Multinational corporations and capitalist development: a critical discourse in microeconomics

1. Introduction
The first multinational corporations were the East Indian Company established by the British in 1600 and the Dutch East Indian Company established in 1602 (Cf: Bowen et al, 2002; Glenn, 2007). These started as private corporations chartered by the states of their respective countries. These early multinational corporations were not only fully supported by their states and administered other lands under their countries’ flags, when the Dutch company ran into bankruptcy and would be liquidated, its debts were socialized, i.e. borne by the Dutch state, while its profits had always been private (Cf: Ricklefs, 1991).
Since their not so humble beginnings four hundred years ago, multinational corporations have been a key feature of capitalist development as it spreads its fangs across the world. The globalization discourse in the past few decades has however given added fillip to the need for a deepened understanding of what multinational corporations are, what they do and how they fit into the framework of capitalism as a whole.
This is not surprising and is not just about the “discourse” of globalization. The “global reach” of multinational corporations represents the arm with which capital breaks down all walls, moulding the entirety of the world in its image as Marx and Engels asserted in the Communist Manifesto. It is pertinent thus, to examine if despite the century and a half separating today’s globalization from the Communist Manifesto, multinational corporations represent a qualitatively different organization from the most minute of firms.
In this essay, I intend to contribute to the critical discourse on multinational corporations and capitalist development, within dimensions of the discipline of microeconomics. The thesis of the paper is hinged on an assertion that multinational corporations epitomize the essence of capitalist development. Despite the complexities of their forms, processes, operations and relations, they are and remain the firm theatre for the production and reproduction of the socioeconomic relations for the exploitation of labour
I do thus present the following propositions:
• Capitalism is of necessity a multi/transnational phenomenon, the relations of production and exploitation inherent in it operate essentially within the same locus at both its unit level and within the transnational reality of its materiality
• Multinational corporations are not just a peculiar feature of capitalism and capitalist development at a particular point in time. They might evolve and differ in some aspects from other types of firms, but remain essentially typical in their origins, determinant dynamics and goals
• The “free market” is a myth; capitalist development rests implicitly on power relations situated within administrative structures which rather become explicit in the market, as against originating from within it.
The implications of our point of departure impinge on the perspective of multinational corporations expansion in the age of capitalism’s neoliberal globalization which situates this in structural changes such as the falling transaction costs associated with transportation and communication, dominance of new technologies in the production process and the development of new financial instruments and a concomitant retreat of the state (see Strange 1996).
Multinational corporations continued expansion, dominance and role as the captains of the capitalist economy rests squarely within the logic of capitalist production’s trend towards monopoly and corporate-organized production and trade.
In the light of the above, the approach taken by this study is that of a microeconomic analysis situated within the post-sceptic paradigm on globalization (see Martell 2007) which takes note of the factual reality of globalization, without losing sight of the fact that with capitalist development, as an old axiom goes: “the more things change the more they remain the same”.
2. Operational definition of MNCs
It might be necessary to make a clarification on the term “multinational corporations”, which is used throughout this essay before proceeding with its analysis. The term “multinational corporations” was coined by the Harvard Multinational Enterprises Project mid-last century and soon became largely accepted in describing what authors like Penrose, and Vernon had described earlier as “international corporations” (see O’Brien and Williams, 2007). In the 1970s and subsequently with both the preference of the United Nations and the spread of neo-Gramscian perspectives on International Political Economy, the term transnational corporation, became popular in describing firms which operated in more than one country (see for example, Sklair, 2002). In the cause of this essay, for the avoidance of doubts we shall use the term multinational corporations, to refer to this category of firms which to borrow from Dickens (1994) have “the power to coordinate and control operations in more than one country, even if it does not own them”. In doing this we take note of but choose to avoid the “unsettled disputes” on possible differences that “distinguish between MNCs, global enterprises, international business organizations, transnational corporations and so on” identified by Persaud (1980,15), due to this analysis’ limitations of space and time.
3. MNCs as firms
Multinational corporations are first and foremost firms. They are administrative organizations of persons with the primary purpose of valorizing in-puts, towards appropriating profits accruing from the sales of the commodities or services that they produce in the market.
Penrose in her seminal work on the growth of the firm considers the possibility that large firms might need to be considered as separate species even if of the same genus as the traditional smaller business firm dominant in advanced capitalist economies before the middle of the 20th century (1959, 19). Her position however does not vitiate the fact that firms they still are, even with such species-complexities.
Chandler would further the horizons of this perspective stressing the importance of scale and scope as determinant features of industrial capitalism. Not surprisingly it could be argued, he thus identifies “organizational capabilities” as the “core dynamic” of the firm in this form of the capitalist firm (1994, 593 – 595).
The firms with the largest scope and scale, of course, are the multinational firms. Their organizational capabilities within and across the frontiers of states can not be disputed. Indeed, it is not our intention to do this. Rather, it does buttress our position that capitalism and capitalist development can not be understood strictly within the paradigm of the free market which multinational corporations and the neo-conservative ideologues of neoliberalism hold forth as a mantra.
The Schumpeterian argument of “creative destruction” where competition over innovation and not a market-driven, competition over prices prevails gives an inkling to our position (Schumpeter, 1942). Quite instructive though in buttressing the fact that a world dominated by multinational corporations is not genuinely one of a “free market” and indeed that with the capitalist firm as the site of production of commodities, the market is constructed can be averred from Richardson’s perspective in “Organization of Industry” (1972).
As Richardson points out, the perspective of firms as “islands of planned co-ordination in a sea of market relations” is quite misleading . He further rightly argues that “firms are not islands but are linked together in patterns of co-operation and affiliation” (p. 895). Planned coordination as he points out “does not stop at the frontiers of the individual firm but can be effected through co-operation between firms” (Ibid).
Considering the wealth MNCs control across the whole world, a picture thus arises, whence the perspectives above are taken into consideration. This is a picture of the co-operation of the personifications of capital across borders with the market as being subordinate to the aims of this co-operation. The aim of this co-operation is quite clearly that of enhanced and enhancing of profits. The market is thus not the invisible divine god it is claimed to be. It amounts to nought but the hand-maiden for a mystified administration of an ever-concentrating regime of capital.
The transnationalizing firm
We have looked at multinational corporations from the general perspective of being a firm-organization. This might not adequately address the questions of why and how, some firms transnationalize, while others do not.
Peter Dickens (ibid) carries out an incisive study on “transnational corporations” identifying them as “the primary ‘movers’ and ‘shapers’ of the global economy” (p. 106). Pointing out the significance of transnational corporations not only in shaping the contemporary global economy, but precisely because of that in undermining the autonomy of nation-states; he presents possible macro and micro level explanations for why firms “transnationalize”. We shall be concerned here with the possible micro-level propositions made, in line with the thrust of our analysis.
The micro level approaches which he engages with, focus on the firm. The seminal works of Hymer (1976) and Dunning (2003) served as the substrate for his analysis.
Hymer reveals the fact that market imperfections which firms with the requisite resources to exploit can find is actually at the heart of their transnationalizing quest. This for us is indeed very instructive as it runs counter to the oft held litany of governments in the global south that seek foreign direct investment, supposedly on the altar of the market, while what they actually tend to do is to bend the supposed freedom of the market in the interest of multinational corporations.
The “eclectic” paradigm of Dunning, who sees the possible challenges to global capitalism as moral and is concerned with making it a good phenomenon, is nonetheless insightful as well. It presents three conditions as being conditional for a firm to transnationalize. These are: ownership-specific advantage; inherent internalization of such advantage such that it is best wielded directly by the firm as against leasing it for example; location-specific-factors. A cursory look at each of these shows that they boil down not to a submission to the market, but rather to their providing interstices within the market framework within which extra-market powers and capacities of such concerned firms are best utilized towards the valorization of capital.
The multinational corporation’s oligopolistic characteristic also fuses with an increasing dominance of finance market in maintaining capitalist imperialism as the highest stage of capitalism (see Lenin, 1916). This macro might of the multinational corporations economically which is translated into political might would amount to nought if MNCs do not wield much more than only power at the micro level. The continued exploitation of the labour of the immense majority of the population by an infinitesimal minority cannot be wrought without the forging of hegemony at the workplace.
Burawoy (1982) gives a succinct analysis of how with the age of monopoly capitalism, this phenomenon that inheres in the firm, becomes the more strengthened. A closer look at this might be beyond the purview of this analysis. The crux of his position which we concur with, however, is in highlighting the fact that the production process not only results in the production of use value and valorization but as well manufactures the consent of the working class who see their fates as being tied in with the continued existence of the firm and thus capitalism as a going concern.
MNCs comprising a distinct set of transnational processes, activities and structures in the labour process subordinated to capital accumulation and the profit motive of the bourgeoisie, but being basically an epitome of the fundamental category of the production relations within the micro-unit wherein such relations abide, i.e. the firm, thus become an engine room for transnationalizing consent. This however also makes them sites for contestation in a global world by counter-hegemonic forces who seek, a brave new world
Conclusion
In this essay, I have argued basically that while multinational corporations might in size and complexity be considered as variants of sorts, of non-MNC capitalist enterprise, the same logic and interests binds it. This line of argumentation never the less does not lose sight of the variants of types within the fold of MNCs as a category, but rather abstracts from this towards its micro-analytical pursuit.
The aim of the analysis has been to underscore the continuity within the not merely seeming, but indeed changing realities, of our present age of globalization which MNCs are “primary movers and shakers” in and of. This qualitative continuity in scope and scale, geographically and organizationally is one of the continued and indeed enhanced exploitation of labour by capital and the organization of the labour process within and across borders to engender this.
The analysis’ contribution to micro-theory has been largely economic but notes the sociological dimensions that make such economic materiality possible within an equally micro-level operationalizing of the theory of hegemony. With this we summarily captured both the most pervasive danger of the multinational firm to humanity and the hope that spurts from its transnationalizing additive feature on its essential sameness to capital’s primary unit of domicile and expansion, the firm.
Multinational corporations as firms, in summing up we must say, present the most visible personification of capital for organized labour and indeed all forces that believe another world is possible to confront in making such world come to birth, building from our communities, the shop-floor of the firm and to the transnationalized global world.

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