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Published online by Cambridge University Press: 28 March 2014
IN RECENT YEARS THERE HAS BEEN A FORMIDABLE GROWTH OF literature on the political and other implications of business corporations. Much of the writing on the corporations has been of an alarmist nature. We are usually referred to the growth of an impressive economic (and, by implication, political) power of the corporations, the lack of effective democratic control on their activities, and the consequent need to establish a more effective set of constraints. It is suggested that internally the corporations are tending to by-pass the legislatures and other representative institutions, while externally the multinationals are integrating sectors of economies across states, and employing a management which may owe primary loyalty to the corporation and not the state in which managers are based. The emergence of the multinationals therefore not only seriously challenges many of our cherished political institutions and procedures, it also confronts our patterns of thinking about the sovereign state which have been inherited from the 16th century. In that they escape from the constraints of national boundaries and representative institutions it is alleged that the corporations are rendering obsolescent our traditional concepts of both state and sovereignty. Much of this argument is neatly encapsulated in the evocative titles of such scholarly works as Beyond the Nation State and Sovereignty at Bay.
1 For some corporations ’ statements to this effect see Tugendhat, Christopher, The Multinationals, Eyre & Spottiswoode, London, 1971, pp. 4–5 Google Scholar.
2 ‘In the sixteenth century framework [of thinking] the international corporation is an intruder’. Hugh Stephenson, The Coming Clash, Weidenfeld & Nicolson, London, 1972.
3 This is better conveyed in Aron ’ s reference to industrial societies, which alerts us to both the centripetal and the centrifugal tendencies, than in Galbraith ’ s notion of industrial states.
4 James, Alan, ‘The Contemporary Relevance of National Sovereignty’, in Leifer, Michael, ed., Constraints and Adjustments in British Foreign Policy, London, 1972 Google Scholar.
5 For a sample of discussions on this point see Vernon, Raymond, Sovereignty at Bay, Longmans, London, 1971 Google Scholar, and the contributions to Dunning, John H., ed., The Multinational Enterprise, Allen & Unwin, London, 1971 Google Scholar.
6 For a sample of discussions on this point see Raymond Vernon, op. cit., and the contributions to John H. Dunning, op. cit.
7 For discussion of different management styles see the following, Brooke, Michael A. and Remmers, H. Lee, The Strategy of Multinational Enterprise, Longmans, London, 1970 Google Scholar; Alsegg, Robert J., Control Relationships Between American Corporations and their European Subsidiaries, American Management Association, Inc., New York, 1971 Google Scholar; and Parlmutter, Howard V., ‘Unions and Firms as Worldwide Institutions’, in Gunter, Hans, Transnational Industrial Relations, Macmillan, London, 1972 Google Scholar.
8 ‘The Rise of the Managed Economy Reunites Politics and Economics with a Truly Political Economy’, Cairncross, A., The Managed Economy, Blackwell, 1970 Google Scholar, and for an early statement, see Dahl, Robert A., ‘Business and Politics: A Critical Appraisal of Political Science’, in Dahl, et al., eds., Social Science Research on Business: Product Potential, Columbia University Press, New York, 1959 Google Scholar.
9 Dahl, Robert A., After the Revolution, Yale University Press, New Haven, 1971 Google Scholar.
10 Berle, A. A., The Three Faces of Power, Harcourt Brace, New York, 1968 Google Scholar.
11 Other writers would also be happier to view the giant corporations as ‘states’. For an elaborated analogy of the corporation to the state see Earl Latham, ‘The Body Politik of the Corporation’, in Mason, E. S., ed., The Corporation in Modern Society, Atheneum, Cambridge, Mass., 1959 CrossRefGoogle Scholar. For example, General Motors, with its 1–3 million stockholders, 800,000 employees, operating in twenty‐four states, and with an annual turnover exceeding that of the GNP of most states, may more plausibly be regarded as a miniature political system than a ‘mere’ commercial enterprise or pressure group.
12 David Easton, Cf., A Systems Analysis of Political Life, Wiley, New York, 1965, pp. 21 Google Scholar f.
13 Rosenau, James, Linkage Politics, Free Press, New York, 1969 Google Scholar. Linkage politics is defined by Rosenau as ‘any recurrent sequence of behaviour that originates in one system and is reacted to in another’, op. cit., p. 45.
14 These economies of scale do not necessarily apply to all enterprises. In less technological industries the evidence suggests that large size does not correlate with level of profits. For a review of the evidence see Child, John. The Business Enterprise in Modern Industrial Society, Collier‐Macmillan, London, 1969, pp. 95–7Google Scholar.
15 For a useful summary of the trends and figures for corporate mergers and concentration in America see Barber, Richard J., The American Corporation, MacGibbon Kee, London, 1970 Google Scholar, Chap. 2. More generally, and controversially, see Galbraith, J. K., The New Industrial State, Penguin, London, 1967 Google Scholar.
16 For instance some 40 per cent of the value of direct US investment in West Germany and Britain is accounted for by three multinationals, Standard Oil, General Motors and Ford. See Galbraith, op. cit., Chaps. 26, 27 and Shonfield, Modern Capitalism, Oxford University Press, London, 1965.
17 Galbraith, op. cit., Chap. 6. For statements on the separation of ownership from control see Berle, A. and Means, G., The Modern Corporation and Private Property, Harcourt Brace, New York, 1932 Google Scholar, and Burnham, J., The Managerial Revolution, Indiana University Press, New York, 1941 Google Scholar. For a contrary argument see Miliband, R., The State in Capitalist Society, Weidenfeld & Nicolson, London, 1969 Google Scholar, Chap. 2, and for a thorough review of the differing evidence see Child, op. cit., Chap. 3.
18 For this convergence see Galbraith, op. cit., p. 391; Kerr, Clark, Industrialism and Industrial Man, Oxford University Press, Cambridge, Mass., 1960 Google Scholar, and Nove, Alec, The Soviet Hconomy, Allen & Unwin, London, 1969 Google Scholar.
19 Ionescu, G., ‘Saint‐Simon and the Politics of Industrial Societies’, Government and Opposition, Vol. 8, No. I, 1973 CrossRefGoogle Scholar. See also Bell, D., ‘Notes on the Post Industrial Society’, The Public Interest, No. 6, Chicago, 1966 Google Scholar.
20 Friedman, W., Law in a Changing Society, Penguin, London, 1972, p. 321 Google Scholar.
21 See Ehrman, Henry W., ‘Interest Groups and the Bureaucracy in Western Democracies’, in Dogan, M. and Rose, Richard, eds., European Politics: A Reader, Macmillan, London, 1971 Google Scholar. See also Apter, David, ‘The Premise of Parliamentary Planning’, Government and Opposition, Vol. 8, No. 1, 1973, pp. 3–33 CrossRefGoogle Scholar.
22 See Cohen, Stephen G., Modern Capitalist Planning: French Model, Weidenfeld & Nicolson, London, 1969 Google Scholar, and Hayward, J. E. S., Private Interests and Public Policy, Longmans, London, 1966 Google Scholar.
23 Rokkan, Stein, ‘Norway: Numerical Democracy and Corporate Pluralism’, in Dahl, R. A., Political Opposition in Western Democracies, Yale University Press, New Haven, 1966 Google Scholar.
24 Shonfield, Modern Capitalism, particularly pp. 389 ff. For an important discussion on the British control of different types of corporatism see Harris, Nigel, Competition and the Corporate Society, Methuen, London, 1972 Google Scholar. Harris draws a useful distinction between étatiste and pluralist versions; in the former the state is dominant, in the latter there is a bargaining relationship and groups tend to operate as self‐regulating fiefdoms.
25 Beer, S. H., Modern British Politics, Faber, London, 1969, pp. 318 Google Scholar ff. Finer, S. E., Anonymous Empire, Pall Mall Press, London, 1958 Google Scholar, and Rose, Richard, ‘The Variability of Party Government’, Political Studies, Vol. XVII, 1969 Google Scholar.
26 Coombes, David, State Enterprise, Allen & Unwin, London, 1972 Google Scholar, and Robson, W. A., Nationalised Industry and Public Ownership, Allen & Unwin, London, 1962 Google Scholar.
27 For a thorough discussion of the Italian enterprises and the theory and practice of accountability see Holland, Stuart, ed., The State as Entrepreneur, Weidenfeld & Nicolson, London, 1972 Google Scholar.
28 For the confidence of the technostructure that it knows what is in the public interest, see the remarks of Nigel Despicht in Holland, ed., op. cit.
29 Theodore Lowi, J., ‘Interest Group Liberalism’, American Political Science Review, Vol. LXI, 1967 Google Scholar.
30 For an excellent discussion of the various aspects of accountability in this sphere, see Smith, Bruce L. R. and Hague, D. C., etc., The Dilemma of Accountability in Modern Government, Macmillan, London, 1971 CrossRefGoogle Scholar.
31 Bruce L. R. Smith, op. cit., p. 55.
32 Of the Fortune 500 large industrial enterprises, Raymond Vernon found that 187 were multinational, i.e. they had subsidiaries in six or more countries. He also found that in terms of numbers of employees, sales and plants in the USA, and profitability and R & D expenditure, these multinationals scored higher than the remainder of the 500. See Sovereignty at Bay, pp. 8–9.
33 Remmer, Brookeand, The Strategy of the Multinational Enterprise, Longman, London, 1970 Google Scholar.
34 Jack Behrman, Cf., National Interests and the Multinational Enterprise, Prentice‐Hall, New Jersey, 1970 Google Scholar, Chap. 8.
35 US refusal to allow the subsidiaries in NATO countries to export to the communist bloc has mainly applied to high technology products such as computers and radar. These extra‐territorial applications are based on the US Trading with the Enemy Act and The Exports Control Act.
36 On the prospect of Europe ’ s technological dependence on America see Servan‐Schreiber, J. J., The American Challenge, Penguin, London, 1967 Google Scholar. See also Jack Behrman, op, cit., p. 63.
37 The policies of corporations in scheduling the timing of payments between affiliate and parent companies, in anticipation of the British currency revaluation, were actually instrumental in precipitating the devaluation of the pound in 1967. See Fortune, 15 September 1968.
38 Levinson, Charles, Capital, Inflation and the Multinationals, Allen & Unwin, London, 1971 Google Scholar.
39 Hugh Stephenson, op. cit.
40 See Sampson, Anthony, The Sovereign State, Hodder & Stoughton, London, 1973 Google Scholar.
41 Cf. Robert J. Alsegg, op. cit., On the close control of French subsidiaries by American companies see Johnstone, Allen W., United States Direct Investment in France, MIT Press, Massachusetts, 1965 Google Scholar.
42 Cf. J. J. Servan‐Schreiber, op. cit. For a sensitive discussion of these problems see Vernon, op. cit., Chap. 6.
43 The following three quotations illustrate the assumption that states will and should give way to the needs of the multinationals: (a)‘…erosion of the rigid concept of national sovereignty, is a process that should, I think, be consciously encouraged’ and ‘For the explosion of business beyond national borders will tend to create needs and pressures that can help alter political structures to fit the requirements of modern man far more adequately than the present crazy quilt of small nation‐states’, George Bull, former US Undersecretary of State, cited in Behrman, op. cit., p. 182. (b) ‘Business is in the vanguard of an economic one‐worldism which is finding governments still pursuing their parochial sovereign interests’, Barber, op. cit., p. 234. (c) Corporate managers ‘are creating a different dimension of economic truth which must sooner or later be reflected in the political mechanism to deal with it’, Rolfe and Damm, eds., op. cit., p. 34.
44 Cf. Shonfield, Modern Capitalism and Vernon, Beyond Sovereignty. For a statement of the ‘convergence’ thesis see Galbraith, op. cit., p. 391.
45 Cf. Vernon, op. cit., p. 249. It is interesting to consider the implications of the titles of some popular books: The American Challenge (France), The Silent Surrender (Canada), The American Takeover of Britain.
46 Cited in Rolfe, Sidney, ed., The Multinational Corporation in the World Economy, Praeger, New York, 1970, p. 26 Google Scholar, of in the words of Mr Harold Wilson in 1966, when he was British Prime Minister, American investment would be welcomed for its expertise and technological benefits but ‘capital investment in Europe [should not] involve domination or, in the last resort, subjugation’.
47 For discussion of the relationship between size of organization and the worth of participation see Robert Dahl, After the Revolution.
48 For the confusion surrounding the concept of public interest see Frankel, Joseph, National Interest, Macmillan, London, 1971, pp. 40–3Google Scholar, and Chap. 9.
49 Cf. Dahl, After the Revolution. For similar prescriptions applied to Western Europe, see Pinder, John in Mayne, R., ed., Europe Tomorrow, Fontana, London, 1972 Google Scholar, and Denis de Rougemont, ‘Vers une fédération des régions’, in Bulletin de la Culture, No. 2, 1968.
50 See Miliband, , The State in Capitalist Society, Weidenfeld & Nicolson, London, 1969 Google Scholar, Mandel, , Europe versus America, New Left Books, London, 1970 Google Scholar, and Barratt‐Brown, Michael, From Labourism to Socialism, Spokesman Books, London, 1973 Google Scholar.
51 This theme of the reciprocal influences between, on the one hand, political and economic unity and, on the other, trends towards unification of the EEC states and the growth in transnational relationships between groups in the different states, emerges strongly in Andrew Shonfield ’ s Reith Lectures, Europe, Unknown Destination, 1972.