RC Passage #2

PASSAGE II

The viability of the multinational corporate system depends upon the degree to which people will tolerate the unevenness it creates. It is well to remember that the ‘New Imperialism’ which began after 1870 in a spirit of Capitalism Triumphant, soon became seriously troubled and after 1914 was characterized by war, depression, breakdown of the international economic system and war again, rather than Free Trade, Pax Britannica and Material Improvement. A major reason was Britain’s inability to cope with the by-products of its own rapid accumulation of capital: i.e., a class-conscious labour force at home; a middle class in the hinterland; and rival centres of capital on the Continent and in America. Britain’s policy tended to be atavistic and defensive rather than progressive—more concerned with warding off new threats than creating new areas of expansion. Ironically, Edwardian England revived the paraphernalia of the landed aristocracy it had just destroyed. Instead of embarking on a ‘big push’ to develop the vast hinterland of the Empire, colonial administrators often adopted policies to arrest the development of either a native capitalist class or a native proletariat which could overthrow them.

As time went on, the centre had to devote an increasing share of government activity to military and the other unproductive expenditures; they had to rely on alliances with an inefficient class of landlords, officials and soldiers in the hinterland to maintain stability at the cost of development. A great part of the surplus extracted from the population was thus wasted locally.

The New Mercantilism (as the Multinational Corporate System of special alliances and privileges, aid and tariff concessions is sometimes called) faces similar problems of internal and external division. The centre is troubled, excluded groups revolt and even some of the affluent are dissatisfied with the roles. Nationalistic rivalry between major capitalist countries remains an important divisive factor. Finally, there is the threat presented by the middle classes and the excluded groups of the underdeveloped countries. The national middle classes in the underdeveloped countries came to power when the centre weakened but could not, through their policy of import substitution manufacturing, establish a viable basis for sustained growth. They now face a foreign exchange crisis and an unemployment (or population) crisis—the first indicating their inability to function in the international economy and the second indicating their alienation from the people they are supposed to lead. In the immediate future, these national middle classes will gain a new lease of life as they take advantage of the spaces created by the rivalry between American and non-American oligopolists striving to establish global market positions.

The native capitalists will again become the champions of national independence as they bargain with multinational corporations. But the conflict at this level is more apparent than real, for in the end the fervent nationalism of the middle class asks only for promotion within the corporate structure and not for a break with that structure. In the last analysis their power derives from the metropolis and they cannot easily afford to challenge the international system. They do not command the loyalty of their own population and cannot really compete with the large, powerful, aggregate capitals from the centre. They are prisoners of the taste patterns and consumption standards set at the centre.

The main threat comes from the excluded groups. It is not unusual in underdeveloped countries for the top 5 per cent to obtain between 30 to 40 per cent of the total national income, and for the top one-third to obtain anywhere from 60 to 70 per cent. At most, one-third of the population can be said to benefit in some sense from the dualistic growth that characterizes development in the hinterland. The remaining two-thirds, who together get only one-third of the income, are outsiders, not because they do not contribute to the economy, but because they do not share in the benefits. They provide a source of cheap labour which helps keep exports to the developed world at a low price and which has financed the urban-biased growth of recent years. In fact, it is difficult to see how the system in most underdeveloped countries could survive without cheap labour since removing it (e.g. diverting it to public works projects as is done in socialist countries) would raise consumption costs to capitalists and professional elites.

1. The author is in a position to draw parallels between New Imperialism and New Mercantilism because
1) both originated in the developed Western capitalist countries.
2) New Mercantilism was a logical sequel to New Imperialism.
3) they create the same set of outputs—a labour force, middle classes and rival centres of capital
4) both have comparable uneven and divisive effects.

2. According to the author, the British policy during the ‘New Imperialism” period tended to be defensive because
1) it was unable to deal with the fallouts of a sharp increase in capital.
2) its cumulative capital had undesirable side-effects.
3) its policies favoured developing the vast hinterland.
4) it prevented the growth of a set-up which could have been capitalistic in nature.

3. In the sentence, ‘They are prisoners of the taste patterns and consumption standards set at the centre.’(fourth paragraph), what is the meaning of ‘centre’?
1) National government.
2) Native capitalists.
3) New capitalists.
4) None of the above.

4. Under New Mercantilism, the fervent nationalism of the native middle classes does not create conflict with the multinational corporations because they (the middle classes)
1) negotiate with the multinational corporations.
2) are dependent on the international system for their continued prosperity.
3) are not in a position to challenge the status quo.
4) do not enjoy popular support.