Lethbridge Herald, The (Newspaper) - October 9, 1973, Lethbridge, Alberta
4 THE LETHBfMDOC HERALD Tuttday, OclobW 9, 1973 New governor-general Mergers affect economy adversely By Bruce Whiteitone, syndicated commentator The appointment of Jules Leger to succeed Roland Michener as governor- general ends the speculation some of it bordering on the absurd about who would be the choice. It is to be hoped that it will not be the beginning of bitter remarks. Those who wanted to see a Westerner appointed should recognize that this is not an approrpriate time to break the practice of alternating the nation's top office between representatives of English-speaking Canada and French speaking Quebec. Eventually it might be possible to ignore such considerations and simply pick the best person available but the country isn't ready for that yet. Actually, it is only incidental that Mr. Leger meets the need of coming from the Fench-speaking segment of Canada. He could well be the best qualified Canadian for the position. Few men have held as many important posts and discharged their responsibilities with such distinc- tion. Perhaps he showed his metal best dur- ing the years he was Canada's am- bassador to France. Those were the years when President Charles De Gaulle was meddling in the extremely sensitive area of Canadian unity. Mr. Leger exer- cised admirable diplomatic restraint and skill in dealing with this situation. The new governor-general will not like- ly match the flair of Mr. Mitchener in the office but he will at least equal his predecessor in the dignity bestowed on the highest functions in the land. He may also bring new dimensions to the perfor- mance of his duties which only his in- timates in public service can anticpate. Canada has been honored by this ap- pointment. The fate of multinationals Multinationals the huge cor- porations which span political boun- daries and sometimes seem to be a law unto themselves are undergoing careful scrutiny on several fronts. A special United Nations committee of 20 economists and businessmen from around the world is looking into the matter of the accountability of super companies, their economic effect on the host country, and the danger of interference in political affairs. Ironically, the committee was first proposed by Chile, in June, 1972, because of International Telephone and Telegraph's interference in its elections and domestic politics. Spokesmen for many of the huge cor- porations. Exxon. General Motors, Ptizer Chemicals and International Businesss Machines, the largest mul- tinational of all, have already testified. ITT was not present at the initial hearings. Among their suggestions were the adoption of a voluntary code of conduct, greater employment of "foreign nationals." and a rationalization of taxa- tion of such companies. Although there was general agreement that some form of accountability was necessary, a vice-president of GM ex- pressed skepticism about what the UN could do and said that even mul- tinationals "exist at the will of the state" and are "governed by the laws, policies and customs of the countries in which they operate and by the consumers they serve." Dr. John Deutsch, principal and chancellor of Queen's University and formerly head of the Economic Council of Canada, is the Canadian represen- tative on the committee, which expects to have its report ready next summer. In an objective analysis for the Wall Street Journal. John Diebold, chairman of a management consultants group, set forth four objections to present MNC operations in developing countries, including the fact that they do not train local inhabitants in entrepeneurial skills. Their operations, he said, subject them to charges of cheating on taxes, their purpose is not to meet local needs, which may be overwhelming, but to produce a marketable commodity, and their presence aggravates political tension, so that they come to be regarded as ex- ploiters rather than agents for re- distribution of wealth and diffusion of technology. Mr. Diebold admitted candidly that some MISCs "are getting away with murder." which turned out to be an un- pleasant metaphor in view of the Chilean coup, but expressed the fear that an expose of multinations may become a witch hunt in which the MNCs "are murdered instead." He suggested that MNCs are uniquely qualified to meet the biggest needs of the poor counties, i.e., raising standards of health, nutrition, education, and shelter, and recommended that rich countries should tie their aid programs to performance contracts in which MNCs agree to raise the protein intake in the host country by x per cent in x years or to raise literacy standards by x per cent or even to operate birth control programs. This, he said, would put the most dynamic force in the world working on the most important problems in the world. In another analysis of multinationals. Professor Neil H. Jacoby. author of "Corporate Power and Social Respon- sibility." sees a similar positive poten- tial. However, he feels that the public de- mand for greater social responsibility from corporations should be met by government legislation or regulation so that no corporation can gain a price ad- vantage from shirking its social duties. Because it will be necessary for nations to develop supranational organizations for regulating MNCs he sees these huge corporations as "the most pwoerful human institutions in the forging of a world order." Canada has an obvious interest in the late of multinationals, in view of the large amount of foreign capital invested here. It may be less obvious that this country also has a responsiblity, because it is a wealthy, developing nation, in determining whether multinationals are instruments for social good or social harm. THE CASSEROLE In a recent speech an MP complained of "pretty rigid suppression" of the prison pop- ulation of Prince Albert Penitentiary. Suppression? In a penitentiary'' Horrors! Speaking of inflatable buildings you mean you weren't9 there's one in Germany that's nearly 600 feet. long, more than 100 feet wide, and about 40 feet high. (The figures are only approximate, as Europeans measure things in It's made of plastic, and it's kept rigid by a barely noticeable extra at- mospheric pressure. Quite a lew months ago. reacting to Swedish protests at the resumption of bomb- ing in North Vietnam, the U.S. refused to n'aiYie a new ambassador to Sweden, withdrew their deputy chief of mission from Oslo, and announced publicly that a new Swedish ambassador would not be welcome in Washington. Sounded a bit petty at the time, but they must have meant it: it's that way today, and with no indications of any change of heart. criminals" include three wanted for escaping custody, one for being unlawfully at large and obstructing a peace officer, and one whose crime is possession of stolen property. The other two are more likely villains, one wanted lor non-capital murder and the other for robbery, conspiracy and wouldn't you know it0 parole violation. "In another effort to fight inflation the German Bundesbank has approved a second D-mark 500 million edition of the Federal Stability Bond So says a German news report, and it goes on to explain that these are seven year. 10 per cent bonds, that cannot be cashed before maturity. So now 10 per cent is considered as "stability." Showing a nice sense of proportion, the nabobs of professional tennis recently levied another in fines against Romanian ace Ilic Nastase. for throwing a match, and for cursing one of iheir officials. John Crosby of the London Observer notes that there has been progress, of a sort, in that in the 16th century landlords used to cut the traveller's throat and take his wallet, but nowadays they don't slit his throat. Evidently frontier life is settling down somewhat. Canada's seven "most wanted The Alberta Cattle Feeders Association is complaining about the high prices being paid tor feed grains. What's that old song about 'the cowboy and the farmer should be friends1'" It has been nearly two years since the pre- sent government took office in Edmonton and yet the Department of Advanced Education is still not reorganized. Given the general rule that the smaller the organism the shorter the period of gestation, there are understandable fears that a bureaucratic monster is being formed. Meanwhile, the Native-American Studies Progratn of the University of Lethbridge has been waiting a decision lor six months because the department has not yet establish- ed a program-approval policy. Note from the business world: The million judgment against IBM. in damage suit initiated by Telex Corporation, can be paid out of next quarter's net profits "without discomfort." says the London Observer. The great wave of con- glomerate mergers which took place in the past decade has left a lingering trail ol misfortune. The merger mania has adversely effected our economy and led to a chain reaction in the political and social fields as well. This merger boom, like others in the past, occurred in the midst of a strongly rising stock market. When the stock market declined in 1969-1970, many of the conglomerates were heavily burdened by a mountain of debt assumed in order to finance acquisitions. All too frequently the purchases were made at in- flated levels and the ensuing market collapse dragged down the conglomerates even more than other companies listed on the stock exchange. Though the speculative ex- cesses that accompanied the merger have hurt many of the companies involved, the economic damage has turned out to be more significant for us all. Corporate mergers in- creased economic concentra- tion and impaired com- petition. In general, the structural changes that normally develop in companies when they reach a certain optimum size did not take place this time. In the 1920's. however, the mergers that took place then destroyed local monopolies but created in their place a new potential for mass production in national markets. For example. General Motors acquired smaller automobile manufac- turers as well as subsidiaries to supply component parts. The resulting greater strength had undoubtedly enhanced ef- ficiency, promoted mass merchandising and led to much lower costs so car prices dropped sharply. In Canada, the cement manufac- turers acquired other cement producers and raw material producers. Similarity, steel companies took over iron mines or fabricating operations. It was only in the recent years that acquisitions and mergers did not lead to cost saving or improved production techniques. Operations became too spread out and too diverse to be handled properly under one corporate "roof." Perhaps the most damaging result of the most recent merger era was the public outcry that developed against all "big" corporations. The merger mania led to an im- pression of business in- competence that is not true of the business community as a whole. The popularity of the political slogan "corporate rip off" undoubtedly attests to "So nothing came of them again this year you'll cheer up when your government tomato crop failure subsidy cheque Multinational squeeze is pinching By C. L. Sulzberger, New York Times commentator UNITED NATIONS. N.Y.- It is ;i shirtling paradox that I ho United States, which has traditionally favored fret1 trade, business competition and opposed monopolies or cartels, should now be the ad- ministrative scat for most of the world's largest cor- porations including those mul- tinalional monsters which dominate: the economic scene. Since 1890 (Sherman An- titrust Act i the U.S. Congress steadily legislated against excessive bigness and in favor of more rivalry and today six basic laws seeking these aims remain valid: most recently the 1950 Celler-Kefauver Act amending the Clayton Act of 1914 to check monopolistic growth and to help small business. Yet the results seem like a sour joke. I am not talking only of what John Kenneih Caihraith in his latest book I'T.nmomics and the Public describes as the power of a few hundred cor- porations to exploit the rest of the U.S. economy for their own purposes. Even more ominous is the global shadow of multinational corporations whose system. Galbraith says. the tendency to inequality." Hichard J. Barnet points out in a review of Galbraith's hook- "Theglobal corporation is the only worldwide mechanism for transferring income, and in so doing it is largely free of effective con- trol by national governments, inducting the government of the United States." (leneral De Gaule. as was often his wont, discerned these dangers early hut had only partial success in preventing key French con- cerns from being gobbled up by the multinational octopus. And. of course, its threat to smaller, poorer lands than France intensifies. During the recent series of monetary crisis warping the world currency structure, part of the heavy battering came from supercorporations slamming their immense funds about from one nation's bank to another to profit from instability and insure against loss, all in the name of sound business and the legendary widows and orphans holding their stocks. The multinationals not only have financial power hard to calculate and the ability to distort markets: they have vast potential power to in- tervene in favor of their con- ceived interests. They are becoming increasing targets not only for Communist and third world propaganda but for capitalistic criticism. .lean-Jacques Servan- Schreiber. astute French editor and author of "The American Challenge." says: "The great multinational cor- mir.'it challenge the nations and their political sovereignty. The Americans are challenged too The sheer power of these economic giants has outstripped the ability of states to control them." It is estimated that 15 per cent of the world's gross production trillion) is produced by multinational corporations. This sector is growing at a rate of 10 per cent annually, faster than the economies of many nations. Sales of (ieneral Motors around the world exceed the CNP of wealthy Belgium. Some conglomerates use subsidiaries in tax havens to minimize tax hills. Some in- vest abroad where they can profit from production and repatriate these profits in appreciated local currency to the dollar's disadvantage although the dollar's depreciation is certainly not their fault. A panel of experts from the UN's economic and social council is now studying the impact of multinationals on global relations and economics. It is silly to regard this new phenomenon as evil per se but it is just as silly to permit it to escape logical surveillance and control. While, negatively, uninhibited mul- tinationsls can bend curren- cies, restrict markets and es- cape taxes, positively they can help open new tran- sideological fields of global commerce and investment. Various curbs have been suggested to avoid excesses. In Canada and Europe there has been talk of restricting multinational corporative ac- tivities. President Nixon has mentioned modest curbs on their favorable tax treatment. Servan-Schreiber has propos- ed international prohibition of tax havens. There have been more extrme ideas of nations locking the door o 11 movements of capital and goods. Certain trade unions have come up with the vigorous suggestion that they organize an international labor force to counterbalance the vast power of the multinationals. The international metal- workers' federation drafted plans for an attack on "the growth ami influence of mul- tinational capitalism." KCOSOC wants to work out a triple set of regulations to handle the problem: inter- national trade laws for governing conduct of the con- glomerates: an authority to enforce these rules: and means of policing activities of the multinationals. The basic idea is great. Rut how it can bo elaborated among nations of conflicting nationalities and how it can be supervised without a real world govern- ment remains an enormous unknown. popular revulsion against many corporate activities; nevertheless, the phrase is un- fair as a generalized attack. Socially, a result of the merger era was the false legitimacy it seemed to con- fer on the pursuit of profits by financial manipulation rather than by producing something of genuine value. Some com- panies specialized in using adroit tricks to present an illu- sion of rising profits. By tem- porarily presenting a picture of earnings growth based on accounting tricks, the merger craze greatly weakened public confidence in the securities market and has impaired the ability of "Wall Street" to function as a source of capital and investment. Perhaps the youth culture's disdain for material things can be attributed directly to these shoddy practices of many businesses. From a political standpoint, business suffered because it offered no inspirational or social ideal to counter the threat proposed by those who denounced materialism. If the merger wave had not taken place, faith in the business community would have been higher and business would have been more prosperous. As a result, there would have been more job opportunities as business would have been more confident and would ex- pand. Another arresting new phenomenon of the merger madness was growing cor- porate warfare. Corporations that have had difficulty succeeding in the marketplace are trying to win their fortunes in court. Takeover bids are now resisted in monster lawsuits, shareholders are seeking redress for their losses by su- ing management, and anti- trust activity in both North America and in the United Kingdom has increased in volume. The merger wave collapsed in this 1969-1970 recession. Now that the economy is recovered, is another round of merger activity abcut to begin? Only a few small businesses are anxious to sell out while many foreign corporations appear interested in taking over undervalued Canadian companies such as the Japanese takeover of Bruck Mills. However, a repetition of the merger wave is unlikely now. For one thing, many com- panies consider their shares undervalued, relative to book value, because of the depress- ed stock market. Therefore, companies that might tempt raiders are prepared to put up stronger defensive tactics because share prices, in their judgment, are too low. In Canada, the government is on the verge of legislating new obstacles to foreign takeovers. Finally, the direc- tion of the economy offers few clues now to the future. This was not the case in the 1960's when there was a defence boom, a tremendous growth in' housing and expansion in con- sumer spending. What form the economy will take will have to await future developments. In the interim, it is to be hoped that business will be led by those with more positive social vision than was the case in the merger craze of the last few years. BERRY'S WORLD Eligibility on economic strength By David Winder, Christian Science Monitor commentator UNITED NATIONS, N.Y.- Japan is not officially demanding admission into the exclusion club of the "Big Five" at the UN. But it is presenting impressive new credentials to show why it ought to be admitted. As a first-run spectacular it has made a generous pledge of million to ease the UN's critical financial burden. It is not a bribe. It is an attempt to set an example to other nations and to knock Soviet and American heads together so they will stop feuding and start paying more to the UN. The contribution points up the interest wealthy countries like Japan and West Germany have in the UN, and on which the world body increasingly depends. It also highlights the fact that Japan, like West Ger- many, contributes more than either Britain or France, though not enjoying the two European permanent members' correspondingly great status. When Japanese Prime Minister Kakuei Tanaka visited Washington last month. President Nixon promised him the U.S. would support Japan's bid for a per- manent UN Security Council seat. Some observers expect Japan's ambition in that direction might spur a rival bid from, say, India, a fellow Asian country with a popula- tion four times that of Japan's. Of even greater significance in the long term perhaps was Japan's blueprint for a peaceful and more economically contented Asia, this was outlined in a major foreign policy speech at the UN earlier by the Japanese foreign" minister, Masayoshi Ohira. It was a remarkably un- Oriented speech and a clear signal from Japan that it has no intention of dominating Asia in this post-Vietnam era. Instead it seems anxious to reassure Asian countries that its ambitions in that area are peaceful, constructive, and in view of projected heavy UN involvement altruistic. Clearly, the emphasis was to show that Japan could demonstrate to the world that it could become eligible for a permanent seat at the UN Security Council not by nuclear or military might but through peaceful co-operation and assistance by virtue of its extraordinary economic strength. thought we got the boat in search of a noncom- petitive The Utkbridge Herald 504 7th St. S. Lembridge, Alberta LETHBRlDGE HERALD CO. Proprietors and Publishers Published 1905-1954, by Hon. W.A BUCHANAN Second Class Mail Registration No. 0012 Member ol The Canadian Press and the Canadian Dally Newspaper Publishers' Association and the Audit Bureau ol Circulations CLEOW MOWERS. Editor and Publisher THOMAS H. ADAMS, General Manager DON PILLING WILLIAM HAY Managing Editor Associate Editor ROY MILES DOUGLAS K. WALKER Advertising Manager Editorial Page Editor "THE HERALD SERVES THE SOUTH"