The Dialectics of Globalization (page 4 of 5)
By Jerry Harris

Because of the transformative character of the era, some TNCs like Volkswagen have one foot planted in global production and the other in national soil. The state of Lower Saxony is still Volkswagen’s largest shareholder and just over half of its workers are in Germany. Still Volkswagen has 19 global production sites, over 80% of its sales are in foreign countries and it ranks 15th in the world in foreign held assets. (Volkswagen) Under such circumstances both national and global concerns are important, but the direction of the company is towards greater transnationalization.

One of the key globalist trends is the rapid growth of cross border mergers and acquisitions (M&As). This represents an important integration of the transnational corporate and class interests. The following chart shows data from the U.K., Germany, France, Switzerland and the US, and includes 17 of the top 20 TNCs involved in cross border M&As over 14 years of activity.

This high level of global integration is another indication that dominant TNCs are no longer based in nation-centric economies. During these years there was a total of 59,273 cross-border M&As worth over four and a half trillion dollars.

A good example of the spectacular rise in world mergers is the auto industry where there are now five transnational players who own or control 20 formerly independent manufactures. The General Motors’ empire includes: Fiat, Subaru, Isuzu, Saab, Daewoo and Suzuki. Ford controls Jaguar, Aston Martin, Land Rover, Mazda, and Volvo. Volkswagon has acquired Audi, Bently, Birgatti, Lamborghini, Seat and Skoda. The three other major world corporations are Damiler Benz merged with Chrysler, Renault which controls Nissan and Toyota which recently took over Daihatsu. This leaves only Honda, BMW, and Hyundai as important independents. (Bradsher/Schuman)

Another interesting example is from the rapidly globalizing steel industry.
LNM is the second largest steel producer in the world. It is registered in the Netherlands; owned by Indian entrepreneur Lakshmi Mittal, its main office is in London, and it operates mills in Poland, Romania, the Czech Republic, Germany, France, Algeria, South Africa, Kazakhstan, Indonesia, Trinidad, Mexico and the US. (Financial Times, Profile)

Foreign Affiliates and Globalized Currency

The opening of financial markets and cross-border flows of capital ties together a vast web of currency and investments. The depth and speed of these markets would have been impossible to build without information technologies allowing billions in currency to rocket around the world within seconds based on real-time data flows. Money markets trade about $1.2 trillion dollars everyday with 90% of this money invested less than 7 days before a new transfer. The top five banks in currency speculation include UBS with 12.36% of the market; Deutsche Bank with 12.18%; Citigroup at 9.37%; JPMorgan with 5.78% and HSBC at 4.89%. (Hughes) These banks trade in world money worth hundreds of billions everyday and so become less invested financially or politically in the strength of any single currency. All currencies are part of their market and so the differences in rate, volatility and arbitrage become their main concerns.

Under such conditions maintaining the strength and stability of the major currencies is a shared effort and responsibility of the transnational capitalist class. A primary example of this is the hundreds of billions of dollars invested in the US bond market by China and Japan. This helps maintain the value of the dollar so Americans can continue to buy Asian products. Neither the US nor Asia is in a hegemonic position, but in a codependent relationship. We can add Europe into the mix because its patterns of trade and investments are similar to TNCs in Asia and the US.

Exchange rates have a different effect on nationally based manufactures hitting them harder, particularly if they are dependent on exports. When the value of the dollar falls middle sized companies sending merchandise to the US will see the value of their sales fall. If the Euro gains strength the volume of their sales may decline because their relative price increases. Without diversified holdings throughout the world these companies are less able to counterbalance their financial vulnerabilities. This can deeply affect some sectors, like the Mittelstand businesses in Germany, resulting in nationalist political demands and are played out in various forms in each country.

Larger TNCs can more easily protect themselves from currency swings because of their financial and manufacturing positions around the world. For TNCs foreign affiliates are more important than exports from their national base. For example, in 1997 sales by U.S. owned foreign affiliates abroad totaled $2.4 trillion compared to $928 billion in U.S. exports. Sales by foreign affiliates inside the U.S hit $1,717 trillion while their imports equaled $1 trillion. (UN 02a, 2-6) In the same year global sales by TNC foreign affiliates hit $9.7 trillion compared to cross-boarder trade that totaled $5.3 trillion. (UN 02a, 1-3) In addition up to 30% of exports are between parent firms and their foreign affiliates reducing the importance of exports from nationally based companies even further.

Therefore competition among the most powerful section of the capitalist class is less about states using their power to insure export markets for territorially based corporations, than transnational competition that seeks advantages through a global web of production facilities. Exports and foreign imports become an economic and political issue of more importance to nationally based capitalists with less political power, again reflecting the conflict between the two forms of accumulation. More >>