www.UsHumans.net: Chapter 18
Today's global business
We saw in Chapter 14 that Medieval China had an enormous amount of commercial activity while the wool industry of Europe was just beginning to involve herders and merchants from England to Italy. The first centralized factories of the wool industry created the Industrial Revolution around the year 1760, as described in Chapter 15. We saw that U.S. companies grew to cover state-sized regions by 1850 and that around the year 1900, corporations began merging into nationally-sized businesses. By 1950, a few corporations had come to dominate each industry within each nation. For example, in the early 1900s car makers initially numbered in the hundreds but within a few decades had merged into just a handful. By 2000, nationally-sized corporations from each of the U.S., Europe, and Japan were merging into globally-sized businesses. Today, we see a merger of record-breaking size in the news every week. (For a list of internet links involving international business, visit “The WWW Virtual Library: International Affairs Resources” at http://www2.etown.edu/vl/intlbus.html.)
In this chapter we will see that the current phase of our 250-year-old Industrial Revolution is one of global corporations searching the planet for locations having the cheapest labor, crops, and raw materials to produce a product for the lowest possible cost and then transporting those products to the regions of the Earth–namely, the U.S., Europe, and Japan–in which they can charge the highest possible selling price. This results in the highest possible profit, which becomes the income of the most wealthy 1% of us. Those products are not sold in the countries in which they are made because wages are so low, and the selling price is so high, that the product makers are unable to purchase those products.
We have seen that the enlargement of our national governments was a delayed and reluctant response to the social consequences of our switch from farming to factory work, as described by Mills. Much of that enlargement was a single reaction to the economic depression of the world's industrialized nations during the 1930s. We will see how business has continued to grow faster than our governments have reacted to govern them. In fact, business is now global while government is not at all. We can be certain that there will be further future changes in our national governments as they react to the emergence and growth of globally operating corporations. We can expect increasingly global cooperation among our independent, sovereign nations in order to deal with today's global issues. Today, the global corporation is affecting the ability of the people of a sovereign nation to choose their own economic course. We can believe our global corporations will enjoy additional decades of lightly-governed expansion while the governments of our independent nations catch up. The economies of the world’s nations may soon be functionally combined by global business, long before many politicians admit they are not in full control.
The following description of globalization is a summary of Global Dreams by Barnet and Cavanagh. They state that their purpose is not to blast the greed and corruption of the corporate world but to better understand the global system that is being created. The formidable power and mobility of our global corporations are decreasing the effectiveness of our national governments to set their own agendas in many areas, including employment policy, attempts to control interest rates or the flow of capital, or even to use tax laws to promote policy. Approaches to resource development and environmental protection that were put into place just thirty years ago are now obsolete.
Global corporations from Europe, Japan, and the U.S.
About three hundred global corporations make up the bulk of those that are creating the "global economy." (Visit www.fortune.com/fortune/global500 for a list of the top five hundred global corporations. See also, www.unctad.org/Templates/Page.asp?intItemID=2443&lang=1.) These three hundred corporations own 25% of the world's twenty trillion dollars in productive assets; this money is held in the sixty largest banks and financial institutions. These three hundred corporations have managed to merge and acquire their way to being in control of this staggering portion of the world’s productive assets in just 150 years. Europe and Japan have been even less anti-merger minded than has the U.S. We currently see U.S. legislators in news interviews saying "The antitrust laws are a thing of the past; if our companies don't purchase those of other nations, theirs will purchase ours." According to Forbes in 2003, the five hundred global corporations having the most income produced a combined total income of $18 trillion, see www.forbes.com/2002/07/03/internationals.html. (Visit www.forbes.com/global/2002/0722/global.html for the complete list.) Since the Gross Product of the entire world was $55 trillion in 2004, these five hundred corporations have acquired a large part of our economic activity (see www.cia.gov/cia/publications/factbook/geos/xx.html#Econ for the current Gross Product of the World).
Many corporations have budgets larger than those of most sovereign nations. For example, Ford Motor Company's budget is larger than that of Saudi Arabia plus Norway, and the company has more than 100 billion dollars in assets. The sale of Philip Morris products exceeds the Gross National Product of New Zealand. (Ten percent of the items you purchase at a grocery store in the United States are Philip Morris products.) General Motors' 1992 sales of $133 billion is as large as the combined Gross National Products of Tanzania, Ethiopia, Nepal, Bangladesh, Zaire, Uganda, Nigeria, Kenya, and Pakistan, though these countries contain 10% of the world's population. The five hundred largest industrial corporations employ 0.05% of us but control 25% of the world's economic output. The combined 1991 sales of the five largest diversified service companies, each of which is a Japanese company, was about the same as the 1988 Gross National Product of the Soviet Union, which was a planned economy just like that of a corporation.
A large corporation is no longer owned by persons in the home nation. For example, by 1991 foreign companies from Britain, Germany, Holland, Japan and other nations owned major portions of the companies of the United States, including 50% of consumer electronics, one-third of chemicals, 20% of cars, 70% of tires and 50% of the film and recording industries. Korten shows that General Motors owns 37.5% of Isuzu, while Ford Motor Company owns 25% of Mazda. Rather than considering a global corporation as "belonging" to your country, it is more accurate to assume that it is owned by a group of persons from Europe, Japan, and the United States. The primary interests of the corporate leaders are not even centered on any region of the world. They describe their entity as stateless while politicians and bureaucrats talk as if a particular corporation is a national asset or an instrument of national policy. One "U.S." corporate head described his company as "We are a favored merchant in the richest national market."
Most of the global corporations were formed in Europe, the United States, and Japan but are no longer truly bound to their original nations. They act like chameleons in that they will pretend to be from whichever country suits their needs at any particular moment. For example, Taiwan banned car imports from Japan but buys Japanese Hondas from the United States. When a nation allows a foreign company to place a manufacturing plant within its border, they typically require that the foreign company obtain one-third of its raw materials locally. The corporation will "comply" with this rule by purchasing from the local companies that it happens to own.
These corporations are "global" because their products are combined from portions made in many regions of the world, by many different companies, and then sold in many nations. While operating globally, these corporations want to appear to be local companies in each of many of the world's nations. They own and operate many individual companies in many different nations. Today's corporation is no longer from any one nation: it is from many of them. Any globally operating corporation that you see down the street is not from your country; it is from many countries.
Global manufacturing blurs imports and exports
It used to be easy to know which nation had manufactured a particular product, but not so today. In many industries the entire product is no longer made within a single nation. (Visit www.worldtrademag.com for a perspective of this activity.) A global corporation will combine raw materials and labor at one or more locations in the world to build a component of a product. This component is then shipped elsewhere to be combined with other components that have each had a separate but similar history. Each step in the manufacture of a finished product can be done in a different country. A final product often includes portions made by several other corporations. For this reason, some manufacturing corporations are better described as purchasing networks. (Our global corporations search the world for raw materials that cost the least amount of money.) A finished product also requires the services of data processors, insurance brokers, lawyers, administrators, and advertisers that can now live in any nation while working on any of these globally-manufactured products.
It is more difficult today to define what is meant by an imported or exported item. By 1991, only half of U.S. "imports and exports" consisted of transactions between one company within the U.S. and another unrelated company outside the U.S. This corresponds to what we have traditional considered to be “imports and exports.” The other half consisted of transfers of components and services between two portions of a single global corporation. To suit any law or any tax incentive, the global corporation can make Japanese components appear to be from the United States or make components from the United States appear to be from Japan.
To recap, it is more difficult to say that a corporation "belongs" to a specific nation and increasingly difficult to state the nation of manufacture for many products. And it is now hard to say from which nation an item has been imported, or to which nation it has been exported, because many products pass through several nations as they are being made. Economist Robert Reich has estimated the foreign contributions to a car considered to be "made in the United States" to include 30% Korean labor, 18.5% Japanese components, 7% German designing, 4% Taiwanese components, 2.5% British advertising and marketing, and 0.5% Irish and Barbadoan data processing. The remaining 37.5% goes to Detroit heads, New York lawyers, bankers, Washington D.C. lobbyists, and the worldwide shareholders.
During the 1990s, many smaller corporations found they too could move factories to nations having low labor-costs. Many global corporations setup plants in Mexico just south of the United States border to take advantage of lower labor rates. Trade between a parent U.S. corporation and its assembly plant located in Mexico is considered to be trade between the U.S. and Mexico. These global corporations are also able to take advantage of the fact that the United States charges a lower import duty from Mexico than it does from many other countries. When the United States makes a trade agreement with, for example, Mexico, then every global corporation that can manage to will take advantage of that agreement by being a "Mexican corporation." It is becoming less meaningful for nations to make import-export agreements with other nations about the exchange of the products of global corporations.
The World Bank (see www.worldbank.org) was initially formed in order to fund the repair of Europe after the devastation of World War II, it went on to fund the developing world. It made loans to any industrializing nation that was willing to be economically redesigned in the process. This was often viewed as an unwanted intrusion. For example, a loan might be granted under a stipulation that it begin exporting a product. Recall that in 1776, Adam Smith said that the key to a nation's wealth was to export more than it imported, but it is more complicated than that today. Some nations found out the hard way that it might export its product, raw sugar for example, at one price and then buy it back as another product at a much higher price. The nation’s raw materials might be sold to just a few global corporations, and that nation might purchase the resulting products from just a few global corporations.
The U.S. aid to the world after World War II resulted in a glut of dollars around the world. European banks had so much U.S. currency that they began making loans in U.S. dollars. Money was becoming a global product. By the 1970s the U.S. had to begin devaluing its dollar. The world's financial markets changed when Nixon forced the end of fixed exchange rates and stopped backing the dollar with gold. Exchange rates and interest rates began to fluctuate widely and resulted in the rise of the global financial market. Now nations have less control over their own economy. The low value of the United States dollar in the 1980s multiplied the capital of Japanese and European corporations and made it easier for them to purchase many U.S. corporations at bargain rates.
Today's huge international movement of money makes it more difficult for a nation to produce adjustments in its own exchange rates. Billions of dollars per day are electronically transferred around the world but only 10% of this exchange actually involves transactions for goods and services; the reminding 90% involves currency speculation. Large corporations are involved in this speculation. In a three-year period, Phillip Morris made $300 million by betting against the U.S. dollar. CitiBank earns $600 million per year trading currency. One person held enough currency to make $117 million in 1991 betting on the German Mark and then one billion dollars betting on the British Pound.
The global corporations have made it harder for a nation to control its banking, monetary, and financial industry. Since 1776 the U.S. has been suspicious of creating a large national bank, such as the Bank of England. (We have seen that the Bank of England was founded in 1694 as a way to finance projects from the savings of England's citizens.) Many of our banking laws were created after having learned the hard way about dangerous banking practices. As many banks went bankrupt after the 1929 Crash, many persons lost their savings. In response, the U.S. government formed the Federal Deposit Insurance Corporation, or FDIC, to guarantee up to $100,000 per account. (If a person has five times that amount to deposit, then they open five individually-guaranteed accounts.)
Throughout its history, the banking laws of the U.S. have been designed to keep banks local. The bank is to gather the money of the local residents and then use it to finance the home purchases and new business startups of those local residents. The bank's profits were to be paid as interest to its local depositors. However, there is much more profit in global transactions than in such local ventures.
U.S. banks were not allowed to make international loans. However, they found ways to hold money in foreign subsidiaries from which they could make international loans. They also found ways to shift money between banks, savings and loans companies, and insurance businesses. They also found ways to make interstate transactions appear to be local, all in the attempt to avoid the old keep-banks-local laws. The U.S. financial corporations complained that local regulation was handicapping the local institutions who were competing globally. The recent deregulation of the U.S. banking industry did not introduce new ideas or new ways of doing business, it was just an acknowledgment that the old laws were no longer being used. “Local” U.S. banks now take local money and invest part of it into the world's stock markets and other parts into bonds and securities. It is now the case that any bank, insurance company, savings and loan, or home mortgage company can make loans to a customer in any location and each is allowed to offer checking accounts. Your home loan might be sold and resold around the globe without you even knowing it. Instead of lending money locally to you or your small business, your local bank can now use your money in foreign speculation where it might obtain quick and large profits–or losses.
The recent savings and loan fiasco cost U.S. taxpayers about one-half trillion dollars, see http://critcrim.org/critpapers/potter.htm. This has shown that if the U.S. allows a company to invest other people's money at their own discretion then the government can no longer insure each individual's account–as it has done since the 1929 banking disaster. Some suggest that our local bank should be required to lend a portion of our money back to us if it wants the privilege of having the government provide Federal Deposit Insurance Corporation guarantees to the customers of that bank. Since the local bank is using our local money, maybe it should be required to inform us of its investment actions and results by displaying these figures on their front door. Maybe it needs periodically to renew its license to operate. We can then decide if we want to place our money into a locally oriented bank or into a one whose speculations either pays us in increased returns or losses our money for us.(The Internet is making it easier for an individual to invest their own money wherever they like.)
There is a danger that local banks might get out of the business of funding local projects. In this case Barnet and Cavanagh explain that one way to steer capital toward long-term investment, whose returns require years to mature, in the local region is to tax the profits received from short-term investments, whose returns require just months or weeks to mature. Global corporations have changed local financing means such that a nation can no longer keep its money within its borders or keep foreign money outside its borders. Any monetary or fiscal policy that a nation set in place just a few decades ago is now obsolete.
Foreign banks have been disliked everywhere because finance is considered central to local security and development. For this reason, Germany does not want to relax its control over its BundesBank. Nationalistic persons have wanted finances to remain in local hands, but money has become a global product. One U.S. treasury official bragged that the recent NAFTA agreement might result in Mexico giving its financial system to the U.S.
Some differences remain between the banking laws of the U.S., Europe, and Japan. The financial corporations will surely press for further changes in banking laws or continue to find ways of getting around them, making them effectively obsolete. For example, European banks want to be allowed to own corporations, as is done in Japan. Banks in Japan own two-thirds of Japanese stock and so have a long-term interest in the corporation's future and do not demand large annual dividends.
The banks of the world prefer to make a few large loans to nations rather than numerous, tiny loans to individuals. More profit is earned from the interest charged on nation-sized loans than on person-sized loans. Today, some nations are paying more in interest than they are receiving in new loans. Banks prefer making a loan to a nation over a loan to an individual because they feel that a nation hardly ever defaults on a loan. Banks sometime acquire portions of a nation's industry in exchange for its debts. Our banks clamor for the accounts of those 5,000 of us humans in the world who have 100 million dollars in assets. During the Korean war, Communist China moved all of its U.S. dollars to a Soviet owned bank in Paris–as do the wealthiest members of any nation entering a period of trouble.
In the 1980s banks went after profits from the 20% annual rate of interest they could obtain making credit card loans to most every member of a nation. In 1987, 1.5% of all U.S. retail sales were being made with CitiCorp brand credit cards. CitiCorp was mailing twenty million monthly statements to its card holders and processing one million new card applications every month. In 1991, CitiCorp wrote off one billion dollars in credit card debt. In 2005, U.S. bankruptcy laws were made more stringent (recall that debtors prison was ended in the 1840s). Also in 1991, CitiCorp offered its credit card to everyone in India who was rich enough to own a phone and so appeared in the phone book. In Indonesia they made this offer to every satellite dish owner.
The World Bank estimates global drug profits to be $300 million per year, which is similar to the 2005 U.S. military budget of $450 million. This money is laundered by shifting it in small amounts, under $10,000, from one bank to another. In the process, the money crosses many borders. To avoid raising alarms, each transaction is kept below $10,000. The technique is described in a United Nations report that you can find at www.un.org/ga/20special/featur/launder.htm. Corporations earn money from every financial transaction they handle. One renegade CitiCorp employee recently revealed the corporate instruction manual containing the procedures used to handle this sort of illegal currency transactions.
By the way, a group of eleven New York banks own the Clearing House Interbank Payments System (CHIPS), see www.ny.frb.org/aboutthefed/fedpoint/fed36.html, which handles much of the daily movement of money around the world. They sell this service to 142 other banks from around the world. The CHIPS complex has twelve security gates (Herbert said "Oh, make it a dozen") and consists of four computers, each of which simultaneously duplicates the information processing for safety. Two of these computers are in New York while the other two are in New Jersey.
Political power of global corporations
The decisions of the directors of the global corporations are not subject to direct democratic controls, as Mills has pointed out. Barnet and Cavanagh interviewed many executives and found their global thinking was much more developed than that of the politicians they interviewed. However, the business executives had essentially no concern for the social, political, or environmental consequence of their decisions. These things were all considered beyond their power to address. A recent author has said that executives do show concern for such consequences if they are held personally liable for any damages done by their corporation. For the World Bank view of corporate social responsibility, visit http://www.worldbank.org/wbi/corpgov/csr/r_video.html. See also, their “list of organizations doing work on CSR” under “more resources.”
These corporations are no longer just economic institutions. They are now involved in politics, often blurring the line between public authority and private power. For example, they will apply their considerable economic leverage to get their "home" countries to open foreign markets by threatening trade wars. They help forge trade agreements that enable them to veto health and environmental legislation of sovereign nations. Some of our governments have recently participated in the elimination of some of our cultures by removing a people from their land so that it can be used for industrial purposes. Global corporations get an opportunity to influence a nation's policy when that nation is trying to entice a corporation to setup a plant within its borders. Some nations compete for plants by offering tax breaks or by agreeing to act in ways that are beneficial to that company. Some nation's have repealed earlier labor safety laws to help invite new factories.
Global corporations and governing one's national economy
The global corporations are making it harder for even the largest nations to control their own economy. Neither can the leaders of a nation act alone in altering the world's economy. Recent U.S. administrations have mistakenly thought they were in control of their own economy, as illustrated in the following examples. The U.S. government thought it would be a good idea to demand that Japan build cars in the U.S., but the result was that Japan gained a larger share of the U.S. auto market. The U.S. demanded that Japan raise the value of the Yen, but this increased its trade deficit with Japan and helped Japanese corporations purchase U.S. firms at a lower price.
The U.S. demanded a more-open financial system for the world because it assumed that its corporations would devour foreign firms but were instead devoured by those much-larger foreign firms. In 1990 the thirteen largest Japanese banks had 500 billion dollars in capital while the fifty largest U.S. banks had only 100 million dollars in capital, and there were 14,000 banks in the U.S. system of stay-local banks while Japan had just 158. By 1989, Japanese banks were providing 20% of the loans in California–without the knowledge of the consumers.
The Reagan administration cut taxes but raised spending by borrowing 200 billion dollars per year. This money was borrowed through global auctions of long-term U.S. Treasury Bonds. At one quarterly auction in 1986, Japanese firms purchased 80% of the bonds. The chair of the Federal Reserve Board, Paul Vocker, then responded that the U.S. was in danger of losing control over its economic destiny. Reagan was giving eloquent speeches about his policies that he was funding with foreign money–without it being widely known by the listeners. If Japan had not bought 190 billion dollars in U.S. treasury Bonds in 1986, the citizens of the U.S. would have had to pay higher taxes and interest rates that year, and would have suffered social cuts. Every day, 150 billion dollars in U.S. Treasury Bonds changes hands around the globe, involving a group of just several thousand people. In 2004, the Bush-Cheney team similarly borrowed money to finance 18% of the U.S. government, borrowing $400 billion of the 2.2 trillion dollar budget. (For the latest federal budget, see www.whitehouse.gov/omb/budget.) As it is often said, a family can borrow 18% of its expenditures for only a few years. This can’t go on for decades without bankrupting the nation; it means that our political leaders are in danger of failing us if they can not see beyond the next election, and we are in danger of failing ourselves for going along with them. Taken to an extreme, the U.S. government would stop collecting taxes for a four-year presidential term and instead borrow 100% of the nation’s funds. That president could them claim he cut taxes to zero. The trouble is that cutting taxes today by borrowing actually increases the taxes paid a few years later because of interest charges. The accumulated borrowing of the U.S. government produces the total U.S. debt. It had grown to nearly eight trillion dollars by 2005 (see www.publicdebt.treas.gov/opd/opdint.htm), which is 3.5 times its annual income.
When Clinton announced a policy to increase inflation, it meant that the fixed, future value of the outstanding U.S. security bonds would be partly canceled by inflation. For this reason, major groups of bond holders sold their bonds; this drove down the interest rate, which in turn canceled the desired effects of Clinton's announced increase in inflation. Third-world nations are already familiar with external influences on internal affairs but this comes as a recent shock to "powerful" nations.
The announcement of U.S. economic policy first affects just those few thousand of us who control much of the nation's assets and wealth. This is described in the daily news as a collective reaction to a particular event. For example, it might be reported that "The Dow is down today in response to the military strike in Asia." This report might be more fully written as "The Dow is down today due to the collective response to the military strike in Asia of those few thousand of us who control much of the nation’s assets and wealth." Those few thousand persons do not all live in the U.S. The Saudi’s alone own more than 5% of U.S. stock. (Which means that each time you fill your car with gasoline you are giving away some U.S. stock.) Millions of people will individually react to an event for millions of reasons. Stock market movements can be related to a single event only when a small number of persons are reacting.
There are many ideas of the largest factors in the economy. Keynes pointed out that consumer demand drives the economy by purchasing factory products and that a decrease in demand will cause factory output to decrease, which in turn will cause unemployment to increase. This "demand-side" view of economics seeks to overcome slumps in factory demand with deficit spending by the government in purchasing factory products. These purchases are hoped to increases the number of factory jobs.
In another view, "supply-side" economics seeks to allow business to attract consumers by innovating and producing without being “constrained by taxes or regulation.” This has also been described as "trickle-down" economics because the further increases in wealth for the wealthiest of us would eventually trickle down to the poorest of us. But the income of the top 1% of us has quadrupled in the last century while the income of the rest of us has remained essential unchanged. There has been increasing inequality in our wealth and income. We also know from past experience that regulation is needed to protect us from those occasional business persons who will attempt to gouge us consumers and sell us spoiled or defective products.
Lafer instead hypothesized that cutting taxes would increase consumer spending and increase jobs, and that this in turn would actually result in a larger amount of collected taxes than we would have otherwise received. (Does this mean that cutting taxes to zero results in the largest amount of collected taxes?) Mundell said the opposite: government should reduce taxes and spend less to increase growth and to fight inflation and unemployment. Senator Jack Kemp first accepted Laffer and Mundell's ideas and then presidential candidate Reagan promoted them into what his competing candidate George Bush described as "Reagan's voodoo economics." We often hear politicians quoting these experts while arguing over economic policy. In yet another approach to increasing the economy, doubling our wages would give us money to spend that in turn, would increase production and result in a “trickle up” process. This might also end the Welfare State.
Global corporations are getting harder to tax. In the 1950s, U.S. corporations paid 39% of federal income taxes but by 1990 this had shrunk to just 17%. It was 7% by the year 2000. (You might like to see the latest revenue source figures at www.cbo.gov/showdoc.cfm?index=6060&sequence=5&from=0.) On its income tax forms, a corporation might show the government that it lost money, but it will show that it made a healthy profit on forms shown to potential stock purchasers. (For company and industry data, including the annual report of a specific corporation, visit http://faculty.philau.edu/russowl/industry.html.) Any portion of a corporation's sales can be recorded as transfers between its various subsidiaries. The selling price can be written down as any convenient value such that the corporation's profits occur in the nation with the least amount of corporate taxes. (Our nation's would have to form global arrangements to deal with this.) In 1987, 59% of the non-U.S. based corporations who were operating within the U.S. reported a profit of zero dollars. In the previous three-year period their income went up 50% while their taxes went up by just 2%. Toyota recently settled out of court for one billion dollars when the U.S. Internal Revenue Service accused it of misreporting profit this way.
California once tried to compute a global corporation's tax from the portion of its employees, sales, and assets occurring within California. Sony, and others, spent $137,000 campaigning against this law. Twenty-seven other States also tried to do this but dropped their efforts when global corporations threatened to leave these States. California was able only to pass a watered down version of the proposed law, allowing corporations to purchase an "exemption" for a small fee. The global corporations won this battle.
Global corporations search the world for the cheapest labor
Within a few decades of building the first textile factories in the Northeastern U.S., corporations were moving their factories to other states in search of lower wages (see Chapter 15). Still today, a large corporation operating within the U.S. takes advantage of the regions having the lowest labor costs. Data entry, hospital record-keeping, customer accounting, customer support, and consumer credit processing can be done wherever labor is cheapest. When you speak to a customer service representative on the phone, they are likely to be sitting in a U.S. county having low labor costs. In the last decade, these positions have moved overseas. In fact, engineering is now being moved overseas where pay is one-third that of the U.S.
Today's global corporations move manufacturing plants to the country where they can find the absolute lowest labor costs. And after being at that new location for a decade or so, the factory will again be moved because the labor rates there have increased. (This also results in the de-industrialization of the former country.) Plants that were first setup in Taiwan and Korea have been moved to Thailand, Indonesia, and China. The people of Europe and the U.S. noticed only that product labels that at first said "Made in Japan" cycled through, for example, "Made in Korea, Taiwan, Thailand, Indonesia, Malaysia, and then China." (What our global corporations need is a factory with wheels so that each year it can be dragged somewhere else.) Sometime in the future there will be no more locations of dirt-cheap labor.
The nations that see their factories depart view this as a loss of jobs and a process of de-industrialization. The nations that receive the factories complain that the jobs are not under their control and are removed at the whims of corporate executives. They also complain that they remain technologically dependent on the larger resources of these Japanese, European, and U.S. corporations despite their investments in their own research and development capabilities and in the education of their own engineers and researchers.
In 1994, corporations were paying hourly wages of $2.05 in Hong Kong and $3.65 in South Korea but just $0.89 in Mexico. (For 2002 figures, see www.bls.gov/fls/ichccreport.pdf.) Since hourly wages were lower in Mexico, many global corporations built plants there, often located just south of the United States border. (The corporations of Europe, Japan, and the United States will also open a plant within each other's country to obtain access to its market even if it has to pay higher wages than could be obtained in Asia.) The low cost of labor is not wholly passed to consumers. Instead, lower costs result in higher profits for our global corporations, which we have seen is the income of those of us who own the corporation.
An unjustly low quality of life for about one-quarter of U.S. residents resulted in our government legislating a minimum hourly wage, see www.dol-union-reports.gov/esa/minwage/chart.htm. Should the world's governments create a global regulation of minimum wages to make them everywhere uniform? An example of the way in which our global corporations remain decades ahead of our attempts to govern them is given by the fact that the governments of today's nations cannot globally legislate a minimum hourly wage. Such a minimum would instantly alter many of the procedures of our global corporations, for example, it would stop the fleeing of industry from one nation to another. Do you want to stop industry from fleeing your nation? Then make an international agreement for a global minimum wage for the labor used to make the products of global corporations. The thinking of our national leaders often remains stuck in the independent-nation past by seeking solutions that involve just their own country, as if they could unilaterally solve problems that are global in extent. In the coming decades, our leaders will think globally and cooperate globally to solve problems that involve the people of every nation.
Labor unions played a large part in raising wages in the U.S. as it was industrializing, but today only 12.5% of the U.S. labor force belongs to a union (see http://stats.bls.gov/news.release/union2.t01.htm). Union membership has eroded because factories can move about the planet while workers mainly stay in one place. Today it would require a global union of workers to negotiate with global corporations. (When do you think such a union will be formed?) Does the drop in union membership and the decrease in strikes mean that workers are happy? In Chapter 15 we saw that during the 1890s there were 1,300 strikes per year that involved more than 1,000 workers. In 1971 the U.S. had just 300 such strikes, and by 2004 this number had fallen to just 17, see http://stats.bls.gov/news.release/wkstp.t01.htm. Keep in mind that the number of workers today is much larger than it was in the 1890s. We saw that Henry Ford hired "thug-like" guards to quell worker complaints in the early days of Detroit. In 1990, the Ford Motor Company use the same approach in one of its plants in Mexico. During the incident one person lost his life.
The Nike corporation sells 40% of the basketball shoes sold in the U.S. but it does not have a single shoe factory. It purchases shoes from Asian contractors for $5.60 per pair and then sells them in North America, Europe, and Japan for $70 to $130. The corporation has paid $5.60 for this item and will add $100 of administrative and marketing costs as it charges what the world's market will bear. Nike has 8,000 employees, all working in sales, promotion, marketing, advertisement, and management.
Nike's Asian contractors employ 75,000 people who work under poor conditions. (For related information, visit http://cbae.nmsu.edu/~dboje/AA/academics_reebok.html.) An Australian reporter described how girls work eleven hour days and then sleep six persons to a room in company barracks. There is one toilet and one faucet for every thirty-five girls. (We saw similar working conditions in U.S. factories during the years 1840 through 1900 and that corrective legislation did not occur until fifty years later.) The girls are subject to sexual harassment and injury. They are reluctant to return to the home village because villagers often think that girls who go to the city mostly find work as prostitutes. The girls average $7.70 per week in wages. That Nike shoe would cost a girl about fifteen week's wages–if she didn't eat. Nike executives say that there is no reason for them to know about the working conditions of the girls. Meanwhile in 1992, they paid the athlete Michael Jordan twenty million dollars to promote their shoes–about as much money as the combined wages of all the girls. In response to the bad publicity, Nike now suggests that its suppliers maintain basic working conditions. You might like to grade their performance.
There are similarly poor working conditions in many places throughout the world, from Guatemala's textile plants to the California "sweat shops" raided by police in 1999. In the Philippines, children are known to work twelve hour days for seven days a week at one-seventh an adult's wage. These were the conditions that resulted in the U.S. child labor laws enacted around the year 1900. We have learned the hard way that insufficient money produces malnutrition and misery but not death. The wages of many of us provide just enough money to stay alive. In our more-distant past, we saw that greed would cause a lender to take a person's child in exchange for debt. The general population needs to protect itself from the insatiable greed of some of us. Barnet and Cavanagh state that either global standards will be raised to a decent minimum or all of us workers will be dragged down together by the corporation's search for the cheapest labor out of the global labor pool. You might like to read Race to the Bottom by Alan Tonelson. For a list of questions involving working conditions, visit http://www2.gsb.columbia.edu/ipd/j_labor_bk.html. See also www.ilo.org.
Products of global corporations sold mostly to people within the richest nations
The factory worker who is paid a few dollars per day can not buy the $100 item they make for the global company. It's as simple as that. These products are not sold locally but are instead shipped to the more-industrialized nations of Europe, Japan, and North America where they can be sold for $100.Out of the entire world's population, three-quarters of us cannot afford to purchase the items the global corporations sell because one of their items can cost a year's worth of spare money. The global corporation is happy to do business with just the wealthiest members of many countries. For example, the top 12% of the population of India makes up a target consumer market of 100 million persons. The continued growth of the global corporation depends on a continued growth in the number of available customers by selling to the peoples of an increasing number of nations. In order for those of us who work in the factories of the global corporations to be able to purchase the products we make, we would have to receive a living wage from these global corporations.
In many countries, cars can be sold to only the very rich. Out of the 400 million cars in the world, there are 150 million in the United States, thirty-six million in Japan, twenty-four million in Germany, 1.7 million in each of India and China, and 180,000 in Nigeria. There is one car for every thirteen persons in Brazil, one per seventy-seven in Korea, and one per 677 in China. Through recent years, the number of new cars being manufactured has leveled off at fifty million per year. No more can be made than this number because the auto manufacturers have found that the world contains just fifty million new-car buyers per year. In many countries, a used car can cost 5-10 year's wages. We have seen that in the United States throughout the 1900s, new cars typically sold for one or two year's wages.(Korten also explains that one-third of the vehicles in the United States–including all sorts of trucks, minivans, and sports utility vehicles–are not subject to the more-stringent environmental laws that apply only to passenger cars.)
As each new industry emerges, it is soon controlled by just a few corporations. In the last 150 years we saw this happen to the steel, railroad, and auto industries. In the last fifty years, the electronics, computer, and cable-television industries emerged and soon came under the control of just a few corporations. It has been less well-known that this has also happened in most every other industry. Today, most every industry is dominated by just a handful of corporations. We will look at a few samples, including the electronics, publishing, entertainment, and food industries.
Akio Morita started a small electronics company, the Sony Corporation (named after the Latin word for sound, sonus), in 1946 rather than take over his family's saki and soy sauce business. In 1952, he found an explosive opportunity by licensing AT&T's transistor. Sony paid AT&T a $25,000 advance against future royalties. AT&T was a regulated monopoly that had to license its inventions to all qualified applicants, even foreign companies. Japan instead has a policy to protect indigenous technologies because these will enhance its economy and its bargaining power. (We saw the same goals 2,500 years ago in the wild stories about local monsters the Saba Kingdom spread to protect its frankincense and myrrh industry and in England's attempts to guard the secrets of its Industrial Revolution.) Sony grew with the transistor radio. A more recent product is the Sony Walkman, of which they have sold 100 million units. Morita said that the key to his success was his ability to sell in the United States. Today, he assembles one million "American built" television sets per year in San Diego using components manufactured in Japan, the United States, and other countries.
Another Japanese electronics company was started by Matsushita, who had pawned his wife's kimonos to help obtain start up funds. Matsushita's sales had grown to fifty billion dollars by 1991. Matsushita owns Panasonic, Quaser, and Technics. His company manufactures video-cassette recorders sold under General Electric, Magnavox, Sylvania, and J.C. Penny labels. The engineers of Sony designed the Beta video-cassette format while engineers at Matsushita designed the VHS format.
The relation among Japanese firms is different from that of Western companies. Many different corporate heads meet every other Friday for discussion. Japanese firms will help to save a failing competitor to save national honor, while Western corporations want only to drive out the competition or to buy them up. Japan built its dominance of the electronics industry in just a few decades. Recently, Korea has built its electronics industry into the world's fourth largest.
Entertainment, book, news, and record businesses
The entertainment industry consists of film, radio, television, music, magazines, toys, and theme parks and such. In the last decade, the news industry has also become incorporated within this system. The global distribution of these products spreads items of the maker's culture around the world. For example, Disney sells 1.5 billion dollars worth of watches, hats, and comic books each year in Japan. The globalization of the Western entertainment industry is seen by some receiving nations as an invasion of barbarous, foreign culture.
Instead of radios and televisions the United States now exports movies, music, and television reruns. Half the annual revenues earned by the movies and music of the United States are generated outside that country. Barnet and Cavanagh state that the American Dream is the number one export of the United States. U.S. movies depict unlimited freedom and stirring revolts but also disrespectful children and scantily clad people. The 1920s first experienced the national influence wielded by mass media. Political dictators have used the mass media to release official truths and to promote nationalistic values. For example, when I was spent the summer of 1973 in West Berlin, the nightly television of East Berlin consisted solely of a few hours of dance productions and war movies celebrating communism and its victories. Recently, the internet and satellite television are causing the world's dictators to lose control over what their subjects see and hear (this may be good news). Today, any group that has a cause, including political candidates, seeks the assistance of entertainment personalities.
The entertainment industry had revenues of 150 billion dollars in 1989. This industry is dominated by just six global corporations. By 1995, Warner was the only U.S. corporation out of the six. Germany's Bertelsmann (see www.pbs.org/wgbh/pages/frontline/shows/cool/giants/bertelsmann.html) owns RCA and Arista and many others. Holland's Phillips owns Thorn-EMI. CBS is owned by Sony, while Matsushita owns MCA; both of which were mentioned above. Certain corporations own a radio station in about every large city. As you wander the country you'll find a "Z" or a "Q" rock station, and a "smooth jazz” station in many cities while in the rural areas you'll hear the "mix" station.
By 1988, just twenty-eight companies controlled most of the public information available to the people of the United States. As large companies have purchased news companies, those news companies have trouble criticizing their owners. Other conflicts occur: For example, GE owns NBC that airs news shows describing GE interests, including nuclear power plants and technologies for detecting breast cancer. Some newspaper reporters have said that certain stories which criticized some other corporation were cancelled by the newspaper owner who owned stock in that other company. These reporters have gone so far as to say that “There is Freedom of the Press in the U.S. today as long as you own the press.”
By the year 2000, a handful of companies each owned thousands of newspapers and television stations–and nationwide cable services, also. It is now the case that one company often owns most of the TV and radio stations within a given city. See www.pbs.org/wgbh/pages/frontline/shows/cool/giants/index.html for a chart of conglomerates. Visit www.openairwaves.org/telecom/default.aspx for more information, including ownership rules. This restricts the number of views presented to the citizens of those cities. The result has been that news topics are now being selected by very few persons throughout the U.S. There have been cases of a conglomerate using its news system to promote its own agenda. For example, it may choose not to air certain political advertisements critical of its preferred candidate. It may generally present the views of a single political party, going so far as to present opinion as fact. By the way, the myth of the liberal press evaporates when one determines that the majority of the “talking heads” shown in news interviews are conservatives.
Too many of our “news reports” have recently become drama and opinion rather than investigation and constructive criticism. To choose discussion topics, a televison “news” show will present potential topics to a group of test viewers, looking for those topics producing the greatest emotional response from those test viewers. For example, they might find that many viewers are enraged at the thought of a welfare recipient using the money to buy drugs. When later broadcast, this topic might sell a lot of advertising for oatmeal and such. Instead of a useful discussion of drug use and its possible causes and solutions, this “news show” is simply selling oatmeal and enraging the public in no constructive way. The conglomerate says it is simply supplying and selling what obtains the most profit.
One in fifteen of us now work in the three trillion dollar per year tourism industry of transportation, restaurants, and motels. In previous times, soldiers were the only persons to see other lands. Today, 8% of the world's population travels to another country during each year. The most visited places are France, Spain, the United States, and the Epcot Center in Florida. Tokyo Disneyland and its supporting companies involve 6.3 billion dollars per year in sales, which is about the same revenue as comes from Japan's camera exports.
The Bertelsmann corporation is a publishing giant from Germany. Reinhard Mohn owns all of its voting stock. Mohn is the great-grandson of the founder of his publishing company that began by printing hymn books in 1835. In the difficulties of the 1920s the company was down to six employees. During World War II Mohn spent three years in a POW camp in Concordia, Kansas. After the war he rebuilt his company by searching through the debris of bombed buildings to find books to trade. The books were in high demand but nobody had cash. He traded books for whiskey, which he then traded for bricks. Finally, he used the bricks to rebuild his own building.
By 1994, Bertelsmann was a collection of 375 companies including Bantam, Double-Day, Dell, RCA, and Arista. It had 44,000 employees and eight billion dollars in annual sales; one-third of its sales were in the United States. Bertelsmann owns music, video, and book clubs along with publishing houses, printing companies, television, radio, magazines, and newspapers. In one Minnesota plant, they print 140 different magazines. Of all the paperback books produced in the United States, 20% are printed in their Dallas, Texas subsidiary. Membership in Bertelsmann's book clubs grew from one million persons in 1954 to twenty-five million in 1990.
For decades the publishing industry had averaged a 4% profit but the global corporations who purchased them expect a 10% to 15% profit. A publisher typically makes 15% to 25% profit from the sales of a textbook, but just 5% to 6% from the sales of other types of books. The corporation pays close attention to the contents of textbooks in their attempts to maximize profits. For example, if you write a general biology textbook then your publisher will closely compare it with the best-selling biology textbooks. The publisher might ask you why your textbook has only one page about frogs while the bestsellers average five pages about frogs. Most books sell less than 3,000 copies. A bestseller used to sell about 350,000 copies until the bookstore chains began operating in the 1970s and helped increase that number to one million copies. In 1938, 21% of the United States residents said that their favorite past-time was to read a book; in 1994 the percentage had fallen to 14%.
Large corporations have large amounts of cash and other assets that they use in speculative manners, hoping to be ahead of others to cash in on the next popular craze. In the 1960s, IBM and other computer companies began buying U.S. book publishing companies because they expected paper books to be replaced by a computerized form. In the 1970s, CBS and Capitol Records also began buying book publishing companies. But they were all a few decades ahead of their time so their dreams of quick and large profits did not emerge. After waiting as long as they could bear, they began selling their publishing companies in the 1980s. And, as mentioned above, the low value of the dollar during the 1980s meant that many foreign companies could purchase those of the United States at bargain rates. Most countries limit foreign ownership of publishing, television, and radio companies. (In the 1950s and 1960s, the United States taxpayer provided 30% of some publisher's profits in exchange for sending U.S.-friendly books to the third world.) Publishing is now a globally owned and operated industry.
Global record and CD sales reached $20 billion dollars in 1990, and then grew to $35 billion by 2000 before beginning a decline due to the growth of digital music. In 2004, 200 million digital music tracks were downloaded in France, Germany, Britain, and the U.S. Music is now a globally owned and operated industry. Phillips alone sells half the world's classical music. Today, all the music in the United States is distributed by just six major corporations. These six sell the use of old songs to help sell tires, shoes, and cars and such.
Since the record label has a monopoly on the work of each of its artists, it can sell it for the highest price the market can bear. This was recently found to be $18 per disc when some nation-wide retailers made a mutual but illegal agreement to raise their selling price to that amount. The music industry first determines the average amount of money which a consumer can annually spend on music and then divides by $18 to calculate how many albums can be bought per year. In turn, this determines the number of artists the industry will promote. Just a few artists, whose careers average about five years in length, earn most of the profit of each record label. The $4.20 cost of making a compact disc includes its material and machining along with artist royalties. The disc is sold for $10.70 to the retail store that sells it to us consumers for $18. Book publishers similarly determine both the selling price and the number of books that will get published each year.
Blank cassette recording tape manufacturers have to pay into an artist's fund to pay royalties on the resulting homemade duplications. The digital video disk manufacturers had hoped to keep the price of a blank disk higher than the price of a disk that already contains a movie. Tape and discs are now on their way out. That is, instead of requiring our own physical copy to use in our own player at home, the internet is enabling us to view or listen to the film or music of our choice at any moment. It is changing from a fee per disc to a fee per use.
Authors and music bands seek agents to represent them to the publishing and recording corporations. Each agent receives one hundred submissions from authors or bands for each one they choose to show to a book publisher or recording company. In turn, those companies receive one hundred submissions from agents for each one they choose to print or produce. Publishers and record companies are sometimes less concerned with knowledge or talent and more concerned with making a book or record that is similar to one that recently sold in large numbers. The musician Sheryl Crow recently remarked that “The industry wants clones, not talent.” Publishers and record companies are in the fashion business and play a large role in generating the fashion. Recently, state control over books and records has been diminishing while corporate marketing has been establishing its own conventions–not by suppressing thought and talent but by drowning it out.
Music fans are not freely choosing what becomes available to them. MTV has considerable market power in choosing which artists it will play or promote. You might like to see the techniques used in marketing to teenagers described in the PBS Frontline documentary The Merchants of Cool. Promoters have been known to pay radio stations sixty to eighty million dollars per year to repeatedly play their artists songs and to leave out the songs of another artist. The music industry generates interest in its artists through promotions. For example, the Pepsi corporation bought two-minutes of prime-time television to promote Madonna's "Like a Prayer" in forty countries. However, this was kept off the air in the United States when the American Family Association threatened to boycott Pepsi products.
As mentioned in Chapter 17, books and records are just now beginning to be made available in computer format. Each band can now record their own music directly onto their own internet site, and each author can now place his or her work on internet sites for all to consider without having to obtain the consensus of a corporation's personnel about the work's profit potential. This means that we are beginning to be able to select from every author and every band's works instead of being able to select from just the works that corporate personnel have chosen to make available to us.
For the last few decades, rock-and-roll distributed by U.S. and U.K. companies has dominated the airwaves. To protect something of their own culture from this distributed deluge, some nations require that its radio stations play a certain, minimum amount of local music. For example, Canada requires that 30% of an AM station's on-air time be used in playing the music of Canadian artists. The internet also makes the world's musical varieties more available to all of us. As mentioned in Chapter 16, the world contains countless musical styles. If you have found that one type of music makes you happy, rock-and-roll for example, then you will find you can become fifty times as happy by also listening to fifty other kinds of music. This happiness has been restricted in the past due to a restricted choice in available music. Local musical types are the result of local language, history, and culture. Some artists have said that the key to getting music out to the whole world is to sing in English because it may then be distributed, but then their music has been excessively altered. Of the thousands of types of music in the world, Reggae is the only foreign style to acquire a large audience among the English speakers of the United States because it is sung in English.
Today, a corporation can double its income earned through a musician’s work by selling clothing and other merchandise with that musician's name on it. A movie-making corporation can also use its movie to sell its music, dog food, phones, and the game version of the movie all at once. Cereal companies, like Ralston-Purina, pay a 3% royalty to place logos from the latest films and toys onto their packages. Much of what our children wear, drink, eat, ride, play with and sleep on have logos that indicate promotional deals between the world's largest corporations. Much of this promotion involves the film, music, and entertainment industry of the United States, which is largely owned by German and Japanese corporations.
In 2004, almost $300 billion was spent on advertising in the U.S. Since the population of the U.S. is about 300 million persons, this means that $1,000 was spent on each person. Some companies spend 25% of their income on advertising. The top spenders include Proctor and Gamble, Phillip Morris, Kellogg, RJ Reynolds-Nabisco, General Motors, Sears, Pepsico, McDonalds, and the two European corporations Unilever and Nestle. About one hundred companies account for 40% of advertising, see www.charleswarner.us/articles/100LNA04.htm for related information. The most cost effective ad is aired globally. Half the world’s advertising occurs within the United States where each person is exposed to advertising about once per minute for a total of one-half million times per year. By 1990, one-third of the world's population could no longer avoid a daily bombardment of advertising. Advertisements are now shown on anything with which a person might spend two seconds of his or her time, including parking meters and door handles. Just last month, I began to be subjected to video advertising while waiting in line at the grocery store. Our advertising designers hope to arrange it such that you cannot choose to avoid ads. Since your GPS-equipped cell phone knows your current location, there is recent talk of sending advertisements to your cell phone as you pass each and every store. Products are now promoted within the classroom.
On the receiving end of the advertising, ads try to teach our children to be consumers and debtors. Sometimes ads are teaching children for more hours per week then are their parents. But then, we parents can explain to our children the purpose and techniques of advertising. At the transmitting-end of advertising, ads often use children to sell products because it is known that the simple sight of a child makes us happy. Some ads attempt to evoke our concerns for children by telling us how their product will make us better parents or how our children will be safer or happier. Celebrities are also used to sell products.
Those of us who make advertising will study groups of test-persons to find "emotional buttons" that bring out intense responses. The advertising agencies want to know what makes us mad, happy, afraid, and comfortable and such. They often sell a mood more than they sell a product. (In Chapter 20 we will see how today's political campaigners hire advertisers who use these same tactics of finding emotional buttons that markets candidates and issues as if they were oatmeal.) Advertisers want to know what makes a Luxembourger or an Indonesian feel calm or anxious. They want those of us who have little income to feel “energized” as we go to the store in search of the good life we have seen in advertisements.
The physical responses of test-persons are also monitored. For example, marketers want to know how a person goes about choosing among brands as he or she walks down the store aisle. To find out, marketers use lasers and mirrors to monitor the eye movements of pre-wired test-persons as they walk down store aisles. In this way they determine which shelf locations people most often look toward. The result: we all know that the brand-name products are placed at eye level, while the cheapest items are on the shelves farthest from eye-level. The sales of a product can depend on its shelf-placement within a store. Marketers have also video taped consumer behavior in actual stores, sometimes without their knowledge.
Advertisers study the motivations of purchasers. They want to know if people purchase items to “be like other people or to own prestigious things” and they want to know what is the most important factor to you in choosing among brands. Is it cost, brand name, brand reputation, in-store coupon, convenience, today’s sale, referral from trusted friends, or loyalty? To make ads more effective, marketers ask test subjects to describe the feelings an advertisement has attempted to evoke and the feelings it actually evoked. They also ask the test subjects to describe the emotional state of the people shown in the ad. Were they happy or sad, worried or calm? (Visit www.pbs.org/wgbh/pages/frontline/shows/teenbrain to view the PBS Frontline documentary Inside the Teenage Brain, which describes how research on brain growth has found that teenagers are not yet able to accurately ascertain the emotion signaled by a person’s expression.) When sales are more important than art, movie makers will display alternative movie endings to a test audience in order to find the ending that will maximize profit.
Do you believe that the brand of cola that you think tastes “normal” is easily changed simply by sticking to a different brand for a couple weeks? After that time, the previously considered “normal” brand will taste funny and you will find yourself hooked on the new brand. Nationally advertised name brands cost two or three times as much as do “bargain” soda brands. Getting you hooked on one brand enables that manufacturer to charge twice as much. Advertising is used to enable the continuation of the higher price by promoting brand loyalty. Does advertising work? Try switching soda brands for two weeks and see if there had been any real reason for you to have been loyal to that earlier brand. By the way, in 1975, 77% of us bought an advertised brand over an unrecognized one but by 1990 this had fallen to 62%. Korten suggests that we tax advertising by 50% and use the money to educate people so that they will not to be tricked by it.
As for my own response to advertising, it keeps me from watching any television or hearing any radio at all except for (decreasingly so) commercial-free, public stations. Whenever I see or hear two advertisements in a row its enough to make me begin shaking, wheezing, and retching. I run in circles feeling that I'm trapped and can't escape. I begin to chew my own head off in an attempt to end the unwanted mental intrusion. And then I never buy those products. My doctor told me I have fabricitis and Escherobia, which is a phobia of the impossible. If it were up to me, I’d outlaw the advertising use of adverbs, adjectives, dramatic re-enactments, displays of mood, music, jingles, children, testimonials, and the phrase "order in the next ten minutes." All that would remain is for an ad is to make a statement like "Joe's diner sells food from 2-4, Monday to Thursday." In the last third of The Meaning of it all, Thoughts of a Citizen-Scientist, Feynman complained–back in the 1960s–about the irritating manner in which advertisers treat us like idiots.
Electrically measuring customer and voter emotions
Marketing personnel will electrically monitor many persons as they hear and see an advertisement to determine which words, backgrounds, colors, and actions produce the most positive response from the viewer. We will see below that Reagan's staff employed this strategy as they tried to choose even the backdrop for each of his appearances. They attempted to design and promote an image for Reagan because popular presidents more often get their way with Congress. Reagan's staff attempted to promote his image as if they were selling a product. Politicians hire consulting groups who electrically monitor test-persons as they hear and see a speech made by themselves or by rival candidates. The electrical measurements record each individual's emotional response as each word is heard. Consultants Find which topics or words produce the greatest reactions from the people in the test group and inform the sponsoring politician about which topics to avoid or pursue. Polls are used also to measure interests and concerns.
Industries and political views are marketed to the masses by using those things found to push the emotional buttons of a room-full of test subjects. When one industry is pitted against another by proposed legislation, each uses these techniques to promote their concerns and to scare people away from the opposing view. For example, a proposal to allow freight trucks to pull three trailers instead of just two has been fought by the railroad industry with scary pictures of swaying trailers being driven down the highway. If word gets out about the truth of your business or political view, marketers believe all you have to do is run advertisements claiming the opposite of that truth. For example, we see ads claiming that coal-fired electrical generating plants provide clean energy and other ads hoping to portray how the world will be better off if we were to let one global corporation control the world's food supply. Whenever you see an ad containing calming music you know its designers believe that that is all it takes to sway you to their side.
Monitoring and analyzing each customer's purchases
Grocery stores and pharmacies and such have been encouraging us to present what is touted to be a discount tag but is actually an identification card, see www.nocards.org. Your I.D. card is used to keep track of every item you purchase, record the profit made from you each month, and determine your purchasing patterns. (I suspect the cash register will soon project a voice telling me that I’m behind on my hygiene product purchases.) The store operators then know which things you normally buy and how much you are willing to pay for each item. Since the company knows the profit it is making off each of its customers, it can turn itself into a store dealing only with its group of most profitable customers. For example, if a sufficient number of customers show that they are willing to pay twice the normal price for certain items, then that will become the price of those items. It has been recommended that store operators stop selling those items bought only by its group of least-profitable customers. Even the shelf-locations of the items you purchased can be analyzed to determine which items you choose not to purchase even though they were placed right next to items you did buy. A store can use your purchasing information and deduced habits to tailor special discount offers for you that results in a larger profit for the store. For example, it can be determined that you might usually buy the cheaper brand A but will buy more-expensive brand B when its price is lowered to be just a certain amount above the cheaper one. My friend in the data mining industry says the grocery store cart may be equipped with a scanner to provide the customer with a running total price of the items placed into the cart. This will provide the store with information about the time sequence in which you selected items. For example, did you first pick up strawberries or angel food cake. As you place one item into the cart–peas, for example–a synthesized voice in the cart might recommend additional items for use with those peas.
Each collection of items you purchase together are analyzed by “data mining” software that searches for patterns of common content between different shoppers. For example, my friend says that people who buy chicken sometimes also buy bleach, which is used to clean up after preparing the meal. A mail order store might find that persons who bought two certain items, such as a pillow and a tie, often also purchased a third item, which might be a bowl. After this analysis has been done, if you then call in to order a pillow and a tie, the person who is taking the order will enter those two items into the computer and be told to ask you if you also need a bowl. The startled customer might respond with "How did you know?" Sellers hope that your purchases might be due to similar needs or to having a similar personality. Internet purchases are wholly computerized and so naturally include these techniques. Your internet browsing can be monitored to determine which products would be most-successfully advertised to you.
Each time you purchase prescription drugs at a pharmacy, your name and address and such is recorded along with the sale. Drug manufacturers purchase these records from drugstore chains and then analyze them to find ways to maximize their own profits. For example, they will look at records from each individual zipcode and decide whether or not a large enough percentage of patients are purchasing their higher-cost drugs. If too many patients are buying cheaper, generic brands then the manufacturer will target advertising to both the doctors and the patients living within the area of that zipcode.
Forty-seven million of us, which is 1% of the world’s population, work in the world's tobacco industry. Phillip Morris is the largest tobacco company. The 640 million cigarettes it makes each day accounts for 11% of the worldwide total. In 1964 and 1997, about one-half trillion cigarettes were sold in the U.S., but the per-capita consumption rate had fallen by half during that time. Tobacco companies spent $12.5 billion on advertising and promotion in 2002 (see www.ftc.gov/reports/cigarette/041022cigaretterpt.pdf for the entire Federal Trade Commission Report). In 2002, almost four billion cigarettes were sold or given away in promotions. There are 6 trillion cigarettes sold each year throughout the world; this is about one thousand for each of us. The three largest tobacco companies sell two-thirds of cigarettes sold worldwide, except fo those nations having total monopolies. The Chinese state monopoly makes 1.5 trillion cigarettes per year that are smoked by its one billion residents. Phillip Morris, RJ Reynolds-Nabisco, and British American Tobacco control 80% of the U.S. market. Phillip Morris also rivals Nestle as the world's largest food corporation. Ten percent of the items you buy at the grocery store are actually Phillip Morris products. Despite the number of products they sell, cigarette sales account for 60% of the profit of Phillip Morris.
The price of cigarettes has been steadily rising for decades simply because manufacturers found they could raise the price and we would still buy them. Cigarette manufacturers average 35% profit from their product. (I assume that marijuana cigarettes will be legalized in the U.S. a few days after tobacco companies notice the profit they could obtain from their sale. What price would they find they could charge for such a pack?) In the poorer parts of the world, including the inner cities of the U.S., cigarettes are individually sold due to the high cost of packs. The National Association of Convenience Stores reports that cigarettes account for one-third of in-store sales in convenience stores, averaging $200,000 in sales and $50,000 in gross profit per store, see 2004 SOI Highlights at www.nacsonline.com (search for soihighlights2004.pdf).
The U.S. Commerce Department figures that each one billion dollars in trade means 25,000 jobs, or twenty-five jobs for each million dollars in trade. The United States import-export of tobacco was 4.5 billion dollars in 1990. A billion dollars in tobacco sales means $350 million in profits for the tobacco corporation's stock holders and $100 million in wages for a few dozen executives. Excluding corporate executives, the 25,000 of us who are employed in tobacco in the U.S. earn a combined annual wage of $250,000 to $500,000.
In 1964, 50% of those of us humans who live in the United States were smokers. After thirty years of bombardment by scary messages this has dropped by only half. About 25% of us smoke today. In the U.S. about half of smokers are men and half are women. There has been much effort recently to decrease smoking. Worldwide anti-smoking groups share data and techniques and they share the experiences of their dealings with legislatures, lobbyists, doctors, and activists. On the other side, tobacco interests tell restaurants and bars how to fight proposed anti-smoking legislation. When there are threats to ban smoking in particular place, there is often much screaming and shouting "as if someone were trying to ban sex." Advertising of tobacco products is being banned in additional countries every year. Tobacco advertising had been especially aimed at hooking adolescents because they are likely to become lifelong smokers. The RJ Reynolds-Nabisco ads portraying Joe-Cool the Camel increased their share of existing young smokers from 1% up to 30%. By 2005, about half the world’s nations had signed onto the Framework Convention for Tobacco Control which seeks to ban advertising and to ban indoor smoking from the workplace. This may help to reverse the worldwide increase in smoking. About half the world’s adult men smoke cigarettes; that is, we stick dried and aged, burning leaves into our mouths. Yum. This has been in fashion for five hundred years–few fashions last so long. We can conclude that smoking is addicting simply from the fact that the fashion has lasted so long and that there are few such strange cultural habits shared by half the world’s male population.
Of the people who smoke daily for fifty years, about half are killed by their habit. Every year about 400,000 persons die in the U.S. from tobacco related illnesses. These deaths occur after spending about $150 billion dollars on medical bills. Worldwide, tobacco is the cause of about 9% of all deaths; there are five million tobacco related deaths per year (see http://www.lungusa.org/site/pp.asp?c=dvLUK9O0E&b=39860, and www.who.int/tobacco/health_priority/en). In Physics as a Liberal Art, James S. Trefil calculates that the lifetime of a smoker is shortened by about 13 minutes with each cigarette smoked. Since it takes about 13 minutes to smoke a cigarette, this means that one’s life is shortened by about the amount of time spent smoking.
The United States tobacco corporations do not grow any tobacco themselves, they just package and sell it. A farmer in the U.S. will choose to grow tobacco because they can earn $1,200 per acre of tobacco but just $72 per acre of soybeans. (At the same time, farmers do not have a completely free choice of crop because each region's soil and climate is not suitable for every possible crop.) The United States tobacco companies do not care about the tobacco farmers of the United States because these companies purchase tobacco from whichever nation's farmers will sell it to them for the lowest price. A United States tobacco company will go to a farmer in Brazil, who might be growing a low-priced vegetable, and supply the funds needed for the conversion to growing high-priced tobacco. On average, the farmer makes four times as much money from tobacco. In exchange, the farmer has to agree to sell all of the tobacco to that one tobacco company. Seventy-five percent of the tobacco imported into the United States comes from thirty developing countries. This makes those nations and their farmers dependent on the tobacco crop. There is a danger that a nation can spend more money buying cigarettes than it receives from selling tobacco.
The United States tobacco companies got the officials of the United States Commerce Department to threaten to impose trade sanctions on Japan, Taiwan, and Korea unless these nations agreed to open up their markets and allow U.S. tobacco companies to have a larger share of their citizen's tobacco purchases. One Commerce secretary said the U.S. tobacco industry plays trade-laws like a Stradivarius. Tobacco companies are among the largest campaign contributors. In 1992, Phillip Morris and RJ Reynolds-Nabisco each gave $100,000 to both presidential candidates. They gave $2 million to federal candidates in the 2003-2004 election cycle, as shown at http://tobaccofreeaction.org/contributions. With the number of smokers decreasing in the U.S., tobacco companies are interested in increased access to foreign markets. For example, in 1985 foreign tobacco had just 2.3% of the Japanese market, where sixty percent of adults smoke, and just 0.2% of the Korean market, where 75% of adults smoke.
Ten percent of Korea's budget comes from a cigarette tax on its locally grown tobacco monopoly. There is a $1,250 fine and a prison term for persons caught smoking foreign cigarettes. The United States tobacco industry hired former Reagan administration officials to lobby Washington and Seoul. They also hired former CIA personnel to help them in sales to stores whose owners were known to be opposed to U.S. tobacco and in regions known to be similarly opposed. The United States tobacco industry threatened to stop buying Korean tobacco crops–it had been purchasing 30% of Korea's tobacco crop. The United States tobacco companies have their eye on India and China next, so watch the newspaper to see the events unfold.
We have seen that 90% of us have been employed as farmers throughout the period extending from the origin of cities to the beginning of the Industrial Revolution. (In the United States today, just 1% of the population is occupied as farmers.) Old world farmers grew rice, wheat, and other cereals while New World farmers grew maize. Beginning around the year 1500, seeds from New World foods–including maize, potatoes, corn, and tomatoes and such–were taken to be grown in Europe and Africa where they had never before been seen. Tomatoes then began to transform Italian cooking, potatoes became the Irish staple, and maize became a major crop in many African nations. The limited genetic variability of the transported potatoes played a role in the Irish Potato Famine of the 1840s, see http://vassun.vassar.edu/~sttaylor/FAMINE. We have also seen that some Old World crops were taken to the New World, including rice and watermelon.
We have seen that throughout our history we could not transport food for any distance at all. If we attempted to transport food in the ancient world, we would consume our entire cargo within a few days. In ancient Rome the price of a wagon load of grain doubled every fifty transported-miles (80 kilometers). There could be an area of hunger just 100 kilometers (60 miles) from an area of surplus and no way to move food between the two areas. For this reason, food has always been locally grown and eaten. Each city has obtained its food from its surrounding farm lands. Canned food storage was an early nineteenth-century adaption of bottling. We saw the beginnings of refrigerated food transport as Gustavus Swift began using ice-packed railroad cars in 1881 to ship meat from Chicago to the Eastern cities, and we saw that Gail Borden began his dehydrated-milk company after seeing infants die from the contaminated milk they had to drink while traveling across the ocean on a boat. Around 1900, refrigerated ships began to be used to transport food for long distances.
Since 1950 refrigerated trucks have been moving fruit and other foods between the northern and southern hemispheres, traveling in a direction that alternates with the season. Food is moved between Africa and Europe and between South America and North America. It takes just ten days to move grapes from Chile to Chicago. (This means that your grapes first basked in the southern sun, were visited by Chilean birds, picked by a Chilean person, took a ride on a truck, became a world traveler as they passed through many nations, arrived in your home town, and then ended up on your table.) The long-distance transportation of food requires picking fruit earlier than normal and then chemically delaying its ripening process. All the fruit on a single tree normally ripens simultaneously as a chemical signal is released by one part of the tree and then detected by the rest of it. To delay ripening during shipment, fruit might be placed into a container equipped to evacuate that chemical.
Agriculture accounts for 4% of today’s $50 trillion gross world product. About 80% of food is consumed in the nation in which it was grown. The international trade of food is now about $400 billion per year. The processing and trading of food is being handled by a small number of global corporations who are changing the arrangement of the world's food system. They are influencing where each type of food is grown by moving farming to the equatorial countries that have longer growing seasons and they are influencing where crops are processed and packaged by moving factories to the countries having the lowest wages.
The global food industry has been raising the price of our food throughout recent decades in a continual search for the highest price we will pay for the finished food products. At the same time, by being a large-scale customer, they have the muscle to continually pay farmers a decreasing amount for crops. By being such a large seller, the corporations can charge increasing amounts for the finished products. We saw that this muscling of costs and prices began to occur with the emergence of the first large-scale corporations–for example, in Standard Oil’s nineteenth-century muscling of raw material and transportation costs and in the selling price of its finished product. Our global corporations now want to purchase raw food from those locations of the earth where it can be purchased for as low a cost as is possible, process it into breakfast cereal and candy and such, and then transport it to those regions of the earth where it can be sold for as high a price as is earthly possible. In the same way, the small number of corporations that control every other industry are searching for the lowest cost of materials and the highest selling price for finished products.
As one example of this muscling, let’s look at breakfast cereal. The retail price of a package of Kellogg’s Corn Flakes is divided into the following portions for each of the various steps in its production. The farmer receives 4.5%, the grain elevator and the grain miller get 2% (recall the millers of Medieval Europe and of nineteenth-century New England), and the grocery store receives 22%. The Kellogg corporation receives the remaining 71.5% for its labor, freight, packaging, marketing, and administrating. Another brand of Corn Flakes sells for 25% less, but Kellogg sells 40% of all breakfast cereals.
If a product is distributed today then it has also been monopolized. If one hundred different companies manufacture the same item, just one of those companies can take over the entire market by making a deal with the single company who has taken over the wholesale distribution of that item. In the case of the food industry, the result has been that the shelves of every grocery store in town–and throughout the nation, from Boston to San Francisco–now contain essentially the same items. (The chocolate bars of the global food companies are already seen in stores from Eastern Europe to South America.) You can tell that a deal has been struck between a manufacturer of a specific item and the distributor when retail stores suddenly drop the products of that manufacturer. This also means that the price will increase.
Just as in the book and record industries, the global food corporation's products swamp out the variety that would occur from having many small and independent food producers. Large food corporations will test-market 6,000 of their own "new” products each year but prefer we do not even see the products of competitors. Most of the new products are variations of existing ones. For example, we see one hundred new varieties of potato chips every year, each with its own flavor dust magically glued onto potatoes and fingers. (I’m surprised that the flavor dust is not sold separately so we could apply it to other things.)
Besides tobacco (mentioned above), the list of Phillip Morris products includes General Foods, Kraft, Miller Beer, Maxwell House, Jell-O, Kool-aid, Cheeze Whiz, Philadelphia Cream Cheese, Oscar Mayer, Breyers Ice-Cream, Tang, Parkay, Sanka, Post Cereals, and Toblerone chocolate. Phillip Morris' size means that it has much weight in negotiations with supermarkets over price and shelf space. The supermarket makes as little as 2% profit on the food it sells. In effect, it is selling nothing but fast turning shelf space to a small number of food processing companies. Just as Phillip Morris got the United States government to force open Japan's tobacco market, it also wants the Japanese market opened to Phillip Morris food products. Since we have seen that the raw materials for "American" tobacco, cars, televisions, and everything else come from all over the world, when Phillip Morris talks about its “products,” it is really talking about its “finished products” composed of raw materials obtained from throughout the world. That is, Phillip Morris doesn’t grow food, it processes it. By the way, to buy Kraft, Phillip Morris had to borrow ten billion dollars from a collection of sixty-five banks. It had to do this in secret or else the price of Kraft stock would have gone up. Meanwhile, those banks were turning down smaller, less-profitable loans to many individuals.
Already by 1921, just thirty-six companies were handling most of U.S. wheat exports. The ten largest food companies today handle one-third of the food exports of the United States. Cargill, which began as a printing company, controls 96% of U.S. wheat and 95% of U.S. corn exports, 90% of European and 98% of Canadian barley exports, and 80% of Argentinean wheat exports. Fruit is Chile's second largest export but only one of its four largest fruit companies is Chilean owned. From 1989 to 1991 there were 450 mergers in the European food and drink industry, and 387 in that of the U.S. Many car companies bought food companies, and many food companies acquired businesses in other industries. For example, the Sara Lee corporation sells cakes, underwear, Fuller Brushes, wine, coffee, and shoe polish in twenty-three countries.
The global food industry funds scientific research to find cheap chemicals having similar molecular arrangements to expensively grown food. Fast food chains fund much of this research. These chemicals fool our taste buds and cost much less than raising or growing actual food. This cost savings means increased profits for the corporation. The development of protein-rich food for those of us who are poor is of little interest to global food companies because the low price we can pay would mean low profit.
We have food for all of us throughout the world but many of us are going hungry. Not because food isn't available but because our families can't afford to buy it. Some of us live a malnourished life or even starve to death within sight of a wheat field destined for export. Within our civilization, two out of the six billion of us do not have enough money for adequate food. (For the current population, visit www.world-gazetteer.com.) Many of us formerly self-sufficient farming families now work in food processing factories but are not paid enough money to buy the food we make. Each year, millions of us die of hunger, including thirteen million of our children. Many starvation-caused deaths occur during prolonged civil war that interrupts a region’s agricultural production; sometimes war is accompanied by drought. Instead of the weather causing famines, as has periodically happened through the last 10,000 years, they are now caused by war and our own economic system. Assuring that we are all fed is a meaningful task for our mutual efforts. You might like to read the U.N. report Feeding the Cities at www.fao.org/worldfoodsummit/english/fsheets/cities.pdf. You might also view the U.N. video clip Scorched Earth: FAO in Sudan, see www.fao.org/videocatalogue/index.jsp?lang=EN. It discusses attempts to help feed people in Sudan, whose agricultural production has been upset by fifty years of war. Visit www.fao.org/newsroom/en/news/2005/102196 for U.N. efforts to counter the effects on food production from twenty years of war.
Until recently, each city was self-sufficient in its food production–or it wouldn't have existed. The addition of the food industry into the mix of globalized business has meant that many nations now need to import as much as 25% of their food supply and that they pay a larger price for their imported food. They try to pay for this higher priced food by exporting other products. The income some nations receive from exports depends on too few products. They can be left short of money when there is a drop in demand for the small number of products that they do export.
The stipulations of some international development-loans have played a role in creating the dependence of some nations on too small a number of exported products. The lender's economics experts were attempting to setup the economics of these nations to follow the idea that a nation must find a high priced specialty product to export to receive income. These experts say it is ok not to grow your own food if you have money from your specialty product to hire other nations to grow food for you. (For a list of the major industries of each nation, see www.cia.gov/cia/publications/factbook/fields/2090.html.)
A few decades ago, many nations who were previously self-sufficient in food production began concentrating on growing more-profitable and more specialized export crops. But so did other countries. The selling price of crops also began to be pressured downwards by the emergence of the supply-controlling global corporation and its efforts to find the absolute lowest price it could pay for crops. The result is that the people of many nations pay more for their food now that it is imported than they had earlier paid when it was locally grown by themselves. A nation might find that the sugar they export for a lower and lower price is being re-bought at a higher and higher price in the form of candy and breakfast cereal and other processed foods. In recent decades, fifty to seventy-five percent of the people of the world have stopped growing their own food. The overall result has been that about one-third of us humans today do not have sufficient income to buy enough food. Visit www.fao.org/worldfoodsummit/english/fsheets/malnutrition.pdf for the U.N. report The Spectrum of Malnutrition. Also visit www.fao.org/worldfoodsummit/english/fsheets/food.pdf for the report The Right to Food.
The causes of worldwide hunger, for two out of the six billion of us, include wages that are too low for us to afford enough food to eat, income shortages that occur when nations are exporting too few products to survive drops in demand, paying more for imported food than we used to pay when we grew our own food locally, and the global corporation's efforts to purchase crops for as little as possible and sell finished food products for as high a price as possible, see Commodity markets: global trends, local impacts at www.fao.org/newsroom/en/focus/2005/89746. Famines occurred throughout ancient times but were due to intermittent crop failures rather than to failures in the leaders of our governments and businesses. Drought and soil erosion are less frequent causes and are less widespread in that they are not worldwide. If droughts were the sole cause of hunger, it would be an easy job today for our civilization to build a worldwide system of water pipes and canals and such. But the lack of crop-water is a small cause of today's global hunger. We can easily transport emergency food from one region of the world to another, as we do today for humanitarian reasons.
The globalization of the food industry also makes a government less able to control food, health, and environmental standards. For example, a U.S. food company can grow food in another country using pesticides banned from use within the U.S. but still export that food to the U.S. Global corporations are suggesting trade agreements for governments, including the WTO and GATT talks, that can force a nation to decrease its environmental and health standards to those of the lowest existing standards of any member nation–under threat of trade sanctions. Do you think the governments of the world should get together and make decisions about growing and distributing food or should these decisions be made by our corporate leaders? For an opposing view, the Global Trade Watch promotes democracy by challenging corporate globalization, arguing that the current globalization model is neither a random inevitability nor “free trade,” see www.citizen.org for more information.
Throughout the world, the globalization of the agricultural industry is putting the self-sufficient family farmer out of business. Small family farms are being replaced by large industrial farms that have capital, machinery, and corporate contracts. These large corporations are buying up the land of the small family farmer, who then move to a nearby big city in search of housing and a factory job. The trouble is that most of us displaced farmers are forced to take big-city jobs with pay that is too low to provide a living wage. Today, millions of us live in large shanty-town neighborhoods surrounding the world’s largest cities.
Today's worldwide migration of 75 million job-seekers per year
Some of us are adventurous enough to look elsewhere for employment and opportunity, particularly to countries that have a shortage of workers in certain jobs. Since the 1960s there have been large numbers of persons migrating around the world in search of jobs–about seventy-five million persons per year in the 1990s, which is about 1% of the world's population. (We saw in Chapter 15 that 2% of Europe's population was migrating to the New World during the beginnings of the Industrial Revolution.) We are not migrating from the poorest to the wealthiest nations but are leaving the most recently industrializing nations and moving to a nearby nation that has been industrializing for a longer time. For more information about migration, visit www.ilo.org/public/english/protection/migrant.
Many families have moved to distant lands leaving the cultural homeland of their village behind, becoming separated from their traditional way of life and society. Some villages have been significantly emptied of people. Often, the father goes alone and then sends money back home. People are sending money home at an annual worldwide rate of twenty-eight billion dollars per year through monitorable bank transactions, and still more through other channels. As newly arrived immigrants find a city with jobs and opportunity they will inform their friends and family back in the home village. Just as we saw occurred for the arriving factory workers of the U.S. around the year 1850, who wrote home about a better life, advising that “everyone in the family come except John, because he couldn't take the harsh ways."
People from many nations are taking part in this migration. Turks often choose work in Germany while Algerians find jobs in Paris. Workers moved from Indonesia and the Philippines to Hong Kong, Korea, Singapore, and Taiwan. In the late 1970s in Switzerland, 20% of the work force were foreigners. A Taiwanese official has said that as natives moved up the industrial ladder, 500,000 illegal immigrants moved in to fill unskilled positions. The Philippines export the greatest number of nurses. Construction workers are the largest export of Jordan and Bangladesh. Jordan's workers send 700 million dollars per year back home to their families; a larger amount of money than is received from its principal crop. In the 1970s, hundreds of thousands of young men from India, Pakistan, and Bangladesh went to work in the oil fields of the Middle East. In Kuwait, half of its two million workers are foreigners. The Gulf War sent one million foreign workers within each of Kuwait and Iraq back to their homelands. The war caused the earnings of Jordan's construction workers to fall by 25%.
These migrations have an affect on both the sending and the receiving nations. It is often the most-capable persons who leave a country to find jobs in a country industrialized for a longer period, resulting in a "brain drain" from the sending countries. Half the mathematics, computer science, and engineering doctorate degrees in the U.S. are earned by foreigners, many of whom then stay in the U.S. Some of those western-educated persons return to their home countries and, when needed, work to open up their political systems. We will see in Chapter 19 that these persons played a role in approving the transition away from the single-party system in the Republic of China in Taiwan.
The United States is a land of immigrants and is continually enriched and renewed by them, but many persons in the U.S. hate immigrants. In the year 1900, 25% of the people who were living in the United States had been born in another country. Hobsbawm reports that in the years 1900 to 1915 there were fifteen million immigrants into the U.S. but only five million in the years 1915 to 1930, and less than one million during the depression and World War II. This long period with low immigration meant that just 5% of the population was foreign-born in 1960; but by 1997, this number had grown to 10%. During the 1990s, new births by existing citizens and the immigration of new citizens each accounted for about half the growth in population of the U.S. Our gross national product increases with the size of our population. This means, for one thing, that immigration will be involved in the increases of our Gross National Product, the number of new housing starts, and every other economic indicator we hear about in the monthly news.
Bennett reports that in 1997, 40% of U.S. immigrants were the spouses, parents, and children of U.S. citizens. Since 1960, twenty million persons have immigrated into the U.S. (our current population is 290 million persons). By 1996 about five million illegal immigrants had settled in the U.S., comprising 2% of the population. Half of us immigrants came from Mexico. About 40% of the illegal residents of the U.S. arrived legally for a temporary stay but failed to depart.
Ten percent of U.S. residents speak a foreign language at home. Within ten years of arriving in the U.S., 75% of immigrants speak English well. As our grandparents immigrated to the U.S. during recent centuries, they too spoke only their native languages at first. Their children would learn the language of their new home. The people of the U.S. are unique in the world in their attitude that they should not have to know, or even hear, any other language. The people of other nations want to speak the languages of many other nations to make it more inviting for tourists to come and spend money.
The U.S. benefits greatly from immigration. For example, more than 20% of Congressional Medal of Honor recipients have been immigrants. Immigrants to the U.S. pay ninety billion dollars in annual taxes and receive five billion dollars in government aid in return. Some small groups have pooled their money and gone into business. For example, 4,000 Afghans in New York City own a chain of fried chicken restaurants. Throughout the last 200 years of U.S. immigration, the arriving workers have received the hardest jobs, a hostile greeting, and an isolated existence. But they came because they felt that it meant that they, and especially their children, would have a better chance at a good life. That has always been the reason people move from one place to another.
Franchises and preferential agreements between corporations
Franchise operators are small business owners who work for themselves. Small business owners often work night and day, rarely get a vacation, and struggle to have enough sales to cover payroll but they are happy not to have a boss con