Transnational corporations taken with Grendel’

Acouple of years back, I found myself with a beloved colleague from the DOTC, the late Assistant Secretary for Budget and Comptrollership, Teresita S. Valdez, together with another colleague, Emma Hizon, director of the Management Information Systems Service of the DOTC, at a cozy, quaint restaurant in Harvard Square, Cambridge, Massachusetts. We at the DOTC were all saddened when Tessie passed away just a year later. Tessie was, aside from being DOTC’s super budget expert, a dear friend of mine, and I grieved when she left us, for we missed her presence and gradually learned to psyche ourselves into getting used to her not being with us anymore.

After an extremely tiring schedule of meetings in Ottawa, Canada which followed attendance at a conference in Vancouver, we decided to rest that Friday when the Ottawa meetings ended before flying home. It was a choice between seeing a couple of Broadway plays in New York or flying to Boston where both of them had never been to. I was able to persuade them to fly to Boston, tour Harvard Square, sight-see a little driving to Maine just an hour away by car for lunch at "Bosn’s Landing," a favorite of my family which serves the freshest lobster meal in the world with a great view of a nearby lake, at extremely reasonable prices. They had never been to any part of Massachusetts while I was not only familiar with Boston because two sons went to pre-prep schooling at Fay School in Southborough, Massachusetts and an only daughter obtained her college and master’s degrees at Wellesley College and Harvard University, both in Massachusetts, but because my late husband worked for his undergrad degree at Harvard and showed me Harvard Square many times and very thoroughly, in the late Sixties and Seventies.

And it was a joy to be Tessie and Emma’s tourist and gourmet guide. It was extremely memorable too ... I did not of course know then that Tessie was going to pass away just a year later. We had only two nights in Boston for, as usual, work awaited us back home. The first night, I was going to treat them at a favorite Korean restaurant in Harvard Square called "Shilla," but got so frustrated to find out that Shilla had become so successful that it was undergoing renovation and expansion and was closed. In Harvard Square, you walk, because at dinnertime it is either so difficult to park a rented car or any car for that matter, or impossible to grab a cab. We walked a little, getting very hungry in the process, and that’s how we found ourselves inside this restaurant called "Grendel’s Den" at 89 Winthrop St., Harvard Square, Cambridge. We got even hungrier waiting to get seated, not having made any reservations being walk-in customers. When finally we sat down and were given the menu, I got the surprise of my life that we were in fact in the historic Pi Eta Clubhouse where Grendel’s Den was located. Pi Eta was Eddie Lichauco’s school club; in fact, he spent five years of his life there. He had brought me there a number of times but the place had become strange to me because of Grendel’s Den which had changed the facade of the place and had been opened only years later.

In a celebrated case, I am certain, very much celebrated about by the Harvard students, Harvard’s Tyler professor of law, Lawrence Tribe, won the right for Grendel’s to serve liquor only in 1982, since said restaurant was within the building of the clubhouse. Sometime in 1988, I was at one of the lounges within the Pi Eta Clubhouse sipping coffee and partaking of Grendel’s yummy Chocolate Chip Cookie Pie, with a former classmate at Yale, Herb Pearlman, who had obtained his AB degree from Harvard and his law degree from Yale, and was then and now an outstanding practitioner of law. Herb loved to engage in argumentation and debate and since his major field of study was also International Law, we found ourselves talking and arguing about the ever-increasing presence in the world of the transnational corporations and the "conflict of laws" situations these phenomena caused. The transnational was indeed an extremely fertile subject, one that Herb was so eager to indulge in, the many aspects of which together with their implications on the global world of business provided an arena within the confines of the historic Pi Eta Clubhouse for discussion and debate that lazy afternoon in the Fall of 1988 in Cambridge. Herb is a difficult person to have an argument with because of his rich and extended verbosity. How he can manage to be as gallant as ever with me however, in spite of our verbal clashes, is amazing ... difficult, also because of his firmness which I call "obstinacy," and since obstinacy is also a friend of mine, you can imagine how stimulating this discussion was. We discussed the transnational corporation as zoologists would skin a cat.

What indeed are transnational corporations? They are business organizations comprising several legal entities linked together by a controlling parent corporation. In economic literature there is a multiplicity of definitions, and a certain confusion in terminology has ensued. As transnational corporations have their origins in different national corporations and employ different strategies from one industry to another, it is not surprising that there is no uniform definition that truly exists. Most commonly, economists use the term "multinational enterprise." The term "multinational" signifies that the operations of the firm involve several nations and the term "enterprise" denotes an organization composed of a network of corporate and non-corporate entities in different countries joined together by ties of ownership.

The United Nations adopted the nomenclature "transnational corporation" in the Seventies. Transnational corporations have a hierarchical structure. The chain of command leads from the main office at the top to the subordinate units in different national territories.

Transnationals have reduced the capacity of governments to control national economies. Economic growth is largely dependent on the level of investments in a country. If the re-investments of profits by foreign subsidiaries constitute a significant part of the annual investments in the whole economy, or, which is more likely, of the investments in the export industries, the rate of economic growth and the foreign exchange earnings of the country will be directly affected by the global policies of the transnationals concerned. The measures resorted to by transnationals influence the general economic, monetary, fiscal, balance-of-payments and employment stability of the countries in which they operate.

It is possible, of course, for a transnational to circumvent a tight monetary policy of one state by borrowing through an affiliate elsewhere and by transferring the funds across national boundaries. If such direct transfers of capital are restricted, transfer prices, royalty payments or open accounts between the units of the corporation can be used for channeling resources to places where the investments are considered most profitable. The affiliate transaction also offers several avenues for tax evasion.

Government programs for research, development of technology, and for training skilled labor may mainly benefit the transnational corporations: They carry out the research for which government subsidies are available and then apply the new technology commercially; the best managers and technicians tend to be employed by the affiliates of international firms. Furthermore, as the subsidiaries of a transnational follow the overall corporate strategy, there remains the possibility, disturbing for any government, that the locally trained personnel, or the technology developed by public grants may, at any moment, be transferred to a foreign country.

In general, politicians, industrialists and other observers in the developed and the less developed countries do not have the same view of the emergence and then prominence of transnational corporations in the global business sphere. Much of the impressive economic growth of the post-war period in the developed states is believed to be due to the international operations of the large enterprises, particularly US corporations. They have provided capital, technology, and managerial skills and stimulate the modernization of the western industrial societies. But US foreign investments, export and technology controls, as well as antitrust laws have raised delicate issues of extraterritoriality between industrial states. In Canada, the UK, Japan and the European Economic Community, as is well-known, there has been much debate on the means of encouraging national enterprises under conditions of increasing international competition and the need, very much appreciated by concerned nation-states, for exercising more public control over the operations of transnationals.

Every government has imposed regulations and restrictions on foreign investors in accordance with national economic conditions, and varying policies have naturally been adopted. From a total perspective, however, it is perhaps no exaggeration to say that in the rich world, especially in Europe, the international corporation, the transnational entity has become the hero of the saga of economic growth, and even national sovereignty is beginning to seem unimportant and irrelevant within a context where (it is thought) more rapid growth can be achieved through international integration.

In the less developed countries and the developing world to which the Philippines belongs, transnationals are confronted by many different political, social and economic circumstances. In the socio-cultural setting of the Third World, the image of the transnational corporation tends to be a threatening one, for, after all, transnationals represent powerful industrial nations, alien cultures and foreign ideologies whose national economic and political institutions appear insufficient to withstand their force and modify their effects.

Sovereignty and the dignity of statehood are cherished by the newly independent countries. Transnationals, when exercising their influence in the countries, may be regarded as agents of neo-colonialism. In general, a feeling of unfair treatment prevails in developing countries, the governments of which often contend that transnationals gain disproportionately from their operations in the underdeveloped world.

Throughout the two decades that I have found myself immersed in the work of a United Nations agency council, and having collaborated throughout all these years with the plenipotentiaries in the telecommunications sector, a sector where transnationals abound that had enjoyed some glorious boom years recently, it is a fair statement to make, wherein Prof. Herb Pearlman and I were in wholehearted agreement, that, although governments are concerned with the increasing power of transnationals, they generally concede that in narrow economic terms, the internationalization of production has added considerably to the efficiency of the world economy.

It helped, by the way, that Herb enjoyed the same delicious Chocolate Chip Cookie Pie that I did where there was also supreme agreement. It also helped that the Pi Eta lounge provided a common feeling of nostalgia for him, the difficult prolific debater, and me.