There have been a number of changes in the way the world functions in this century. The globalisation of business has greatly expanded the economic power of the United States.
Transport has improved enormously. One hundred years ago, a journey from England to New Zealand took three or four months an involved a high level of risk. Now it takes just 24 hours and is very safe.
Shipping costs have reduced enormously. Goods can be shipped from anywhere in the world for such a small additional cost that they can compete with locally-made goods.
All over the world, national governments have reduced tariffs and other trade barriers. This has allowed an enormous increase in trade volumes. As consumers have found out more about the range of imported products they can buy, the pressure on governments to open their borders to trade will increase.
Communications have improved to such an extent that a message can be sent anywhere in the world instantly at a very low cost. This gives the managers of international corporations the ability to control activities all over the world. They can get reports about situations as they are happening and communicate decisions or instructions instantly.
Computers and information technology have given corporations the ability to manage large volumes of information. This together with improved communications has allowed the managers of large corporations to manage enormous business empires. Their ability to control their business is far superior to that of the Old Testament emperors. They often did not know what happened in the far reaches of their empire for months, and it could take months to send back a command in response. By the time their message arrived, the situation may have totally changed. They could only maintain control by appointing governors who were loyal to them and who would carry out their instructions.
The function of a manager has been developed to a high level of skill. Colleges have been established to train managers in these skills. The result is that one person is able to manage a very large business. As the science of management has advanced, the size of the business that can be managed as one unit has grown. Jack Welch, the manager of General Electric, was able to successfully control a business, which engages in an amazing variety of activities (aero engines to microwave ovens). It had factories all over the world. This level of administrative coordination has never occurred before in human history. A combination of his management skills with the benefits of modern technology made this possible. In economic terms, the business that was controlled by Jack Welch is probably greater than the empire controlled by Alexander the Great.
Management has been separated from ownership. Two hundred years ago, almost every business was operated by its owner. Some family businesses had grown much larger, but a few key members of the family would still manage them. Other family members would take a close interest in the business; some would be its agent in another town. The large modern business has thousands of shareholders, who own just a very small share of the business. Their only interest is in the share price, and possiblly the size of the dividend. The managers of the business are free to manage, without any interference from their shareholders. This means that they can pursue the interests of the business, without reference to anyone.
Limited liability laws have allowed corporations to grow. They allow a business to operate on a very large scale, with no individual shareholder being accountable for the corporation's debts or losses. However, in reality, there is no such thing a limited liability. There is just transferred liability. Limited liability just transfers the liability to employees, contractors and suppliers who lose out if the company fails. Nevertheless, limited liability laws have made possible the enormous size or modern business organisations.
Family businesses were rooted in a nation, whereas modern managers are citizens of the world. The owners of a family business would have a loyalty to the country in which they lived. The shareholders of a modern business may be scattered all over the world, so the business has no loyalty to any nation. Modern business managers tend to be cosmopolitan. As they climb the corporate ladder, they often have to live and work in different countries, so they tend to have more loyalty to their business, than to a particular nation.
Globalisation has caused international merger and acquisition activity (typically spanning several and legal systems) to proliferate. The value of merger and acquisition activity has skyrocketed over the past decades.
Television is now the main forum for public communication and discussion, and television is controlled by big business. This gives large corporate business great power over what people think. Even the civil government is dependent on the media for communication.
Television has given those who can afford to buy advertising and sponsor programs tremendous power to influence the way that people think and what they will buy. As an image based medium, television can powerfully convey an image of the way that a person must appear to be "cool". The result is that people all over the world are wearing the same clothes and eating the same food. Differences are now greater between generations that across national boundaries. McDonalds can now be found in virtually every city in the world. The power of television has given large corporations ability to create worldwide demand for their products.
The television commercial has orientated business away from making products of value and toward making consumers feel valuable, which means that the business of business has become pseudo therapy (Neil Postman, Amusing Ourselves to Death).
Modern business is borderless. Modern technology means that a business does not have its headquarters or its productive processes in the same place. They don't even need to be close to raw materials or their customers. A business can establish its production processes, in the country where the cheapest labour with the necessary skills is available. Many specialist functions like product design and development, marketing, or IT development can be in the country where the skills required are available at the cheapest price. The headquarters can be in a country, which offers the best tax and legal benefits.
Many modern business activities are very capital intensive. They need to be very large to achieve the economies of scale that allow them to supply low-cost goods to worldwide mass markets. The new communication and information management technologies have allowed the emergence of the large and complex financial intermediaries and markets needed to supply this capital.
Modern business is very mobile. Often the most valuable assets of a business are its management skills and the brands and technologies it owns. These can easily be moved from one country to another. If there are better opportunities in a different country, then a business can easily move to take advantage of it. Capital will always move to where it finds the best return. It has no loyalty to any people or nations. "Technology is taking us down a road where money, companies and ideas, can cross national borders more easily than before" (Management, February 1999).
Television gives consumers everywhere an awareness of how other people live. This global awareness creates a global demand for global products. "The convergence of tastes puts pressure on governments to make sure their people have access to the best and cheapest products from all over the world. When they refuse in the name of national interest or market protection, people will find a way to vote with their pocket books" " (Management, February 1999). The internet makes it easier for consumers to bypass trade barriers that governments may put in place. It gives consumers the power to purchase goods from the country where they are cheapest.
A mobile phone might be designed in London and made in China from parts produced in Canada, American and Sweden, on the orders of a headquarters in Finland (The Economist, 23 Sept 2000)
All these factors have contributed to the power of the large multinational corporations.
At the same time, they are reducing the power and authority of national governments. The relationship between market power and political power has changed. In a contest between a multinational corporation and a national government, the corporation will usually win. If a national government put laws in place or raises taxes that the corporation does not like, it will simply leave that nation and move to where it will be treated better. Globalisation has reduced the ability governments to regulate international capital flows. Consequently, large financial organisations can determine the rise and fall of nations.
Multi-national business also has tremendous power over the people of the world. The persuasive powers of television give them control over what we buy and how we spend our money. On the other hand, because they employ us, or buy the output of the businesses that employ us, we are dependent on them for our income. If a large corporation pulls out of a small nation, many people will lose their livelihoods. They control both what we buy and ability to earn income, so we cannot stand against their power.
The only threat to a large corporation is other corporations, and this threat is very real. These businesses are in very serious competition with each other. If they don't keep up with their opposition, they can be taken over or simply lose their place. IBM once was master of the computing businesses. However, because it failed to understand the potential of the personal computer, it very nearly collapsed. Bill Gates understood that potential, so Microsoft very quickly overpowered IBM.
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