Are Western companies becoming less global?

 

"Twelve months ago Russia joined the ignominious list of countries—alongside North Korea and Cuba—where consumers are denied the joys of a Coca-Cola. The American beverage giant had halted its operations there following the latest sanctions on Russia. Thirty years before, when Coca-Cola expanded in Russia after the collapse of the Soviet Union, barriers to global commerce were being torn down. Today they are being re-erected—and not just around Russia.

America's Treasury Department is reportedly working up plans to stop outbound investment in cutting-edge technologies in adversarial countries.

 It has already banned the sale of advanced microprocessors and chipmaking equipment to China. 

Sino-American commerce could snap shut entirely if China imitates Russia's belligerence in its relations with its own coveted neighbour, Taiwan. At the same time, America is dangling subsidies worth half a trillion dollars with the aim of bringing supply chains for semiconductors, electric cars and clean energy back home. The European Union is expected to unveil a chunky package of similar sweeteners any day now.

Operating as a multinational company has always involved difficulties, from co-ordinating across time zones to navigating a patchwork of regulatory regimes. The latest strains on globalised commerce—wrought by geopolitical tensions and rising protectionism—raise tricky questions for the corporate giants of the West that have been among globalisation's biggest beneficiaries. Their initial responses sketch out the contours of the Western multinational of the 21st century. It is less reliant on China and more reliant on intangible assets such as software and patents. But overall, it is no less global.

Western firms started spreading out into the world in the 1600s, when Europe's colonial trading houses ventured (often violently) beyond the old continent in search of commercial opportunities. 

By the start of the 20th century the global stock of foreign direct investment (FDI), a rough proxy for the prevalence of multinational businesses, was hovering at 10% or so of world GDP.

Then, around the time Russians took to glugging locally made Coke, the West's corporate globetrotters experienced their own carbonated high. Freer trade, lower shipping costs and better communications technology allowed them to become more truly global. They set up shop wherever they could find cheaper labour, lower taxes or new customers. In the early 2010s the worldwide stock of FDI reached the equivalent of 30% of global output. Western businesses accounted for 78% of the total. The average American multinational had a dozen foreign subsidiaries.

In the past decade or so things started to change. American and European companies began to lose some of their foreign fizz. Banks battered by the global financial crisis of 2007-09 and the ensuing euro-zone debt rigmarole slimmed down their foreign businesses. And new competitors, especially from China, began to challenge Western firms. Four of the five biggest smartphone brands in India, for example, are now Chinese. Last year China overtook Germany as the world's second-largest car exporter, behind only Japan.

Since 2010 the foreign sales of listed American and European companies have grown by a meagre 2% per year, down from 8% in the 2000s and 10% in the 1990s (see chart 1). Multinationals have been adding fewer foreign factories to the FDI stock. Annual flows of American and European foreign investments (excluding reinvested earnings) plunged from a peak of $659bn in 2015 to $216bn in 2021, according to the United Nations Conference on Trade and Development—and that was an uptick from $156bn in 2019, before covid-19 quashed them almost completely in 2020. Between 2010 and 2021 the West's share of the worldwide FDI stock fell from 78% to 71%. The typical American multinational now has just nine foreign subsidiaries.

Politicians on both sides of the Atlantic applaud this trend. They are talking up a domestic manufacturing renaissance and increasingly trying to keep China, the West's factory turned foe, down. In January monthly spending on factory construction in America hit $10.9bn, up by 55% on the year before. The EU hopes its new subsidies will have a similar effect.

America Inc and Europe SA are also cooling on China—both as maker of and market for their wares. According to BEA data, the value of American multinationals' factories and equipment in China peaked in 2018. Western politicians may claim the credit for this change, but a bigger reason may be pricier Chinese labour. Since 2010 manufacturing wages in China have increased four-fold, from $2 per hour to over $8 in nominal terms.

As for the Chinese market, it remains important for some sectors. Western semiconductor companies, for example, derive around 30% of their sales from China. But chipmaking accounts for just $400bn of the $12trn of sales generated abroad by listed Western companies (see chart 2). Look across all industries, and China is responsible for less than one-eighth of Western firms' foreign revenues, according to Morgan Stanley, an investment bank—a much smaller share than American and European sales across the Atlantic or to the rest of the emerging world (see chart 3). Only 8% of European companies' total revenues come from China. For their American counterparts, the figure is 4%. According to BEA figures, American multinationals' sales in China were flat between 2017 and 2020. In India they grew by 6% a year in the same period.

Western multinationals are, then, becoming somewhat less Chinese. Yet it would be a mistake to conclude that they are turning into homebodies. In so far as the "reshoring" of production from China is happening, observes Arend Kapteyn of UBS, a bank, it is mostly confined to a narrow set of favoured sectors. Overall manufacturing output remains below what it was before the financial crisis in America and roughly unchanged in Europe, after adjusting for inflation.

Indeed, Western business looks the opposite of world-weary. American firms may have a quarter fewer foreign subsidiaries than a decade ago, on average, but the drop was more than offset by the number of them with a presence abroad. This swelled from 2,300 in 2010 to over 4,600 in 2020, BEA data show. On March 13th it was reported that Chick-fil-A, an American fast-food chain, plans to spend $1bn on expansion in Asia and Europe.

The biggest firms maintain a large foreign presence. General Motors, a Detroit carmaker, still boasts more than 100 foreign subsidiaries. Most of Chick-fil-A's new foreign diners will be able to wash down chicken sandwiches with Coca-Cola, which continues to quench thirst in more than 200 countries and territories.

Western business is not giving up on foreign production, either. Apple and Adidas are increasingly sourcing their iPhones and sneakers, respectively, from geopolitically friendly places like India and Vietnam, where wages are roughly a third of those in China to boot. This month Elon Musk announced that Tesla would build a new factory in Monterrey, Mexico, another low-wage location with the added benefit of being next door to the car company's home across the border in Texas.

The world is still your Coke can

Those globetrotters are increasingly after more than merely cheap manual labour. 

Technological progress means that many firms' most productive assets are now not their physical plant and equipment but intangibles like computer programs and patents. 

This increases the returns on investment in talent, especially in places where an educated workforce commands lower wages than in the West. Technologies such as speedier broadband, video calls and cloud computing make this talent pool easier than ever to tap. Richard Baldwin of the Geneva Graduate Institute predicts that the offshoring of white-collar work will form the basis of a new wave of globalisation akin to the dispersion of manufacturing in earlier decades.

Multinationals have already begun to think more expansively about what tasks can be done offshore, notes Jimit Arora of the Everest Group, a consultancy. American multinationals' spending on research and development (R&D) in low-cost countries roughly doubled between 2010 and 2020 (see chart 4). 

Last November Boeing, an aircraft manufacturer, announced it would build a $200m R&D facility in the Indian city of Bangalore, its largest outside America. American tech giants such as Alphabet, Amazon and Microsoft have also opened R&D centres in the city. So has Walmart, America's mightiest supermarket chain, and Rolls-Royce, a British maker of aircraft engines.

The importance of intangibles will only grow as businesses across the economy reinvent themselves for the digital era. Siemens, a German industrial giant, already calls itself a "technology company" focused on digital simulations, data analytics and so on. Walmart now employs some 25,000 tech specialists, equivalent to the combined workforce of Pinterest, Snap, Spotify and Zoom, four tech darlings.

Because software tends to be expensive to build but cheap to reproduce, big firms that can spread the fixed costs of development enjoy an ever greater competitive advantage. And multinational companies can spread those costs widest of all.

Between 1990 and 2021 the average return on equity of American and European listed companies with less than $1bn in sales fell from 8% to 4%. That for firms with revenues of $10bn or more rose from 12% to 18% (see chart 5). And being big is easier if you are international. In 2021 American and European listed companies with $10bn-plus in revenue generated 43% of their sales abroad on average, compared with just 32% for those with sales below $1bn. Global reach is, in other words, more important than ever. With ambitious emerging-market rivals nipping at their heels, retreat is not an option for the West's corporate champions.” [1]

·  ·  · 1. "Are Western companies becoming less global?" The Economist, 18 Mar. 2023, p. NA.

 

Paskutinis kapitalizmo etapas: Didžiojoje Britanijoje per lengva valdyti įstatymus pažeidžiančius verslus

Kodėl paskutinis etapas? Įstatymus pažeidžiančios įmonės nukonkuruoja visas kitas.

 

     "Visada spręskite apie vyrą pagal jo batus. Tai, kas veikia, kaip madingų žmonių taisyklė, tinka ir žmonėms, kurie Britanijoje gaudo gudrius darbdavius. Geriausias būdas patikrinti, ar automobilių plovimas yra teisėtas, yra pažvelgti į darbuotojų kojas", - sako pranešime Mary Creagh, etiškos prekybos iniciatyvos, kuri nagrinėja piktnaudžiavimą darbo jėga, pirmininkė. Teisėta operacija turės darbuotojus su tinkamais batais, nes jie mašinas šveičia rankomis. Apsukrus žmogus pamatys, kaip vargšės sielos šveičia automobilius permirkusiuose treniruokliuose. 

 

Jei verslas yra šykštuojantis šluostėms, tai, tikriausiai, pažeidžia ir kitas taisykles – ar mokama mažiau, nei minimalus atlyginimas, ar samdomi žmonės, neturintys teisės dirbti Didžiojoje Britanijoje.

 

     Rankinės automobilių plovyklos, kurių visoje Didžiojoje Britanijoje yra mažiausiai 5000, yra archetipinis Didžiosios Britanijos juodosios rinkos ekonomikos pavyzdys. Ministras pirmininkas Rishi Sunak baiminasi, kad dešimtys tūkstančių žmonių, kasmet mažomis valtelėmis plaukiančių Lamanšo sąsiauryje, „tiesiog išnyks“ į šią ekonomiką, jei nebus kas nors padaryta. Vyriausybė ėmėsi susidoroti su atvykėliais ir pasirašė su 479 mln. svarų sterlingų (575 mln. dolerių) susitarimą su Prancūzija, kad sustabdytų migrantus, ir paskelbė apie naujus drakoniškus įstatymus, kuriais siekiama sulaikyti ir deportuoti atplaukusius asmenis. Tačiau vyriausybei panikuojant dėl mažų laivelių, ji nepaiso priežasties, kodėl daugelis leidžiasi į kelionę: konservatoriai per daug palengvino įstatymų pažeidimo verslą Didžiojoje Britanijoje.

 

     Šis faktas keistai nepastebimas. Kai pokalbiuose iškyla automobilių plovyklos, jos dažnai vaizduojamos, kaip linksmas niūraus Didžiosios Britanijos produktyvumo, o ne nelegalumo pavyzdys. Kodėl keturi darbuotojai atlieka vienos mašinos darbą? Tačiau pagal praėjusių metų Notingemo Trento universiteto atliktą tyrimą įstatymų pažeidimas yra „endeminis“ automobilių plovyklose. 

 

Tyrimo metu 89% apklaustų automobilių plovyklų nepateikė atlyginimo lapelių. Privalomas „teisės į darbą“ patikrinimas buvo atliktas tik 7% įmonių. Tik viena iš dešimties turėjo tinkamą draudimą. Įtarimai dėl šiuolaikinės vergovės, kai žmonės yra priversti dirbti už mažą atlyginimą arba be jo, slegia šį sektorių.

 

     Ministrai visa tai žino. Tačiau kai 2018 m. vyriausybė bandė sugriežtinti taisykles, ji pasirinko savireguliaciją. Kodekso, kuris iš esmės prilygo automobilių plovykloms, pažadėjusioms laikytis galiojančių įstatymų, ėmėsi nedaugelis operatorių. Tos įmonės, kurios yra pelningos daugiausia dėl to, kad nesilaiko įstatymų, buvo mažiau linkusios. Tuo tarpu vartotojai džiaugiasi, kad jų „Nissan Qashqai“ išplauna už dešimtį.

 

     Automobilių plovyklos toli gražu nėra pavienis pavyzdys. Vietiniai greitosios mados operatoriai išparduoda drabužius sunkiai įtikinamomis kainomis. Sweatshops dirba nebaudžiamai tokiose vietose kaip Lesteris, o daugiausia užsienio darbo jėgos dažnai verčiamos dirbti nelegaliomis sąlygomis. 2018 m. kilo pasipiktinimas, kai paaiškėjo, kad kai kuriems miesto drabužių pramonės darbuotojams atlyginimas siekia vos 3,50 svaro per valandą. Po metų parlamento ataskaita atskleidė daugybę problemų – nuo nesuskaičiuojamų atlyginimų iki priešgaisrinių durų užrakinimo. Sąlygos nepagerėjo. Neseniai Notingamo universiteto atlikta apklausa atskleidė, kad maždaug pusė miesto tekstilės darbuotojų vis dar negauna minimalaus atlyginimo, nedarbingumo atostogų ar atostogų išmokų. Trečdalis atlyginimo lapelių negavo. Ketvirtadaliui buvo išskaičiuotas atlyginimas.

 

     Pagrindinių darbo teisių įgyvendinimas yra silpnas. Mokesčių administratorius kasmet tiria apie 3000 iš maždaug 5 mln. Didžiosios Britanijos įmonių dėl minimalaus atlyginimo pažeidimų. 2007–2021 m. tik 16 darbdavių buvo sėkmingai patraukti baudžiamojon atsakomybėn už nacionalinio minimalaus darbo užmokesčio įstatymo pažeidimą. („Tai yra daugiau, nei praėjusiais metais (15),“ – giriamasi ataskaitoje, atskleidžiančioje šį triumfą.) „Tai net nesislepia akivaizdoje, tai tiesiog vyksta akivaizdoje“, – sako M. Creagh.

 

     Londono centre galima vykdyti aiškius ir akivaizdžius sukčiavimus. Oksfordo gatvę, judrią parduotuvių gatvę, perėmė parduotuvės, parduodančios keistą bagažo, vape sulčių ir „m&ms“ mišinį, kurio kaina yra 24,99 GBP už 500 g maišelį.  Įtarimai pinigų plovimu kenkia sektoriui. 

 

Vietos valdžios tyrėjai susitinka su daugybe fiktyvių įmonių ir direktorių, kurių nėra. 

 

Silpni įstatymai ir vangus nacionalinių institucijų vykdymas leidžia sukčiams klestėti.

 

     Taryba daro ką gali. Jis dažnai puola į parduotuves, tokias, kaip Oksfordo gatvėje, įtardama, kad šios parduoda nesaugias prekes, nesvarbu, ar tai nesaugios vape sultys, ar šokoladas. 

 

(Vienas įprastas gudravimas yra ištirpdyti pigų prekybos centrų šokoladą ir parduoti jį, kaip „Wonka“ batonėlius už 8 svarus sterlingų už popsą.) 

 

Pagalvokite apie tai kaip Al Capone metodo tęsinį. Prikalti Čikagos gangsterį už žmogžudystę pasirodė neįmanoma, todėl valdžia apkaltino jį mokesčių slėpimu. Jei sunku įrodyti, kad yra vengimas mokėti mokesčius, verčiau muškite šiandieninius piktadarius, kad jie parduoda suklastotą šokoladą.

 

     Slaptas ingredientas yra nusikaltimas

 

     Problema nėra neišsprendžiama. Yra pakankamai veiksmų, kuriuos vyriausybė galėtų padaryti siekdama susidoroti su juodosios rinkos verslu. Konservatoriai jau seniai žadėjo sujungti skirtingas agentūras, atsakingas už piktnaudžiavimą darbu, į vieną instituciją. Tačiau tai dar neįvyks, nepaisant to, kad dėl to buvo ginčijamasi daugiau, nei prieš trejus metus. Griežtesnis įmonių direktorių tapatybės patikrinimas numatytas šiuo metu Parlamente svarstomame ekonominių nusikaltimų įstatymo projekte. Tačiau vyriausybė negarantavo, kad „Companies House“, registruojanti įmones Didžiojoje Britanijoje, turės išteklių pritaikyti savo naujus įgaliojimus.

 

     Dr. Alison Gardner iš Notingamo universiteto paprastai įsikiša tik pačiomis ekstremaliausiomis aplinkybėmis, o tai reiškia, kad žemo lygio nusikaltimai yra nepastebimi. Kažkas, patekęs į vergiją, gali būti išgelbėtas. 

 

Darbuotojui, kuris negauna ligos pašalpos arba uždirba mažiau, nei minimalus atlyginimas, nesiseka. 

 

Mokesčių inspekcija nesiima piktnaudžiavimo minimaliomis algomis dėl tos pačios priežasties, dėl kurios policija nebesivargina tirti, tarkime, nusikaltimų su automobiliais: dažniausiai turi nerimauti dėl didesnių dalykų.

 

     Vyriausybei, kuri rimtai nori kovoti su pagrindinėmis nelegalios imigracijos priežastimis, o ne tik atrodo griežta, ji turi daug galimybių. Iki tol kiekvienas, ieškantis etiškos plovyklos, turėtų pasitikrinti, ar nėra šluosčių be tinkamų batų." [1]

 

·  ·  · 1. "It is far too easy to run lawbreaking businesses in Britain." The Economist, 18 Mar. 2023, p. NA.

The final stage of capitalism: It is far too easy to run lawbreaking businesses in Britain.

 Why final stage? Lawbreaking businesses out-compete all others.

"Always judge a man by his shoes. What works as a rule of thumb for fashionistas also works for people rooting out dodgy employers in Britain. The best way to check whether a car wash is legitimate is to look at the workers' feet, says Mary Creagh, the chair of Ethical Trading Initiative, which looks at labour abuses. A legal operation will have workers in proper boots, as they scrub vehicles by hand. A dodgy one will see poor souls scrubbing cars in soaking trainers. If a business is skimping on wellies, it is probably breaking other rules—whether paying below the minimum wage or hiring people who do not have the right to work in Britain.

Hand car washes, of which there are at least 5,000 across Britain, are the archetypal example of Britain's black-market economy. Rishi Sunak, the prime minister, fears that the tens of thousands of people who cross the Channel in small boats each year will "just disappear" into this economy unless something is done. The government has launched a crackdown on arrivals, signing a £479m ($575m) deal with France to stop migrants and announcing draconian new laws to detain and deport those who make the crossing. But as the government panics about small boats, it ignores the reason why many make the trip: the Conservatives have made it too easy to run a lawbreaking business in Britain.

This fact is oddly overlooked. When car washes do crop up in conversation, they are often portrayed as an amusing example of Britain's lousy productivity, rather than illegality. Why are four workers doing the job of one machine? Yet lawbreaking is "endemic" at car washes, according to a study last year by Nottingham Trent University. In the study 89% of surveyed car washes did not provide payslips. Mandatory "right to work" checks were completed in only 7% of businesses. Only one in ten had the correct insurance. Allegations of modern slavery, where people are forced to work for little or no pay, dog the sector.

Ministers know all this. But when the government attempted to tighten the rules in 2018, it opted for self-regulation. A code, which largely amounted to car washes promising to follow existing laws, has been taken up by few operators. Those businesses that are profitable largely because they do not adhere to the law were less keen. Consumers, meanwhile, are happy to have their Nissan Qashqai washed for a tenner.

Car washes are far from an isolated example. Local fast-fashion operators knock out clothes at scarcely believable prices. Sweatshops operate with impunity in places such as Leicester, with a largely foreign workforce often forced to work in illegal conditions. In 2018 there was an outcry when it emerged that some workers in the city's garment industry were paid as little as £3.50 an hour. A year later, a parliamentary report revealed a glut of problems, from withheld wages to fire doors being padlocked shut. Conditions have not improved. A recent survey by the University of Nottingham revealed about half of textile workers in the city still did not receive minimum wages, sick leave or holiday pay. A third did not receive payslips. A quarter had wages withheld.

Enforcement of basic labour rights is weak. The taxman investigates about 3,000 of Britain's roughly 5m businesses each year for minimum-wage violations. Between 2007 and 2021 just 16 employers were successfully prosecuted for breaking the national minimum-wage law. ("This is an increase on last year's figure (15)," brags the report revealing this triumph.) "It is not even hiding in plain sight, it is just happening in plain sight," says Ms Creagh.

It is possible to run clear and obvious scams in central London. Oxford Street, a busy shopping thoroughfare, has been taken over by stores selling an odd mix of luggage, vape juice and m&ms priced at £24.99 for a 500g bag. Such shops have skipped business rates to the tune of £9m, according to Westminster Council. Allegations of money-laundering dog the sector. Investigators from the local authority are met with a series of shell companies and directors who do not exist. Weak laws and slack enforcement by national bodies allow scammers to thrive.

The council does what it can. It often raids shops like the ones on Oxford Street on suspicion of selling dodgy goods, whether unsafe vape juice or knock-off chocolate. (One common ruse involves melting down cheap supermarket chocolate and then flogging it as knock-off Wonka bars for £8 a pop.) Think of it as a sequel to the Al Capone approach. Nailing the Chicagoan gangster for murder proved impossible so the authorities charged him with tax evasion. If tax-dodging is proving difficult to prove, whack today's villains for flogging dodgy chocolate instead.

The secret ingredient is crime

The problem is not intractable. There is plenty that the government could do to crack down on black-market businesses. The Conservatives have long promised to meld the disparate agencies in charge of labour abuses into a single body. But it is yet to happen, despite being mooted over three years ago. Stricter identity checks for company directors are contained in an economic-crime bill currently going through Parliament. Yet the government has not guaranteed that Companies House, which registers firms in Britain, will have the resources to apply its new powers.

A skint state will generally intervene only in the most extreme circumstances, meaning low-level crimes are overlooked, argues Dr Alison Gardner from the University of Nottingham. Someone in outright slavery may be rescued. An employee who does not get sick pay or earns less than the minimum wage is out of luck. The tax authorities do not crack down on minimum-wage abuses for the same reason that the police no longer bother to investigate, say, car crime: they usually have bigger things to worry about.

A government serious about dealing with the root causes of illegal immigration, rather than just looking tough, has plenty of options available to it. Until then, anyone looking for an ethical car wash should check for wellies.” [1]

·  ·  · 1. "It is far too easy to run lawbreaking businesses in Britain." The Economist, 18 Mar. 2023, p. NA.