Corporations Are Not Human : Not Even Close ---Episode 43

  COMPETITION DOES NOT EXIST IN INTERNATIONAL 
                                                 MARKETS


   The public is encouraged to believe that the corporate titans of Japan, North America, and Europe are battling it out toe-to-toe in international markets. This image is increasingly a fiction that obscures the extent to which a few core corporations are strengthening their collective monopoly market power through joint ventures and strategic alliances with their major rivals. 
   For example, American computer giants IBM, Apple Computer, and Motorola formed an interfirm alliance to develop the operating system and microprocessor for the next generation of computers. In 1991, Apple Computer turned to the Sony Corporation to manufacture the cheapest version of its PowerBook notebook computer. 
   Toyoto struck a deal with General Motors to produce Toyoto cars in the United States for sale in Japan. General Motors now owns 37.5 percent of the Japanese auto manufacturer Isuzu, which produces automobiles for sale under the GM and Opel brand labels. Chrysler has had an ownership stake in Mitsubishi, Maserati, and Fiat. Ford Motor Company has a 25 percent stake in Mazda and names three outside directors to the Mazda board. Ford and Mazda jointly own a dealer network in Japan, cooperate in new product design, and share production techniques. The Economist suggests the following exercise : 

     Take a really big international industry such as cars, in which the products are complicated and fairly expensive. Write down all the manufacturers' names (there are more than 20 large ones for cars) along the four sides of a square. Now draw lines connecting manufacturers that have joint ventures or alliances with one another, whether in design, research, components, full assembly, distribution or marketing, for one product or for several, anywhere in the world. Pretty soon, the drawing becomes an incomprehensible tangle ; just about everyone seems to be allied with everyone else. And the car industry is not an exception. It is a similar story in computer hardware, computer software, aerospace drugs, telecommunications, defense and many others. 

   Cyrus Friedheim, vice-chairman of Booz, Allen, & Hamilton, a management consulting firm, foresees an economic future dominated by what he calls "the relationship-enterprise," a network of strategic alliances among firms spanning different industries and countries that acts almost as a single firm. He points to the discussions among Boeing, members of the Airbus consortium, McDonnell Douglas, Mitsubishi, Kawasaki, and Fuji about cooperating on the joint development of a new super-jumbo jet and to the group formed by the world's major telecommunications firms to provide a worldwide network of fiber-optic underwater cables. According to Friedheim, these corporate juggernauts will dwarf existing global corporate giants, with individual relationship enterprises reaching total combined revenues approaching $1 trillion by the early 21st century, making them larger than all but the six largest national economies. 
   The world's corporate giants are creating a system of managed competition by which they actively limit competition among themselves, while encouraging intensive competition among the smaller firms and localities that constitute their periphery. The process forces the periphery to absorb more of the costs of the "value added" so that the core can produce greater profits for its own insatiable master, the global financial system. 

                 CENTRALLY MANAGED ECONOMIES

   The scale of the concentration of economic power that is occurring is revealed in the statistic that of the world's hundred largest economies, fifty are economies internal to corporations. The aggregate sales of the world's ten largest corporations in 1991 exceeded the aggregate GNP of the world's hundred smallest countries. General Motors' 1992 sales revenues ( 133 billion ) roughly equaled the combined GNP of Tanzania, Ethiopia, Nepal, Bangladesh, Zaire, Uganda, Nigeria, Kenya, and Pakistan. Five hundred fifty million people inhabit these countries, a tenth of the world's population. 
   The world's 200 largest industrial corporations, which employ only one-third of one percent of the world's population, control 28.3 percent of the world's economic output. The top 300 transnationals, excluding financial institutions, own some 25 percent of the world's productive assets. The combined assets of the world's fifty largest commercial banks and diversified financial companies amount to nearly 60 percent of The Economist's estimate of a $20 trillion global stock of productive capital. The global trend is clearly toward greater concentration of the control of markets and productive assets in the hands of a few firms that make a minuscule contribution to total global employment. The giants are shedding people but not control over money, markets, or technology. 
   This concentration of economic power in relatively few corporations raises an interesting contradiction. Corporate libertarians regularly proclaim that central economic planning is grossly inefficient and unresponsive to consumer preferences. Yet successful corporations maintain more control over the economies defined by their product networks than the central planners in Moscow ever achieved over the Soviet economy. Central management buys, sells, dismantles, or closes component units as it chooses, hires and fires people at the stroke of a pen, moves production units around the world at will, decides what revenues will be given up by subordinate units to the parent corporation, appoints and fires managers of subsidiaries, sets transfer prices and other terms governing transactions among the firm's component organizations, and decides whether individual units can make purchases and sales on the open market or must do business only with other units of the firm. Unless top management chooses to invite dissenting views, its decisions on such matters are seldom open to question or review by any subordinate person or unit. 
   Although no global corporation yet manages a planned economy on the scale of the former Soviet economy, they are coming closer. The 1991 sales of the world's largest diversified service companies (all of which happen to be Japanese) were roughly equivalent to the entire 1998 gross domestic product (GDP) of the former Soviet Union. Cuba, with a GDP of $26.1 billion, now ranks seventy-second among the world's centrally managed economies ; the first seventy-one are all global corporations. Tiny North Korea doesn't even make the list of the world's 500 largest centrally managed economies. 
   It is far from incidental that, in its internal governance structures, the corporation is the most authoritarian of organizations and can be as repressive as any totalitarian state. Those who work for corporations spend the better part of their waking hours living under a rule that dictates their dress, their speech, their values, their behavior, and their levels of income --- with limited opportunity for appeal. With few exceptions, the corporation's employees can be dismissed without recourse on almost momentary notice. The current "lean and mean" transformation of the corporation seeks to extend this authoritarian rule beyond the boundaries of the corporation itself over far greater networks of organizations in ways that allow the corporation to consolidate its control while reducing its responsibility for the well-being of any member of the network.