Academics From Canada

"Today, multinational business is under attack by socialist and other critics on a wide spectrum of issues. New charges that multinational firms corrupt the officials of foreign governments have been added to the litany of criticism Many governments, especially those of the Third World, have taken or threaten to take punitive and restrictive actions against foreign companies. Such measures would impede international investment, slow down economic progress, and damage the economic welfare of all countries concerned."

"The revelation that American companies were making payments to foreign political parties and government officials touched a sensitive nerve in the post-Watergate era. Although most knowledgeable people were aware of the bribery of domestic government officials, they felt more keenly about the payment of millions of dollars to foreign officials."

"Since 1950, American enterprises have invested in virtually every part of the world. Their annual exports in 1976 were more than $117 billion, and their foreign investments in book value were about $133 billion. This unparalleled international movement of goods, capital, technology, and managerial resources has had both successes and failures, but the former have by far outweighed the latter."

"The African nations that won their independence from the European colonial powers are, for the most part, uneasy confederations of tribes that are traditional enemies. The primary loyalty of their citizens is not to the state, but to the tribe and its chiefs. The political objective of the dominant tribe is to capture the country’s economic power base, which is the government, and, once it has been seized, to hold on to it."

"During the decade of the 1970s, the print and electronic media emerged as an institution comparable in power and influence to the three coordinate branches of government. Shielded by the First Amendment to the U.S. Constitution, the press has become almost invulnerable to the criticism and legislative curbs that limit the power of such other social institutions as business or government. Congressmen, who depend upon the radio and television networks for national visibility, are loath to level criticisms at the media."

"World War I created a huge drain on U.S. oil. Fear of inadequate domestic reserves caused the U.S. government to urge its nationals to develop foreign sources and to support them in this effort. But American oil companies were unable to obtain exploration concessions in the Middle East and other areas because of the political influence of the British, Dutch, and French empires. The United States called for an ‘open door’ policy. Ultimately, after prolonged and stubborn British opposition, an agreement was made in 1928…"

"Before World War II, the United States Gulf and the Caribbean were the foreign world’s primary sources of crude oil. Eastern Hemisphere consumption was relatively small and yet its crude oil production supplied less than half of its petroleum needs."

"A foreign oil industry consisting mainly of private multinational companies competing in open markets has unique values to the Western World. Profit-motivated firms have proven to be better adapted to accept long-term risks and to allocate investment multinationally than have politically motivated government agencies."

"The competition of government oil companies with private enterprises was often buttressed by monopoly privileges, public preferences, low-priced capital, special tax benefits, or freedom from the commercial obligation to earn a normal return on investment. These government companies, regardless of whether they had complete or partial monopolies of oil production and trade in their own countries, were part of the structure of the foreign oil industry. They could not be dismissed as ‘noncompetitive’ with private oil enterprises."

"One hallmark of a competitive market is that new firms are able to—and do—enter it… The key economic consideration is the relative difficulty of overcoming the barriers to entry, which can be measured by the advantages of established firms in the industry over potential entrants. In general, the relative difficulty of entry into any industry is determined by the amount of capital required for an efficient scale of operations,…"

"The postwar burgeoning of oil enterprises throughout the world wrought important changes in the structure of the foreign oil industry. Competitors multiplied, concentration of the industry was reduced, and the market positions of the ‘seven largest’ companies shrank."

"Political payments by multinational companies in foreign nations have long been a pervasive practice; but a cultural taboo against discussion of the subject, combined with a lack of public information, has created a vacuum in public understanding."

"After World War II, foreign government levies on the incomes of private oil companies were progressively and substantially increased. This was true of both royalty and income tax rates… Later, the 50 percent rate of taxing foreign oil income was materially increased in many nations… Colombia’s oil law of 1962 changed the tax rate to 68 percent of net income from production. Contract agreements with Indonesia provided that 60 percent of profits would go to the government… The oil companies were unable to pass on all the increased costs per barrel to petroleum consumers after 1957, because of the redundancy of supplies."

"The Soviet Union, as might be expected, conducted a ceaseless campaign to persuade the less-developed countries to nationalize their petroleum industries, by deprecating the record of private oil enterprises and extolling the virtues of governmental petroleum monopolies."

"The postwar tendency of foreign governments to intervene directly in the regulation of petroleum production and pricing contrasts sharply with the laissez-faire policies followed up to World War II. Formerly, rates of output and prices were almost entirely within the discretion of the private oil companies."

"Because exporting and importing nations have conflicting goals, and the interests of individual countries within each group are not identical, United Nations efforts to regulate the industry have not been successful."

"Proven crude oil reserves in the foreign non-Communist world were estimated to be just under 41 billion barrels at the end of 1948; they had increased sixfold to 250 billion barrels by 1962 and then more than doubled this amount to 522 billion barrels by 1972. This increase over a twenty-four-year period was equivalent to an average annual compound growth rate of 11.2 percent—a spectacular expansion of the non-Communist world’s oil stock outside the United States and Canada."

"Foreign oil companies suffered major expropriations of their property during the postwar period, usually without payment of full compensation to the private owners. These episodes—the most significant were in Algeria, Ceylon, Cuba, Egypt , Iran, Libya, and Peru—followed by many years the first major oil industry expropriation by the Bolshevik government of Russia in 1918 and a second major expropriation of foreign oil properties by the Mexican government in 1938. All illustrated the great latent power of governments over the international oil companies and the reality of the political risks inherent in the industry."

"Expropriation and nationalization of private oil properties, and the growth of government oil companies, extended public ownership in oil. However, the primary result of postwar government petroleum policies was to enhance competition in the industry. Governments encouraged new entrants, which diffused the structure of the industry. The number of competing firms increased, and the market positions of the largest international oil companies declined, reducing concentration. As the entrants developed more concession areas, the growth of petroleum supply relative to demand accelerated, intensifying competition in both crude oil and product markets, and depressing prices and rates of return on investment."

"Because conduct judged improper or illegal in one culture may be considered quite proper—even unavoidable—in other cultures, we have been chary of making moral judgments. Thus, we have sought to avoid the twin pitfalls of arrogant ethnocentrism and moral absolutism."

"Motivated partly by the decision to convert its navy from coal to oil, the British government ultimately acquired a major interest in what was then the only oil-producing company in the Middle East."

"How did it come about that only a few international oil companies held concessions to all of this region Middle East at the end of World War II? The answer lies in the bitter struggle of the United States government to gain an entrance for its nationals into the British-dominated Middle East, a struggle which very significantly shaped the structure of the industry as it emerged from World War II."

"The foreign oil industry was radically affected by World War II. The burden of meeting Allied military requirements fell largely on the United States. Between December of 1941 and August of 1945, nearly 7 billion barrels of oil were produced to meet the requirements of the United States and its allies, almost 6 billion barrels of which came from the United States."

"World energy problems entered the headlines during 1973 and 1974 when members of the Organization of Petroleum Exporting Countries (OPEC) unilaterally quadrupled the price of crude oil. Concurrently, members of the Organization of Arab Petroleum Exporting Countries (OAPEC) cut back production and imposed a temporary embargo on shipments to the United States for political reasons. Suddenly, the industrialized nations awoke to their heavy and increasing dependence upon the abundant supplies of oil from Africa, the Middle East, and Latin America."

"A static technology is, however, almost inconceivable. It runs so strongly against established drives in American society as to be practically impossible. So long as we are thinking beings, we will find new ways to increase the productivity of work! The basic point, however, is that economic growth is needed to improve the quality of life. A rise in the GNP, taken by itself, is neither good nor bad. Everything depends upon what kind of production has increased, its costs to society, and who benefits from it. What people now want and need is resource-conserving, pollution-free growth—growth that does not harm the environment and demands less of the earth’s limited resources."

"In a world market that was free of all taxes, royalties, or other governmental constraints, and in which competition was effective, the price of oil would be very low. But the real-world market for oil is dominated by high taxation by the oil-exporting nations, and, since 1972, by concerted efforts of the members of the OPEC to raise prices and to restrict output. Because of effective competition in the industry and the power of OPEC, an international oil company today has relatively little influence on the price of oil to consumers."

"During the war years, the United States government gave serious thought to acquiring a direct interest in Arabian [oil] reserves."

"The basic flaw in the distribution of political power among American economic institutions is that producer interests rather than consumer interests tend to dominate and shape the actions of government."

"A second drastic reduction in the political power of American corporate business occurred during the Great Depression of the 1930’s. This crisis shook the faith of the American people in the capability of its industrial and financial leaders, even in the enterprise system itself… Roosevelt sought to make political capital of the popular disillusionment with business; and he made business a scapegoat for errors of federal economic policy that had deepened and prolonged the depression."

"Because contributions for charitable and educational purposes were the earliest form of corporate social action, their pattern enables us to test the validity of our theory. Corporate giving was stimulated by federal legislation in 1935 authorizing companies to deduct from taxable income up to 5 percent on account of such gifts."

"The multinational corporation is, beyond doubt, the most powerful agency for global economic unity that our century has produced. It is fundamentally an instrument of peace. Its interest is to emphasize the common goals of peoples, to reconcile or remove differences between them. It cannot thrive in a regime of international tension and conflict. The instrumentality of multinational business is man’s best hope of achieving political unity on this shrinking planet."

"In 1949 coal met nearly two-thirds of the world’s energy needs, oil less than one-quarter, and natural gas about one-tenth, with water power a residual 2 percent. By 1971 the use of coal had dropped to one-third of world energy consumption, while the use of oil had risen to 43 percent and natural gas to 21 percent."

"If big businesses in concentrated industries truly behaved as oligopolists, one would find higher prices, persistently higher profits, more extensive advertising, and less product innovation among such industries than among unconcentrated industries. However, the facts show either the contrary or insignificant differences. During the period of price inflation from 1965 to 1970, prices rose most in the unconcentrated industries."

"Thus the principle that no foreign political payments shall be made often collides with the principle that we should expand international trade and investment, that multinational companies should conform to local business practices, that the United States should avoid extraterritorial application of its laws, or that this county should abjure moral as well as political and economic imperialism."

"The 4,400 business corporations that disappeared by merger during 1968 were a small number compared with the 12,000 that disappeared by failure, or the 207,000 new corporations that were formed. Even the $43 billion in securities exchanged in mergers that year were only 3.3 percent of the market value of corporate securities."

"During 1968, more than forty-four hundred companies disappeared by mergers involving an estimated $43 billion in securities—an all-time record. In this tidal wave of mergers, which subsequently crested and receded, conglomerate firms accounted for either a substantial or a preponderant fraction, depending upon the definition of ‘conglomerate’ adopted."

"A fourth factor underlying the merger wave of the 1960’s was the steep rise in the load of corporate income taxation since World War II. In 1940, the effective federal corporate income-tax rate was 27 percent; in 1968, it was 50 percent. Rates of state and local taxes on business incomes have risen commensurately."

"Modern management science has made it feasible for corporations to expand the scope and variety of their operations. It has created new economies of scale through which larger aggregations of men, materials, and funds can be efficiently deployed and controlled over larger areas."

"During the recent nineteen-year period from 1950 to 1969, corporate profits, both before and after taxes, formed a shrinking proportion of the national income."

"Still another trend supports greater emphasis upon the social responsibilities of business firms and greater interest in the interactions between business and public policies. The great problems of contemporary society, such as environmental pollution, waste disposal, unemployment, poverty, urban renewal, and mass transit, are most likely to be solved by combining the organizational discipline of the action-oriented business corporation with the legal and taxing powers of government. Private corporations will more frequently be used to attain public purposes. At the same time, the public has made it clear that it will no longer tolerate the thrusting of private cost upon itself."

"Because some conglomerate, and other, mergers have proved to be unsound and failed. It has been proposed that government should prohibit such mergers. But there is no feasible way to identify bad mergers in advanced; only time and the test of market competition reveal them."

"The largest corporations, like companies of lesser size, are a changing rather than a static group. Their annual turnover rate reflects the rise or decline of management and the vagaries of business fortune. Of the hundred largest industrial corporations in 1909, only thirty-six remained on this list in 1948. And, of the top hundred companies in 1948, only sixty-five continued to hold this ranking in 1968."

"The American credo is one of faith in institutional pluralism and of mistrust of large size and concentrated power, political or economic. The growth of giant institutions has always been viewed with apprehension, even though it has been for the most part the natural product of rising populations and income, and of technological changes that created economies of larger scale."

"It comes as a shock to many, therefore to learn that the majority of the labor force in the United States works for government, unincorporated business, nonprofit institutions, or are self-employed. Less than half of the total labor force was employed in the entire corporate sector in 1969.Less than one-quarter worked for ‘large companies,’ defined for present purposes as those employing more than two hundred people."

"The growth of the British company population was not interrupted, as it was in the United States, by the economic depression of the 1930’s and World War II. By the middle 1960’s, the United Kingdom was more densely populated with companies in relation to its human population than was the United States, although the reverse had been true in 1935."

"Until 1837, companies were individually charted by ad hoc legislation. In that year Massachusetts enacted the first general corporation law, which was comparatively stringent in limiting corporate powers. Subsequently, motivated by the philosophy of free enterprise, as well as by competition among the states in charter-mongering, state corporation laws were progressively relaxed."

"The primary difficulty is the problem of determining what the interest of business is.At any given time, business corporations are split on many national issues; there does not appear to be a monolithic ‘business interest.’ Thus, petroleum companies have opposed liberal oil import quotas, while petrochemical companies have favored them in order to obtain less expensive feedstocks; steel companies have sought restraints upon imports of foreign steel, whereas automobile companies and other large users of steel have fought them; and even with respect to such matters as labor union legislation or antipollution regulation, businessmen are far from presenting a united front because firms in some industries are much more deeply affected than those in other industries."

"Certainly the political assets of American labor organizations are formidable in both manpower and money. Unlike corporations, eighteen million union members vote. With the union shop prevailing in most states and union dues being deducted from members’ paychecks, labor unions have a steady inflow of funds, estimated to be around $700 million per year in 1963…Indeed, many a businessman seeking a favor from government has found that his most effective course was to get the support of the leaders of the unions representing his employees!"

"During the sixty years between 1910 and 1970, the percentage of Americans living in urban areas of 2,500 or more rose from 45.7 to 73.5, and the number of urbanites more than tripled from 42 to 150 million. Urbanization clearly has brought important benefits to people… But this overwhelming tendency of people to concentrate in cities has worsened the environment through crowding, traffic congestion, delays and loss of time, and the over-loading of transportation, marketing and living facilities."

"At the end of 1968, the United States contained about 1.6 million active, profit-seeking corporations and about 200 million people—one corporation for each 126 persons."