Business Goes Global As Investment Booms
Breakfast at Dunkin' Donuts. Lunch at Burger King. Grocery shop at Giant Food. Sleep at the Holiday Inn. It all sounds very American. But every one of these companies is British-owned.Skip to next paragraph
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Business has gone global - quicker than many realize. In Europe, American companies are among the largest employers. In China, investors from Japan, the US, and Europe are scrambling to open factories. In America, millions are working for Japanese, German, Dutch, and British firms.
Sir John Kerr, Britain's ambassador to the US, jests: "The American way of life - we have just taken it over."
Worldwide foreign direct investment surged 40 percent in 1995 to $315 billion. "Globalization is no longer rhetoric. It is a fact," notes Douglas Gregory, senior adviser of IBM Canada Ltd.
And globalization is continuing at a rapid pace, with major implications for business, governments, and ordinary citizens. Business faces wider competition and takeover threats from foreign companies. Many governments in both rich and poor countries are trying to attract foreign investors by liberalizing their economies and their investment regulations. More and more workers - about 5 million in the United States alone - work for foreign-owned firms.
"The modern economy cannot be understood without tackling the role of this investment," says Joerg Weber, an economist at the United Nations Conference on Trade and Development in Geneva. UNCTAD compiles global statistics on world investment in an annual report.
On the ground, the effects of the investment push include:
Spate of mergers. Just a few weeks ago, British Telecommunications made a deal to buy MCI Communications Corp., America's second-largest long distance company, for more than $20 billion. That has been followed by more British-US deals: Invesco PLC agreed to pay $1.6 billion for AIM Management Group, a mutual-fund company. Dominion Resources, a Richmond, Va., power company, plans to buy East Midlands Electricity PLC, one of five remaining independent electric companies in Britain, for $2.15 billion.
Meanwhile, Dutch bank ABN-AMRO agreed to buy the Standard Federal Bancorporation of Troy, Mich., for $1.9 billion on Friday, Nov. 22.
A networked economy. Production increasingly is a cross-border, often cross-ocean, affair. One-third of world trade occurs within "transnational companies" - as the UN terms companies operating in more than one nation. This mainly means shipments between a parent company and its foreign affiliates. Another third of trade, Weber says, is between companies and some sort of non-equity affiliation - a strategic alliance, a supplier of parts, a subcontractor.
All told, foreign affiliates of transnational firms now generate annual sales well in excess of $6 trillion. That's equal to about 20 percent of the world's entire economic output.
Tough issues for governments. The growing economic ties can leave governments in awkward positions. President Clinton, for example, faces enormous pressure from business interests not to let human rights and other concerns interfere with America's growing ties in China. And on Nov. 26, survivors of the Bhopal gas-leak disaster protested outside India's Parliament. In October, India's Supreme Court barred a manslaughter suit against executives of America's Union Carbide Corp. Thousands died in the 1984 tragedy.