“Make America Great Again,” Donald Trump’s campaign slogan, was cleverly designed to suggest that the nation as a whole has been in decline. And Trump repeatedly blamed past administrations for this situation, attacking them for pursuing policies that he said left US corporations unable to compete with their foreign rivals to the detriment of US workers.
US workers have indeed experienced a steady deterioration in their working and living conditions. But Trump’s focus on national decline and call for national revitalization obscures what a class analysis plainly shows: leading US corporations have greatly benefited from past policies and continue to dominate global markets and profit handsomely. In other words, US workers and US corporations do not share a common interest. Moreover, Trump administration policies designed to strengthen US corporate competitiveness can be expected to further depress worker well-being.
Globalization Changes Things
We live in a world where economic processes and outcomes are heavily shaped by corporate globalization strategies. This means that national statistics and measures of economic performance can be misleading. Sean Starrs, in an essay titled “China’s Rise is Designed in America, Assembled in China,” makes this point by using a global lens to evaluate the relative economic strength of China and the United States.
In the pre-globalization era, a country’s production tended to be nationally rooted. Thus, for example, Japan’s post World War II rise as a major producer and exporter of cars and consumer electronics meant that Japan’s “rising world share of national accounts [could be considered] synonymous [with] rising national economic power.” But transnational corporate globalization strategies have dramatically changed things.
Thanks to the expansion of transnational corporate controlled cross-border production networks, the production of many goods and services has been divided into multiple segments, with each segmented located in a different country. As a result, national economic activity tends to be truncated and less revealing of national value-added than in the past.
These networks are most fully developed in East Asia, and their expansion helped transform China into “the workshop of the world.” China is now the leading producer and exporter, largely to the United States, of such key products as cell phones and laptop computers. However, in sharp contrast to the Japanese experience, most of the value-added in the production of these high-technology goods is captured by non-Chinese firms. Thus, Chinese national accounts, especially its trade account, greatly overstate Chinese economic power. At the same time, US national accounts, including its trade account, greatly overstate the loss of US economic power.
The table below, from Starrs’s article, shows China’s top five exports of manufactures, as well as export values and market share for each product. It also shows US export values and market shares for the same products. Finally, it also includes the relative share of global profits from sale of these products earned by Chinese and US corporations. Starrs used the Forbes Global 2000 list, which ranks the top 2000 corporations in the world using a composite of four indices–assets, market value, profit and sales–and groups them by their appropriate sector of activity, to calculate the profit shares.
As we can see, China was responsible for 38 percent of world exports of telecommunications equipment in 2013, compared with a 7.4 percent share for the United States. Yet, US firms captured 59 percent of the profit generated by sales of these products; the Chinese share was only 6 percent. Perhaps even more striking:
There is not a single profitable Chinese firm in textiles that is large enough to make the Forbes Global 2000, despite China’s exports making up 39 percent of the world’s. Exports of clothing from production in the United States is miniscule compared to the rest of the world, at 1.3 percent, yet American firms reap 46 percent of the profit-share — even when the top two firms in the world, Inditex (owner of Zara) and H&M, are both European (Spanish and Swedish, respectively).
The reason for this is simple: Chinese production of the products listed in the table takes place within cross-border production networks largely dominated by US corporations. US firms are able to monopolize the profits generated by the production and sale of these products thanks to their control over the relevant technologies, product branding, and marketing.
The point then is that in the age of globalization, national accounts are no longer a reliable indicator of national economic strength.
Continued US Global Dominance
A simple look at national accounts does paint a picture of declining US economic power. For example, the US share of global GDP has slowly but steadily declined. It was 37 percent in the mid-1960s, 33 percent in the mid-1980s, 27 percent in the mid-2000s, and most recently approximately 22 percent. The US share of world merchandise exports has also declined. It averaged approximately 12 percent throughout the 1980s and 1990s and then began rapidly falling. It was down to 8.5 percent by 2010.
However, Starrs finds that once one takes globalization dynamics into account, US corporations continue to dominate international economic activity.
The table below, again from Starrs’s article, looks at 16 leading sectors and the national profit share for the top 2000 publicly traded global corporations within each sector, for the years 2006, 2010, and 2014. As we can see, in 2014, the US was the only country with corporations that finished in one of the top three places in all 16 sectors. US corporations had the largest profit shares in 10 of the 16 sectors, including those at the technological frontier. They are:
- Aerospace and defense
- Computer hardware and software
- Financial Services
- Heavy Machinery
- Oil and Gas
- Pharmaceuticals and Personal Care
If we define market control as either a 40 percent share of global profits or a profit share more than twice that of the second-place nation, US corporations dominated in 8 of these sectors:
- Aerospace and defense
- Computer Hardware and Software
- Financial Services
- Heavy Machinery
- Pharmaceuticals and Personal Care
Here are the 6 sectors which were led by a country other than the United States:
- Auto Trucks and Parts: Japan is first and the US third
- Banking: China is first and the US second.
- Construction: China is first and the US tied for second.
- Forestry, Metals, and Mining: Australia is first and the US third.
- Real estate: Hong Kong is first and the US third.
- Telecommunications: the UK is first and the US second.
China is the only country other than the United States that finished first in more than one sector. But as Starrs points out:
Almost all of these top Chinese firms are state-owned enterprises with heavily protected domestic [markets] with very few operations abroad (with the partial exception of Chinese firms in natural resource extraction). None of these behemoth state-owned enterprises can be characterized as globally competing head-to-head with the world’s top corporations to advance the technological frontier, yet these firms constitute the bulk of the non-foreign ownership of profit from production and investment conducted in China.
And the US is second to China in both sectors.
In short, US corporations remain dominant and highly profitable. And, US dominance is even greater then these results suggest. That is because US capital “disproportionately owns not only the economic activity occurring within the territory of the United States, but also around the world.” Thus, while the US “accounts for only 22 percent of global GDP . . . the proportion of American millionaires and total household wealth is 42 percent and 41 percent respectively [of world totals].”
In sum, it is clear that the US state has done well by leading US firms and their owners. The problem for us is that the policies that helped produce this outcome—deregulation, liberalization, privatization, and globalization, to list a few—have not benefited US workers, and in most cases workers in other countries as well. Moreover, sustained US corporate dominance does not guarantee the vitality, or even the stability of the global economy. Core economies continue to stagnate and there is no reason to think that renewal is on the horizon. In fact, quite the opposite is true; there are growing signs that the US expansion is near end and that Chinese growth will continue to weaken.
Trump, with his call to “Make American Great Again,” aims to use nationalism to win support for his own efforts to advance US corporate interests. While it remains unclear to what extent his policies will differ from those of past administrations, it is already certain that they will not serve majority interests. This destructive use of nationalism must be challenged. The best way is to promote a strategy of resistance that flows from and helps to popularize a grounded class analysis of the workings of our economy.
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