As corporations search for new production sites, governments compete furiously using location subsidies and tax incentives to lure them. Yet underwriting big business can have its costs: reduction in economic efficiency, shifting of tax burdens, worsening of economic inequalities, or environmental degradation.
Competing for Capital is one of the first books to analyze competition for investment in order to suggest ways of controlling the effects of capital mobility. Comparing the European Union's strict regulation of state aid to business with the virtually unregulated investment competition in the United States and Canada, Kenneth P. Thomas documents Europe's relative success in controlling—and decreasing—subsidies to business, even while they rise in the United States.
Thomas provides an extensive history of the powers granted to the EU's governing European Commission for controlling subsidies and draws on data to show that those efforts are paying off. In reviewing trends in North America, he offers the first comprehensive estimate of U.S. subsidies to business at all levels to show that the United States is a much higher subsidizer than it portrays itself as being.
Thomas then suggests what we might learn from the European experience to control the effects of capital mobility—not only within or between states, but also globally, within NAFTA and the World Trade Organization as well. He concludes with policy recommendations to help promote international cooperation and cross-fertilization of ways to control competition for investment.
With the nations of the world becoming more interdependent, it is imperative to take international influences into account in understanding the organization of industry within a country. This book extends the structure/conduct/performance framework of analysis to present a fully specified simultaneous equation model of an open economy—Canada.
By estimating a system of equations of all the major variables, the authors can identify which variables are dependent and which are independent. They are thus able to assess the relative importance of such factors as seller concentration, import competition, retailing structure, advertising expenditure, research and development spending, and technical and allocative efficiency in shaping the organization of industry in Canada. In addition, using both industry-level and firm-level data, the authors develop methods for assessing the effect of structural variables on diversification strategies and the consequences for market performance. They also study the effects of such variables on firms’ access to capital markets. The book concludes with a discussion of the implications of the findings for government policy.
The world’s multinational enterprises face a spell of rough weather, political economist Ray Vernon argues, not only from the host countries in which they have established their subsidiaries, but also from their home countries. Such enterprises—a few thousand in number, including Microsoft, Toyota, IBM, Siemens, Samsung, and others—now generate about half of the world’s industrial output and half of the world’s foreign trade; so any change in the relatively benign climate in which they have operated over the past decade will create serious tensions in international economic relations.
The warnings of such a change are already here. In the United States, interests such as labor are increasingly hostile to what they see as the costs and uncertainties of an open economy. In Europe, those who want to preserve the social safety net and those who feel that the net must be dismantled are increasingly at odds. In Japan, the talk of “hollowing out” takes on a new urgency as the country’s “lifetime employment” practices are threatened and as public and private institutions are subjected to unaccustomed stress. The tendency of multinationals in different countries to find common cause in open markets, strong patents and trademarks, and international technical standards has been viewed as a loss of national sovereignty and a weakening of the nation-state system, producing hostile reactions in home countries.
The challenge for policy makers, Vernon argues, is to bridge the quite different regimes of the multinational enterprise and the nation-state. Both have a major role to play, and yet must make basic changes in their practices and policies to accommodate each other.
During the 1970s and 1980s, American manufacturing enterprises saw their technological dominance challenged by increasingly tough competition from abroad. This book investigates business responses to those challenges. On average, F. M. Scherer shows, 308 U.S. companies reacted to rising imports of high-technology products by cutting back research and development expenditures as a percentage of sales. The cutbacks were particularly large in industries protected by voluntary trade restraint agreements and other trade barriers.
Using statistical data and eleven in-depth case studies, Scherer finds that company responses to new high-technology competition from abroad were highly diverse. Aggressive reactions predominated in firms producing color film, wet shavers, medical imaging apparatus, fiber optics, and earth-moving equipment. But the efforts of U.S. manufacturers in other lines such as color television, VCRs, and facsimile machines, were too meager to repel technologically innovative overseas challengers. Exploring why reactions differed so much from case to case, Scherer finds systematic explanations in such variables as the multinationality of enterprises, domestic market structure, links to academic science bases, and the educational background of top managers. He concludes by offering proposals to improve the competitiveness of American high-technology companies.
Tracing the development of communication markets and the regulation of international communications from the 1840s through World War I, Jill Hills examines the political, technological, and economic forces at work during the formative century of global communication.
Hills analyzes power relations within the arena of global communications from the inception of the telegraph through the successive technologies of submarine telegraph cables, ship-to-shore wireless, broadcast radio, shortwave wireless, the telephone, and movies with sound. As she shows, global communication began to overtake transportation as an economic, political, and social force after the inception of the telegraph, which shifted communications from national to international. From that point on, information was a commodity and ownership of the communications infrastructure became valuable as the means of distributing information. The struggle for control of that infrastructure occurred in part because British control of communications hindered the growing economic power of the United States.
Hills outlines the technological advancements and regulations that allowed the United States to challenge British hegemony and enter the global communications market. She demonstrates that control of global communication was part of a complex web of relations between and within the government and corporations of Britain and the United States. Detailing the interplay between American federal regulation and economic power, Hills shows how these forces shaped communications technologies and illuminates the contemporary systems of power in global communications.
This is the first book that explores the relationship between the United States and Japan in terms of the competition for industrial raw materials. With startling consistency, their responses to similar problems appear to stem from each country's history and culture, almost as if the country had no choice but to pursue the policy selected. Vernon suggests that in this field of policy, political leaders are prisoners of their national environment more than anyone--including the leaders themselves--has been prepared to recognize.
Examining in turn the world markets in oil, aluminum, copper, and steel, Vernon shows how Japan has learned to cope with its have-not status, using flexible and inventive national policies designed to help industries acquire what they need. The United States, on the other hand, lacking an explicit and consistent national policy, is torn between protecting domestic producers of these resources and trying to develop dependable sources of supplies abroad. The result is a haphazard and unstable raw-materials policy.
This unique commingling of political and economic analysis will appeal not only to scholars of international relations, domestic political behavior, and commodity markets but also to the informed layman who wishes to understand what is likely to happen as two economic superpowers range the world to satisfy their appetites for raw materials.
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