An atlas of multinationals throws an unusual light on globalization

Nayan Chanda, Editor, Yale Center for the Study of Globalization, New Haven

Since the massive protests that disrupted the World Trade Organization's meeting in Seattle in 1999, not a single international gathering on trade issues has convened without being dogged by protesters condemning globalization. Everyday newspapers report how globalization is changing people's lives. But what is this all-powerful globalization? The dictionary defines it as "an act of making things global in scope and action".

But who are the actors? Who exactly is "making things global in scope"? Scholars have debated endlessly about the phenomenon that has emerged as one of the most contested in our epoch. Finally there is a book -- Global Inc -- that takes us under the skin of the global economy, offering an X-Ray-like image of the sinews and arteries of multinational corporations. This is not to say multinational corporations are the principal force behind globalization, but the extent of their reach and power certainly makes them one of the most important actors.

The inspiration behind this examination of the global economy, the MIT historian Bruce Mazlish, came up with the idea of the book one day in 2000 when he read a UN report on the power of the modern day Leviathan -- the multinationals. It said that of the 100 largest economic entities in the world, 53 were multinational corporations (MNCs). Astoundingly, these private companies were wealthier than over 120 nation-states.

Given their tremendous influence on economies, politics, and culture worldwide, he concluded, getting a true grasp on globalization would depend on understanding the nature, historical roots, and functioning of MNCs. Mazlish, who has been leading the New Global History initiative, set about to organize a conference resulting in, among other things, the book under review -- a marvelously produced atlas with short explanatory articles put together by business executive Medard Gabel and economic geographer Henry Bruner.

The phenomenon of globalization has shrunk the world and made it increasingly interconnected and interdependent over the millennia. Driven by technological and economic forces, globalization gathered momentum in the fifteenth century with Columbus' discovery of the New World.

But it was the emergence of the world's first multinationals -- the British East India Company (in 1600) and the Dutch East India Company (in 1602) that truly launched the process that has matured into the current economic integration of the world. With the rapid evolution of transportation technology from horse-drawn carriages to sailboats to container ships, the speed and volume of exchange grew dramatically, linking the world ever-closer together.

As the authors put it, "globalization and global corporation are as interrelated as the chicken and the egg." Without technological advances, corporations would not have been able to spread as far and as wide as they have. And without the resources and the drive to use these technologies, the pace of globalization might have been much slower.

From a mere three thousand in 1990 the number of multinationals has grown to over 63,000 today. Along with their 821,000 subsidiaries spread all over the world, these multinational corporations directly employ 90 million people (of whom some 20 million in the developing countries) and produce 25 percent of the world's gross product. The top 1,000 of these multinationals account for 80 percent of the world's industrial output. With its US$210 billion in revenues, ExxonMobil is ranked number 21 among the world's 100 largest economies, just behind Sweden and above Turkey.

Along with some amazing numbers -- portrayed in beautiful maps and charts -- about the nature, reach, and power of the multinationals, this book helps to demolish many misperceptions. Would you guess which country in the world is the home to the largest number of multinational corporations? It is not the U.S., Britain or Japan.

Some 9,356 multinationals have chosen Denmark as their home, followed closely by Germany Sure, the wealthiest ones (93 out of the top 100) are still located in the U.S., Japan, and Europe, but the automatic assumption that big multinationals are American is simply no longer true. In 1962 almost 60 percent of the world's top 500 multinationals were American but by 1999 American corporations accounted for only 36 percent of the total.

Given the power and reach of such corporations, one would imagine them to be large entities. However, the authors say that most of the 63,000 firms that operate internationally employ less than 250 people, and some service companies have even fewer workers.

After the collapse of the Soviet Union and expansion of the European Community, there has been a phenomenal growth in small companies doing business across national borders. Many of the newly emerging economies have surpassed the U.S. in the number of multinationals that call them home. Compared to 3,387 corporations in the U.S., some 7,460 MCCs are headquartered in South Korea, and 4,334 in Japan. With its $485 billion in assets, the largest multinational of the developing world is Hong Kong- based Hutchison Whampoa.

The authors note that the multinationals have had some beneficial effects, even if they are "the unintentional by- products of multinational corporations' profit-maximizing activities." They have paid increasing tax revenues to the government of countries they operate in, provided employment opportunities, offered goods and services that were previously unavailable, and, above all, brought in capital, technology and management techniques.

But the list of the negative impacts of their operations is also long. One of the areas where the power of the multinationals is felt most is in the realm of culture. Since MNCs dominate media production and distribution -- just six corporations sell 80 percent of all the recorded music worldwide -- they introduce ideas and images that some governments and religious groups fear may destabilize their societies.

McDonald's -- which boasts 29,000 restaurants in 120 countries -- has been accused of promoting an unhealthy diet, although the authors point out that the company has varied its offerings according to local tastes, serving all-kosher meals in Israel and lamb-based Maharaja burgers in India.

The impact of the multinationals, however, goes much further than fashion and food. Because of their clout in generating jobs and revenues, governments in the developing world compete to win their investment.

In the process, tax rates, social policies, labor relations, accounting practices, and a whole lot of other things get determined by the concerns of multinationals. "Given the enormous influence that large multinational corporations wield in today's society through contributions to political campaigns, "influence peddling", and outright bribery in many parts of the world," the authors say, "it would not be far-fetched to say that the power of the large corporation could also be a threat to the democratic process."

One can only hope that the globalization of telecommunications and the media that multinationals have helped to bring about will also provide the means for critics worldwide to bring attention to the problems created by the multinationals' drive for profit.

This article appeared in YaleGlobal Online, (www.yaleglobal.yale.edu) a publication of the Yale Center for the Study of Globalization, and is reprinted by permission.