The copyright page of this book has been mangled by the scanner, but two lines survive it intact. One reads, in Cyrillic, "© Издательство «Наука», 1978". The other reads "English translation of the revised Russian text © Progress Publishers 1983". So the spine is five years out. This is a book of 1978, published by Nauka — the press of the Academy of Sciences, not the Institute of Marxism-Leninism — and reworked for English readers at the turn of 1982–83.
The reworking was real but uneven, and the unevenness is the most interesting thing about the volume. Astapovich refreshed his tables on the capitalist core all the way up to the last possible moment: the corporate rankings come from Fortune of May and August 1982, the research-and-development league table from Business Week of 5 July 1982, the United States balance-of-payments series from the Survey of Current Business of August 1982, and the profit-rate table in Chapter One runs to 1981. But the chapter on the developing countries — Chapter Six, the longest and the best in the book — still rests on a UNCTAD paper prepared for the Manila session of May 1979 and on the UN's Transnational Corporations in World Development: A Re-Examination of March 1978. One half of the book was brought up to the summer of 1982. The other half was not. Hold that thought; it will turn out to matter more than anything else here.
Who wrote it. A. Z. Astapovich was a working economist of the Academy of Sciences system, not an apparatus functionary, and the company he keeps in his footnotes places him precisely: he argues with Soviet colleagues by name — Belous on the mass versus the rate of profit, P. Khvoinik on whether intra-firm exchange can be called trade at all, Yu. Shishkov on regional differentials in the rate of profit, I. D. Ivanov on the definition of a multinational. This was the Soviet international-economics milieu of the détente decade, and it did serious work. The commission behind the book is legible too. In the second half of the 1970s the Soviet Union had taken up a position inside the United Nations argument over transnational corporations, alongside the Group of 77 and behind the New International Economic Order. The book's closing pages are given over to the two draft codes of conduct then under negotiation — one on transnationals, one on the transfer of technology — and to the demand that they be legally binding rather than voluntary. That is what the book is for. It is ammunition for a diplomatic campaign.
A great deal, and it should be said at length.
Astapovich's central empirical claim is that the transnational corporation's decisive innovation is not size but the internalisation of exchange: that a growing share of world trade is not trade at all but administered transfer between units of one firm, at prices the firm sets. He gets the scale roughly right — up to 60 per cent of capitalist-world exports passing through the transnationals, intra-firm transfers covering "up to a third of world trade turnover" — and he gets the mechanism exactly right. The chapter on financial policy in Chapter Two is the sharpest thing in the book. He shows that between 1950 and 1981 United States companies increased their foreign direct investment by $216 billion of which only $57 billion was actually exported from the United States, $122 billion being reinvested profit; that over the same period American foreign affiliates sent about $220 billion home and received only $80 billion; that profit flows had been reoriented towards finance subsidiaries in favourable tax jurisdictions; and that a firm can shift value simply by changing the base year on which it values a subsidiary's assets. He notes, almost in passing, that many transnationals own foreign affiliates whose activities are recorded nowhere at all. He offers a back-of-envelope estimate that a ten per cent uplift on the roughly $65 billion of goods then moving between American parents and their overseas units would generate more than their annual dividends, with a footnote observing that mark-ups above 100 per cent are not rare, so ten per cent is a floor.
None of that is polemic. It is a description of base erosion and profit shifting written thirty years before the OECD gave the practice a name and a work programme, and it has aged better than almost anything else printed by Progress in the 1980s.
The evidence in Chapter Six is stronger still, because it is specific. In Latin America, he reports, roughly half of all exports and forty per cent of imports move as intra-firm sales, "bypassing the market"; three-quarters of manufacturing transnationals there make general use of transfer pricing; their declared export prices run 40 to 62 per cent below those of local firms while their affiliates' import prices run 60 to 132 per cent above, across petrochemicals, electronics, pharmaceuticals, rubber and motors. The single most arresting figure is Colombian: "The official and actual levels of foreign-affiliate profitability in the pharmaceutical industry in Colombia were respectively 6.7 and 79.1 per cent." Declared profit was 3.4 per cent of actual income; inflated import prices carried 82.6 per cent of it. That figure is not Astapovich's own — it comes, as his reference makes clear, from the Greek economist Constantine Vaitsos's 1974 Oxford study of intercountry income distribution and transnational enterprise, the work that founded the entire transfer-pricing literature — but he read it, understood what it meant, and put it at the centre of his argument at a time when most Western economics was still treating the multinational as a neutral efficiency-improving institution.
He is equally concrete on restrictive business practice. Over ninety per cent of technology contracts in Mexico, Peru and Chile, and over seventy per cent in Bolivia, Colombia and Ecuador, carried clauses restricting the export of goods made with the licensed technology; contracts routinely bundled compulsory purchase of patents and trademarks unrelated to the transfer. He reports the Saudi government's complaint that Western electrical manufacturers, operating through the International Electrical Association and its "H Procedure" of 1973, were charging Saudi Arabia between 200 and 400 per cent more than developed-country buyers. And he gives the Brazilian case, which is the one readers remember: nine leading Western monopolies "tried to suppress the local electrical engineering industry through a collusive agreement. They cut their prices, stretched out delivery schedules and supplied defective materials causing accidents." The sabotage fund, he notes, was financed by a levy of two per cent on the contract price of goods sold. That comes from Richard Newfarmer's UNCTAD study, and it is accurately transmitted.
Then there is a body of work almost nobody expects to find in a Progress title: a detailed, sourced account of industrial relations inside American subsidiaries in Britain. Astapovich traces the export of American labour practice — measured daywork, the fixed-term collective agreement, the productivity agreement — through Esso, Vauxhall, Chrysler at Rootes, International Harvester and Otis, and cites the Office of Manpower Economics figure that by 1972 some nine per cent of British workers were on measured daywork, but thirty per cent in motors, where American investment was heaviest. He reconstructs the Ford of Britain dispute of February 1969 clause by clause: the eight per cent rise, the increase in holiday pay from £5 to £25, the new lay-off payments, and the penalty provisions that stripped those payments from anyone taking part in "unconstitutional" action; the four-week strike called by the shop stewards; and the second agreement, in which the penalties survived in collective rather than individual form, so that the union itself became the policing agency. He is right about the significance, and right about the sequel: the state, which could ordinarily lean on a British company, could not lean on Ford. His sources here — Kujawa on the automotive industry, Steuer and Gennard at the LSE, the Commission on Industrial Relations, evidence to United States Senate committees — are real, checkable, and Western. This is not agitprop. It is research.
On wages he is careful with a subject that invites carelessness. He gives the ILO's 1975 assembly-plant comparisons — electronics workers in Hong Kong at $0.27 an hour against $3.12 in the United States, a ratio near twelve to one — alongside the American Tariff Commission's finding that labour productivity in electronics assembly in developing countries ran at about ninety-two per cent of the American level, and sometimes at parity. Cheap labour, in other words, was not less productive labour. He notes that eighty per cent of the workers in Mexico's "electronics belt" were women between sixteen and twenty-four. Read alongside the debate about export-processing zones that was then beginning in the West, this is a solid piece of work.
Now the harder half, and it has to be approached through the dating problem set out at the start.
Search this book for the Third World debt crisis and you will not find it. The word "debt" occurs twice. Once it is a line in a table of financial outflows from the developing countries, sourced to a UN document of 14 May 1979, showing debt and interest repayment rising from $24.2 billion to $35.2 billion. The second occurrence concerns General Electric's loans to AEG-Telefunken. There is no analysis of sovereign borrowing, no discussion of the recycling of petrodollars through the commercial banks, no mention of the International Monetary Fund at all, and no mention of Mexico.
Mexico suspended payments on 20 August 1982 — the same month whose Fortune and Survey of Current Business Astapovich was consulting to update his corporate tables. Within a fortnight Intercontinental Press had the story on its cover: Will Reissner, "Economy plunges into crisis: United States uses collapse of peso to force concessions", in the issue of 6 September 1982, laying out the second devaluation of the year, the freezing of $12 billion in dollar accounts, Finance Minister Silva Herzog's meetings with over a hundred banks, and the fact that some major American banks had the equivalent of up to ninety per cent of their equity out on loan to Mexico. Three months before that, Ernest Mandel had already published the structural version in International Viewpoint no. 8 of June 1982, under the title "The second postwar world recession". Mandel identified the substitute markets that had sustained the previous cycle — OPEC, "the so-called socialist ones, as well as a series of semicolonial countries" — and wrote flatly that "These markets were largely financed by loans." He then named what was coming: "the crisis of the capitalist world economy is coinciding with the emergence of the inherent crisis of the economies of the postcapitalist countries."
Astapovich's book, revised in the same season, sees none of it. This is not a failure of information; the man was reading American business weeklies within weeks of publication. It is a failure of framework. His subject is the corporation, and the corporation was not the instrument through which the periphery was drained after 1979. The bank was. A theory that locates imperialist extraction in transfer prices, restrictive licensing clauses and repatriated dividends will produce, as this book does, an accurate and detailed account of one channel while the other opens up beneath it. Mandel, whose Late Capitalism (1975) had covered much the same ground on multinationals, could see the second channel because his object was the accumulation cycle of the world economy rather than the strategy of a firm.
Two other absences are worth naming precisely. Chile appears three times in this book, always as a data point on credit allocation or computer assembly. Allende does not appear; nor does 1973; nor does ITT's role in it, though ITT appears seven times as a corporation. Astapovich cites the 1973 hearings of the Subcommittee on International Trade of the Senate Finance Committee — twice, on wage differentials — but not the hearings held the same year by the Senate Foreign Relations Committee's Subcommittee on Multinational Corporations under Frank Church, which published ITT's own internal documents on Chile and produced the most damaging evidence any Western institution had ever placed on the record about a transnational corporation and a foreign government. A Soviet book on transnational corporations and neocolonialism, published in 1983, which does not use the Church subcommittee, has left its best ammunition in the magazine. OPEC, likewise, appears not once, in a book with a chapter on raw-material dependence written across the decade of the two oil shocks.
Now the silence that governs the rest.
The socialist world appears in this book three times, and only in three registers. It is a competitive stimulus: "Economic competition with socialism persistently compels modern capitalism to make more efficient use of the latest technological discoveries." It is a benefactor: the socialist countries gave "varied economic, scientific and technological help" to the newly independent states, and "Relations between the socialist community and the developing world have always been marked by the equal and mutually beneficial nature of their economic cooperation." And it is a diplomatic bloc at the United Nations, voting for binding codes of conduct.
That is all. Comecon does not appear in this book. Neither does the Council for Mutual Economic Assistance under any name, nor Eastern Europe, nor East-West trade, nor détente, nor a single Comecon joint enterprise, nor the transferable rouble, nor Soviet arms exports, nor Poland. Chapter Five is titled "Relations between TNCs and the State", and it does not contain the Siberian gas pipeline. In June 1982, while this text was being finalised, the Reagan administration extended its pipeline sanctions to the foreign subsidiaries and licensees of American firms, and Dresser, Caterpillar, John Brown, AEG-Kanis and Nuovo Pignone found themselves ordered by Washington to break contracts signed under French, British, West German and Italian law. It was the purest test case in the whole history of the subject: a state attempting to command transnational corporations across borders, with the Soviet Union on the other side of the deal, and the European states siding with the corporations against the American government. Astapovich's own chapter is about exactly this problem. He does not mention it.
The reason he cannot is that once the socialist economies enter the frame, the analytical instrument he has built begins to swing round. Consider what the instrument measures. Intra-firm transfers at administered prices that bypass the market. A single planning centre allocating output between countries according to its own priorities rather than theirs. Systematic wage differentials between workers integrated into one division of labour. Restrictive conditions attached to the transfer of technology. Long-term dependence of a junior partner on a dominant partner's plant and specifications.
Every one of those describes Comecon after the Complex Programme for Socialist Economic Integration of 1971. Intra-bloc prices were not market prices; they were set by formula on lagged world averages, which after 1973 meant Soviet oil moved east below the world price and East European manufactures moved west above it. Whether that flow constituted a subsidy from Moscow or a tribute to it was argued at the time and is argued still — the well-known calculation by Marrese and Vanous, published in 1983, put the implicit transfer in the satellites' favour and remains contested — but nobody on either side of that argument thought the prices were arrived at by exchange between equals. Astapovich has written a whole book about administered pricing inside an integrated multi-country enterprise and has not applied one paragraph of it to the multi-country enterprise he lived in.
Nor to its debts. The socialist countries' hard-currency borrowing from Western banks was one of the largest single components of the lending boom of the 1970s; Poland had already gone to its creditors for rescheduling in 1981, and martial law was declared in December of that year. Mandel, in June 1982, put the socialist bloc on the same list as OPEC and the semicolonial countries as a debt-financed substitute market for capitalist exports. Astapovich, revising his book in the same months, records neither the borrowing nor the crisis it produced in the country where the largest independent workers' movement in the world had just been suppressed — and this in a volume whose Chapter Four is a passionate account of workers' international solidarity against employers, complete with a survey of trade-union combines in the motor industry. There is a sentence in that chapter about how transnationals use wage differentials to buy off a layer of workers: "Thanks to their selective employment and wage policy they create a social bulwark of opportunism and reaction." One is entitled to ask what the author thought a privileged administrative stratum, allocating scarce goods within a bloc it dominates, creates.
The method for asking that question had existed since 1936. Trotsky's The Revolution Betrayed is not a book about corporations, but its first chapter is an exercise in exactly Astapovich's kind of arithmetic, turned inward: iron and steel output per worker in the best Soviet foundry at a third of the American average, "a ratio of 1 to 5, or worse" on the national figures, 5,000 tons a year per quarry worker in the United States against 500 in the Soviet Union. Trotsky insisted that "the living standard of the masses can be defined, at least in rough figures, only by dividing the products by the number of consumers", and then did the division — railway kilometres, merchant tonnage, automobiles per thousand — until the Soviet Union stood beside Denmark and Spain. And in the appendix on "Socialism in One Country" he named the underlying condition that Astapovich's book takes as settled: "If a bourgeoisie cannot peacefully grow into a socialist democracy, it is likewise true that a socialist state cannot peacefully merge with a world capitalist system." A book arguing for legally binding UN codes of conduct as the road to the democratisation of world economic relations is, whatever else it is, an argument that the merger can be managed.
Read Chapter Two's section on financial policy and the whole of Chapter Six as economics. They are good, they are sourced almost entirely from Western and UN material a reader can check, and on transfer pricing, technology dependence and restrictive business practice they were right earlier than most of the Western profession. If you want one Progress title that a working economist could cite today without apology alongside Menshikov's Millionaires and Managers — which this volume succeeds, moving the question from who owns the corporation to what the corporation does across frontiers — it is this one.
Read Chapter Five knowing that the great contemporary case is missing from it, and Chapter Six knowing that its financial data stop in 1979 while the rest of the book runs to August 1982.
And read the whole against the analysis it could not contain. Mandel's "The second postwar world recession", International Viewpoint no. 8, June 1982, is the same world seen whole, four months before this book went to press, and it is the place to start; his Late Capitalism (1975) is the long version of the argument about multinationals and the long wave. The debt crisis as it broke is in Intercontinental Press from September 1982 onward — Reissner's Mexico piece of 6 September 1982 is the moment of impact — and the Fourth International's accounting of what the decade of debt did to Latin America runs through International Viewpoint for the rest of the 1980s. For the method Astapovich was not permitted to point homeward, The Revolution Betrayed is still where it starts.
The instrument in this book is a good one. As with its predecessor in this series, the interesting question is not whether it works. It is what its maker was not allowed to measure with it.