On Sat, 31 Jan 1998, Dennis Redmond replied to Richard K. Moore.
>> Japanese TNC's, for example, are becoming entities whose stock is
>>traded globally and which produce goods in Asia for exportation to
>>world markets while paying minimal taxes to anyone - what has that,
>>really, to do with Japan?
>Everything. Japanese TNCs are competitive because of a huge hidden
>infrastructure of national subcontractors, small and medium-size firms,
>plus a canny and effective developmental state which invests in
>education and retraining and socializes the cost of R & D for big firms.
I think the way it works is as follows. A TNC says it is going to set up
in Europe. The various countries then compete to get the business, with
various grants, subsidies and special concessions. Mainly the UK has led
the field, resulting in lower unemployment and a continuing decline that
is evident over the past seven years. Therefore we have to accept that
all of this has been good. Additionally the organisation will require
servicing, the supply of goods and services, which in turn creates
further employment, to give a 'trickle down' for the central
organisation.
For instance, in the Central Belt of Scotland, this area has seen all the
traditional industries disappear, many of them converting primary
resources such as the production of steel for local manufacture.
The process of rundown began in the 60's and is almost complete. Indeed,
everything is now geared to ensuring the TNC operates efficiently and
effectively. This includes infrastructure, supply of power and water,
plus a trained supply of workers.
There are some failures, such as investments that backfire, and when the
TNC decides to move nearer the market. Overall the history of the past
forty to fifty years can be seen as some sort of natural evolution, of
changing fortunes and the inevitable faith in belief that nothing stands
still. Therefore we are made to believe had it not been for the coming of
the TNC's then where might we be now?
Now I shall give an alternative view. This has to be seen with regard the
overall economy, where it was given in 1980 that by increasing the number
of TNC's, along with privatisation and deregulation, was going to reduce
government spending, which incidentally is a requirement demanded by the
EU and the convergence criteria needed for the common currency. In 1980
the total government spend was about 44 per cent of GDP, and it was the
main aim of the government at that time to reduce this to about 36 per
cent or lower. One of the first actions of the Tory government in 1979
was to increase value added tax from 8 to 15 per cent, and now this is at
17.5 per cent. The last decree of the Tory government before being ousted
was to increase value added tax on household fuel, in fact the plans had
they been re-elected would have increased the scope of the tax to cover
almost everything, such as all food products and water.
>From 1979 the per cent of tax did decrease, it went down to about 38 per
cent round about 1985 and from then on it has steadily increased. Now,
what I suspect is that the reduction in tax through privatisation and the
benefits from deregulation are simply a means of shifting the load, the
public pay the same price, or more likely more, but since it doesn't go
through the governments books then this is money 'saved'. So where has
the increase in tax gone? I say it has gone to the TNC's. (As I am
sitting here I see on the news the PM has agreed to give Ford- Jaguar
£43M, so the jobs are saved!)
Before 1970-80 there was a degree of democracy, local government was
effectively devolved, there were over fifteen hundred local authorities,
and nearly all government departments had a regional basis. All of this
was wiped away more or less at a stroke, in 1974 the number of local
authorities in England and Wales was reduced to forty, and a year later
Scotland ended up with just twelve. Government departments were
'privatised' in to Quasi Autonomous National Government Offices, or
QUANGO's. Now these offices are truly private, they are the Local
Enterprise Companies, or LEC's.
The reason for these offices was to speed up the process by employing
professionals rather than elected and amateur representatives. The larger
of these are headed up by members of the banking 'industry', and all
offices have 'revolving doors'. They have overseas offices, in places
such as Tokyo and San Francisco. The LEC's and regional development
organisations work together and co-ordinate with other 'advisory'
organisations.
Thus, a TNC comes along and is given a handout, or if it is an
established one and intimates it cannot continue then it gets a handout.
The TNC will find itself in a development zone, all services provided by
the local authority, highways built, power supplied, and then gets big
tax concessions, plus a moratorium on the books for ten years.
Next, those who can offer services to the TNC line up for grants and
whatever. This is where the LEC comes into its own, it is there to sift
out applications that are useful to the TNC. It also ensures there will
be competition for the services, this is what is meant by the 'enterprise
initiative'. Those organisations that do emerge have to save costs for
the TNC, the idea of 'just in time' puts all of the costs of stock onto
the server. Characteristically these server organisations compete amongst
each other by reducing their prices, not by innovation. If a server did
have patentable technology it is going to find the costs of maintaining
the patent right is probably too high, and in any event the TNC can
simply use the invention and let the server take them to the law, a
completely erroneous strategy. The savings to the TNC are enormous, from
services such as window cleaning to the barrow boys bringing in
sandwiches, this is 'enterprise' as shown on television.
Any application for assistance that has the potential to compete with a
TNC or has a technological base to convert a resource into one with added
value will be shown the door, the back door. Other 'enterprises' do of
course get assistance, but here they too are 'competitive', such as
offering, for example, a bakery. It is no coincidence if one specialist
comes along someone else will get assistance for the very same service.
At the extreme some people will get assistance for labour intensive
occupations, generally where there is a limiting market.
The failure of a server is of no consequence, there are always others in
the pipeline, and the principle of the server system is based on price
reduction so it is expected that one struggling on very low profit is
adding to the profits of the TNC.
TNC's do not compete, they are not part of the 'enterprise initiative'.
All pharmaceutical organisations appear as if they 'compete' when you go
into a chemists shop or drugstore. Look carefully and you will see there
is no competition. Bread, there are two makers in the UK. Margarine,
there must be over twenty on the shelf, and guess what, they are all made
by the same company. Where is there any competition? Wherever you go all
products go through a monopoly organisation at some stage, and this is
where the bulk of profits are made.
In total the cost of having TNC's, and the European system has cost the
people of the UK dearly. Whatever is paid in additional tax, plus the
supposed savings brought about by privatisation, has gone to TNC's. This
acts like a vast silent siphon, or 'the hole in the economic tank' and
one that is curiously unquantifiable.
But then I might have missed something?
William Kirk.