Michael Rowbotham - from Goodbye America! p. 154 ff

[N]o analysis of globalisation would be complete if it did not offer an explanation for the astonishing dominance of corporate business in the modern world economy. The extensive marketing, cross traffic of goods and remote production of goods that could be produced more locally all point the finger at one kind of commerce - the multinational corporation.

There are two principal ways in which a debt based financial system presents conditions that allow multinationals to prosper and drive out more efficient competitors. Everyone knows it is cheaper to buy good quality products that last longer. But despite the fact that modern economics could produce good quality, durable products, and although consumers naturally prefer them, in an economy riddled by debt, low price goods enjoy a marked sales advantage. This spells success for mass production and big business.

Mass production naturally enjoys economics of scale. But there are, or should be, marked diseconomies of scale that ensure a balance between mass production and small/medium sized businesses. More labour intensive methods are better able to supply what people actually want in terms of quality and durability, and should therefore be preferred by consumers. Small/medium sized commerce can also be more distributed geographically and hence carry lower costs associated with transport and distribution. It also offers a more accessible, often more attractive work environment and should therefore be favoured by employees.

But although many mass produced products lack quality, mass production does allow goods to be produced at very low unit cost. The need to transport and distribute mass produced goods obviously raises costs, but generally, mass-production and bulk transport can secure a price advantage over production on a smaller scale. The choice is then with consumers - lower prices or better quality?

In the modern, debt based economy, there is only one winner. Consumer decisions over price, quality and what they can afford inevitably favour mass produced goods, because lack of effective demand, or lack of purchasing power, places financial pressure on consumers to purchase low priced products. The aggregate of consumer expenditure decisions favours mass produced goods and services - precisely those products offered by large, centralised businesses such as multinationals. Industry thrives and changes accordingly.

Once low price becomes the dominant consideration for consumers, the green light is given to a perpetual decline in quality and durability as industry actively seeks to cut costs, increase output, transport in bulk and undercut the opposition. The term 'improved methods', rather than referring to changes that bring about improvements to the actual product, is now virtually synonymous with increasing output at lower unit cost and a declining standard of product. The decline in durability and consumer satisfaction in everything from new houses, cars and household goods to foodstuffs and financial services is well documented. This bias in favour of cheap, mass produced goods constitutes a major aberration, or malfunction, of the free market pricing mechanism. It has ushered in an era of competitive cheapness, declining quality and durability; of goods that require constant replacement and create mass produced consumer dissatisfaction.

Mass production naturally requires large, centralised commerce. Supplying the dominant market in low cost goods, big business slowly squeezes out small/medium decentralised firms, both by direct competition and by gradual collapse of the networks that supply their raw materials and distribute their finished goods. Thus corporate big business flourishes with its culture of bulk manufacture, bulk growing, bulk supply, bulk delivery and even bulk retail.

The advantage to big business does not stop with the defect in pricing that unduly favours cheap mass produced goods and services. The pressure to change and adapt, as well as mass produce, requires research and development facilities - again larger companies are better able to compete.

Size helps multinationals access capital, since they are generally able to obtain credit more easily, at lower rates of interest and on more advantageous terms. Size also grants multinationals an advantage over smaller businesses when it comes to withstanding the pressure of debt. Banks and other lending institutions are less likely to foreclose on large debts to Big Business than they are on small business debts. It has frequently been observed that, if the standards of accountancy applied to small businesses were applied to corporations, many would be immediately wound up. The old dictum, "if you owe the bank £100 it's your problem; if you owe the bank £1,000,000 it's the bank's problem" is now part of our investment culture.

Size has become an essential survival strategy for international businesses. Competition from similar corporations generates an impetus towards growth, both as a form of commercial defence and aggression. These corporations have often come into existence in the first place by mergers and acquisitions of related or competitor companies. This process has now reached a stage at which companies cannot rest for a second. If their share value falls or if they become financially over exposed, if they are too small or if they are simply too successful, the odds are that they will be the subject of a predatory take over. And what is the best way to ensure that you are not the subject of such a take over? It is to become predatory yourself, adopt an aggressive, acquisitive, expansionary policy

Multinationals are actually the creations of debt finance; the culmination of the unfair advantage given to big business in a debt economy; the ultimate in mass production, cost cutting, employment shedding, bulk transport, extensive marketing, constant change, excessive centralisation and poor product quality and durability.

In the ruthlessly competitive, brutally commercial culture of the world market any opportunity to secure an advantage will be taken. This includes the opportunity to capitalise on the desperate financial position of the Third World. Indeed. buying out the Third World is not only the best corporate investment opportunity ever, it is an opportunity that must be taken - for if one company does not, its competitors surely will.

Developing nations, desperate for foreign investment, are driven to compete to attract the multinationals. The pressure of debt and the low factor prices that prevail in those countries provide multinationals with vistas of valuable, little exploited and deeply undervalued resources, including labour that is little more than slavery. Multinationals are able to obtain cheap raw materials, cheap labour and low priced commercial assets; they can expect (or demand) low taxes and lax labour and environmental regulation. Everything multinationals need to set up cheap manufacturing outposts for export to industrialised nations using bulk transport strategies is readily available. Meanwhile, debtor nations are desperate for foreign investment, convinced (after the blind alley of debt) that this offers a path to successful development.

That multinationals operate in this way, capitalising on the 'development gap' between the wealthy and Third World nations, is well understood. But it is not usually appreciated that there is a tie in between the debts of Third World nations and those of the wealthy nations; a linkage that multinationals turn to exceptional advantage. This linkage offers further insight into the persistent decline in the quality and durability of goods and services, and emphasises that globalisation is an extension into the world economy of trends already witnessed within national economics.

Investment in debtor nations provides multinationals with the opportunity to mass produce goods for export from the Third World to the industrialised nations at very low unit costs. Although the cost of transport raises the price of these goods, they are often sufficiently cheap to undercut producers in the more wealthy nations.

It should not automatically be accepted that, just because these goods carry lower price tags, they ought to succeed in finding a market in wealthy industrialised nations. These products have, or should have, a marked disadvantage. Corporate Third World production is mass production for mass marketing; grown in bulk, harvested in bulk, manufactured, processed, assembled and transported in bulk. Many such goods, services and foodstuffs are of pronounced low quality, yet they still sell in the industrialised nations.

This is where the astonishing level of 'wealthy nation' debt comes into play. The excessive levels of national, private and commercial debt in industrialised nations create a market in which consumers and the retail networks gravitate towards low price goods. Thus corporate production in the Third World of low-price, poor quality products finds a ready market.

The apparent preference of the world's consumers for junk - junk food, cars, furniture, electrical goods, kitchen utensils - is just that. An apparent preference. The cheap, throw away culture dominating the world is the inevitable product of two factors - first, the price/value discrepancy between Third World and industrialised nations and, second, the undue advantage granted to cheap goods in a debt based economy. Multinationals are simply business concerns that take full advantage of, and respond to, these two factors.

This analysis shows just how essential Third World debt is to multinational success and also to globalisation. It also highlights the cost to the wealthy nations of the rising dominance of multinationals. These business empires succeed not because they supply what consumers want, but what they can afford in a debt-based economy. Multinationals thereby drive out more resource efficient, localised, quality oriented commerce.

The commercial success of multinationals is not any measure or reflection of true productivity, or efficient use of resources. Their success is due to their ability to take advantage of the gaping financial disparities between nations. Sheer size gives them the power to hold peoples and nations to ransom; to enforce low wages and extract concessions and thus keep production costs to an absolute minimum, to find a world market for the resultant goods at a selling price which disguises the cumbersome inefficiency of their operations and covers the gross wastage of transport; and to externalise and deflect the widespread social, employment and environmental consequences of their activities.

Multinationals take advantage of the financial conditions within the individual wealthy and in Third World nations, and the world economy as a whole. Their success is thus a financial success. Corporations are financially efficient in a world where finance rules. But in terms of resources - natural and human - they are grossly wasteful and destructive.