《国际政治经济学》文献资料（Political Economy of Foreign Investment）The Internationalization of Capital-Stephen Hymer

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The Internationalization of Capital Stephen Hymer The multinational corporation,or the multinational corporate system, has three related sides:international capital movements:international capitalist production;and international government. By international capital movements I refer first to the direct in- vestment of corporations in their overseas branches and subsidiaries, which.at present amounts to about $80 billion for American multi- nationals and about $50 billion for non-American multinationals.Sec- ond,I refer to the associated flows of short-term,long-term,and equity capital stimulated by the multinational corporation,which in turn stimu- late the growth of international finance,that is,deposits in foreign banks, investments in the Eurocurrency and Eurobond market,investments in corporate stock of multinational firms by non-nationals,and so forth. The direct foreign investment by corporations has served as a base for a vast superstructure of credit drawing capital from all over the world;the associated noncorporate private capital flows from one country to anoth- er are at least as large as direct investments by corporations,and probably are growing faster. International capitalist production refers to the incorporation of labor from many countries into an integrated worldwide corporate productive structure.American firms,for example,directly employ from 5 to 7 million people in foreign countries,and a growing but unknown number indirectly through subcontracting,licensing,and so forth.By com- parison,the total employment of the 500 largest American firms is 13 or 14 million (this figure includes some,but not all,foreign employees), The author is Professor of Economics,New School for Social Research,New York,New York.This paper was presented at the Annual Meeting of the Association for Evolutionary Economics,New Orleans,Louisiana,27-28 December 1971. 91 This content downloaded from 202.120.14.154 on Mon,04 Jan 2016 03:31:29 UTC All use subject to JSTOR Terms and Conditions

The Internationalization of Capital Stephen Hymer The multinational corporation, or the multinational corporate system, has three related sides: international capital movements; international capitalist production; and international government. By international capital movements I refer first to the direct investment of corporations in their overseas branches and subsidiaries, which. at present amounts to about $80 billion for American multinationals and about $50 billion for non-American multinationals. Second, I refer to the associated flows of short-term, long-term, and equity capital stimulated by the multinational corporation, which in turn stimulate the growth of international finance, that is, deposits in foreign banks, investments in the Eurocurrency and Eurobond market, investments in corporate stock of multinational firms by non-nationals, and so forth. The direct foreign investment by corporations has served as a base for a vast superstructure of credit drawing capital from all over the world; the associated noncorporate private capital flows from one country to another are at least as large as direct investments by corporations, and probably are growing faster. International capitalist production refers to the incorporation of labor from many countries into an integrated worldwide corporate productive structure. American firms, for example, directly employ from 5 to 7 million people in foreign countries, and a growing but unknown number indirectly through subcontracting, licensing, and so forth. By comparison, the total employment of the 500 largest American firms is 13 or 14 million (this figure includes some, but not all, foreign employees), The author is Professor of Economics, New School for Social Research, New York, New York. This paper was presented at the Annual Meeting of the Association for Evolutionary Economics, New Orleans, Louisiana, 27-28 December 1971. 91 This content downloaded from 202.120.14.154 on Mon, 04 Jan 2016 03:31:29 UTC All use subject to JSTOR Terms and Conditions

92 Stephen Hymer which means that many large corporations have 30,40,or 50 percent and more of their labor force outside the United States. International government refers to the erosion of the traditional pow- ers of nation-states and the emergence of international economic policy instruments in line with the tendency of the multinational corporation to internationalize capital and labor.When a corporation invests abroad,it not only sends capital and management out,but also establishes a system for drawing foreign capital and labor into an integrated world network.When many firms from many countries do this together on an expanded scale,as has been true over the last decade and will be increasingly true in the next,they are forming a new world system.They are unifying world capital and world labor into an interlocking system of cross penetration that completely changes the system of national econo- mies that has characterized world capitalism for the past three hundred years.This process reduces the independence of nation-states and re- quires the formation of supranational institutions to handle the increased interdependence.To create a world market where state frontiers dis- appear,a world system is needed in which the separate interests,laws, governments,and systems of taxation and regulation are lumped togeth- er into a unified code of laws on the rights and limits of international private property. This three-pronged process is far from complete and is anything but smooth,but it has moved further and faster than is commonly realized. The outlines of a new international system already can be discerned, and,it must be quickly added,so can its cracks.American firms have been in the vanguard,but European corporations are close on their heels;Japanese corporations,who have just started,are moving very quickly.International capital markets and international banking also are growing by leaps and bounds,and the combined movement of these forces is rapidly reducing the autonomy of governments.The pressure for international governmental agencies is very great and a start has been made on many fronts,but the process has been zigzagging and is far from off the ground. The Argument In this essay I wish to concentrate on the political economy of the process,that is,the political consolidations accompanying the multina- tionalization of business.In the last analysis,markets come out of the barrel of a gun,and to establish an integrated world economy on capital- ist lines requires the international mobilization of political power. The central image of my analysis is the pyramid of power,and the focus of study is the merging of the separate pyramids of nation-states This content downloaded from 202.120.14.154 on Mon,04 Jan 2016 03:31:29 UTC All use subject to JSTOR Terms and Conditions

92 Stephen Hymer which means that many large corporations have 30, 40, or 50 percent and more of their labor force outside the United States. International government refers to the erosion of the traditional powers of nation-states and the emergence of international economic policy instruments in line with the tendency of the multinational corporation to internationalize capital and labor. When a corporation invests abroad, it not only sends capital and management out, but also establishes a system for drawing foreign capital and labor into an integrated world network. When many firms from many countries do this together on an expanded scale, as has been true over the last decade and will be increasingly true in the next, they are forming a new world system. They are unifying world capital and world labor into an interlocking system of cross penetration that completely changes the system of national economies that has characterized world capitalism for the past three hundred years. This process reduces the independence of nation-states and requires the formation of supranational institutions to handle the increased interdependence. To create a world market where state frontiers disappear, a world system is needed in which the separate interests, laws, governments, and systems of taxation and regulation are lumped together into a unified code of laws on the rights and limits of international private property. This three-pronged process is far from complete and is anything but smooth, but it has moved further and faster than is commonly realized. The outlines of a new international system already can be discerned, and, it must be quickly added, so can its cracks. American firms have been in the vanguard, but European corporations are close on their heels; Japanese corporations, who have just started, are moving very quickly. International capital markets and international banking also are growing by leaps and bounds, and the combined movement of these forces is rapidly reducing the autonomy of governments. The pressure for international governmental agencies is very great and a start has been made on many fronts, but the process has been zigzagging and is far from off the ground. The Argument In this essay I wish to concentrate on the political economy of the process, that is, the political consolidations accompanying the multinationalization of business. In the last analysis, markets come out of the barrel of a gun, and to establish an integrated world economy on capitalist lines requires the international mobilization of political power. The central image of my analysis is the pyramid of power, and the focus of study is the merging of the separate pyramids of nation-states This content downloaded from 202.120.14.154 on Mon, 04 Jan 2016 03:31:29 UTC All use subject to JSTOR Terms and Conditions

Internationalization of Capital 93 into an international pyramid."When two primitive feudal states amalga- mate,"wrote Franz Oppenheimer in his classic treatise on the state, "their social layers stratify in a variety of ways,which to a certain extent are comparable to the combinations that result from mixing together two packs of cards."The process of integration now going on in the in- ternational economy may be thought of in a similar way-as the in- terpenetration of national corporation and capital into a new multination- al system of ownership and control.The shuffle is neither random nor even,nor are the decks of the same size.Aces,kings,and queens are trying to remain on top,but instead of lording over their separate piles, they are cross-penetrating into a more complex structure. I have chosen the image of cross-penetration instead of American imperialism pure and simple because I believe that the American he- gemony which characterized the past twenty-five years has ended with the recovery of Europe,Japan,and Russia.American capital may well be able to retain a position of dominance,but it is under severe challenge and will have to share power with other capitalists far more than it has done in the past. I wish in my analysis to stress how competition in the product and capital market helps forge a unified interest among capitalists,while the corporate hierarchy and competition in the labor market divide and weaken popular power.The dynamic of the multinational corporation is thus a contradictory one.True,it expands the social nature of produc- tion to a world level;but only on the basis of minority power,and a conflict emerges between the general social power into which capital develops,and the private power of individual capitalists over these social conditions.As capital unites many workers in production and collectivizes many capitals in ownership,it becomes an alienated in- dependent power which stands opposed to society and checks the full development of human productivity and its universal application.Pace, Adam Smith,who thought the magic of competition could turn private interests into the general interest (but who later began,as Robert Heilbroner has shown,to sense the severe limitations of this method based on madness);the capitalist organization is fraught with con- tradictions whose cost becomes more onerous as productivity is devel- oped and the system broadens to worldwide scope. Under capitalism,the mutual and universal interdependence of in- dividuals who remain indifferent to one another constitutes the social network that binds them together.In the market,capitalism unites pro- ducers,who fundamentally acknowledge no other authority but that of competition,and who are not able to develop a social outlook com- mensurate with the social production they create.In the factory or This content downloaded from 202.120.14.154 on Mon,04 Jan 2016 03:31:29 UTC All use subject to JSTOR Terms and Conditions

Internationalization of Capital 93 into an international pyramid. "When two primitive feudal states amalgamate," wrote Franz Oppenheimer in his classic treatise on the state, "their social layers stratify in a variety of ways, which to a certain extent are comparable to the combinations that result from mixing together two packs of cards." The process of integration now going on in the international economy may be thought of in a similar way - as the interpenetration of national corporation and capital into a new multinational system of ownership and control. The shuffle is neither random nor even, nor are the decks of the same size. Aces, kings, and queens are trying to remain on top, but instead of lording over their separate piles, they are cross-penetrating into a more complex structure. I have chosen the image of cross-penetration instead of American imperialism pure and simple because I believe that the American hegemony which characterized the past twenty-five years has ended with the recovery of Europe, Japan, and Russia. American capital may well be able to retain a position of dominance, but it is under severe challenge and will have to share power with other capitalists far more than it has done in the past. I wish in my analysis to stress how competition in the product and capital market helps forge a unified interest among capitalists, while the corporate hierarchy and competition in the labor market divide and weaken popular power. The dynamic of the multinational corporation is thus a contradictory one. True, it expands the social nature of production to a world level; but only on the basis of minority power, and a conflict emerges between the general social power into which capital develops, and the private power of individual capitalists over these social conditions. As capital unites many workers in production and collectivizes many capitals in ownership, it becomes an alienated independent power which stands opposed to society and checks the full development of human productivity and its universal application. Pace, Adam Smith, who thought the magic of competition could turn private interests into the general interest (but who later began, as Robert Heilbroner has shown, to sense the severe limitations of this method based on madness); the capitalist organization is fraught with contradictions whose cost becomes more onerous as productivity is developed and the system broadens to worldwide scope. Under capitalism, the mutual and universal interdependence of individuals who remain indifferent to one another constitutes the social network that binds them together. In the market, capitalism unites producers, who fundamentally acknowledge no other authority but that of competition, and who are not able to develop a social outlook commensurate with the social production they create. In the factory or This content downloaded from 202.120.14.154 on Mon, 04 Jan 2016 03:31:29 UTC All use subject to JSTOR Terms and Conditions

94 Stephen Hymer corporation,an authoritarian hierarchy is used to coordinate labor,to keep the worker ignorant of the cooperative process of which he is part, and to alienate him from his work,his instruments and machines,and his product.Because of the undemocratic nature of the work process,the possibilities for human development created by science cannot be real- ized,while the fact that workers are not cooperating voluntarily,but are coerced by an alien force,means that capital must continuously squan- der energy wrestling with their insubordination.An attempt is made through the state to coordinate capitalism on a plane above that of the market so that the waste of externalities can be reduced,and the conflicts between capitals and between capital and labor can be amelio- rated.But the state has to operate with its hands tied.It has to solve problems without damaging the system of private property that produces these problems.The good intentions of public policy always founder on this rock,and society must continue to bear the costs of constant rivalry, the inability to meet social needs,and the frustration of human devel- opment. A Marxian bias is evident in my presentation.Unfortunately,Marx's promised volumes on wage labor,foreign trade,and the state and the world economy were never written (or have not been found),and the elements of his analysis are scattered throughout his many writings. However,a succinct statement of his basic argument,which the reader may find useful,is found in Volume 3 of Capital(p.261 of the In- ternational Publishers edition).There he identifies "three cardinal facts of capitalist production,"as follows: 1)Concentration of means of production in few hands,whereby they cease to appear as the property of the immediate labourers and turn into social capacities.Even if initially they are the private property of capitalists.These are the trustees of bourgeois society, but they pocket all the proceeds of this trusteeship. 2)Organization of labour into social labour;through competition. division of labour,and the uniting of labour with the natural sci- ences. In these two senses,the capitalist mode of production abolishes private property and private labour,even though in contradictory forms. 3)Creation of the world market. The stupendous productivity developing under the capitalist mode of production relative to population...contradicts the basis,which constantly narrows in relation to the expanding wealth,and for which all this immense productiveness works.They also contradict the conditions under which this swelling capital augments its value. Hence the crisis. This content downloaded from 202.120.14.154 on Mon,04 Jan 2016 03:31:29 UTC All use subject to JSTOR Terms and Conditions

94 Stephen Hymer corporation, an authoritarian hierarchy is used to coordinate labor, to keep the worker ignorant of the cooperative process of which he is part, and to alienate him from his work, his instruments and machines, and his product. Because of the undemocratic nature of the work process, the possibilities for human development created by science cannot be realized, while the fact that workers are not cooperating voluntarily, but are coerced by an alien force, means that capital must continuously squander energy wrestling with their insubordination. An attempt is made through the state to coordinate capitalism on a plane above that of the market so that the waste of externalities can be reduced, and the conflicts between capitals and between capital and labor can be ameliorated. But the state has to operate with its hands tied. It has to solve problems without damaging the system of private property that produces these problems. The good intentions of public policy always founder on this rock, and society must continue to bear the costs of constant rivalry, the inability to meet social needs, and the frustration of human development. A Marxian bias is evident in my presentation. Unfortunately, Marx's promised volumes on wage labor, foreign trade, and the state and the world economy were never written (or have not been found), and the elements of his analysis are scattered throughout his many writings. However, a succinct statement of his basic argument, which the reader may find useful, is found in Volume 3 of Capital (p. 261 of the International Publishers edition). There he identifies "three cardinal facts of capitalist production," as follows: 1) Concentration of means of production in few hands, whereby they cease to appear as the property of the immediate labourers and turn into social capacities. Even if initially they are the private property of capitalists. These are the trustees of bourgeois society, but they pocket all the proceeds of this trusteeship. 2) Organization of labour into social labour; through competition, division of labour, and the uniting of labour with the natural sciences. In these two senses, the capitalist mode of production abolishes private property and private labour, even though in contradictory forms. 3) Creation of the world market. The stupendous productivity developing under the capitalist mode of production relative to population ... contradicts the basis, which constantly narrows in relation to the expanding wealth, and for which all this immense productiveness works. They also contradict the conditions under which this swelling capital augments its value. Hence the crisis. This content downloaded from 202.120.14.154 on Mon, 04 Jan 2016 03:31:29 UTC All use subject to JSTOR Terms and Conditions

Internationalization of Capital 95 Internationalization of Corporations "When labour cooperates systematically,"Marx wrote,"it strips off the fetters of its individuality and develops the capability of its species." But in order for labor to cooperate,it must be brought together and linked through exchange.Under capitalism,the cooperation of laborers is entirely brought about by the capital that employs them.The history of social labor is the history of social capital since the number of laborers who can work together depends upon the degree to which capital is concentrated and centralized. The two powerful levers for concentrating capital into larger and larger aggregates and then integrating these aggregates into a unified whole are competition and credit.Competition drives firms to contin- uously reinvest their profits and extend their markets as a means of self-preservation.The credit system unites individual capitals and stimu- lates further increases in their size.It acts as an immense social mech- anism above that of the individual firm for the centralization of capital and the preservation of its collective interest.The market forces are now operating on a world scale and leading to the internationalization of corporations and capital. The Dynamics of Corporate Expansion Business enterprises usually are built around some special discovery or advantage.Before their innovation becomes general,they can under- sell their competitors and still sell at a price well above cost of produc- tion.But their position is constantly threatened by new entrants who may discover a new technology,a new product,a new form of organ- ization,or a new supply of labor.The dialectic of the product cycle gives capitalism its forward motion.An innovation is introduced;if it suc- ceeds,the product enjoys a high rate of growth as it displaces other products and more and more consumers come to use it.As the market becomes saturated,growth tapers off while profitability is squeezed. Simultaneously,other firms try to enter the market because the very success of the innovation provides tangible proof that the new product works and that a market exists.With the secret out,production costs begin to dominate.The competition of other firms using cheaper labor or accepting a lower rate of profit eats into the original innovator's profit. There are two ways of coping with the competitive threat.First,a continuous effort can be made to develop new products;when the rate of growth slows,the firm can switch tracks and continue at a high rate of profit.Second,the product cycle can be prolonged by gaining control of This content downloaded from 202.120.14.154 on Mon,04 Jan 2016 03:31:29 UTC All use subject to JSTOR Terms and Conditions

Internationalization of Capital 95 Internationalization of Corporations "When labour cooperates systematically," Marx wrote, "it strips off the fetters of its individuality and develops the capability of its species." But in order for labor to cooperate, it must be brought together and linked through exchange. Under capitalism, the cooperation of laborers is entirely brought about by the capital that employs them. The history of social labor is the history of social capital since the number of laborers who can work together depends upon the degree to which capital is concentrated and centralized. The two powerful levers for concentrating capital into larger and larger aggregates and then integrating these aggregates into a unified whole are competition and credit. Competition drives firms to continuously reinvest their profits and extend their markets as a means of self-preservation. The credit system unites individual capitals and stimulates further increases in their size. It acts as an immense social mechanism above that of the individual firm for the centralization of capital and the preservation of its collective interest. The market forces are now operating on a world scale and leading to the internationalization of corporations and capital. The Dynamics of Corporate Expansion Business enterprises usually are built around some special discovery or advantage. Before their innovation becomes general, they can undersell their competitors and still sell at a price well above cost of production. But their position is constantly threatened by new entrants who may discover a new technology, a new product, a new form of organization, or a new supply of labor. The dialectic of the product cycle gives capitalism its forward motion. An innovation is introduced; if it succeeds, the product enjoys a high rate of growth as it displaces other products and more and more consumers come to use it. As the market becomes saturated, growth tapers off while profitability is squeezed. Simultaneously, other firms try to enter the market because the very success of the innovation provides tangible proof that the new product works and that a market exists. With the secret out, production costs begin to dominate. The competition of other firms using cheaper labor or accepting a lower rate of profit eats into the original innovator's profit. There are two ways of coping with the competitive threat. First, a continuous effort can be made to develop new products; when the rate of growth slows, the firm can switch tracks and continue at a high rate of profit. Second, the product cycle can be prolonged by gaining control of This content downloaded from 202.120.14.154 on Mon, 04 Jan 2016 03:31:29 UTC All use subject to JSTOR Terms and Conditions

96 Stephen Hymer marketing outlets,searching for and moving to places of cheaper labor, and secrecy.These two methods,of course,are intertwined,for the wider a firm's market,the more it can spread the costs of innovation, and the more it can afford to spend on research and development. Both these methods require further investment.At a given point of time,a corporation may be earning a high rate of profit because it is onto a good thing,but competition and technological change threaten to wipe out its advantage.It must plough back its profits in order to improve production and expand its scale "merely as a means of self-preservation and under threat of ruin."Thus under capitalism change becomes normal and businessmen can never afford to look upon and treat the existing form of a process as final.The incessant revolu- tions in production and the depreciation of the existing capital this implies spur them on to new methods and new places. International Competition in the Fifties and Sixties This dialectic played an important role in the postwar expansion of American firms in foreign countries.The American giants who were or became multinational possessed numerous advantages in organization, technology,access to capital,and product differentiation.They could supply some of the foreign market through exports,gaining a certain protection for their secrets from the long distance between production and consumption.The recovery of Europe and Japan soon challenged them,and they began to see many foreign firms using their technology and methods,or improving upon them.They could see their own ex- pansion being thwarted by the formation of new capitals in other coun- tries,and they discovered their advantages would be short-lived if they did not undertake foreign investment to preserve them. These firms had three motives for expansion:(1)they saw a rapid growth in the markets for goods in which they specialized;(2)they saw cheaper labor (productivity divided by wage)which made it profitable to produce abroad;and (3)they saw foreign competitors growing faster than themselves and gaining an increased share of the world market. To the individual firm these might appear as separate phenomena,but they are closely connected to each other through the labor market. Europe and Japan emerged from the devastation of the war with con- sumption patterns and expectations well below the American standard. However,their potential productivity was not nearly as far below that of America's,given the work habits and levels of skills of the labor force. A large surplus was available if the labor force could be organized and consumption kept from rising too fast. With American help the threat of a socialist alternative was avoided, This content downloaded from 202.120.14.154 on Mon,04 Jan 2016 03:31:29 UTC All use subject to JSTOR Terms and Conditions

96 Stephen Hymer marketing outlets, searching for and moving to places of cheaper labor, and secrecy. These two methods, of course, are intertwined, for the wider a firm's market, the more it can spread the costs of innovation, and the more it can afford to spend on research and development. Both these methods require further investment. At a given point of time, a corporation may be earning a high rate of profit because it is onto a good thing, but competition and technological change threaten to wipe out its advantage. It must plough back its profits in order to improve production and expand its scale "merely as a means of self-preservation and under threat of ruin." Thus under capitalism change becomes normal and businessmen can never afford to look upon and treat the existing form of a process as final. The incessant revolutions in production and the depreciation of the existing capital this implies spur them on to new methods and new places. International Competition in the Fifties and Sixties This dialectic played an important role in the postwar expansion of American firms in foreign countries. The American giants who were or became multinational possessed numerous advantages in organization, technology, access to capital, and product differentiation. They could supply some of the foreign market through exports, gaining a certain protection for their secrets from the long distance between production and consumption. The recovery of Europe and Japan soon challenged them, and they began to see many foreign firms using their technology and methods, or improving upon them. They could see their own expansion being thwarted by the formation of new capitals in other countries, and they discovered their advantages would be short-lived if they did not undertake foreign investment to preserve them. These firms had three motives for expansion: (1) they saw a rapid growth in the markets for goods in which they specialized; (2) they saw cheaper labor (productivity divided by wage) which made it profitable to produce abroad; and (3) they saw foreign competitors growing faster than themselves and gaining an increased share of the world market. To the individual firm these might appear as separate phenomena, but they are closely connected to each other through the labor market. Europe and Japan emerged from the devastation of the war with consumption patterns and expectations well below the American standard. However, their potential productivity was not nearly as far below that of America's, given the work habits and levels of skills of the labor force. A large surplus was available if the labor force could be organized and consumption kept from rising too fast. With American help the threat of a socialist alternative was avoided, This content downloaded from 202.120.14.154 on Mon, 04 Jan 2016 03:31:29 UTC All use subject to JSTOR Terms and Conditions

Internationalization of Capital 97 and the state built an infrastructure,reformed education,adopted new foreign trade policies,and developed an administrative structure for channeling capital and planning investment.The way was cleared for a rapid expansion of private industry.National capitalists were able to draw upon the technology which had accumulated during the war,earn high rates of return,and grow rapidly.This growth,switching people from agriculture to industry and from old industries to new,expanded the market for new products. American firms were thus presented with an opportunity and a chal- lenge.Growth of foreign markets and labor supply made it attractive to invest abroad;growth of European and Japanese firms made it neces- sary.American firms did not invest substantially in continental Europe and Japan in the late forties and early fifties when they had the most political influence.Only after the development of the Common Market did they make their greatest effort,just as it was serious competition from Japanese firms that spurred the great drive to get into Japan.It is more competitive pressure than foresight which guides capitalists to expand. International Competition in the Seventies and Eighties The world economy now presents new opportunities and challenges. The unlimited supply of labor in Europe is drying up as they exhaust their own populations and the possibilities for importing cheap labor. Twenty years of prosperity have changed labor's expectations about consumption standards and work intensity.The greening of Europe is about to begin.A similar tendency toward labor shortage,that is,a decline in the margin between labor's production and consumption,is emerging in Japan.In the United States resistance to work seems about to reach acute proportions from capital's point of view.Firms from all these countries are looking more and more toward labor in outlying fields. In Eastern Europe,low consumption standards and a great expansion of infrastructure,health services,and education have resulted in a poten- tially very high rate of surplus value now bogged down in undemocratic socialism.The managers of these economies are trying,through econom- ic reforms,to channel this surplus into the accumulation of capital and wealth.They could provide a great challenge to Free World capitals. (The threat would be greater,but different,if these countries chose socialist development.)The scramble for East-West trade and technical agreements is an attempt to change this challenge into an opportunity. China,less advanced and less amenable,also presents an important commercial and industrial challenge.(This article was written with a This content downloaded from 202.120.14.154 on Mon,04 Jan 2016 03:31:29 UTC All use subject to JSTOR Terms and Conditions

Internationalization of Capital 97 and the state built an infrastructure, reformed education, adopted new foreign trade policies, and developed an administrative structure for channeling capital and planning investment. The way was cleared for a rapid expansion of private industry. National capitalists were able to draw upon the technology which had accumulated during the war, earn high rates of return, and grow rapidly. This growth, switching people from agriculture to industry and from old industries to new, expanded the market for new products. American firms were thus presented with an opportunity and a challenge. Growth of foreign markets and labor supply made it attractive to invest abroad; growth of European and Japanese firms made it necessary. American firms did not invest substantially in continental Europe and Japan in the late forties and early fifties when they had the most political influence. Only after the development of the Common Market did they make their greatest effort, just as it was serious competition from Japanese firms that spurred the great drive to get into Japan. It is more competitive pressure than foresight which guides capitalists to expand. International Competition in the Seventies and Eighties The world economy now presents new opportunities and challenges. The unlimited supply of labor in Europe is drying up as they exhaust their own populations and the possibilities for importing cheap labor. Twenty years of prosperity have changed labor's expectations about consumption standards and work intensity. The greening of Europe is about to begin. A similar tendency toward labor shortage, that is, a decline in the margin between labor's production and consumption, is emerging in Japan. In the United States resistance to work seems about to reach acute proportions from capital's point of view. Firms from all these countries are looking more and more toward labor in outlying fields. In Eastern Europe, low consumption standards and a great expansion of infrastructure, health services, and education have resulted in a potentially very high rate of surplus value now bogged down in undemocratic socialism. The managers of these economies are trying, through economic reforms, to channel this surplus into the accumulation of capital and wealth. They could provide a great challenge to Free World capitals. (The threat would be greater, but different, if these countries chose socialist development.) The scramble for East-West trade and technical agreements is an attempt to change this challenge into an opportunity. China, less advanced and less amenable, also presents an important commercial and industrial challenge. (This article was written with a This content downloaded from 202.120.14.154 on Mon, 04 Jan 2016 03:31:29 UTC All use subject to JSTOR Terms and Conditions

98 Stephen Hymer perfect replica of a Parker pen-as far as I could tell-manufactured in China;it sells in Iran for 50 cents,and in Singapore for 40 cents.)The scramble for China's surplus labor is just beginning. The Third World also will be an important battleground in the coming years."Capitalist production,"wrote Marx,"first makes the production of commodities general,and then,by degrees,transforms all commodity production into capitalist commodity production"(Capital,vol.2,p. 34).The great commercial revolution in the late-nineteenth and early-twentieth century transformed the Third World into export econo- mies,based for the most part on plantation,peasant,or contract labor systems rather than free markets for capital and labor.The resulting evolution led in the forties and fifties to national independence move- ments and a great increase in urbanization,infrastructure,and education. Large absolute numbers of people (often still a small percentage of the population)became concentrated in the cities,ready,able,and willing to sell their labor power.Standards of consumption have remained low due to the large supply of this free labor,while potential productivity has increased substantially due to the government's expansion of education, urban and industrial infrastructure,and other services. Potential surplus labor is large,while the local capitalist class is weak, due to the restraints placed on it during the colonial period.Many multinationals have begun to tap this cheap labor supply,originally to displace imports,but now to expand exports to other underdeveloped countries and to the developed world.This phase of international in- vestment is just beginning,but is likely to grow rapidly when one considers the plentiful supply of labor.The big danger to the multina- tionals is the possibility of socialism or state capitalism which will prevent the transformation of commodity production into capitalist com- modity production,that is,prevent the transfer of the power of Asiatic and Egyptian kings,Etruscan theocrats,and so forth,over collective labor to the multinational capitalist. The large firms of the world are all competing for these various sources of future growth,but in an oligopolistic rather than in a cutthroat way.They recognize their mutual interdependence and strive to share in the pie without destroying it.As they do so,they come to be less and less dependent on their home country's economy for their profits,and more and more dependent on the world economy.Conflicts between firms on the basis of nationality are thereby transformed into in- ternational oligopolistic market sharing and collusion. Internationalization of Capital The second great lever of capital concentration and centralization is This content downloaded from 202.120.14.154 on Mon,04 Jan 2016 03:31:29 UTC All use subject to JSTOR Terms and Conditions

98 Stephen Hymer perfect replica of a Parker pen - as far as I could tell - manufactured in China; it sells in Iran for 50 cents, and in Singapore for 40 cents.) The scramble for China's surplus labor is just beginning. The Third World also will be an important battleground in the coming years. "Capitalist production," wrote Marx, "first makes the production of commodities general, and then, by degrees, transforms all commodity production into capitalist commodity production" (Capital, vol. 2, p. 34). The great commercial revolution in the late-nineteenth and early-twentieth century transformed the Third World into export economies, based for the most part on plantation, peasant, or contract labor systems rather than free markets for capital and labor. The resulting evolution led in the forties and fifties to national independence movements and a great increase in urbanization, infrastructure, and education. Large absolute numbers of people (often still a small percentage of the population) became concentrated in the cities, ready, able, and willing to sell their labor power. Standards of consumption have remained low due to the large supply of this free labor, while potential productivity has increased substantially due to the government's expansion of education, urban and industrial infrastructure, and other services. Potential surplus labor is large, while the local capitalist class is weak, due to the restraints placed on it during the colonial period. Many multinationals have begun to tap this cheap labor supply, originally to displace imports, but now to expand exports to other underdeveloped countries and to the developed world. This phase of international investment is just beginning, but is likely to grow rapidly when one considers the plentiful supply of labor. The big danger to the multinationals is the possibility of socialism or state capitalism which will prevent the transformation of commodity production into capitalist commodity production, that is, prevent the transfer of the power of Asiatic and Egyptian kings, Etruscan theocrats, and so forth, over collective labor to the multinational capitalist. The large firms of the world are all competing for these various sources of future growth, but in an oligopolistic rather than in a cutthroat way. They recognize their mutual interdependence and strive to share in the pie without destroying it. As they do so, they come to be less and less dependent on their home country's economy for their profits, and more and more dependent on the world economy. Conflicts between firms on the basis of nationality are thereby transformed into international oligopolistic market sharing and collusion. Internationalization of Capital The second great lever of capital concentration and centralization is This content downloaded from 202.120.14.154 on Mon, 04 Jan 2016 03:31:29 UTC All use subject to JSTOR Terms and Conditions

Internationalization of Capital 99 the credit system.The formation of a world capital market has only begun,but if its development continues at the present rate,it soon will be a factor of great significance in the world economy. The multinational corporation and the international capital market should be seen as parallel,symbiotic developments.The multinational corporation's need for short-term loans and investment arising from the continuous inflow and outfow of money from all nations,never quite in balance,has encouraged international banking and has helped integrate short-term money markets;its long-term financial requirements and ex- cellent credit rating have broadened the demand for international bond and equity capital.This provides an impetus for free international capital mobility. The Eurobond market,for example,attracts capital from all over the surface of the globe(a significant portion comes from underdeveloped countries,particularly the oil wealth of the Middle East and the war wealth of Southeast Asia),concentrates it in an organized mass,and redirects it via multinational corporations and other intermediaries back to the country from which it came.It then bears the stamp of in- ternational capital and its privileges. The development of the international capital market,in turn,gives multinational corporations increased access to the savings of many na- tions,enables larger undertakings to be formed,and fosters mergers and consolidations.Most important,it helps forge an identity of interests between competing national capitals,a vital ingredient for the survival of the multinational corporate system.We saw in the last section how international competition in the product market raised the horizons of corporations from the national to the international plane.Similarly,the international fow of private capital,through the multinational corpo- ration or alongside it,gives individual wealthholders a stake in the international capitalist system as a whole,in proportion as their income comes less and less from their home country,and more and more from the world economy at large. The overseas expansion of American firms,for example,has substan- tially diversified the investment portfolio of American shareholders in- ternationally.In addition,Americans have purchased stock in non-American corporations,or invested in land or other assets abroad, and thus further transferred their interests from the United States to the world as a whole.Given the prospects for industrial growth outside the United States and the social and political problems within the United States,this diversification is likely to continue as a sort of capital flight. At the same time,capitalists from other countries have been buying corporate stock in the United States,lending money to multinationals in This content downloaded from 202.120.14.154 on Mon,04 Jan 2016 03:31:29 UTC All use subject to JSTOR Terms and Conditions

Internationalization of Capital 99 the credit system. The formation of a world capital market has only begun, but if its development continues at the present rate, it soon will be a factor of great significance in the world economy. The multinational corporation and the international capital market should be seen as parallel, symbiotic developments. The multinational corporation's need for short-term loans and investment arising from the continuous inflow and outflow of money from all nations, never quite in balance, has encouraged international banking and has helped integrate short-term money markets; its long-term financial requirements and excellent credit rating have broadened the demand for international bond and equity capital. This provides an impetus for free international capital mobility. The Eurobond market, for example, attracts capital from all over the surface of the globe (a significant portion comes from underdeveloped countries, particularly the oil wealth of the Middle East and the war wealth of Southeast Asia), concentrates it in an organized mass, and redirects it via multinational corporations and other intermediaries back to the country from which it came. It then bears the stamp of international capital and its privileges. The development of the international capital market, in turn, gives multinational corporations increased access to the savings of many nations, enables larger undertakings to be formed, and fosters mergers and consolidations. Most important, it helps forge an identity of interests between competing national capitals, a vital ingredient for the survival of the multinational corporate system. We saw in the last section how international competition in the product market raised the horizons of corporations from the national to the international plane. Similarly, the international flow of private capital, through the multinational corporation or alongside it, gives individual wealthholders a stake in the international capitalist system as a whole, in proportion as their income comes less and less from their home country, and more and more from the world economy at large. The overseas expansion of American firms, for example, has substantially diversified the investment portfolio of American shareholders internationally. In addition, Americans have purchased stock in non-American corporations, or invested in land or other assets abroad, and thus further transferred their interests from the United States to the world as a whole. Given the prospects for industrial growth outside the United States and the social and political problems within the United States, this diversification is likely to continue as a sort of capital flight. At the same time, capitalists from other countries have been buying corporate stock in the United States, lending money to multinationals in This content downloaded from 202.120.14.154 on Mon, 04 Jan 2016 03:31:29 UTC All use subject to JSTOR Terms and Conditions

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