A Transnational Cultural Lag

The number of people working for foreign subsidiaries of multinational corporations headquartered in the United States and other industrialized countries has nearly quadrupled in the past quarter century. The increase—from 21,524,000 to 81,615,000 workers—includes only people on payrolls, not the uncounted hundreds of millions more employed by the contractors and subcontractors of the multinationals.

Those figures are reported in the latest annual report of the United Nations Conference on Trade and Development (UNCTAD), titled “World Investment Report 2008: Transnational Corporations and the Infrastructure Challenge.” As is common outside the United States, UNCTAD prefers the term transnational corporations to multinational corporations.

It’s not just a semantic quibble. Transnational expresses the realities more fully.

Take General Electric, the world’s top non-financial corporation (ranked by assets). It has 765 foreign subsidiaries or affiliates that have 164,000 employees and a total of $442,278,000,000 in assets. Thus, GE is more than a company with separate branches located in a multitude of countries (160 in all). GE is a cross-border production, marketing, and distribution system whose global presence and activities are better captured by being called a transnational. (For most of the data, click here, and scroll to table 3.)

Ditto for the estimated 79,000 transnationals in the world and the 790,000 foreign affiliates they control. Each contributes to an assortment of global production, marketing, and distribution chains, in which the foreign affiliates hold at least $68,716,000,000 in assets—33 times more than they held 25 years ago.

Those foreign affiliates also exported $5,714,000,000 in goods last year—eight times more than in 1982. The UNCTAD report does not include how much of this was intra-firm trade, or cross-border trade between two units of the same transnational corporation. Government agencies in the past have estimated that intra-firm trade accounts for 40 percent of international trade. (It follows that cross-border trade within GE and other U.S. based transnationals accounts for a large chunk of the U.S. trade deficit—a fact ignored in official U.S. news releases on trade imbalances.)

UNCTAD reports are rich in significant data that are seldom mined by the media. Very little of the above information and analysis is contained even in UNCTAD’s own news releases on the new 411-page report, which was issued on September 29.

The trends outlined in the report are examples of the magnitude of global changes in the past quarter century, changes that, together, make the 21st century global economy different in kind, and not just in degree, from the 20th century international economy.

Have the rules of this new world been adapted to that great change? That’s a fundamental question. It is not addressed in this report.

Human Rights for Workers has addressed the question before, and will again. Briefly: Yes, global rules have been improved to protect the rights of businesses and their organizations. No, they still do not cover the rights of working men and women and their organizations. The international labor market, for most of the world’s working men and women, is still a lawless jungle.

A University of Chicago sociologist, the late William Ogburn, had a term for this sort of situation: cultural lag, meaning the tendency whereby a society’s values and habits fail to keep pace with technological and other forms of significant material change. He held that cultural lag often caused social “disequilibrium” until society adjusted to the changes of modernization. That failure to adapt explains why globalization has fueled so much distrust and so many protests.

Congress will soon hold hearings on the financial debacle and the $700,000,000,000 in public money allotted to rescue Wall Street. Those hearings—and the needed curative legislation—must not ignore the transnational cultural lag and the disequilibrium it causes.


Print Page Read more!

The Lingo and the Ideas Behind the Bailout

Imagine this. You find yourself in a theater watching a drama in which the actors speak various foreign languages that you don’t understand. You’d walk out, right?.

That imaginary situation helps explain people’s reaction to the great Bailout drama. It’s all Greek to them. They’d walk out, except in this case they -– we -- can’t. We’re not in the audience but on the stage.

We are all participants, one way or another, in this real-life crisis, but few among us really understand the lingo or the ideas it hides. So what’s happening is a mystery to us. Yet we are faced with a clear warning from the highest authorities of the land: there will be dire consequences to all of us if we don’t agree to their solutions.

We are told to trust the proposed $700,000,000,000 proposal of the President and his experts from Wall Street. But these are the very guys that brung us here. No wonder people are frustrated and negative and skeptical.

At least, and at the very least, we need to get some demystification of the insider jargon of the authorities. So I was glad to see the Washington Post start to make a contribution toward filling that urgent need. On September 26 the Post business section ran two useful features:

--“A Glossary of Terms Behind the Terms Behind the Headlinez,” with definitions of 17 terms, and
--“Q&A: The Crisis and Your Pocketbook,” with answers to two questions, the second one from a homeowner who is keeping up mortgage payments but asks “Why should my tax money be used to help fix a problem I did not create?”

On September 28,I wrote the Post ombudsman, Deborah Howell, a letter of congratulations on this initiative. I resisted telling her it’s about time. In a positive mood, I suggested that both columns should run at least once a week, because the crisis won’t be over soon.

I made these other suggestions on the Glossary of Terms:

First, define more terms. For example, derivatives, credit market, bond market, securities, asset backed securities, Federal Reserve Bank, highly leveraged, credit crunch, and other terms that are being used on TV and in your paper. Make distinctions: e.g., the difference between the capital market and the credit market.

Second, continue defining the terms you've already explained, expand them, and reword some to make them more understandable. For example, liquidity. Use a definition that explains a bank chairman's statement [which the Post quoted]: "We're drowning in liquidity."

Also, provide an Internet way for readers to question your definitions and ask for others.

Regarding the Question and Answer column, I wrote:

I hope that you answer more of the questions that you encourage readers to submit to your Website [washingtonpost.com/yourmoney]. Surely there are more than two. And don't shy away from answering questions more fully. For example, your answer to question 2 neglects an important point: If Congress fails to approve a solid rescue plan, the resulting crash would hurt even families who keep up their mortgage payments, according to the Bush administration. If you don't believe the Bush administration, explain why you don't.

To be responsible, you ought to acknowledge that it was a failure of strong regulation that has brought us to the brink. The guilty should be held responsible, yes, but most of what they did was perfectly legal because no laws outlawed such actions.

I should have added these points, but didn’t:
-- The unethical, corrosive behavior is still legal.
-- And it is being taught in some of our best business schools, according to Peter Morici, economist at the University of Maryland. In fact, on his own shelves, he has a copy of a text being used, he said in a TV interview.
-- How about an investigative report on how the ideas taught in our business and economics classes contribute to financial crises, past, present, and future?

Update: A September 30 email from Ombudsman Howell said: “I’d like to put this in my weekly memo to the staff. OK?”

OK.

Further update: For a good discussion of the Bailout quandry, see the Weblog of economist Dani Rodrik here.

Print Page Read more!