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MULTINATIONALS AS AGENTS OF IMPERIALISM: A CASE STUDY OF THIRD WORLD COUNTRIES

 

NNURIAM PAUL CHIGOZIE

 

ABSTRACT

Multinationals are without doubt the most controversial of all non-state actors. In the eyes of many critics they act as the motor of capitalism in the contemporary markets, accused of toppling elected governments, exploiting under-developed countries, engaging in illegal activities, ignoring human rights, and willfully damaging the environment. At the same time, defenders of multinational corporations portray them as engines of progress, innovative in research and development, a modernizing force in international relations, and the best hope for overcoming the chronic under-development and poverty in the Third World. Against this background, the aim of this work, however, is to examine the character and function of multinationals as agents of imperialism. It tries to provide empirical validation for the basic Marxist thesis that the serious problems of third world countries can be linked to the operations of imperialist forces whose most powerful catalysts are the multinational enterprises. 

 

How to cite this article: Chigozie, N. P. (2018). Multinationals as Agents Of Imperialism: A Case Study Of Third World Countries. Equatorial Journal of Communication Technology, 2 (1): 1- 8. DOWNLOAD PDF

 


INTRODUCTION

A multinational corporation is seen as a corporation that owns or control production of goods or services in two or more countries other than their home country. The awareness and controversy created by the roles of multinationals in host countries appears to have been deduced for and against their operation. A good number of works have been made by scholars in both developed and developing countries of the world in a bid to define the operations of the multinationals. Their operations have been viewed and explained differently depending on the approach adopted and the socio-political background of the scholars involved. This divided opinion made up the two main conflicting schools of thought. Firstly are the radical thinkers who are of the Marxist socialist idea. They see the roles of the multinationals with a clash of cynicism and argued that the multinationals are agents of imperialism. While the second are the orthodox thinkers who are seen to be conservative. This school argued that the roles of the multinationals are good and beneficial to the developing countries, claiming that they are agents of development. In between these two schools of thought are the moderates who neither too radical nor too conservative in their analyses, they try to reconcile the negative and positive effects of the multinationals.

However, it is on the basis of the radical school of thought that the activities of multinationals would be reviewed. Multinationals are the fundamental units of imperialism even in its contemporary neo-colonial stage. Their activities are hugely concentrated in ‘Third World Countries ‘or ‘Less Developed Countries’ (LDC) where they amass big investment and get raw materials for their home markets. It is important to stress that the operation of the multinationals in the less developed economies was an extension on the colonial attachment as with the British and French in Africa and Asia or on political and economic influence as with the U.S and Latin America. Most of these multinationals are headquartered in capitalist industrialized countries of United States, Britain, Germany, France, Canada, etc


and have affiliates in Third world countries. The major interest of the multinationals in the less developed countries just like every other business organization is the achievement of their business aims, one that is mainly rest on the repatriation and exploration of profits and resources. Thus, multinationals can be said to present the economic interest and aims of their home governments in the Third world economies. This they achieve by the adoption of numerous business strategies and methods. It is equally worthy to mention that these MNCs, with particular reference to their activities in the third world countries are significant and integral players in the economies of their home countries. Hence, despite the claim of independence by these third world countries, their actions are sometimes in line with the interest of their former rulers, and particularly, multinational entities. The influence of multinationals has been showed in corporation's zeal and capability to exert leverage directly by employing government officials, participating on important national economic policy making committees, making financial contributions to political parties, bribery, etc. They also seek the help of their home government to protect their interests and further their cause in host countries.

 

CONCEPTUAL AND THEORETICAL FRAMEWORK

Multinational Corporation: This is a company that owns or control production of goods and services in two or more countries other than their home country. A multinational corporation can often referred to as a Multinational Enterprise, an International Corporation, a Transnational Corporation, or a Stateless Corporation. According to Franklin Root, Multinational Corporation is a parent company that engages in foreign production through its affiliates located in several countries, exercises direct control over the policies of its affiliates, and implements transnational business strategies in production, marketing, finance, and staffing in a way that transcend national boundaries (Franklin, 1990). United Nations in 1974 defines MNC as an enterprise which control assets – factories, mines, sales, offices and the like in two or more countries. And, to Peter Buckley in 1981, a multinational corporation is a company which has a direct investment base in several countries, which generally derives 20 – 50 percent or more of its net profit from foreign operations and who management makes policy decision based on the alternatives available anywhere in the world (Peter and Jeremy, 2006).

 

Imperialism: It can mean a policy of forcefully extending a nation's authority by territorial gains or simply the establishment of economic and political dominance over other nations. The word imperialism originated from the Latin world “imperium” (Charlton, 2016). In the book, Culture and Imperialism, Edward Said explains imperialism as any system of domination and subordination organized with an imperial center and a periphery (Edward, 1994). Colonialism is generally regarded as an expression of imperialism. The Russian leader, V.I. Lenin had suggested that imperialism was the highest form of capitalism, claiming that imperialism developed after colonialism, and was distinguished from colonialism by monopoly capitalism. Robert Young in Empire, Colony and Post Colony explains that imperialism operates from the center, is a state policy and is developed for ideological as well as financial reasons (Young, 2015).

In another vein, the origin, growth and activities of the multinationals are strongly supported by Economic Liberalism, Economic Realism, and Marxist Theory.

According to the Economic Realist view, individuals act in rational means to maximize their self-interests and therefore, when they act rationally, markets are established, and they perform best in free market system where there is little or no government interference. As a result, international wealth is maximized with free interchange of goods and services.

To Economic Liberals, multinationals are the vanguard of the liberal order. They are the embodiment par-excellence of the liberal perspective of an interdependent world order and economy. They have taken the integration of national economies beyond trade and money to the internalization of production. For the first time in world history, production, marketing, and investment are being done and organized on a global scale rather than in violated national economies.

According to Marxist Theory, Multinationals emerged out of the concentration or centralization of capital integral to the capitalist accumulation process. The growth of MNCs was inherent in the evolution of firms. Ronald Muller in the book Global Reach the power of Multinational Corporation, in 1974 saw the rise of the MNCs as representing the globalization of oligopoly capitalism (Richard and Ronald, 1974). It means the process of concentration and internalization of capital that allowed few corporations to control the economy, which result in a massive expansion of monopoly power, as big monopolistic and oligopolistic companies were able to take advantage of low wages and salaries, capital shortages, and weak states to leverage their profit margins.

Meanwhile, two theories stand out among those that emphasize the oligopolistic and monopolistic nature of multinationals. The first is Product Cycle Theory developed by Raymond Vernon in 1966. This theory applies best to foreign direct investment in manufacturing, the early overseas expansion of U.S corporations and to what is called horizontally integrated investment i.e. the establishment of plants to make the same or similar goods everywhere. The second and more general Industrial Organization Theory on the other hand, applies best to the new multi-nationalism and to increased importance of vertically integrated investment, i.e the production of outputs in some plants that serve as inputs for other plants of the firm. This production of components or intermediate goods has been largely extended by contracting and joint ventures.

 

MULTINATIONAL ENTITIES AND IMPERIALISM

Imperialism is seen as the establishment of economic and political dominance over other nations. The major forms of imperialism include; Economic imperialism, Political imperialism and Socio-cultural imperialism. Economic imperialism is a type of imperialism that allows the area to operate as its own nation, but the imperialist nations control its trade and other business and resources. Political imperialism is a situation where a country may have had its own government but it operates as the imperialist country told it to. While Socio-cultural imperialism explains that the dominating country deliberately tried to change customs, religious, lifestyles and languages in some of the countries. Generally, the imperialist countries assumed their cultures to be superior, and often saw themselves as bringing improvements in the society. It is based on these three forms of imperialism that this work will be reviewed.

Under economic imperialism, multinational establishes economic dominance over their host countries especially in Third world, and more or less exploit their economic resources. Originally, foreign investment by the corporations of advanced countries is as old as the activities of the East India Company and other companies of merchant-adventures. In the modern world there have been three forms of such investment. Firstly, in the period of the old colonialism of the 17th and 18th centuries; Spanish, Dutch and the English companies established mines and plantations in the New world and in parts of Asia, these activities in most cases plundered and exploited the native peoples for their mineral and other riches (Buckley and Clegg, 1988). Secondly, during the second wave of the new imperialism in the late 19th century, Africa, Southeast Asia and other lands were brought within the several imperial systems (Buckley and Clegg, 1988). Foreign investment flowed extensively from Western Europe to the developing areas like Asia, Africa and American. United kingdom, France, Germany etc were exporters of capital. British made extensive investment in India, Canada, Australia and South Africa. In 20th century, MNC investment was mainly in mining and petrol industries. Big oil companies like British and Standard oil were the first MNCs in this areas. The First World War encouraged MNC investment, and due to the protectionist policy, firms replaced exports with foreign production. The third wave began in the 1960s when most countries especially the third world countries launched import-substitution strategies as the most rapid route to industrialization. They encouraged the MNCs to established manufacturing subsidiaries within their borders. In the meantime, British East India Company (established on March 20, 1602), the Swedish Africa Company, Hudson Bay Company, Royal African Company etc were early corporations that encouraged colonialism by: involving in international trade and exploration; establishing and maintaining trading posts and settler colonies; exploit host resources and labour; and investing the resultant profits and net gain in the home country. Specifically in Africa, the chattered companies were called upon either to secure or administer for their home countries their territories. The use of chattered companies, however, was not limited to any one colonial power and colonies. The British used the Royal Niger Company to secure the area of present day northern Nigeria in 1884/85, and to administered it until January 1st 1900, the imperial British East Africa company was used to hold the area of present day Kenya and Uganda from 1885 to 1895 and 1890 to 1895 respectively, and the British South Africa company equally was used to secure and hold the Rhodesians. Official German administrations in Tanzania and Namibia were preceded by chartered companies. King Leopold II of Belgium also used chartered company to exploit his Congo Free State. In furtherance, explaining the role of Royal Niger Company, Peter Buckley asserts;

 

The Royal Niger Company established the British trade on the lower Niger, by stiffing competition; it also killed the incentive to expand the area of that trade until 1900. Through the company, Britain secured the area of modern northern Nigeria in 1884/85 and maintained a sentence of control there until January 1st, 1900 when the British government was prepared to take over its administration. Finally, the company began for British the conquest of Northern Nigeria when it fought and defeated Bida and Ilorin in 1897.

 

Nowadays, Multinationals exert power and control over entities once they are established through their control over technical and intellectual properties. For example, Adidas holds patents on shoe designs, Siemens holds many patents on equipment and infrastructure, and Microsoft benefits from software patent. These patents often make MNCs to maintain a monopoly in the local economy, preventing local firms and businesses from developing and improving. Nigeria experience is a good case in point. The roles of Multinationals in Nigeria span the major significant facets of the national economy, such as Petroleum, Mining, Manufacturing, Banking, Construction, Distribution, Transport and Agriculture. Despite the dominance of oil sector in the economy, the Nigerian government maintains only formal control over it. According to T. Turner in 1976, the six MNCs that dominated the oil oligopoly in Nigeria were Shell – BP (U.S), Mobil (U.S), Agip (Italy), ELF (France), Taxaco, Ashland (Bade, 1978). Nigeria depends on the marketing subsidiaries of these six oligopolistic for import of petroleum imports. Apart from petroleum, British imperialists through the chartered companies in the colonial period had major control of crown lands in Nigeria and this gave Britain the power and monopoly of exploitation over Nigeria mineral wealth. The most known Multinational that dominated this sector was the British owned Tin Mines Limited. Together with petroleum, mining has harbored between 30 percent and 50 percent of all foreign investment in Nigeria from 1962 to 1974. More so, Banking and Insurance have been the exclusive monopoly of imperialists in Nigeria finance industry until recently. The foreign commercial banks dominated the nature of development of these areas. The multinational banking corporations have maintained the British reluctance and inability to participate in medium-term lending in place for self-liquidating transactions and overdraft lending. In this manner, the imperialist banks and insurance companies have been the crucial sources of economic surplus. They practically prefer to invest overseas or to lend to fellow foreign exploiters in Nigeria rather than to give credit to Nigerians. The main duty of the major foreign banks in Nigeria like United Bank for Africa, Standard Bank, Barclays Bank, has been to fulfill the wants of large Multinationals in Western Europe and North America and their partners in Nigeria. Moreover, one of the main features of manufacturing sector in Nigeria is its control and dominant by imperialist Multinationals. Three of the biggest Multinationals in this sector whose roles cut across other areas of the Nigerian economy are United Africa Company (UAC), Lonrho, and Unilever. The common structure of these firms links to the familiar lineage of imperialist enterprises. Nigeria's commercial or distributive sector was the first area to be infiltrated and assaulted by imperialists during the early days of colonialism. Various British trading enterprises such as the Royal Niger Company, John Holt, G.B. Olivant, and Kingsway created trading posts in Nigeria to instigate the earliest exposure of the country to the exploitative activities of the Multinationals. Later, other imperialist countries like France, Germany, later, and more recently, U.S and Canada especially after independence of 1960, entered in the structure. Their imperialist commercial stations maintain warehouses and trading stores throughout the country for the import of diverse products and the wholesale distribution of these imports as well as the local products of the multinationals in the manufacturing sector. In another vein, Building and Construction is a rapidly growing sector of Nigeria economy. Road construction is controlled and dominated by foreign expatriates led by Julius Berger and Dumez of Germany. Among them these Multinationals, they have handled over 10 billion naira worth of civil engineering contracts in Nigeria since 1970 alone. According to Ogunpola in 1968; the distribution of building contractors between Nigerians and expatriates was 2 to 19 in 1960, 3 to 29 in 1962, 3 to 38 in 1964, and 3 to 39 in 1966 for contracts over 200,000 naira. Similarly, transport and communication is another sector that has been dominated by MNCs. Shipping was dominated by the West African Conference Lines. The government owned Nigeria National Shipping Line established in 1961, controls barely 10 percent of the country's shipping21. Air transport was equally dominated by Multinationals like Pan Am, Lufthansa, Swiss Air, etc. Their huge capacities, enormous funds and personnel enabled them to overshadow the country's only airline; Nigeria Airways, in both passenger and Cargo traffic. Road transportation has been somewhat controlled by imperialists in regard to supply of machineries such as tractors, trucks, buses and tankers, and the provision of consulting services. Until 1973, almost all the fleet of tankers conveying refined petroleum throughout the country was foreign-owned and operated through the oil multinational corporations.

Meanwhile, apart from Nigeria, Peru and DR. Congo are good examples of multinationals imperialist activities. The post-independence Congolese state attracted several multinationals because of its enormous mineral wealth. The state is stupendously rich in gold, diamonds, copper, coltan resources and a host of other mineral ore deposits. Roughly eighty percent of the world's coltan reserves is located in Eastern Congo, making it the ideal place to obtain resources for big MNCs (Ola, 1999). MNCs in DR. Congo had not only partake in causing and aiding crisis especially in Eastern Congo, but as well exploited the Congolese natural resources. U.S, Belgium and Lebanese corporations are the major culprits.

Furthermore, the Peruvian economy since the 1950s has been controlled by the U.S multinationals particularly in the mining sector of the economy. Top firms like Marcona mining company, and Cyprus mining company are major MNCs with heavy investment stakes in Peru. MNCs firms since their operations in Peru have enjoyed considerable support from the government. Thus, making the multinational especially U.S multinationals to exploit and dominate the economy.

Under political imperialism, MNCs pose a threat to the political sovereignty of the host countries. They intrude in the politics of their host country trying to establish political dominance. This intrusion could either be covert or overt depending on some factors. Most MNCs intrude by encouraging militancy and militancy groups in the state. They are sometimes engaged in lobbying, bribing or coercing government officials to make policies and programs that are of their benefit and interests. Writing on the political influence of MNCs, Ronald Muller examines the influence of Exxon mobile;

 

Exxon mobile is a striking example of the political power exercised by the MNCs even over big and powerful countries. They put crucial amount of money into political campaigns and lobbyings. John Boehner, head of the republicans in the House of Representative, is currently their most prominent shillman in the U.S. with sites in over 53 countries, and exercising influence in all of them, funding anti-environmental groups, and paying scientists for research; claiming that there is no need to be concerned about global warming….It is clearly wealthy and more powerful than 70 or so nation state (Barnet and Muller, 2008).

 

Similarly, owing to the fact that these corporations need a stable host government, which is sympathetic to capitalism, they try as much as possible to defend and protect the existing government whenever a reactionary leader or group seems to take-over the government. The Multinationals try to maintain the status quo and move ahead to establish alliances between international capitalist and domestic capitalist elite. This alliance is maintained by the intervention of the firm's home governments in the local affairs of the Less Developed Countries. In this way, multinationals tends to make the host country politically dependent upon the metropolitan country. It is on record that MNCs kept president Mobutu of Dr. Congo in power for so long because he was important to them and with MNCs they sucked dry the economy of Dr. Congo (Ola, 1999). The MNCs especially U.S and Belgium corporations were equally responsible for the early exit and assassination of Patrice Lumumba because he would not allow their exploitative activities. The same story is true of Captain Thomas Sankara of Burkina Faso. Former Iran Prime Minister, Mosadeq was controversially removed for plotting against the interest of US corporations in Iran. Guatemala former leader, Col. Label was gunned down for accepting to revoke the certificate of occupancy of about 234,000 hectares of land owned by United Fruit Company, a U.S. company. Further, the major feature of multinationals in Chile had been attributed to political instability. The victory of Allende El-Salvador meant a massive blow on the investment of U.S in Chile. Hence big MNCs like Anaconda, ITT (international telephone and telegraph company), and Kennecott began a strategy with respect to Allende government (which opted for land reforms and nationalization), including forming adhoc committee on Chile. The purpose of the adhoc committee was toward the application of pressure on the US government wherever possible to make it clear that a Chilean takeover of foreign investments would not be tolerated without serious repercussions. However, despite the enormous threat from the MNCs and the subsequent economic measures adopted by the U.S government, Allende’s government commenced nationalization from 1971 - 1973. He nationalized foreign investments like Chiltelco, ITT, Anaconda, Kennecott etc. This process of nationalization triggered the MNC to adopt other strategies in kicking out Allende from government. As such, they involved in alliance with some elements in the military to oust and execute Allende in 1973; thus replacing him with Augusto pinochet. Pinochet's government thereafter, nullified Allende’s nationalization policy and therefore introduced privatization process which caused re-admittance of foreign investors into the Chilean economy.

In Nigeria, the adverse effect of MNCs in Nigeria is their act of creating political instability through which to gain political advantage. The Nigeria civil war of 1967 to 1970 has been linked to an attempt at balkanization of Nigeria by the imperialists. In the meantime, T. Turner has argued that the 1975 coup in Nigeria involved the political machination of the MNC oil oligopoly (Turner, 2012). According to her, contradictions within Nigeria's comprador state involving the foreign oil technocrats and the comprador bourgeoisie ultimately led to the coup that removed Yakubu Gowon’s regime35. It is argued that the combination of government interference and price hikes against the oil corporations showed too threatening to their exploitative profits, so they had to destabilize the country. The public condemnation of imperialist firms against Nigeria’s indigenization of foreign enterprises which was made in 1972 is another case in point. Allegations of British involvement in the 1976 February abortive coup in which the late head of state General Murtala Muhammed and others were killed have also been attributed to the protection of British imperialist activities in Nigeria and of world imperialist interests in Southern Africa. Specifically, the emergence of Murtala Muhammed after the 1975 coup led to a major change in the relationship between the government and MNCs. Upon the emergence of Murtala Mohammed, Nigeria's approach to foreign policy and foreign investment was radically changed to the extent that the military government commenced a nationalization process, one that affected the almost all the foreign investment in Nigeria. This policy has been viewed by some scholars as one of main reasons behind the killing of Murtala in 1976. His assassination did not finally stop the nationalization process. In 1979, after been accused of disrespecting the Nigerian government by exporting Nigerian oil to apartheid South Africa, Shell- BP was nationalized with some major British interests in Nigeria.

Finally, under cultural imperialism, the domineering presence of foreign corporations in the host countries is characterized as constituting a form of cultural imperialism through which the developing country loses control over its culture and its social development (Hogsett, 2013). Multinationals see their culture as a superior culture, and in a bid to dominate, fulfill economic gains, and “civilize” the local peoples, the MNCs dismantle the indigenous cultures by imposing their own. They destroy the cultural values and ways of life, for instance, Languages, lifestyle, techniques are defined and constructed through the ideology and norms of the MNCs home government and system. What’s more, foreign corporations neglects and undermines the customs and values of the society, introducing through its advertising and business practices new values and tastes inordinate and inappropriate to the host nations. They assault national dress by insisting on their imported “tie and collar”, especially in banks and financial companies, and disseminate capitalist values through support for Christian religious activities and bourgeois educational programmes including social studies that depict host countries especially the Third World Countries as ‘uncivilized natives’ with incurable ‘tribal’ animosities.38 Their frenetic promotion of imperialist habits of consumption in mass media advertisements and imperialist of permissive foreign popular music, of which America's ‘Motown’ is the best example, are also subversive of national culture39. In the name of so-called international understanding, it is argued that they sponsor foreign exchange programs and trips for academics, technocrats, business executives, etc with the main intention of exposing them to the powerful propaganda of imperialist norms and values which undermine native cultural norms. According to C.M Hogsett in “Multinational Corporations and Cultural Imperialism", MNCs have been around since imperialism, however, concerns about their power and influence started in the 1980s and grew exponentially after the collapse of the Soviet Union and the rise of internet" (Todd, 2000). In the meantime, the high expanse of U.S corporations and brands in the wake of the cold war led to concerns about U.S soft power and cultural imperialism. Todd Gitlin, a sociologist, calls out U.S pop culture the latest in a long succession of bidders for global unification (Hogsett, 2013). According to him, it succeeds the Latin imposed by the Roman Empire and the Catholic Church and Marxist Leninism imposed by communist government. Tom Freston, MTV president said it this way; “today's young people have passports to two different worlds; to their own culture and to Americans". Also, according to Washington Post made in America in 1998, Hollywood movies, TV, and music are considered the biggest threat to other cultures. Meanwhile, concerns about U.S cultural imperialism have slowly reduced as other countries and cultures have begun producing and projecting their own films, lifestyles and cultures.

 

CONCLUSION

Multinationals show a world in which capital and technology have become mobile while labour has remained immobile. Continual changes in comparative advantage among countries, advances in modern transportation and communications, and good government policies encouraged companies to locate their production facilities in the most advantageous locations around the world. The result of this has been the creation of a web of interlocking relationships among states and world's big corporations. The economic and political effects of foreign investment and the formation of economic alliances across national boundaries have become issue of controversy between the radical and orthodox schools of thought.

Be that as it may, foreign direct investment can help or hinder, but it is worthy to stress that the major cause of economic development lie within the host countries. Against this, what is needed is to have a good code of conduct for MNCs and an efficient policy and rules in the host countries. Multinationals are like double edged sword. The sword can injure if not handled well. The MNCs cannot be entirely blamed for lack of development or the manner of development is taking within less developed countries. Their absolute aim is profit maximization and their activities are aimed at achieving the goal, not developing the host countries. If the technology and products that they introduce are inappropriate, if their actions worsen regional and social inequalities, if they weaken the balance of payments stand, in the last resort, it is left for the host country’s governments to pursue policies which will eliminate the underlying causes of the problems.

 

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