Internationalization of Capital 95 Internationalization of Corporations "When labour cooperates systematically,"Marx wrote,"it strips off the fetters of its individuality and develops the capability of its species." But in order for labor to cooperate,it must be brought together and linked through exchange.Under capitalism,the cooperation of laborers is entirely brought about by the capital that employs them.The history of social labor is the history of social capital since the number of laborers who can work together depends upon the degree to which capital is concentrated and centralized. The two powerful levers for concentrating capital into larger and larger aggregates and then integrating these aggregates into a unified whole are competition and credit.Competition drives firms to contin- uously reinvest their profits and extend their markets as a means of self-preservation.The credit system unites individual capitals and stimu- lates further increases in their size.It acts as an immense social mech- anism above that of the individual firm for the centralization of capital and the preservation of its collective interest.The market forces are now operating on a world scale and leading to the internationalization of corporations and capital. The Dynamics of Corporate Expansion Business enterprises usually are built around some special discovery or advantage.Before their innovation becomes general,they can under- sell their competitors and still sell at a price well above cost of produc- tion.But their position is constantly threatened by new entrants who may discover a new technology,a new product,a new form of organ- ization,or a new supply of labor.The dialectic of the product cycle gives capitalism its forward motion.An innovation is introduced;if it suc- ceeds,the product enjoys a high rate of growth as it displaces other products and more and more consumers come to use it.As the market becomes saturated,growth tapers off while profitability is squeezed. Simultaneously,other firms try to enter the market because the very success of the innovation provides tangible proof that the new product works and that a market exists.With the secret out,production costs begin to dominate.The competition of other firms using cheaper labor or accepting a lower rate of profit eats into the original innovator's profit. There are two ways of coping with the competitive threat.First,a continuous effort can be made to develop new products;when the rate of growth slows,the firm can switch tracks and continue at a high rate of profit.Second,the product cycle can be prolonged by gaining control of This content downloaded from 202.120.14.154 on Mon,04 Jan 2016 03:31:29 UTC All use subject to JSTOR Terms and Conditions
Internationalization of Capital 95 Internationalization of Corporations "When labour cooperates systematically," Marx wrote, "it strips off the fetters of its individuality and develops the capability of its species." But in order for labor to cooperate, it must be brought together and linked through exchange. Under capitalism, the cooperation of laborers is entirely brought about by the capital that employs them. The history of social labor is the history of social capital since the number of laborers who can work together depends upon the degree to which capital is concentrated and centralized. The two powerful levers for concentrating capital into larger and larger aggregates and then integrating these aggregates into a unified whole are competition and credit. Competition drives firms to continuously reinvest their profits and extend their markets as a means of self-preservation. The credit system unites individual capitals and stimulates further increases in their size. It acts as an immense social mechanism above that of the individual firm for the centralization of capital and the preservation of its collective interest. The market forces are now operating on a world scale and leading to the internationalization of corporations and capital. The Dynamics of Corporate Expansion Business enterprises usually are built around some special discovery or advantage. Before their innovation becomes general, they can undersell their competitors and still sell at a price well above cost of production. But their position is constantly threatened by new entrants who may discover a new technology, a new product, a new form of organization, or a new supply of labor. The dialectic of the product cycle gives capitalism its forward motion. An innovation is introduced; if it succeeds, the product enjoys a high rate of growth as it displaces other products and more and more consumers come to use it. As the market becomes saturated, growth tapers off while profitability is squeezed. Simultaneously, other firms try to enter the market because the very success of the innovation provides tangible proof that the new product works and that a market exists. With the secret out, production costs begin to dominate. The competition of other firms using cheaper labor or accepting a lower rate of profit eats into the original innovator's profit. There are two ways of coping with the competitive threat. First, a continuous effort can be made to develop new products; when the rate of growth slows, the firm can switch tracks and continue at a high rate of profit. Second, the product cycle can be prolonged by gaining control of This content downloaded from 202.120.14.154 on Mon, 04 Jan 2016 03:31:29 UTC All use subject to JSTOR Terms and Conditions
96 Stephen Hymer marketing outlets,searching for and moving to places of cheaper labor, and secrecy.These two methods,of course,are intertwined,for the wider a firm's market,the more it can spread the costs of innovation, and the more it can afford to spend on research and development. Both these methods require further investment.At a given point of time,a corporation may be earning a high rate of profit because it is onto a good thing,but competition and technological change threaten to wipe out its advantage.It must plough back its profits in order to improve production and expand its scale "merely as a means of self-preservation and under threat of ruin."Thus under capitalism change becomes normal and businessmen can never afford to look upon and treat the existing form of a process as final.The incessant revolu- tions in production and the depreciation of the existing capital this implies spur them on to new methods and new places. International Competition in the Fifties and Sixties This dialectic played an important role in the postwar expansion of American firms in foreign countries.The American giants who were or became multinational possessed numerous advantages in organization, technology,access to capital,and product differentiation.They could supply some of the foreign market through exports,gaining a certain protection for their secrets from the long distance between production and consumption.The recovery of Europe and Japan soon challenged them,and they began to see many foreign firms using their technology and methods,or improving upon them.They could see their own ex- pansion being thwarted by the formation of new capitals in other coun- tries,and they discovered their advantages would be short-lived if they did not undertake foreign investment to preserve them. These firms had three motives for expansion:(1)they saw a rapid growth in the markets for goods in which they specialized;(2)they saw cheaper labor (productivity divided by wage)which made it profitable to produce abroad;and (3)they saw foreign competitors growing faster than themselves and gaining an increased share of the world market. To the individual firm these might appear as separate phenomena,but they are closely connected to each other through the labor market. Europe and Japan emerged from the devastation of the war with con- sumption patterns and expectations well below the American standard. However,their potential productivity was not nearly as far below that of America's,given the work habits and levels of skills of the labor force. A large surplus was available if the labor force could be organized and consumption kept from rising too fast. With American help the threat of a socialist alternative was avoided, This content downloaded from 202.120.14.154 on Mon,04 Jan 2016 03:31:29 UTC All use subject to JSTOR Terms and Conditions
96 Stephen Hymer marketing outlets, searching for and moving to places of cheaper labor, and secrecy. These two methods, of course, are intertwined, for the wider a firm's market, the more it can spread the costs of innovation, and the more it can afford to spend on research and development. Both these methods require further investment. At a given point of time, a corporation may be earning a high rate of profit because it is onto a good thing, but competition and technological change threaten to wipe out its advantage. It must plough back its profits in order to improve production and expand its scale "merely as a means of self-preservation and under threat of ruin." Thus under capitalism change becomes normal and businessmen can never afford to look upon and treat the existing form of a process as final. The incessant revolutions in production and the depreciation of the existing capital this implies spur them on to new methods and new places. International Competition in the Fifties and Sixties This dialectic played an important role in the postwar expansion of American firms in foreign countries. The American giants who were or became multinational possessed numerous advantages in organization, technology, access to capital, and product differentiation. They could supply some of the foreign market through exports, gaining a certain protection for their secrets from the long distance between production and consumption. The recovery of Europe and Japan soon challenged them, and they began to see many foreign firms using their technology and methods, or improving upon them. They could see their own expansion being thwarted by the formation of new capitals in other countries, and they discovered their advantages would be short-lived if they did not undertake foreign investment to preserve them. These firms had three motives for expansion: (1) they saw a rapid growth in the markets for goods in which they specialized; (2) they saw cheaper labor (productivity divided by wage) which made it profitable to produce abroad; and (3) they saw foreign competitors growing faster than themselves and gaining an increased share of the world market. To the individual firm these might appear as separate phenomena, but they are closely connected to each other through the labor market. Europe and Japan emerged from the devastation of the war with consumption patterns and expectations well below the American standard. However, their potential productivity was not nearly as far below that of America's, given the work habits and levels of skills of the labor force. A large surplus was available if the labor force could be organized and consumption kept from rising too fast. With American help the threat of a socialist alternative was avoided, This content downloaded from 202.120.14.154 on Mon, 04 Jan 2016 03:31:29 UTC All use subject to JSTOR Terms and Conditions
Internationalization of Capital 97 and the state built an infrastructure,reformed education,adopted new foreign trade policies,and developed an administrative structure for channeling capital and planning investment.The way was cleared for a rapid expansion of private industry.National capitalists were able to draw upon the technology which had accumulated during the war,earn high rates of return,and grow rapidly.This growth,switching people from agriculture to industry and from old industries to new,expanded the market for new products. American firms were thus presented with an opportunity and a chal- lenge.Growth of foreign markets and labor supply made it attractive to invest abroad;growth of European and Japanese firms made it neces- sary.American firms did not invest substantially in continental Europe and Japan in the late forties and early fifties when they had the most political influence.Only after the development of the Common Market did they make their greatest effort,just as it was serious competition from Japanese firms that spurred the great drive to get into Japan.It is more competitive pressure than foresight which guides capitalists to expand. International Competition in the Seventies and Eighties The world economy now presents new opportunities and challenges. The unlimited supply of labor in Europe is drying up as they exhaust their own populations and the possibilities for importing cheap labor. Twenty years of prosperity have changed labor's expectations about consumption standards and work intensity.The greening of Europe is about to begin.A similar tendency toward labor shortage,that is,a decline in the margin between labor's production and consumption,is emerging in Japan.In the United States resistance to work seems about to reach acute proportions from capital's point of view.Firms from all these countries are looking more and more toward labor in outlying fields. In Eastern Europe,low consumption standards and a great expansion of infrastructure,health services,and education have resulted in a poten- tially very high rate of surplus value now bogged down in undemocratic socialism.The managers of these economies are trying,through econom- ic reforms,to channel this surplus into the accumulation of capital and wealth.They could provide a great challenge to Free World capitals. (The threat would be greater,but different,if these countries chose socialist development.)The scramble for East-West trade and technical agreements is an attempt to change this challenge into an opportunity. China,less advanced and less amenable,also presents an important commercial and industrial challenge.(This article was written with a This content downloaded from 202.120.14.154 on Mon,04 Jan 2016 03:31:29 UTC All use subject to JSTOR Terms and Conditions
Internationalization of Capital 97 and the state built an infrastructure, reformed education, adopted new foreign trade policies, and developed an administrative structure for channeling capital and planning investment. The way was cleared for a rapid expansion of private industry. National capitalists were able to draw upon the technology which had accumulated during the war, earn high rates of return, and grow rapidly. This growth, switching people from agriculture to industry and from old industries to new, expanded the market for new products. American firms were thus presented with an opportunity and a challenge. Growth of foreign markets and labor supply made it attractive to invest abroad; growth of European and Japanese firms made it necessary. American firms did not invest substantially in continental Europe and Japan in the late forties and early fifties when they had the most political influence. Only after the development of the Common Market did they make their greatest effort, just as it was serious competition from Japanese firms that spurred the great drive to get into Japan. It is more competitive pressure than foresight which guides capitalists to expand. International Competition in the Seventies and Eighties The world economy now presents new opportunities and challenges. The unlimited supply of labor in Europe is drying up as they exhaust their own populations and the possibilities for importing cheap labor. Twenty years of prosperity have changed labor's expectations about consumption standards and work intensity. The greening of Europe is about to begin. A similar tendency toward labor shortage, that is, a decline in the margin between labor's production and consumption, is emerging in Japan. In the United States resistance to work seems about to reach acute proportions from capital's point of view. Firms from all these countries are looking more and more toward labor in outlying fields. In Eastern Europe, low consumption standards and a great expansion of infrastructure, health services, and education have resulted in a potentially very high rate of surplus value now bogged down in undemocratic socialism. The managers of these economies are trying, through economic reforms, to channel this surplus into the accumulation of capital and wealth. They could provide a great challenge to Free World capitals. (The threat would be greater, but different, if these countries chose socialist development.) The scramble for East-West trade and technical agreements is an attempt to change this challenge into an opportunity. China, less advanced and less amenable, also presents an important commercial and industrial challenge. (This article was written with a This content downloaded from 202.120.14.154 on Mon, 04 Jan 2016 03:31:29 UTC All use subject to JSTOR Terms and Conditions