecuador in dealing withforeign capital but demonstrates that it is possible to build up such confidence on both sides through a record of mutually beneficial relationships maintained over a period of years…. It is possible that the future will see a general evolution toward the abolition of special contracts between foreign-owned corporations and sovereign governments, except where specific permits are required by law for a public-utility type of operation.” (May and Plaza, The United Fruit Company, p. 216.)

47 In the United Fruit Company case, it is curious that Ecuador was found to be the most “dependable” of the countries in which the firm was operating. One outstanding authority on Latin American political culture rated at least two other states within the company's range of interests as substantially more developed than Ecuador, which he identified as possessing an elite that was “moving violently toward nationalistic aspirations, but with sluggish response in the body social.” (K. H. Silvert, “Political Change,” p. 216.) “Dependable” in the commercial, business context makes sense in relation to a politically stagnant state or one in which the level of political development, as we have defined it, has reached the point where one may feel fairly confident that further violent changes in the legal basisof the state are unlikely. It is with the continuity of law that business is primarily concerned, not the continuity of political regimes.

48 United States Business and Labor in Latin America, p. xi.

49 Vorys, Karl von, “Some Political Incentives for Economic Development in India, Pakistan, Burma and Ceylon” (The Western Political Quarterly, vol. XI [Dec., 1959], p. 1064).Google Scholar

50 As political scientist Lucián Pye points out in relation to southeast Asia: “It is significant that the pattern of Western economic activities in Southeast Asia has been one in which the merchant and trader were followed by those involved in the extractive enterprises — in mining, oil, and plantation crops — but this did not lead to a higher stage of industrial production. By creating dual economics in most of the Southeast Asian societies, this pattern of Westernized economic activity gave the peoples of the region a sense of the possibility of a higher standard of living, but it did not provide an adequate basis for an expanding economy that might have improved the lot of everyone in the region.’ (Op. cit., p. 105.)

51 United States Business and Labor in Latin America, p. 61.

52 von Vorys, Incentives for Economic Development, p. 1065.

53 One student of the Anglo-Iranian oil problem wrote, “The peasant support of political nationalism in 1951 [in Iran] was as much the product of a reaction to years [or centuries] of oppression by landlords and inefficient governments as it was a reaction of abuse by foreign commercial enterprise.” (Ford, Alan W., The Anglo-Iranian Oil Dispute of 1951–52 [Berkeley, 1954], p 16.)Google Scholar

54 W. O. Brown and H. Lewis, “Racial Situations and Issues in Africa,” in The United States and Africa, p. 152.

55 Fforde, International Trade, p. 107.

56 United States Business and Labor in Latin America, p. 51.

57 Anthropologist Carleton S. Coon has reported that to Aramco's program of local contracting for all services not directly related to the production and transport of oil “be longs much credit for stimulating new productive ventures of a rising capitalist middle class in eastern Saudi Arabia, for helping to raise the standard of living of a whole province, and for the pro-American attitude of many Saudi citizens.” (Coon, C. S., “Operation Bultiste: Promoting Industrial Development in Saudia Arabia,” in Hands Across the Frontiers [Ithaca, 1955], p. 309.)Google Scholar

58 Technical Cooperation in Latin America (Washington, D. C., 1956), p. 132.

59 The ramifications of the Sears development in Mexico are outlined by Wood, Richardson and Keyser, Virginia, Sears, Roebuck de Mexico, S. A. (Washington, D. C., 1953)Google Scholar.

60 Sometimes American investors, exercising free enterprise, drive the local firms out of business by their superior methods and know-how. This is not a triumph for American technology. The local firms might have done as well if we sent technicians and advanced capital. Foreign capital that displaces internal capital is not welcome. (Herbert L. Matthews, “Diplomatic Relations,” in The United States and Latin America, p. 170.)

61 For a further treatment of these conflicts of interests, see Robinson, Richard D., “Conflicting Interests in International Business Investment,” Boston University Business Review, vol. 7 (Spring, 1960), pp. 3–13.Google Scholar

62 Fforde, International Trade, p. 1.

63 Ibid., pp. 26–27.

64 Possible Nonmilitary Scientific Developments and Their Potential Impact on Foreign Policy Problems of the United States (prepared by the Standard Research Institute, for the Committee on Foreign Relations, United States Senate, 86th Cong., 1st Sess. [Sept., 1959], p. 1).