The Internationalization of Monopoly Capital
by John Bellamy Foster, Robert W. McChesney, and R. Jamil Jonna
In a 1997 article entitled “More (or Less) on Globalization,” Paul Sweezy referred to “the three most important underlying trends in the recent history of capitalism, the period beginning with the recession of 1974-75: (1) the slowing down of the overall rate of growth; (2) the worldwide proliferation of monopolistic (or oligopolistic) multinational corporations; and (3) what may be called the financialization of the capital accumulation process.” (Globalization, he argued was not a recent trend but a process that characterized the entire history of capitalism.)1 The first and third of these three trends—economic stagnation in the rich economies and the financialization of accumulation—have been the subjects of widespread discussion since the onset of severe financial crisis in 2007-09. Yet the second underlying trend, which might be called the “internationalization of monopoly capital,” has received much less attention. Indeed, the dominant, neoliberal discourse—one that has also penetrated the left—assumes that the tendency toward monopoly has been vanquished. In this narrative, the oligopolistic structure of early post-Second World War capitalism in the United States and elsewhere was broken down and replaced by a new era of intense global competition.
We do not intend to argue, in what follows, that those perceptions of growing global competition were all wrong. Rather, we suggest that renewed international competition evident since the 1970s was much more limited in range than often supposed. It has since given way to a new phase of global monopoly-finance capital in which world production is increasingly dominated by a relatively few multinational corporations able to exercise considerable monopoly power. In short, we are confronted by a system of international oligopoly. We present the broad contours of our argument with empirical evidence and explanation. Our treatment of these issues will no doubt raise as many questions as it will answer. Nevertheless, our objective is to demonstrate that addressing the internationalization of monopoly capital is a necessary prerequisite to understanding present global economic trends, including the period of slow growth and financialization in the mature economies.
The general outlines of what we have to say will not, of course, be a revelation to all of our readers. Evidence of the internationalization of monopoly capital has been mounting for decades. As Richard Barnet and Ronald Müller wrote in 1974 in their book, Global Reach: The Power of the Multinational Corporations: “The rise of the global corporation represents the globalization of oligopoly capitalism….The new corporate structure is the culmination of a process of concentration and internationalization that has put the economy under the substantial control of a few hundred business enterprises which do not compete with one another according to the traditional rules of the classic market.”2
As in all cases of oligopoly, where a few firms dominate particular industries or spheres of production, what is evident is not competition in the classic sense. Rather we are confronted with a dialectic of rivalry and collusion.3 In particular, “price competition”—or “price warfare,” as it is often called in business—is viewed as too dangerous, and generally avoided by the giant corporations. Instead, competition between firms largely takes other forms: the search for low-cost position, which remains the bottom line for business; competition for resources and markets; and product differentiation.
The typical or representative firm today is a monopolistic multinational corporation—a firm that operates in numerous countries, but is headquartered in one. In recent years, there has been a growth of multinational corporations in the periphery of the capitalist economy, but in the main such global firms are predominantly headquartered in the rich nations of the center (the more so the larger the firm). As the United Nations Conference on Trade and Development (UNCTAD) stated in its 2010 World Investment Report, “The composition of the world’s top 100 TNCs [transnational corporations] confirms that the triad countries [the United States, the European Union, and Japan] remain dominant,” although “their share has been slowly decreasing.”4
Mark Casson, a leading mainstream analyst of the global corporation, observed in 1985: “From a broad long-run perspective, the postwar MNE [multinational enterprise] may be regarded simply as the latest and most sophisticated manifestation of a tendency towards the international concentration of capital. This view emerges most clearly from the work of Lenin [in Imperialism, the Highest Stage of Capitalism].”5
Today this tendency is manifested most concretely in the growth of international oligopolies. For Louis Galambos, a business historian at Johns Hopkins University, “global oligopolies are as inevitable as the sunrise.”6 Indeed, as the Wall Street Journal put it in 1999:
In industry after industry the march toward consolidation has seemed inexorable….The world automobile industry is coalescing into six or eight companies. Two U.S. car makers, two Japanese and a few European firms are among the likely survivors.
The world’s top semiconductor makers number barely a dozen. Four companies essentially supply all of the worlds recorded music. Ten companies dominate the world’s pharmaceutical industry, and that number is expected to decline through mergers as even these giants fear they are too small to compete across the globe.
In the global soft drink business, just three companies matter, and the smallest, Cadbury Schweppes PLC, in January sold part of its international business to Coca-Cola Co., the leader. Just two names run the world market for commercial aviation: Boeing Co. and Airbus Industrie.7
The same tendency is evident across the board: in areas such as telecommunications, software, tires, etc. This is reflected in record annual levels of global mergers and acquisitions up through 2007 (reaching an all-time high of $4.38 trillion), and in vast increases in foreign direct investment (FDI), which is rising much faster than world income. Thus FDI inward stock grew from 7 percent of world GDP in 1980 to around 30 percent in 2009, with the pace accelerating in the late 1990s. (See Chart 1, below.) Even these figures are conservative in demonstrating the growing power of multinationals since they do not capture the various forms of collusion, such as strategic alliances and technological agreements that extend the global reach of such firms. Nor is there any accounting of the massive subcontracting done by multinational corporations, extending their tentacles into all areas of the global economy. In these and other ways, the rapid expansion of multinationals is creating a more concentrated world economic system, with the revenue of the top five hundred global corporations now in the range of 35-40 percent of world income.