Oligopolies

The merger movement has involved both horizontal concentration and vertical integration in industry, as well as the creation of conglomerates, in particular in western Europe. The vertical integration resulting from mergers is particularly apparent in such fields as the production of aluminium and its end products. Such vertical integration tends to preclude exports of raw materials and intermediate goods except through the structure of the multinational corporations in question. In the industrial sectors of computers, agricultural machinery and motor vehicles, transnational corporations produce components and parts in many different countries of the world, including developing countries. As a result, the finished product represents a culmination of an international co-operative effort involving extensive intra-company trading marked by cross-shipments of sub-assemblies of industrial intermediates and components.

Even more impressive than the growth in trade itself has been the growth in the role of a limited number of giant transnational corporations (TNCs) in world trade. This is due not only to the large percentage of trade which takes place within and among such corporations, but also to the fact that recognition of the role of TNCs in the development of new technologies in production innovation, and in the penetration of export markets for goods and services, has led to their being seen as "national champions", whose interests are increasingly seen to coincide with national goals. In the name of competition, enterprises are encouraged by governments to use all the restrictive business practices at their disposal in order to strengthen their positions in international trade transactions. This situation results in a considerable degree of concentration of market power among firms which consider they would otherwise be unable to reach the "critical size" to compete on global markets. As a result, the tendency towards fewer but larger corporations dominating the world economy seem to be accelerating.

Increased participation by transnationals has had implications for the structure of international trade, including the growing oligopolistic nature of world trade, transfer pricing and the greater impact of restrictive business practices in the international trading system. Despite efforts to regulate such excesses, none of them have effectively imposed obligations upon the transnationals to ensure that their activities conform to the overall goals of the international community, especially that of economic development. Trade and foreign investment liberalization, although increasing competition in many sectors, tends to reinforce oligopolistic global market power in others, particularly in some high technology sectors. Such market domination may be difficult for individual competition authorities to control.

The power concentrated in the hands of the transnational enterprises and their actual or potential use of it, their ability to shape demand patterns and values and to influence the lives of people and policies of governments, as well as their impact on the international division of labour, is dangerous. This is especially so, since there is no systematic process of monitoring their activities and discussing them in an appropriate forum.

While the international division of labour is influenced by the existing international trade and monetary regimes, it may be strongly affected, intentionally or unintentionally, by transnational corporations. Their large capabilities for moving products and inputs across borders are important instruments in affecting the actual division of labour. At the same time, the apprehension that host countries may be turned into 'branch-plant' economies may not be limited to developing countries. The organizational, productive and distributive complexes created by transnational corporations often assign a peripheral and dependent role to affiliates in many host countries, while the centres of top decision-making and scientific research remain in a few highly industrialized countries.

Although the locational pattern of transnational corporations reflects the uneven distribution of the factor endowments, it is in many cases also moulded by artificial administrative devices employed by home and host governments (tariffs, subsidies, etc), as well as by the corporations themselves. In today's complex economy, the 'invisible hand' of the market is far from the only force guiding economic decisions. To a considerable extent, conscious planning, both public and private, has played an increasing role in decision-making. Increasingly, basic decisions on the allocation of resources with respect to what, how and for whom to produce are being concentrated in corporate planning mechanisms. The growth of transnational corporations gives them increasing control over resources and thus augments their capacity to re-allocate them. Such decisions, when taken exclusively from the point of view of the interests of the enterprise pose serious problems.