Joseph Nye has written persuasively about the shift from the kind of “hard power” that is rooted in the coerciveness of command structures—military and machine power—to a novel form of “soft power” that leads by consent and is rooted in “the universalism of a country’s culture and its ability to establish a set of favorable rules and institutions that govern areas of international activity.”4 He suggests that politically soft power is supplanting hard in the modern world, and I will argue that there has been a parallel evolution in the economy from the hard manufacturing to the soft service (information and communication) sector, and that economic power is likely to follow this evolution in the coming decades, upsetting the grim predictions of the declinists about the United States.5 The United States, no longer the dominant manufacturing entity it once was, nonetheless has a sure command of the softer powers that are forging McWorld, which positions it to recapture global leadership. What this suggests is that the story of America’s rise and decline as a manufacturing power is only part of a larger, not yet finished, journey.
In 1950 not long after the end of World War II and before the burgeoning Cold War began to challenge American strength and divert its attention from rebuilding a demobilized peacetime economy to restarting a cold wartime economy, the United States had already overtaken England and Germany as the global power. Military and political factors seemed primary, but underlying them was demonstrated economic power. This unprecedented strategic hegemony rested almost entirely on the American industrial economy as it emerged from World War II—an economy that was driven by the largest and most productive manufacturing and banking companies in the world.6
In that postwar moment when America dominated the world economically, the world it dominated was a far more diversified place culturally. While America exercised hard power hegemony, soft power was scattered and insubstantial, a matter of many different insular local cultures. Semiotic systems were fragmented, while cultural symbols were the possessions of parochial peoples with colorfully distinctive self-images. In the fifties and sixties, there was no “Europe” in Europe. In the world before McWorld, the Swedes drove, ate, and consumed Swedish; the English drove, ate, and consumed English, and the rest of the world’s inhabitants either mirrored their colonial masters or developed domestic consumption economies around native products and native cultures. In France one ate nonpasteurized Brie and drank vin de Provence in cafés and brasseries that were archetypically French; one listened to Edith Piaf and Jacqueline Françoise on French national radio stations and drove 2CV Citroëns and Renault sedans without ever leaving French roadways—two-lane, tree-cordoned affairs that took you through half the villages in France on the way from, say, Paris to Marseille. An American in Paris crossed the waters to get away from Tastee-Freez, White Castle, and Chevrolet pickup trucks and once in France could be certain they would vanish. A German studied in Italy to imbibe Mediterranean, not Atlantic, culture. Americans dominated the economic world in the abstract, but the French dominated France, the English England, and the Italians Italy.
Yet two rival worlds of industrial power evolved inside and outside of the Cold War. While the United States and the Soviet Union focused their energies on defense-and aerospace-related heavy industry, Germany and Japan homed in on consumer products where, ironically, the ideal American mobile, autonomous, choosing consumer who would define the future economy was the natural target. Where defense and aerospace industry were closely associated with hard power and state command structures, the new consumer economies privileged the private sector and pointed toward soft power.
America’s postwar economic hegemony was reinforced by its decision to focus on automobiles. The choice of roadway over railway and the construction of the huge interstate highway system meant that the industries on which automobiles depended (steel, aluminum, chrome, petroleum, rubber, concrete, asphalt, and electronics) would be continually nurtured not just for public sector defense spending but for private sector consumer spending. Automobiles facilitated the suburbanization of America and thus had a vital impact on the housing and construction industry as well. Suburbanization required improved communications and home entertainment and gave television a new role as the national medium. This domestic productivity combined with heavy industrial production in the defense sector sent the economy surging and secured America’s global economic leadership. The arms race allowed (forced) the Soviet Union and suppliers like East Germany to build powerfully competitive industrial economies as well, but it was to those nations that could concentrate on consumer goods that the future really belonged. The United States and the Soviet Union were in effect arms-racing themselves right out of the leadership. The USSR would eventually bankrupt itself in the competition, and America would survive economically only by securing an elephantine national debt, a wrenching trade deficit, and the unwanted status of the world’s largest debtor nation, uneasy in the 1990s with the McWorld its postwar economy has created.
Innovations in electronic and computer technology that had originated in American defense research facilitated developments in consumer goods that the new manufacturing powers in Europe and the Pacific Rim could take advantage of. The smaller throw capacity of America’s underpowered rockets spurred miniaturization, while the demands of high-tech weaponry induced advances in electronics and computers that were quickly translated into consumer technology. Radios, cameras, telephones, video equipment, kitchen and household appliances, as well as home computers—all the things needed to fill up America’s multiplying private cars and private homes—were the new frontier of manufacturing. Despite America’s leadership in research and development, it quickly lost its competitive edge to the nations it had defeated in the war.7
Yet despite attrition, the United States remained a formidable industrial power, gradually building a base for its new ventures in the service economy. Its GDP approached $5 trillion in 1993—better than one-fifth of gross world product, produced by only one-twentieth of its population. Of the world’s 500 leading industrial corporations in 1992, 161 were still American, including five of the top nine and all of the top three (General Motors, Exxon, and Ford).8 But a surprising number of the nation’s leading corporations are newcomers. Founded in 1968, Intel Corporation had sales of $8.8 billion and thirty thousand employees in 1993. Nike was born in 1972, Microsoft in 1975, Apple Computer and Gene Tech in 1976. These corporations are not only new, they represent a new form of economic power.
The real story of America’s vicissitudes as the global manufacturing nation is in fact not the story of power shifting from one country to another, but of the gradual erosion of the very meaning of national predominance in industries that year by year are becoming ever more transnational in their corporate makeup, multinational in their parts acquisition, international in their job allocation, and global in their consumer marketing strategies. Just look at Nike or Intel or Apple. American manufacturing leadership simply is not any longer American, anymore than Japanese manufacturing leadership is Japanese. Manufacturing corporations have become as global as the markets they ply. This is why Paul Kennedy’s book on the rise and fall of the great powers might more appropriately have been titled “On the Rise and Fall of the Very Idea of a Great Power.”
Of course in speaking of global companies and global markets, the globe encompasses only designated players in the game. The geography of the whole planet is not at issue. Excluding oil and mining concerns, there is not a single African, South American, Middle Eastern, or Indian company among the top five hundred corporations, and the story is not much better with respect to patterns of consumption since the primary producers turn out to be the primary consumers as well. In 1991, for example, the United States exported $85 billion in goods to Canada, $48 billion to Japan, $33.3 billion to Mexico, $22 billion to the United Kingdom, and $21.3 billion to Germany. These top five export markets comprised almost $210 billion in exports or way over half of America’s 1991 exports globally.9 Of America’s top five s
upplier countries, four are also top five export markets. Of the top ten importers, eight comprising over 77 percent of America’s total are top export markets.
Country Ranking as Supplier (U.S. imports from) Ranking as Export Market (U.S. exports to)
Japan 1 2
Canada 2 1
Mexico 3 3
Germany 4 5
China 6 16
United Kingdom 7 4
South Korea 8 6
France 9 6
Italy 10 12
Americans worry about their trade deficit: the United States runs significant deficits with seven of the ten on the list, all save France, the United Kingdom, and Mexico. Nonetheless, its deficit trading partners are also its export partners. The only non-European, non-Pacific Rim countries among the top twenty-five U.S. export markets are its Latin American neighbors (with whom America also runs trade deficits): Brazil at number 17 and Venezuela at number 20. Nearly half of the world’s exporters or nearly seventy of the world’s nations listed America as the first, second, or third largest destination for their exports in 1987–88. Forty put America first including all of Latin America but also South Korea, Japan, Nigeria, Mozambique, Iraq, Uganda, Pakistan, Sri Lanka, India, and poor Bangladesh.10 In short, America buys from and sells to its rivals, and they do the same with one another when they are not trading with America. Within the club there may be differentials in import/export ratios that stir up domestic passions (as with NAFTA), but belonging to the club is what really counts.11
Third World countries are marginalized coming and going while Terminal World nations fall off the planet. There may be radical trade deficits among trading partners but only a handful of nations are even part of the calculation. The North/South split overshadows the East/West split. It is reflected in almost every economic report available on central Asia, the Middle East, and—most dauntingly—sub-Saharan Africa, which as a “human and environmental disaster area” totally “peripheral to the rest of the world” can hardly be thought of as occupying “the same historical time.”12
Ironically, global economic forces weaken the nation-state in developed areas where it is most democratic and strengthen it in the Third World where it is least democratic, imperiling liberty in both cases. Democracy loses at both ends of the developmental spectrum. Free societies with expansive economies gradually sever the ties that hold a people to traditional religion and nationhood and corrode the state institutions that make democracy and a free economy possible in the first place. Despotic nations offer no such solvent to nationality and religion, which are strengthened in ways obstructive to modernization and democratization. Not only do the rich get richer and the poor poorer, but the rich get freer while the poor are enslaved.
Of course in the long term, democracy is served by these ironies in neither the First nor the Third Worlds. In the Third World too much state coercion steals liberty from peoples poised potentially for economic takeoff; and in the First World too little state coercion leaves individuals unprotected from market forces over which they have no rational or collective control. Dependency on global markets by virtue of global largesse may be a better deal than dependency by virtue of poverty on local despots, but both constitute a kind of subjugation and neither staves off that common servitude in which disparities are increased as common liberty is diminished.
These manifold ironies, while contributing powerfully to the story of growing global injustice and shrinking the prospects for global democracy, are only footnotes to our primary focus here: the internationalization of markets and the companies that serve them. In the developed world that “counts,” where liberty has (at least in theory) been minimally secured, the erosion of nationality as a significant conditioner of corporate business remains the most important feature of the manufacturing sector. For the decline of democratic control over markets at the level of the nation endangers both justice and social policy and the prospects for global democratic control over the economy. Among the top twenty-five U.S. companies (for 1992) with the largest non-U.S. sales can be found not only energy giants like Exxon (77 percent of sales outside America), Mobil (68 percent), and Texaco (53 percent), and chemical companies like Dow (50 percent) and DuPont (47 percent), but Philip Morris, Coca-Cola, Johnson & Johnson, and Eastman Kodak.13 Dow Chemical earns nearly $4 of every $10 in sales overseas and has nearly twice as many plants abroad as in the United States. Goodyear Tire and Rubber earns 43 percent of its income from abroad and sites more than half of its eighty-three plants outside the United States in twenty-five different foreign countries.
One need knock on only a few doors of corporate entities that carry the name “American” in their company titles to hear how hollow their patriotism rings. Consider American Greetings Corporation (cards and gift items), which earns 14 percent of its sales revenues abroad; American Express, which gets over 20 percent of its earnings beyond America; American Home Products, which earns 24 percent of sales far away from home; the American International Insurance group, which gets 46 percent of its revenue from its international rather than its American side; American Standard (plumbing), which earns 49 percent of revenue on someone else’s currency standard; American Cynamid, which like most American chemical companies earns more than half its revenue (51 percent) abroad; and finally American President (shipping), which derives two thirds of its income from foreign port sailings.14
Twenty or more years ago, many of the American companies now deriving majority revenue abroad were almost exclusively focused on the domestic market. A “French” company like Michelin (tires), with 20 percent of world tire sales, earns only 19 percent of its revenues in France, while Sony earns less than a quarter of its nearly $30 billion in annual income from Japan, deriving over half from the United States and Europe (28 percent of its total sales in each). Smaller countries have also lost even nominal sovereignty over their businesses. Sweden’s cheap furniture retail giant IKEA sells better than four-fifths of its products ($3.2 billion in sales in 1992) beyond Swedish frontiers and founder Anders Moberg (like Wal-Mart’s Sam Walton, a billionaire) recently transferred total ownership of IKEA to a foundation he established in Amsterdam, while company head quarters went to Denmark (Moberg himself moved to Switzerland).15 With a style called “Danish modern,” how Swedish can IKEA really be?
As manufacturing is internationalized, and traditional industrial powers cede dominion to new markets with cheaper labor, the industrial sector is itself being transformed. The internationalization of companies is only one part of this change; for the goods companies make—the very idea of what a consumer good is—are evolving. From hard to soft goods, from soft goods to services, which are themselves becoming goods. We turn now to that part of the story.
4
From Hard Goods to Soft Goods
WHILE MAKING AND selling goods is still the dominant form of economic activity in the international markets of McWorld, the goods are increasingly associated with or defined by symbolic interactions that belong to the service sector in its postmodern, virtual economy manifestations. The move from heavy defense-related industrial production to consumer goods that has been a continuing feature of economic development has in the last decade moved into another phase in which hard consumer goods are increasingly becoming associated with soft technologies rooted in information, entertainment, and lifestyle, and in which products are emerging that blur the line between goods and services. The ancient capitalist economy in which products are manufactured and sold for profit to meet the demand of consumers who make their unmediated needs known through the market is gradually yielding to a postmodern capitalist economy in which needs are manufactured to meet the supply of producers who make their unmediated products marketable through promotion, spin, packaging, and advertising. Whereas the old economy, mirroring hard power, dealt in hard goods aimed at the body, the new economy, mirroring soft power, depends on soft services aimed at the mind and spirit (or aimed at undoing the mind and spirit). This wedding of telecommunications
technologies with information and entertainment software can be called for short the infotainment telesector. The goods sector is captured by the infotainment telesector, whose object is nothing less than the human soul.
Hyperbole? The long dormant language of the soul, until just recently quite unfashionable, at least in corporate capitalism’s domain, is making a secular comeback. As it assimilates and transforms so many other ideologies, postmodernist capitalism has not shied away from assimilating and transforming religion. If Madonna can play erotic games with a crucifix, why shouldn’t Mazda and American Express work to acquire some commercial purchase on the Holy Spirit? “Trucks,” intones a gravelly-voiced consumer in a 1993 Mazda television ad, “are a spiritual thing for me.” The new Mazda pickup is “like a friend”—a friend, that is, “with a new V-6 and a soul to match.” In another ad campaign, American Express teams up with Anita Roddick’s Body Shop to exploit environmentalism, human rights, and what it calls “trading honorably.” The print ad ends with a spiritual pitch: “American Express knows a lot of stores that are good for your body. And Anita knows one that’s good for your soul.”
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