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DOI: 10.1177/000271627240300110

1972 403: 104The ANNALS of the American Academy of Political and Social ScienceChadwick F. Alger

The Multinational Corporation and the Future International System

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104

The Multinational Corporation and theFuture International System

By CHADWICK F. ALGER

ABSTRACT: It has been asserted that the multinational cor-

poration is an instrument for peace and will spur an era of in-ternational government. These claims must be viewed in the

light of other changes taking place in the international system,particularly tendencies toward regionalism and increasing con-flict between rich and poor nations. Multinational corpora-tions, with headquarters in a few rich countries and directedby nationals of these countries, will increasingly be perceivedas neo-colonial activities. Response to the multinational cor-poration, and other tendencies in the international system,make it likely that the future international system will be com-posed of large regional states, with increasing bipolarization be-tween rich and poor regions. The major countervailing force,global, functional, intergovernmental organizations, will prob-ably not be able to prevent this trend because of the unwilling-ness of the rich superpowers to permit these organizations tobe responsive to the demands of the less developed countries.The greatest contribution of the multinational corporationsmay be their demonstration of the potential of nongovern-mental international activity as a challenge to the intergovern-mental system. Might new nongovernmental internationalmovements be formed that cut across the widening rich-poorgap? If this bipolarization is to be checked, these new non-governmental movements, intergovernmental agencies, andmultinational corporations must build more symmetric organi-zations that permit full participation by interests in the lessdeveloped nations and are responsive to their needs.

Chadwick F. Alger is Director, Program in Transnational Intellectual Cooperation inthe Policy Sciences, Mershon Center, and Professor of Political Science, at Ohio StateUniversity. He has spent many years closely observing the United Nations and its

specialized agencies, primari?y in New York and Geneva, and is concerned with the

evolving structure of the UN system. His research on the impact of these organizationson intergovernmental communications and on the socialization of individuals, and his

analyses of the political process in UN organizations, have been widely published.



105

SPECULATION about the effects ofthe multinational activities of busi-ness corporations on the internationalsystem has produced widely divergentviews. On the one hand, Roy Bloughasserts, &dquo;It is not unthinkable that theultimate entry of the world into anera of international government maycome by way of the intergovernmentalagencies already developed or to be de-veloped to deal with problems presentedby the large international corporation.&dquo; 1On the other hand, Robert Gilpin con-cludes &dquo;that the role of the nation-statein economic as well as in political life isincreasing and that the multinational

corporation is actually a stimulant to thefurther extension of state power in theeconomic realm.&dquo; 2 While this extremedifference of opinion may be surprising,it is understandable. Until very re-

cently, research and speculation on

international systems have given almostno consideration to nongovernmen-tal international organizations, whetherthey be profit or nonprofit. Virtuallyall attention has been devoted to

nation-state units. Furthermore, the

extension of the multinational activitiesof business corporations is taking placein the context of other concurrent

changes in the international system.Speculation on the future requires thecalculation of interactive effects amongthese other changes and multinationalbusiness activity.

TRENDS IN THE INTERNATIONALSYSTEM

What are other changes that have

been taking place since World War II?( 1 ) The number of independent na-

tions in the system has greatly in-

creased, primarily through the acquisi-tion of independence by former colonialterritories of European nations in Africaand Asia. Most of these nations arestill attempting to develop viable na-tional polities and economies, and en-deavoring to fully realize their inde-

pendence in the international system.(2) Regional integration is spreadingamong the older nations, particularlyamong the developed nations of Europe.With the development of the AndeanCommon Market and the Central Amer-ican Common Market, the nations ofLatin America are tending to explorethe path followed by Europe. Whilethe nations of Africa and Asia have also

developed regional cooperation, they lagbehind the older nations of Europe andthe Western hemisphere. (3) Thericher and poorer nations are develop-ing greater group identity and develop-ing institutions in which they can

pursue their common concerns. The

poorer nations of Africa, Asia, andLatin America have come together pri-marily in the United Nations Con-ference on Trade and Development(UNCTAD) through forming the

group of &dquo;seventy-seven&dquo; (now actuallyninety-six). The richer nations use

the Organization for Economic Coop-eration and Development (OECD) for

developing common strategy in their re-lations with the poorer nations. (4)Global functional organizations, such asthe World Meteorological Organization,International Civil Aviation Organiza-tion, and World Health Organizationhave grown modestly in importance,and there is increasing interest in thedevelopment of new global functionalactivities for the sea, environment, andouter space. While all nations havesome interest in these activities, thericher nations tend to give them muchhigher priority than do the poorer na-tions who are more concerned with na-

1. Roy Blough, International Business: En-vironment and Adaptation (New York:

McGraw-Hill, 1966). Quotation taken fromexcerpt printed in International Associations,no. 2 (1972), p. 84.

2. Robert Gilpin, "The Politics of Trans-

national Economic Relations," International

Organization 25, no. 3 (Summer 1971), p. 419.



106

tional development. (5) Nongovern-mental ties between citizens of differentnations have grown tremendously. For

example, the number of nongovernmentalinternational organizations grew from1,000 in 1956 to 2,300 in 1970. This

activity is more highly concentrated inEurope and North America than inthe rest of the world. (6) Particularlyin the larger, older nations-but not ex-clusively-sub-national units (urban,regional, and ethnic) rather than thenation unit, seem more relevant thanin the recent past to the solution ofsome major social problems. In mostcases this produces demands for de-centralization rather than independence.

But all is not change. The competi-tion of major powers for military su-periority, spheres of influence, and alliesgoes on as in the past. But technol-

ogy and new conflict strategies have

changed the meaning of national power.Major powers are restrained from usingtheir most destructive weapons becauseof fear of retaliation. Their overseasactivities are highly vulnerable to guer-rilla warfare, kidnapping, and hijacking.Major powers are also increasingly re-strained by new international norms.

Global acceptance of the doctrine ofself-determination has almost elimi-nated overseas colonies.

While not yet as widely accepted,new norms are being developed on ob-ligations of rich nations to poor nations,such as the UN Declaration on the Sec-ond Development Decade, calling forthe narrowing of the gap between therich and the poor nations of the world.The more independent, less developednations are trying to use the UN systemas a means for closing the gap, throughrevision of terms of trade and increasedmultilateral assistance for development.The failure of the third UNCTADConference in Santiago, Chile, in May1972 to respond to the demands of theless developed nations reflects the suc-

cess of the major powers in preventingreally significant response of the UNsystem. While the less developed na-tions find it difficult to generate com-mon policies because of their great di-versity, the unresponsiveness of the

major powers in the UN system seemsto be increasing the group identity ofthe poorer nations. On the other hand,as their demands for economic redressthrough the UN system increase, the

major powers seem to have decreasinginterest in the UN. With the diminu-tion of the Cold War, the United Statesand the Soviet Union are increasingtheir bilateral contacts. The Western

big powers and Japan are increasinglyusing multilateral institutions outsidethe UN, such as the OECD.

Thus, in conjunction with growth inthe multinational activity of business

corporations, a number of changes areproducing an international system of

greater variety and complexity. Theseare reflected in tendencies toward frag-mentation, regional integration, globalintegration, rich-poor polarization, andefforts by major powers to maintain thebasic character of the status quo. Themultinational activities of business cor-

porations, and reactions to these activi-ties, can have significant effect on whichtendencies are strongest in the future.

MULTINATIONAL CORPORATIONSAND PEACE

Many believe that the very structureof the nation-state system has generatedconflict that has led to violence. Thisis based on knowledge that the activi-ties of most citizens tend to be con-tained within the boundaries of theirnation. Because of this, the units ofthe nation-state system are not sewn

together by the same variety of bound-ary-crossing activity that takes placeacross the territorial sub-units withinnation-states. This makes it more dif-ficult for citizens of different countries



107

to discern common interests and col-laborate in common activities. It makesit more possible for citizens and theirgovernments to hate, and to engage inviolent response to the acts of their

counterparts in other countries. (Whenterritorial, and other subgroups, withinnation-states are not sewn together byboundary-crossing activity, violence isbelieved to be more likely within na-tions as well.)The UN can be seen as one effort to

diminish the restraints that the nation-state system places on interaction acrossnational boundaries. While a varietyof specialists get involved in UN activ-ity throughout the UN system, partici-pants are primarily government officials.Limited success of the UN can be par-tially attributed to the fact that its

participants are primarily national offi-cials who have a vested interest in

maintaining the nation-state system inits present form. Also, does not theUN function under impossible condi-tions ? Could it not be more successfulif there were a more integrated globalcommunity, that is, more highly de-

veloped nongovernmental organizationscutting across national boundaries?

Might it not be possible for reallystrong international nongovernmentalorganizations to challenge the tendencyof nation-states to prevent fundamentalchange in the international system?

Frustrated by the apparent inabilityof governments to facilitate needed re-form in the organization of the nation-state system, some observers have re-acted exceedingly positively to the suc-cess of business corporations in movingacross nation-state boundaries. In this

activity they have seen great potentialfor peace. For example:The multinational corporation ... is fun-damentally an instrument for peace.s

It [the multinational corporation] can thusprovide the adhesive which can do moreto bind nations together than any other

development yet found by man in his pur-suit of peace.4

It is possible that the international firmcan be part of an economic community onthe world level, including East and West,North and South, a community in whichthe bombing of suppliers, customers and

employees of the same firm will not befound desirable or permitted. Since the

super-giant firms will be represented in allcountries, war will not be possible.5

There is no doubt that the multina-tional activities of business corporationshave been very successful in bindingtogether citizens from around the globein highly successful collaborative activ-ity. While they have often had to bowto the restraints placed on them by na-tional governments, they have some-

times successfully maneuvered aroundthose restraints. Those who participatedirectly in the activities of multina-tional corporations, and those who in-vest in them, have a stake in the con-tinued activities of these corporations.This gives them an added incentive toprefer peace over violence and otherforms of international relations thatwould interrupt the multinational activ-ities of business corporations. Butevaluation of the potential impact ofthese corporations on peace and other in-ternational issues requires more search-ing examination of their activities, suchas location of headquarters, nationalityof leadership, and location of overseasactivity.

3. Neil H. Jacoby, "The Multinational Cor-poration," The Center Magazine 3, no. 3 (May1970), p. 54. Quoted by Jonathan F. Gallo-

way in "Multinational Enterprises as World-wide Interest Groups," Politics and Society2, no. 1 (Fall 1971), p. 13.

4. Roger Blough, as quoted by Robert W.Cox in "Labor and Transnational Relations,"International Organization 25, no. 3 (Summer1971), p. 579.

5. Howard V. Perlmutter, "Super-GiantFirms in the Future," Wharton Quarterly(Winter 1968), p. 14.



108

According to Raymond Vernon, &dquo;per-haps three out of four&dquo; multinational

corporations are headed by parentcompanies located in the United States.6Most of the remainder are locatedin Western Europe and a few are in

Japan. None have headquarters in theThird World. Pierre Uri writes that&dquo;there are only three authentic exam-ples of companies which, in respect ofthe head office, are not dependent onone single nationality; and even theseextremely complex and particular con-structions only straddle two countries.&dquo; 7Kenneth Simmonds reports that in 150of the largest U.S. multinational firms,only 1 percent of the senior executivesat headquarters are non-U.S., even

though the income generated overseasis about 20 percent of total.8 &dquo;Giventhe fact that key financial, personneland product decisions are made at homeheadquarters,&dquo; Howard Perlmutter con-cludes that &dquo;this statistic is importantin accounting for the degree of ethno-centrism found in many U.S. corpora-tions.&dquo; 9

Judd Polk has claimed that the roleof the multinational corporation in theinternationalization of production is&dquo;the most important structural event tohave occurred in many years and verylikely on a par with the Industrial

Revolution.&dquo; 10 Yet, he is deeply con-cerned with the inability of the multi-national corporation to help bridge thegap between the rich and poor coun-tries :

Much less encouraging, in fact disturbing,is the very limited success of companies orother institutions to connect up the less

developed world to the power grid of themore developed. There even appears to

be the possibility that the most developed[the United States] will not just reducethe flow of resources to other areas but

may actually absorb real resources.&dquo;

Considering the concentration of their

headquarters, leadership, and activity,can multinational corporations &dquo;bindnations together&dquo; and thereby facilitateman’s pursuit of peace?

PROJECTIONS OF FUTUREDEVELOPMENT

Were the anwser Yes, the projectionsof some on the future developmentof multinational business corporationswould be cause for great optimismabout world peace:

In another twenty years 600 or 700 cor-

porations will control most of the businessin the non-Communist world. 12

Present trends could produce a regime of300 or 400 multinational corporations con-trolling 60% to 70% of the world indus-trial output.l3

But when we consider the firms of thefuture-of 1985-it is clear we are talking

6. Raymond Vernon, "International Busi-ness and National Economic Goals," Interna-tional Organization 25, no. 3 (Summer 1971),p. 694. Vernon defines a multinational cor-

poration as "a cluster of corporations of dif-ferent nationalities that are joined togetherby a parent company through bonds of com-mon ownership that respond to a common

strategy, and that draw on a common poolof financial and human resources."

7. Pierre Uri, "Multinational Companies andEuropean Integration," Interplay (November1968). Quotation taken from excerpt in Inter-national Associations, no. 2 (1972), p. 87.

8. Reported by Howard V. Perlmutter in"Super-Giant Firms in the Future," WhartonQuarterly (Winter 1968), p. 11.

9. Perlmutter, "Super-Giant Firms," p. 11.

10. Judd Polk, "Economic Implications ofthe Multinational Corporation," in "The Mul-tinational Corporation" (Washington, D.C.:

Department of State, Office of External Re-

search, February 1969), p. 18.

11. Ibid., p. 29.12. George A. Steiner and Warren M. Can-

non, Multinational Corporate Planning (NewYork: Macmillan, 1966), p. 4. Cited byPeter B. Evans in "National Autonomy andEconomic Development," International Orga-nization 25, no. 3 (Summer 1971), p. 676.

13. Stephen Hymer, as quoted by Evans,"National Autonomy," p. 676.



109

about giants, or perhaps super-giants ...the firms doing $600 million or more sales,now on Fortune’s list, will be doing from$5 billion to $160 billion worth of sales,... the million-man firm should not beunusual. Clearly, the 300 of 1985 will besuper-giants in size and power.14

In the absence of some regulatory schemethe culmination of present trends will bea world organization of individual indus-tries.... Such a situation may leave in-dividual nation-states relatively helpless inthe face of a powerful closely interlockedand geographically mobile network of in-dustrial enterprise. 15

While this growth would not necessarilybe accompanied by continued domina-tion by headquarters in a few devel-

oped countries manned by officials fromthese countries, this could be the case.In reacting to these projections, manyfear that this domination will continue,particularly those with Third World in-terests in view. For these people theprojections stimulate efforts to preventthem from coming true.

Partly as a result of opposition gen-erated by projections of the expectedgrowth of multinational corporations,some believe that this growth will bedramatically checked. Addressing him-self to the future of the multinational

corporation in the Third World, W. N.Dunn concludes that &dquo;there seems to bemore evidence that the MNC [multi-national corporation] is on the declinethan the contrary.&dquo; 16 Robert Cox as-

serts, &dquo;As the historical thrust of themultinational corporation becomes moreapparent and more publicized, the reac-tion against it may be expected to fol-low with growing force.&dquo; 17 StephenHymer, despite his own projectionscited in the last paragraph, concludes,&dquo;One could easily argue that the ageof the Multinational Corporation is atits end rather than at its beginning.&dquo; 1S

PROPOSALS FOR GLOBAL INSTITUTIONS

Since the future impact of the multi-national activities of business corpora-tions on the international system willno doubt be affected by reactions to

their current growth, some additional

insight might be obtained by examiningproposals for controlling and shapingtheir growth. Proposals range from

supranational institutions, to mecha-nisms for facilitating international ne-gotiations, to proposals for nationalaction and changed patterns of multi-national corporation behavior.

George Ball has been an active

spokesman for &dquo;an international com-

panies law&dquo; to be administered by asupranational body. He sees that con-flict will increase between the world

corporation, which is a modern conceptevolved to meet the requirements of themodern age, and the nation-state, whichis still rooted in archaic concepts un-sympathetic to the needs of our complexworld. He would resolve this conflict

by denationalizing multinational cor-

porations which he refers to as the

14. Perlmutter, "Super-Giant Firms," p. 8.15. Paul M. Goldberg and Charles P.

Kindleberger, "Toward a GATT for Invest-ment : A Proposal for Supervision of theInternational Corporation," Law & Policy inInternational Business 2, no. 2 (1970), pp.295-96.

16. W. N. Dunn, "The Multinational Cor-poration and Third World Modernization:Toward a Strategy of Research and Action"(mimeographed), University of Pittsburgh,Graduate School of Public and International

Affairs, February 1971, p. 21.

17. Robert W. Cox, "Labor and Transna-tional Relations," International Organization25, no. 3 (Summer 1971), p. 584.

18. Stephen Hymer, "The Multinational

Corporation and Uneven Development," in "AForeign Economic Policy for the 1970’s,"Hearings of the Subcommittee on ForeignEconomic Policy, 91st Congress, 2nd Session,Washington, D.C., 1970, p. 907.



110

&dquo;cosmocorp.&dquo; 19 Among others, Ball issupported by Goldberg and Kindle-

berger,20 and by Howard V. Perlmutter,who sees that the UN has a key rolein developing rules and laws for govern-ing the activities of multinational cor-porations, particularly because of his

projected growth in their size. He be-lieves that &dquo;it is the responsibility ofthe leaders of today, both business andpolitical, to insure that the power thefirms will possess will not be abused,and that the firms fulfill their potentialas constructive institutions for world

prosperity.&dquo; 21But there seems to be little likelihood

that supranational controls will be de-veloped in the near future. Several,including some-like Goldberg and

Kindleberger-who would prefer supra-national controls, propose the creationof an international forum in which na-tional policies affecting multinational

corporations could be harmonized.

Kindleberger uses General Agreementon Tariffs and Trade (GATT) as a

model in proposing a permanent insti-tution where governments can negotiateon a regular basis. He and Goldbergsuggest the formation of a preparatorycommission to draft a General Agree-ment for the International Corporationsimilar to GATT. This agreementwould include a few principles and lim-ited machinery. It is envisioned thateither companies or countries couldsubmit questions to agency expertswho would render recommendations. Itwould be hoped that the reputation ofthe agency for thorough analysis andimpartiality would encourage voluntaryacceptance of decisions. &dquo;As its status

in the world community improved, theagency could act as an ombudsman forcorporations and countries seeking re-lief from oppressive policies.&dquo; 22 Con-

sidering Ball’s proposal too utopian atthis time, Goldberg and Kindlebergersee their proposal as a feasible meansfor evolving a more highly developedsystem through trial and error and

through the development of a set of

widely accepted precedents on which amore supranational system could bebuilt.

Heribert Maier of the InternationalConfederation of Free Trade Unionshas a more elaborate proposal that callsfor a convention to be drafted providingan international code of behavior to

govern multinational company opera-tions in both industrialized and devel-oping countries. This convention wouldinclude clauses making it compulsoryfor multinational corporations to abideby International Labor Organization(ILO) conventions, particularly those

dealing with freedom of association andthe right of workers to engage in col-lective bargaining. He urges the crea-tion of an autonomous internationalcenter patterned after that establishedby an international convention on thesettlement of investment disputes in1966. This center would operate underthe auspices of ILO, World Bank,GATT, IMF (International MonetaryFund), UNCTAD, and OECD. Com-

plaints about infringement of the con-vention would be heard before a tripar-tite body, consisting of representativesof governments, multinational compa-

nies, and trade unions.23

19. George W. Ball, "Cosmocorp: The Im-portance of Being Stateless," Atlantic Com-

munity Quarterly 6, no. 2 (Summer 1968),p. 165.

20. Goldberg and Kindleberger, "Toward aGATT," p. 319.

21. Perlmutter, "Super-Giant Firms," p. 14.

22. Goldberg and Kindleberger, "Toward aGATT," p. 323.

23. Heribert Maier, "The InternationalFree Trade Union Movement and Interna-tional Corporations," in "A Foreign Eco-nomic Policy for the 1970’s," Hearings of theSubcommittee on Foreign Economic Policy,91st Cong., 2nd Sess, Washington, D.C., 1970,pp. 833-34.



111

OTHER PROPOSALS FOR CHANGE

Raymond Vernon suggests that de-

veloped countries join in a course ofaction that later might be extended tothe less developed countries. First,limits would be imposed on the jurisdic-tional reach of each country into the

territory of another through exercisingtheir sovereign power over parent firms.Second, developed countries would agreeto engage in continuous coordination ofnational policies in areas in which theyhave limited their jurisdictional reach.

Third, nationalities of corporation enti-ties would be &dquo;sorted out.&dquo; For exam-

ple, foreign-owned subsidiaries wouldforgo appeals for the support of gov-ernments of parent companies, butwould be granted guarantees of nationaltreatment by countries that have giventhem corporate life. Fourth, tribunalswould be established to receive and

adjudicate disputes concerning the for-going agreements.Vernon recognizes that U.S. corpora-

tions will continue to generate tensionin less developed countries despite hisobservation that U.S.-based enterprisesare much less intimately related to gov-ernment than those of other major ad-vanced countries. While making pro-posals for U.S. government action thatmight reduce tension, he doubts it willhave much effect. Nevertheless, he pro-poses that the U.S. government evenfurther reduce its influence on foreignsubsidiaries through congressional with-drawal of the Hickenlooper amendment,which ties foreign aid to equitable treat-ment of U.S. investors in recipient coun-tries. He also urges U.S. acceptanceof the Clavo Doctrine-prohibiting for-eign-owned subsidiaries from appealingto parent governments-in countries

willing to grant national treatment to

U.S. subsidiaries. Also recommended isincreased use of multilateral agencies

for aid programs and U.S. implementa-tion of tariff preferences for less-devel-oped countries advocated by UNCTAD.

In testifying before the U.S. Con-

gress, Melville H. Watkins, Professorof Economics at the University of To-ronto, urged a quite different and morenationalistic approach. Because of for-

eign ownership of major industries in

Canada, Watkins believes that Canadahas lost its capacity to control infla-

tion, employment, and rate of economicgrowth. While he presently does notpresume to speak for the majority of

Canadians, he foresees rising national-ism, with &dquo;a strong anticapitalist andsocialist content.&dquo; Wishing &dquo;genuinedemocracy&dquo; in Canada, and believingthat &dquo;no institution is more undemo-cratic and more vulnerable to the

charge of authoritarianism than the

giant corporation,&dquo; he advocates &dquo;publicownership, a Canadian economy ownedand controlled by Canadians for Ca-nadians.&dquo; 24Howard V. Perlmutter urges that

multinational firms themselves develop&dquo;capacities for survival&dquo; through a num-ber of actions that would tend to elimi-nate the ethnocentrism he has observedin most firms. This would includebetter capacity to work with host gov-ernments with a variety of perspectives,better ability to integrate organizationsand individuals from many countriesinto a single firm, and increased abilityto stay in direct contact with users

of company products and services.

Overall, he sees &dquo;no other route than

beginning now to build international

companies, not companies based on

U.S. or European domination of keypositions.&dquo; 25

24. Statement of Melville H. Watkins in"A Foreign Economic Policy in the 1970’s,"Hearings of the Subcommittee on ForeignEconomic Policy, 91st Congr , 2nd Sess., Wash-ington, D.C, 1970, pp. 913-14.

25 Perlmutter, "Super-Giant Firms," p. 13.



112

MULTINATIONAL CORPORATIONS ANDTHE FUTURE INTERNATIONAL SYSTEM

These observations on trends in theinternational system, projections on thefuture development of multinational

corporations, and proposals for changingand regulating their activities encouragefurther speculation on the contradictoryquotations in the opening paragraph ofthis essay. Will the multinational cor-

poration, in the end, reinforce the nation-state system or bring a new era of inter-national government? In other words,will the forces outside multinational

corporations who wish to control andinfluence the further development of themultinational corporation call on thenation-state for assistance or bring to

bear some form of international institu-tion or activity? There is reason to

conclude that both will occur-each ina different part of the world. With the

growing strength of European and Japa-nese corporations and their increasinginvestment in the United States, somesort of intergovernmental collaborationamong developed countries to diminishconflict over the activities of multina-tional corporations seems quite likely.Vernon believes that his proposalswould have a greater chance of beinglaunched among the developed countriesboth because parent firms would &dquo;preferto limit any innovation of this sort tothe comparative safety and security ofthe advanced countries’ jurisdictions&dquo;and because the less developed countrieswould fear the domination of the devel-

oped countries in any intergovernmentaltribunal.2g This suggests that the mul-tinational corporation may spur furtherintegration of the developed nations.On the other hand, response to multi-

national corporations may intensify the

power of the nation-state in the less

developed countries as competing inter-ests in these countries look to thenation-state as the only available coun-tervailing force. As Peter B. Evans haswritten, those concerned with nationaldevelopment &dquo;cannot count on havingtheir welfare maximized by relying onthe unseen hand of economic inter-

change mediated through the organiza-tional framework of the multinational

corporation.&dquo; 27 Furthermore, becauseof the unresponsiveness of the rich na-tions to the poor in multilateral bodiessuch as UNCTAD, tension between therich and the poor nations of the worldis increasing. This will increase sensi-

tivity in less developed countries to theactivities of corporations that are lo-cated in and directed by officials fromthe rich countries. No matter how in-

dependent corporations are from gov-ernments, they will be perceived as partof a neo-colonial structure. Evans’ con-clusion seems reasonable. &dquo;Far from

being an anachronistic impediment, thestate appears to be the only organizationthat citizens of a poor country mightutilize to defend their interests.&dquo; 2$

It seems reasonable to conclude that

expectation that multinational corpora-tions will be a vital force for globalpeace is not well founded. They willlikely intensify conflict across the in-

creasingly polarized rich-poor axis, re-

inforcing this polarization rather than

crosscutting it.

Through time it would seem plausiblethat the less developed countries will

increase their capacity for collaborationin the development of policies on issuesinvolving multinational corporations.These could be organized in response tothe activities of a single industry, suchas the Organization of the Petroleum

Exporting Countries (OPEC); or, in re-26. Raymond Vernon, "Future of the Mul-tinational Enterprise," in Charles Kindleberger,ed., The International Corporation (Cam-bridge, Mass.: MIT Press, 1970), pp. 398-99.

27. Evans, "National Autonomy," p. 691.

28. Ibid.



113

sponse to a more general-purpose devel-oped-nation organization for handlingproblems of multinational corporations,they could be regional. Regionalismcould also be spurred by the devel-

opment of new multinational enterprisesin the less developed countries as com-petitors to those with headquarters in

the developed nations. Arpad von

Lazar argues that Latin American inte-

gration would

essentially benefit the already existinglarge, foreign, international corporationsthat have already monopolized substantialproportions of production and marketing inalmost all of the Latin American coun-

tries... unless strong multinational LatinAmerican enterprises are created.29

The most plausible future world seemsto be one in which the ties within

regions and between the developed na-tions on one hand, and between the lessdeveloped on the other, are stronger,and the ties between the developed andless developed regions of the world arerelatively weaker. This will delay thedevelopment of a more highly integratedglobal community and could evolve intoa world of even larger territorial statesas other regions pattern their develop-ment after the Western European re-

gion. A world primarily composed ofbig nation-states, polarized on economicissues, with no significant nonalignedgroup of nations, would likely be muchmore dangerous for human life than theinternational system of the 1950s and1960s.

Countervailing forcesThe major potential countervailing

force would seem to be global func-tional agencies, such as present special-ized agencies of the UN system and

possible new ones for the environment,sea, and outer space. But the fact thatthe present headquarters of all special-ized agencies are in the same part ofthe world-North America and Eu-

rope-as the headquarters of most

multinational corporations suggests thatfundamental changes in these agencieswill be needed if they are to be such acountervailing force. Under presentconditions of unequal development, thedeveloped nations are more interestedin agencies with regulatory and stan-dard-setting functions on matters suchas global travel, communications, andthe environment. But the less devel-

oped nations see the specialized agen-cies mainly as sources for developmentassistance. To their disappointment,the developed nations are stringentlyholding the line against requests for in-creased development assistance throughthe functional agencies. If these agen-cies are to become a vital countervailingforce to regional and rich-poor frag-mentation, and if they are to developcapacity to serve the global prioritiesof the developed countries, the devel-

oped nations will have to be willing tochannel significantly more resources fordevelopment through these agencies.Otherwise, they too may come to beviewed as simply another branch of aneo-colonial global structure. If the

present performance of major developedgovernments in the specialized agenciesis indicative of future performance, theglobal functional agencies will not be astrong countervailing force. Growthdoes little more than keep up with infla-tion. Indicative are efforts by the U.S.to cut its share of budgets from 31 to

25 percent.Are there alternative countervailing

forces? How about labor? Robert W.Cox has given careful consideration tothis possibility and doubts that laborwould be able to bridge the interests ofworkers in either the developed or less

29. Arpad von Lazar, "Multi-National En-terprises and Latin American Integration: ASociopolitical View," Journal of Inter-Ameri-can Studies 11 (January 1969), p. 112.



114

developed countries.3° It is not a goodomen that labor representatives fromcountries with different economic sys-tems and from countries with extremedifferences in development have had dif-ficulty working together in ILO. Laborunions in Western developed countriessee themselves as &dquo;recognized partnersin the industrial relations systems of thedemocratic countries only after longyears of struggle for recognition.&dquo; 31They are reluctant to engage in globalventures where outcomes are more un-certain. This seems to hold true evenfor at least some officials of interna-tional labor federations. HeribertMaier of the International Confedera-tion of Free Trade Unions has stated,&dquo;In short, the trade unions are boundto view with considerable concern the

growing encroachment of multinationalcompanies upon the sovereignty of thenation state.&dquo; 82 While there has beensome international collective bargaining,this seems to have involved only unionsin developed countries. Cited by Maierare cooperation by U.S. and Canadianworkers in negotiations with Chrysler(1967) and Continental Can (1953).On the other hand, Charles Levinson,secretary general of the International

Federation of Chemical and GeneralWorkers’ Union (ICF), has taken a

strong global point of view. Notingthat multinational corporations are &dquo;the

first genuine world institutions with in-herently global power and authority,&dquo;and that nation-states do not controltheir operations, he concludes that

unions must urgently create a counter-

vailing force.33 But there seems to bemore evidence to suggest that increasedinternational collaboration by unions, ifit occurs, will link unions in the same

region or in countries at the same levelof development than there is to suggestthat unions will become a force for

global integration.

CONCLUSION

While an effort has been made in the

foregoing speculation to develop an

image of the most likely future, it is

certainly not inevitable. But avoidanceof a world of big nation-states polarizedon economic issues would requiremore self-conscious, global community-building than in the recent past. En-thusiastic expectations for the multina-tional corporation as an agent of peaceare based on two fallacies: first, the

assumption that any peaceful coopera-tion across national boundaries will fa-cilitate the development of a peacefulglobal community. The foregoing analy-sis suggests that distribution in the

international system of activity cuttingacross national boundaries is important.By contributing to the integration ofsome countries, the multinational corpo-ration, along with other reinforcingfactors, may intensify the conflict be-tween these countries and others. Sec-

ond, the structure of international activ-ity is important. Dominance of this

activity by one nation or region, and theacquisition of superior rewards from theactivity by this nation or region, willnot facilitate peace over the long run,particularly if the same nation and

region dominate other forms of interna-tional activity.

Critical to peace in the future is the

development of symmetric structures

that bridge the rich and poor areas ofthe world and that guarantee that re-

30. Cox, "Labor and Transnational Rela-

tions," p. 584.31. Maier, "International Free Trade," p.

831.32. Heribert Maier, "Free Labour and

Multi-national Corporations," Free LaborWorld (September 1970). Quotation takenfrom excerpt in International Associations, no.2 (1972), p. 85.

33. Cited by Robert W. Cox, "Labor andTransnational Relations," p. 582.



115

wards of collaborative activity are, andare perceived to be, equitably distrib-uted. The nation-states, that is, na-

tional governments, have had littlesuccess in creating this kind of struc-ture. The nations with the greatestmilitary might and the highest grossnational product (GNP) tenaciouslyhold onto the advantages these forms ofpower give them. They are unwillingto build symmetric structures for col-laborative activity that would permitthose with lesser military might andGNP to fully participate in fundamen-tal decisions affecting the internationalsystem. There is no better reflectionof this state of affairs than comparisonof the 1969 arms budgets of the twosuperpowers, $138 billion dollars, withtheir contributions to the UN system,less than one-third of a billion dollars.Thus they spent over four hundredtimes more on arms than they contrib-uted to the UN system.

Perhaps the greatest contribution ofmultinational corporations is their dem-onstration of the potential of non-

governmental international activity-inbridging nations with a high level of

intergovernmental conflict, and in hav-

ing impact on the international systemthat often surpasses that of intergovern-mental organizations. If it is feasible forcitizens of many countries to challengethe intergovernmental system in thesearch of profits, why is it not also pos-sible for them to challenge this systemin the pursuit of other interests, suchas cutting arms budgets, increasingmultilateral aid to less developed coun-tries, improving the terms of trade forless developed countries, and makingmultinational corporations more respon-sive to the less developed countries?

In conclusion, I would like to revise

Roy Blough’s words quoted in the intro-duction to read: It is not unthinkablethat the ultimate development of a

global community in which peacefulchange has replaced violence may comeby way of the intergovernmental agen-cies and nongovernmental internationalmovements developed to deal with

problems presented by the large inter-national corporations. This would holdtrue i f these intergovernmental agen-cies and international nongovernmentalmovements permitted full participationby interests in the less developed na-tions and were responsive to their needs.



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