448 AMERICAN ECONOMIC ASSOCIATION This contradiction between multinational cor- liberal policy towards private capital,movements porations and nation states has important bearing and mergers that created the multinational indus- on the efficiency of the multinational corporation. trial structure. The main problem,stated most simply,is as fol- lows:if national power is eroded,who is to per- VIl.Conclusion:Some Subjective Evaluations form the government's functions?For example,if This essay has presented a list of advantages nation states,because of the openness of their and disadvantages of multinational corporations. economy,cannot control the level of aggregate Assuming there are no important omissions and economic activity through traditional monetary that each point taken by itself is valid,the ques- and fiscal policy instruments,multinational agen- tion arises as to what weights should be attached cies will need to be developed to maintain full to the various arguments.One simple summation, employment and price stability.Yet such organi- offered here without proof,is as follows:The zations do not exist at present,nor can they be large corporation illustrates how real and impor- quickly built.Either one must argue that the tant are the advantages of large-scale planning, Keynesian problem has somehow been solved by but it does not tell us how best to achieve wider the creation of the multinational corporation domains of conscious coordination.Broadly (along with a host of other problems)or else one speaking,there are two main directions in which must agree that it is not feasible to have interna- one can proceed.Multinational corporations inte- tional business integration via direct foreign in- grate one industry over many countries.The al- vestment proceeding at a much faster rate than ternative is to integrate many industries over one political integration.Yet,this seems to be pre- country and to develop noncorporate linkages be- cisely what is happening.Most of the large Amer- tween countries for the free fow of goods and ican firms have already staked out their claims in more important,the free flow of information. the European market and many of the leading The advantage of the second direction is that it European firms are now rapidly entering foreign keeps the economy within the boundary of the markets,including those of the United States.A polity and the society.It thus causes less tension predominance of multinational corporations in the and creates the possibility of bringing economic North Atlantic economy seems therefore to be a power under control by removing the wastes of fait accomli.Government cooperation is not oligopolistic anarchy.This would allow more growing at anywhere as rapid a rate.If serious scope for solving the two major economic prob- problems arise,governments are likely to reassert lems of today,affluence and poverty,than the their power and attempt greater regulation and first alternative.The trend,however,is clearly in control over the business enterprises within their the direction of the first alternative.The coming jurisdictions.Economists will rightly point out age of multinational corporations should repre- that these restrictions create inefficiencies in the sent a great step forward in the efficiency with allocation of the economic resources.It is impor- which the world uses its economic resources,but tant,however,to realize the role played by a too it will create grave social and political problems and will be very uneven in exploiting and distrib- tinationalism and the problems it causes,see Stephen uting the benefits of modern science and technol- Hymer and Robert Rowthorn,"Multinational Cor- ogy.In a word,the multinational corporation re- porations and International Oligopoly:the Non- American Challenge,"in C.P.Kindleberger,ed. veals the power of size and the danger of leaving The International Corporation (M.I.T.Press,1970). it uncontrolled.448 AMERICAN ECONOMIC ASSOCIATION This contradiction between multinational cor￾porations and nation states has important bearing on the eflSciency of tbe multinational corporation. The main problem, stated most simply, is as fol￾lows: if national power is eroded, who is to per￾form the government's functions? For example, if nation states, because of the openness of their economy, cannot control the level of aggregate economic activity through traditional monetary and fiscal policy instruments, multinational agen￾cies will need to be developed to maintain full employment and price stability. Yet such organi￾zations do not exist at present, nor can they be quickly built. Either one must argue that the Keynesian problem has somehow been solved by the creation of the multinational corporation (along with a host of other problems) or else one must agree that it is not feasible to have interna￾tional business integration via direct foreign in￾vestment proceeding at a much faster rate than political integration. Yet, this seems to be pre￾cisely what is happening. Most of the large Amer￾ican firms have already staked out their claims in the European market and many of the leading European firms are now rapidly entering foreign markets, including those of the United States. A predominance of multinational corporations in the North Atlantic economy seems therefore to be a fait accompli. Government cooperation is not growing at anywhere as rapid a rate. If serious problems arise, governments are likely to reassert their power and attempt greater regulation and control over the business enterprises within their jurisdictions. Economists will rightly point out that these restrictions create inefficiencies in the allocation of the economic resources. It is impor￾tant, however, to realize the role played by a too tinationalism and the problems it causes, see Stephen Hymer and Robert Rowthorn, "Multinational Cor￾porations and International Oligopoly: the Non￾American Challenge," in C. P. Kindleberger, ed.. The International Corporation (M.I.T. Press, 1970). liberal policy towards private capital, movements and mergers that created the multinational indus￾trial structure. VII. Conclusion: Some Subjective Evaluations This essay has presented a list of advantages and disadvantages of multinational corporations. Assuming there are no important omissions and that each point taken by itself is valid, the ques￾tion arises as to what weights should be attached to the various arguments. One simple summation, offered here without proof, is as follows: The large corporation illustrates how real and impor￾tant are the advantages of large-scale planning, but it does not tell us how best to achieve wider domains of conscious coordination. Broadly speaking, there are two main directions in which one can proceed. Multinational corporations inte￾grate one industry over many countries. The al￾ternative is to integrate many industries over one country and to develop noncorporate linkages be￾tween countries for the free flow of goods and, more important, the free flow of information. The advantage of the second direction is that it keeps the economy within the boundary of the polity and the society. It thus causes less tension and creates the possibility of bringing economic power under control by removing the wastes of oligopolistic anarchy. This would allow more scope for solving the two major economic prob￾lems of today, affluence and poverty, than the first alternative. The trend, however, is clearly in the direction of the first alternative. The coming age of multinational corporations should repre￾sent a great step forward in the efficiency with which the world uses its economic resources, but it will create grave social and political problems and will be very uneven in exploiting and distrib￾uting the benefits of modern science and technol￾ogy. In a word, the multinational corporation re￾veals the power of size and the danger of leaving it uncontrolled