Unit 10 Note - Unit 10 PDF

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The Transition to Global Capitalism: -17th century: Internationalization of Merchant Capital (trade) “voyage of discovery” -mid-19th century: Internationalization of Finance Capital (loans and speculative capital): telegraphs, credits moving around the world) -20th century: Internationalization of Production Capital (manufacturing): “transnationalization of the world” become much more connected in production chain Hurst and Thompson “growing integration of the world economy” Links to colonialism/neo-colonialism: -Many today’s TNCs have their origins in the colonial era -Imperial Chemical Industries [ICI]: paint, British’s equivalent of Home Depot -Royal Dutch Shell -Imperial Tobacco [British American Tobacco today], Lucky Strike, Rothmans, Kool, Dunhill, Benson and Hedges -US insurance companies associated with slave trade (Lehman Brothers, Aetna, JP Morgan, Chase, New York Life, Wachovia, FleetBoston, AIG) -Use of colonies for Raw Materials and as Markets -Countries can geographically offset economic crisis by diverting production elsewhere (flooding foreign markets)

Two types of investment: 1/Portfolio: only own share/ not able to market or to manage daily operation 2/Foreign Direct Investment: foreign companies owns above 51% shares and have to ability to make management decisions Outward FDI held by US correlates with rises/falls of Kondratieff Waves The Global Economy on the Eve of the First World War: -Much of FDI outflows follow the empire -German-US: Migration to US (Milwaukee, New York); even German newspaper; often referred as “Pennsylvania Dutch” -France allied with Russia: -France was scared of Germany -1870-1871: France vs Prussia War; French Emperor led to battle and defeated in Sudan  Prussia engaged in “Seize of Paris” -Russia was scared of Germany: national border was close because Poland did not exist then; and large numbers of ethnic German lived in Russia  If German attack France, Russia would get Germany and vice versa -Serbia allied with Russia:

-Kicked of WWI as Germany intelligent knew about the assassination of Austrian Archduke Franz Ferdinand -Austria allied with Germany The Global Economy at the Height of US Power (Since 1967): -Britain no longer important -The Cold War shaped French FDI flows in Russia -US-Liberia: oil -US-S. Africa: mineral -US-Japan/East Asia -US-Iran/Middle East: oil -International FDI flows have little changes from 1999-2003 Evolution of US Transnational Corporate Activity 1. Phase 1 (mid-19th century to 1940): Early period dominated by foreign direct investment (FDI) to obtain raw materials (oil, minerals) for domestic manufacturing; later, entry into Canadian and some European markets a. Largely to secure raw materials (supporting domestic firms) b. US manufacturing FDI overseas increases from 1897 to 1935 2. Phase 2 (1945-1970): FDI and overseas production penetrate consumer markets a. Grew larger to service oversea markets b. Marshall Plan allowed US TNCs to penetrate Western Europe: WWII General George Marshall became the Secretary of States i. Providing political stability and brining countries under the America umbrella; Washington was worried about the spread of the Communist Party and the Emergence of the Cold War with Russia [East-West Conflict] ii. Rebuilding Europe due to WWII casualties: US provided credit for rebuilding construction  Europe going to American firms for rebuilding the country; By rebuilding Europe, it gives America new markets for goods and services c. Establish of $ under Bretton Woods as principal reserve currency gave the US immense power to shape the global economy; allowed the US to print money to fuel borrowing for industry or buying dollar-dominated goods (e.g., oil): Meeting in New Hampshire 1944 between the Allies as Germany was losing the War to plan about the post-WWII economy: i. Created the World Bank ii. Established the US dollars as currency for world trade: JP Morgan “$” vs Keynes’s “new currency managed by no one”;  other countries need $ in order to trade for commodities; it also gives US ability to print $ iii. 1957-1967: 20% of all new US machinery plants, 25% of new chemical plants, and over 30% of new transport equipment plants were located abroad  tremendous internationalization

iv. By 1970: almost 75% of US imports were transactions between the domestic and foreign subsidiaries of US TNCs v. Employment in overseas manufacturing plants of US TNCs (1966-1977): Colonial power just left the area; American’s concern about “Domino Theory” (Vietnam); Spain is ruled by Franco, dictatorship supported by Hitler;  TNC like to invest in dictatorship government because less labor union so the corporation could control labor (lower wage) 3. Phase 3 (1970s-): a. Collapse of Bretton Woods and increased strengths of $ i. “Strong dollar”: dollars can buy a lot more and become more expensive  make US-based producer  import cheaper, export more expensive b. Growing imports from abroad; European and Japanese TNCs penetrate the US market c. US TNCs redeploy capital to lower cost production regions (Europe and less developed countries); example: Nike (subcontracted to other manufacture and put a “Swoosh” on) i. Initially produced in US and UK  Japan  South Korea and Taiwan  Indonesia, Malaysia, China, Vietnam d. Between one-third and two-thirds of global trade is now intra-firm trade between TNCs’ different subsidiaries e. Overseas investments are a growing source of profit for US corporations (growing FIRE industry) f. US TNC employment, 1989-2009: growth in number of oversea employee employed; number of US workers working in US decreases g. Decreased in the percentage of US-based Share of Employment by US TNCs h. Change in the percentage of US TNC’s Domestic vs. Foreign Employment: Internationalization becomes more important for the US economy: FDI, employment TNC’s Dynamics-the Product Life Cycle: matches Kondratieff Waves

-Paths of TNC evolution:

-The product life cycle as an evolutionary sequence of US TNCs’ development

-TNCs as networks within networks: Rather being vertically integrated network chain system Ex: Nike subcontracted with other shoes manufacturers and put the “Swoosh” on; Car industry “TIERS”...