Review: Barry C. Lynn, End of the Line: The Rise and Fall of the Global Corporation (2005)

I bought this book thinking that it would cover the rise of the anti-globalization movement and what I hope is a growing backlash against the power of multinational corporations. But Lynn has a narrower definition of the 'global corporation' than simply a multinational, and he sees the doom of said global corporation stemming not from grassroots rebellions against its overweening power, but rather from the fragility inherent in its productive system. It's an interesting and not entirely implausible argument.

For Lynn, a 'global corporation' is a new breed of business, born of the late 20th century, that is steadily replacing the old assembly line giants like Ford and GM. Those giants of the past profited from economies of scale, collecting under their own factory roofs as many steps of the production process as possible. Efficiency for them meant the continuous operation of the assembly lines, and this required long-term cooperation with closely allied suppliers and parts inventories sufficient to safeguard against possible supply interruptions.

The new global corporation is less a producer than an assembler and marketer of components harvested from a far-flung network of contractors and sub-contractors. Using tracking systems pioneered by companies such as FedEx and WalMart, global corporations keep inventories razor thin, squeezing profits from increases in logistical efficiency and pressing their suppliers to do the same. Lynn explains how companies like Dell have even learned to integrate their marketing campaigns into their supply systems, "engineering demand" so that customers buy the products the company currently has in stock.

Improvements in communications and computing technology have enhanced the growth of the GC's, but legal and political decisions dating from the 1960s laid their foundations. Painting a historical picture with a somewhat over-broad brush, Lynn divides US policy on foreign trade into three periods: From George Washington to F.D.R., the US pursued a policy of foreign engagement sufficient only to allow the US to develop its own self sufficiency. Facing the threat of global communism in the aftermath of WWII, however, the US shifted to policy of economic interdependence among the Western allies, integrating into the US economy the economic interests of much of the rest of the world. The US actively encouraged the development of manufacturing in countries such as Japan and Germany and helped US companies move operations overseas in the belief that such economic ties would best ensure continued peace.

Bill Clinton, according to Lynn, broke with this Cold War tradition and began a "radical" restructuring of foreign trade policy predicated on the notion that no governmental guidance of the market whatsoever would better ensure prosperity and security. Clinton's support of NAFTA and, later, of regularization of trade with China, effectively signaled to US companies that the government would not bar them from relocating to any part of the world any part or all of their production. (It's odd that Lynn singles out Clinton for such ire, considering that by Lynn's own account Reagan and Bush I did nothing to encourage US companies to stay in the US. He seems to view Clinton as an apostate, though he also maintains that "the idea that protectionism kills" was "one of the central founding myths of the modern Democratic Party" [83], and, more ludicrously, that during the Depression the Dems won back American workers by demonizing the Smoot-Hawley tariffs.)

Clinton's deification of the market was predated among businessmen and economists by the work of Milton Friedman in the 1960s. In reaction to the growing consumer rights movement, Friedman argued that a corporation's sole obligation was to its shareholders and stock price, not to its employees, consumers or country. Making the corporation maximally free to increase its value in the eyes of the market, the argument went, was the best way to ensure the efficiency of the economy. This ideology fit well with the development of globally distributed network production systems; legally and physically, companies became more disembodied and placeless, less beholden to anyone save the traders on Wall Street.

Lynn's summation of the effects of these changes is that today's corporations are the leanest, most cost-efficient organizations the world has ever seen. But their very efficiency creates dangers. With less physical plant to look after and ever-fewer employees, the managers of GC's concentrate more on short-term profits and share price rather than careful husbanding of productive resources for the long term-they are less system-builders than system- squeezers. The search for ever-greater efficiency radiates across the productive network, as GC's use the threat of relocation of facilities or contracts to squeeze suppliers and states for lower prices and tax breaks. Suppliers have less and less capital to devote to innovation or to risk management, and the pressure for lower and lower prices has led to what Lynn calls "hyperspecialization" in the production of key components. The entire system is so pulled so taught that an accident in any one part of it can have disastrous results for the system as a whole.

Lynn is somewhat alarmist in his predictions of a coming disaster for this finely- tuned world economic machine. He has a few well-known examples of how an earthquake in Taiwan, or an epidemic in China, threatened to derail certain industries, but I am unconvinced that such shocks could necessarily entail a serious economic downturn. Indeed, we seem to have survived Lynn's exemplar disasters in fairly good shape. But if the GC's are better at managing short-term risk than Lynn gives them credit for, Lynn's more subtle point that GC's search for efficiency is corrosive of social and political well-being seems on target. At the end of his book, he gives eight specific policy recommendations to combat the dangers of globally-networked production, which I can recount at request. More worthy of concluding this overly long review is Lynn's larger point that the corporation is not an inevitable product of global economic development, nor some alien invader bent on destroying society. It is, rather, a creation of government-an organization molded by law and policy-and we can and should use those tools to shape it into a more socially useful form.

From the Rocky Mountains

Our regular readers (!) may be wondering why we haven't posted anything on this blog for awhile. Well, at least part of the explanation may be that three of us are currently up in the Rocky Mountains enjoying some camping and hiking. So sorry for the lack of new entries. I don't have time to write much now, but I did find one thing worth recommending while I was browsing recent magazines in the library the other day. Bill McKibben has a nice article in the latest issue of Harper's Magazine. You can read a lengthy excerpt here. For the whole article, look here. Given the recent (and justifiable) uproar over Pat Robertson's insane remarks about killing the democratically elected leader of Venezuela, it is refreshing to read something from a fellow Christian that makes sense!

Bush Meets the Moms

From the Eric Boehlert post linked in the title above, a glimpse of President Bush in his interactions with two mothers of soldiers killed in Iraq.

Dolores Kesterson told White House staff that she wanted to have a private talk with the president so that she could share her belief that her son died in an unnecessary war. She was interviewed by Bill O'Reilly:

Kesterson: So actually, you know, it did come about. They put me into a cubicle by myself, took everything away from me. I also came prepared with a letter to give to the president about how I felt about the war and, you know, the loss of my son, my only child for a cause that I thought, you know, was not worthwhile at that point in time.

And so president Bush came marching in, to make a long story short, came marching in to the room, got right in my face, eyeball-to-eyeball, nose-to-nose this close, toe-to-toe and he said, "I'm George Bush, President of the United States, and I understand you have something to say to me privately.' And I said, 'Yes, I do respect the office of the presidency of the United States, but I want to tell you how it feels to lose your only child in a cause that you don't believe in, in an unnecessary war. And, you know, we talked about it from there just like you and I are talking about.

O'Reilly: Was he respectful to you?

Kesterson: Yes, yes was. But he did, you know, come at me a few times with trotting out, 'Delores, do you realize we've been attacked on 9/11?' Who doesn't [realize that]?

O'Reilly: He hugged you at the end, did he not?

Kesterson: Well, yes, he asked if he could hug me and I said, 'Well, that's a human thing, you know, I'm human.' And I agreed to it. But my personal feeling is that he really doesn't have a conscience about all this death and destruction. That was the essence I took away after looking him in the eyes and meeting with him—there's just no conscience there.

Cindy Sheehan, who has made headlines by camping out outstide of Bush's Crawford ranch in an attempt to meet with the president, described her first brief encounter with him at the White House during an interview with Wolf Blitzer:

He wouldn't look at the pictures of [my son] Casey. He didn't even know Casey's name. He came in the room and the very first thing he said is, 'So who are we honoring here?' He didn't even know Casey's name. He didn't want to hear it. He didn't want to hear anything about Casey. He wouldn't even call him 'him' or 'he.' He called him 'your loved one.' Every time we tried to talk about Casey and how much we missed him, he would change the subject. And he acted like it was a party.

Good Economic News?

After several pessimistic posts on the economic prospects of the country, I would be remiss to not note the recent trend of better economic news: US consumer spending and income up slightly, inflation not increasing appreciably, durable goods and factory orders up. All this is nicely recapped in this post from Macroblog, along w/ links to some more pessimistic readings of the data, such as this from Barry Ritholtz's The Big Picture. In a nutshell, the pessimistic view is that yes, the economy seems to be moving out of 'soft patch,' but the better monthly and quarterly numbers can't hide continuing huge structural problems that will ultimately have to be reckoned with. Still, at the macro level, the economy seems to be doing better lately.

Random Thoughts on the Roberts Nomination

I've been on the road a lot over the past week, and so I heard a lot of radio news reports during the time of the Roberts nomination to the Supreme Court and the days afterwards. Listening to several different interviews with people who know Roberts (many of them self-described "liberals"), it became increasingly clear that there was a well-planned campaign with clear talking points for friends of Roberts. The agreed line is: he's exceptionally smart, nice, and fair. The strategic craftiness of the Bush Administration thus also became clear. They confused the media all day long beforehand with clever leaks focusing on someone else, then hit everyone unprepared with a white male insider. The Roberts supporters were much better prepared, and his potential opponents were left grasping for some way to dent a juggernaut of framing and conventional wisdom that had already become established.

Of course, I realize that the chances of defeating Roberts in the Senate are pretty hopeless. However, I still think it is worth it for Democrats to mount a fierce fight, as much as they can, by asking him as many questions as possible in an attempt to pin him down. My impression is that he is a pretty far-right guy with lots of elite business connections and some scary social issue and civil liberties positions as well. I am not convinced by the line that he is as good as we can expect from the Bush Administration. It is utterly predictable for this Administration that the first nomination would be quite conservative...they will only back down and nominate someone more reasonable/moderate under exceptional pressure, which looks unlikely. But I think it is worth a struggle at least. After all, this is a lifetime appointment to the Court.

For what it's worth, I heard an interesting theory from a conservative Republican friend of mine back in Nebraska...this friend has some pretty substantial connections and experience in the state party structure. He speculates that Bush may have nominated Roberts with the intention of making him Chief Justice when Rehnquist retires, which may not be too long from now. Vetting him so easily through the current process will make it a breeze for his later confirmation as Chief Justice, thus installing a young far right conservative for a very long time. It sounds like a plausible idea to me, and I fear my friend may be right about this...