j)eveioprrie^4. depevKW^j 

H A Y 1975 

THE ROLE OF MULTINATIONAL CORPORATIONS 

m 

UNIVERSITY OF NOTDT SAME 
MEMORIAL LIBRARY 

F E B 0 1 1 9 7 9 
COLLEGE LIBRARY 

VERTICAL F I L E 

DEPARTMENT OF SOCIAL DEVELOPMENT AND WORLD PEACE 
UNITED STATES CATHOLIC CONFERENCE 

AUGUST 1974 





THE ROLE OF MULTINATIONAL CORPORATIONS 

DEPARTMENT OF SOCIAL DEVELOPMENT AND WORLD PEACE 
UNITED STATES CATHOLIC CONFERENCE 

AUGUST 1574 



PREFACE 

Pope Paul VI in his encyclical Populorum Progressio praised 
the process of industrialization as a necessity for e c o n o m i c 
growth and human development. But he also said that, 
unfortunately, in industrialized society: 

A system has been constructed w h i c h considers profit as 
the key motive for e c o n o m i c progress, competition as 
the supreme law of e c o n o m i c s and private ownership of 
the means of production as an absolute right that has no 
limits and carries no corresponding social obligations. 
This u n c h e c k e d liberalism leads to dictatorship rightly 
d e n o u n c e d by Pius XI as producing "the international 
imperialism of money." O n e cannot c o n d e m n s u c h 
abuses too strongly, solemnly recalling o n c e again that 
the e c o n o m y is at the service of man. 

U.S. citizens may be unaware either of the encyclical or of the 
response of the Wall Street lournal and other similar interests in 
the United States w h o rejected the encylical as "warmed-over 
Marxism." A n d yet, the c o n c e r n for human dignity and justice 
reflected in the encyclical is only one link in the chain of the 
C h u r c h ' s traditional regard for social justice. 

It is also relevant to note that, in his Apostolic Letter A Call to 
Action, Pope Paul VI treated a number of new currents of thought 
c o n c e r n i n g s o c i o - e c o n o m i c ideologies and systems. His treatment 
of "liberal ideology," prompted Msgr. George Higgins, in his 
Commentary on the Apostolic Letter, to note that many 
conservative Americans " w i l l be disappointed to learn that the 
H o l y Father takes a d i m view of ( u n b r i d l e d e c o n o m i c 
individualism) and goes out of his way to warn Christians that, 
like the ideology of Marxism, the liberal ideology likewise calls for 

i 

D e s e k f f f t e d 



careful discernment on their part." Similarly, in its d o c u m e n t 
Justice in the World, the 1971 Roman S y n o d treated w o r l d 
conditions from two rather different diagnoses. As Rev. Philip 
Land of the Pontifical C o m m i s s i o n Justice and Peace noted, these 
two analyses have distinctly different perspectives. T h e first view 
emphasizes the need to harness modern technology, w h i l e the 
latter, " i n origin, Marxist, is widely endorsed in the Third W o r l d 
and receives healthy, if qualified, support from a w i d e spectrum 
of non-Marxist authorities." 

From Leo X l l l ' s Rerum Novarum in 1891 to Vatican ll's 
C a u d i u m et Spes and the 1971 S y n o d of Bishops d o c u m e n t 
Justice in the World, the C h u r c h has consistently raised a 
prophetic v o i c e to defend the integrity and dignity of those 
people w h o suffer injustice. In d o i n g so, the C h u r c h follows the 
gospel message of )esus Christ and his c o n c e r n for his chosen 
people—the poor. 

In the past decade, Latin American bishops and priests have 
expressed themselves with increasing frequency on the root 
causes of poverty in their homelands. Their pastoral letters have 
often been directed to their northern neighbors in the Americas 
because it is the system of capitalism of Western Europe and the 
U n i t e d States that many believe is a contributing cause of 
continual poverty in Latin America. For example, the S e c o n d 
General C o n f e r e n c e of the Latin American Episcopate in Medellin, 
C o l o m b i a , declared in 1968: 

Another feature of this e c o n o m i c situation is our 
subjection to capital interests in foreign lands. In many 
cases, these foreign interests exercise u n c h e c k e d control, 
their power continues to grow, and they have no 
permanent interest in the countries of Latin America. 
Moreover, Latin American trade is jeopardized by its 
heavy d e p e n d e n c e on the developed countries. They 
buy raw materials from Latin A m e r i c a at a cheap price, 
and then sell manufactured products to Latin A m e r i c a at 
ever higher prices; and these manufactured goods are 
necessary for Latin America's c o n t i n u i n g development. 

W h e n A m e r i c a n citizens read the words of Pope Paul VI and 
the bishops and other leaders in Latin America, they often only 

ii 







partially see the truth stated because they are looking through the 
shaded glasses of the social and e c o n o m i c culture of capitalism. 
T o apply a phrase from Msgr. Higgin's Commentary, " w e are a 
people so deeply committed in theory, if not in practice, to the 
philosophy or the ideology of free enterprise in the old fashioned 
sense of the w o r d . " 

It behooves us as citizens of the United States to sharpen our 
vision in these times w h e n the maldistribution of the earth's 
resources and the concentration of the world's wealth are so 
blatant. This enlightened vision is a prerequisite to a more truly 
Christian response. 

Bishop John ). Dougherty 
C h a i r m a n 
U S C C Committee on Social 
D e v e l o p m e n t and W o r l d Peace 

MI 



DEVELOPMENT-DEPENDENCY: 
THE ROLE OF 

MULTINATIONAL C O R P O R A T I O N S 

In the Spring of 1974, an historically significant drama 
occurred at the United Nations. For the first time in its history, 
delegates of the 135 member nations were called to a special 
session of the General Assembly to listen specifically to the 
complaints of the Third W o r l d nations about the inadequacies of 
the international e c o n o m i c system. U . N . Secretary General Kurt 
W a l d h e i m said of the session: " W e k n o w in the history of 
mankind that the present e c o n o m i c system isn't workable 
anymore. W e have to w o r k out a new e c o n o m i c system for the 
w o r l d . " 

T h e issue of e c o n o m i c development is central to an 
examination of the relationship of the international e c o n o m i c 
system and the T h i r d World. In recent years, the debate about 
development and d e p e n d e n c y has engaged government officials, 
economists, international investors and scholars, and at an 
i n c r e a s i n g rate, l e a d e r s h i p in v a r i o u s n a t i o n a l C a t h o l i c 
hierarchies. T h e presence of C a t h o l i c episcopal leaders in this 
debate is understandable in view of the explicit papal writings on 
the issue, beginning in 1931 with Pope Piux Xl's Quardragesimo 
Anno.1 T h e d e v e l o p m e n t - d e p e n d e n c y theme was also evident in 
the S e c o n d Vatican C o u n c i l ' s Gaudium et Spes.2 T h e same theme 
dominated the 1971 R o m a n S y n o d d o c u m e n t Justice in the 
World. 

T h e national hierarchies in Latin America w h i c h have 
entered the debate, identify excessive d e p e n d e n c y u p o n North 
American interests as a contributing factor in Latin America's 
underdevelopment. In doing so, they reinforce the position taken 
by the Latin American episcopate at Medellin, C o l o m b i a , in 1968: 
"the principal guilt for e c o n o m i c d e p e n d e n c e of our countries 
rests with powers inspired by uncontrolled desire for gain, w h i c h 
leads to e c o n o m i c dictatorship and 'the international imperialism 
of money' c o n d e m n e d by Pius XI in Quadragesimo Anno and by 
Paul VI in Populorum Progression In addition to the statements of 
Latin American bishops, a number of lay, religious and clerical 
groups in Latin A m e r i c a have also pinpointed the influence of 

1 



foreign businesses, governments and cultures as a cause of m u c h 
of the poverty and social ills of the Third World. 4 

The impact of U.S. policies on the lives of millions of people 
in less developed countries, particularly in Latin America, where 
traditionally our nation's, ties and that of our C h u r c h are most 
evident, compels us to reflect on our role as members of a 
universal c h u r c h and as citizens of the United States. This 
reflection is especially prompted by the recent statement of the 
U.S. bishops in w h i c h they said: "Internationally, the pervasive 
presence of American power creates a responsibility of using that 
power in the service of human rights."5 

Impact in Latin A m e r i c a 

Evidence is mounting that the concentrated power in the 
hands of a relatively few multinational corporations and banks 
inhibits international development and deters the process of 
achieving justice here and abroad.6 Realization is growing that so-
called e c o n o m i c development and the resultant growth in Gross 
National Product ( G N P ) does not assure the amelioration of the 
harsh living conditions of the vast majority of people of the Third 
World. 7 

T h e oppressive c o n d i t i o n s of poverty and marginality 
frequently result from the influx of foreign private capital.8 The 
fact that concentrated e c o n o m i c power results in enriching 30% 
of a population in Latin A m e r i c a at the expense of the other 70% 
indicts it as a major impediment to w o r l d justice.9 

S u c h concentrated power, motivated by the w o r l d w i d e 
maximization of profits, leads to the development and control of 
an international market strategy w h i c h is of primary benefit to the 
controlling power and not to the development of peoples. The re-
cent disclosures about the activities of I.T.T. in N a z i G e r m a n y ' 0 

and in C h i l e along with Kennecott; and Ford and General Motors 
in N a z i Germany,1 1 accentuate the boldness of this strategy. This 
e v i d e n c e l e n d s c r e d e n c e to P o p e P a u l ' s c h a r g e that 
"multinational enterprises...can c o n d u c t a u t o n o m o u s strategies 
w h i c h are largely independent of the national political powers 
and therefore not subject to control from the point of view of the 
c o m m o n good." 1 2 

2 



It is necessary for us to a c k n o w l e d g e that a real dilemma 
exists. O n one level, as Christians we are committed to the ideal 
that nations have the right of self-determination and e c o n o m i c 
development.1 3 O n another level, our nation is committed to 
protect our national self-interests narrowly defined in e c o n o m i c 
and political terms.14 

Since U.S. government policy tends to equate the free 
enterprise system with our political system, one of the primary 
tasks of American foreign policy is to provide a favorable climate 
overseas for U.S. private investments and to protect that interest.15 

However, for Latin Americans, this U.S. practice tends to 
perpetrate a c o n d i t i o n of d e p e n d e n c y and underdevelopment. 1 6 

This d e p e n d e n c y is reinforced, as the Latin A m e r i c a n bishops 
noted, by a small wealthy elite within each of the continent's 
countries, w h o only too willingly cooperate with foreign business 
interests.17 

Impact in the United States 

It is important for us in the United States to recognize that 
multinational business interests w h i c h play s u c h a dominant role 
in the less developed countries of Latin America also dominate, to 
a great extent, our o w n domestic economy. 1 8 The recent accounts 
of tax write-offs, increasing m o n o p o l y activity, political 
lobbying, machinations of the oil industry during the "energy 
crisis" provide grim testimony to the detrimental effect on U.S. 
citizens of the concentration of e c o n o m i c power. The A m e r i c a n 
bishops expressed their deep c o n c e r n about this concentration, 
specifically in the field of agriculture, where they observed that 
"agricultural conglomerates are expanding, raising the possibility 
of taking over virtually all farming in the U n i t e d States."19 

In our system of political economy, the presumption is that 
concentrations of power are to be guarded against, and 
g o v e r n m e n t a l a g e n c i e s are d e s i g n e d to p r e v e n t t h e s e 
concentrations. The facts are, however, that most of these 
regulatory agencies, underbudgeted and understaffed, are no 
match for the corporations' batteries of lawyers and networks of 
information. In addition, the corporations exercise s u c h strong 
political power that the agencies are often captives of those they 
are supposed to regulate.20 

3 



Furthermore, as most citizens face constantly rising prices, 
lack of s c h o o l funds, inadequate public transportation, and sky-
rocketing medical and legal costs, many feel the e c o n o m i c 
c r u n c h of cutbacks or elimination of federal funds to programs 
servicing the aged, homeless, jobless and poorer classes of our 
society. 

At the same time, recent studies disclose that the wealth and 
power of a relatively small percentage of the population have in 
fact increased. As our G N P has risen from about $200 billion in 
1940 to its present level of more than $1 trillion, "there is a 
startling and c o n t i n u i n g inequality in the distribution of income 
in the U.S., and the overall pattern has remained virtually 
unchanged since W o r l d War II."21 T h e concentration of 
ownership of the nation's wealth (stocks, bonds, real property, 
etc.) presents an even more depressing picture. T h e top 20% of 
wealth holders in the country o w n over three fourths of all 
personal wealth. T h e top 1% alone holds between 20-30% of all 
personal wealth and have d o n e so for decades.2 2 T h e U.S. 
Bishops' C a m p a i g n for H u m a n D e v e l o p m e n t points out, in their 
publication "Poverty Profile," that 80% of the state and local 
bonds are o w n e d by less than 5% of the citizens.2 3 

T h e implications of concentrated financial power are 
underscored by the recent U.S. Senate report " D i s c l o s u r e of 
Corporate O w n e r s h i p . " T h e report notes that information needed 
by government agencies to monitor adequately "the several levers 
of corporate control is held by a few institutional investors, 
principally six superbanks headquartered in N e w York." 2 4 T h e 
impact of this control on both domestic and international policy 
is highlighted in the report: 

...the portfolio c o m p a n i e s in w h i c h a few banks have 
substantial influence make many decisions affecting 
public policy. O i l companies deal with foreign nations 
regarding oil supply and cost. Pipeline c o m p a n i e s deal 
with the Soviet U n i o n for natural gas. Utilities exercise 
the right of eminent domain. Milling c o m p a n i e s and the 
Soviet U n i o n arrange grain sales w h i c h sharply affect 
domestic price, supply, transportation, and storage. These 
are momentous public issues in w h i c h Federal officials 
play a minor role, m u c h of it after basic decisions have 

4 



been agreed u p o n by A m e r i c a n c o m p a n i e s and foreign 
governments.2 5 

The Role of the C h u r c h 

A growing number of Catholics are beginning to share Pope 
Paul Vl's c o n c e r n about the emerging power of multinational 
corporations.2 6 C h u r c h people, both here and in the Third W o r l d , 
are b e c o m i n g increasingly aware that many U.S. domestic and 
international policies are linked together to serve the interests of 
these transnational business enterprises. T h e time is at hand for us 
not only to question the enormous power w i e l d e d by so few 
people and institutions, but in a more fundamental way, to 
question the underlying motivation behind such unbridled 
power. For the motivation continually to increase profit emerges 
from values w h i c h promote excessive individualism, unnecessary 
consumption, and disregard for the quality of human life, all of 
w h i c h are contrary to the deepest values of the judéo-Christian 
tradition.27 

Even the C h u r c h ' s traditional role in education is exposed to 
serious réévaluation because of this power concentration. The 
1971 Roman Synod reminded the C h u r c h ' s educators that: 

the method of education very frequently still in use today 
encourages narrow individualism. Part of the human 
family lives immersed in a mentality w h i c h exalts 
possessions. The school and the c o m m u n i c a t i o n s media, 
w h i c h are often obstructed by the established order, 
allow the formation only of the man desired by that 
order, that is to say, man in its image, not a new man but 
a c o p y of man as he is.28 

In the Third World, most people have the daily experience of 
powerléssness in the face of the relative few w h o o w n and 
control most of the wealth and income, land, industry, political 
and military power. In our country, there is a growing sense 
among working people as well as minority groups that power 
belongs only to those few w h o hold enormous wealth. As 
Catholics, we must continue to rediscover our o w n distinct 
identity as a religious, prophetic people w h o stand apart from the 
powers w h i c h possess dominant control in society. In s u c h a 

5 



process, we can learn m u c h from the C h u r c h in the Third World. 
Together in our preaching and actions, w e are moved to 
p r o n o u n c e G o d ' s judgment on the side of powerless life whether 
of the u n b o r n child, of the elderly without care or security, of the 
overtaxed ci tizen, or of the poor in the barrios of Latin America. 

Footnotes 

1. Pope Pius XI, Quadragesimo Anno, esp. nn. 105,109: "It is obvious 
that not only is wealth c o n c e n t r a t e d , but i m m e n s e power...is 
consolidated in the hands of a few." A n d as to international relations, 
two phenomena are evident: " O n the one hand, e c o n o m i c nationalism 
or even e c o n o m i c imperialism; on the other, international imperialism 
w h o s e country is where profit is." Pope Paul VI in 1967 (Populorum 
Progressio, n. 26), and again in 1971 (A Call to Action, n. 44), reiterated 
Pius Xl's condemnation of e c o n o m i c concentration. 

2. Vatican II, Caudium et Spes, n. 85: " T h e developing nations will be 
unable to procure the necessary material assistance unless the practices 
of the modern business w o r l d undergo a profound change." 

3. S e c o n d General C o n f e r e n c e of Latin American Bishops, The 
Church in the Present-Day Transformation of Latin America in the Light 
of the Council, 1968. (Hereafter: Medellin). 

4. Various statements, e.g., O N I S (Peru), G o l c o n d a ( C o l o m b i a ) , 
Christians for Socialism (Chile), Priests for the People (Mexico), Third 
W o r l d Priests Movement (Argentina). Also, the 1972 "Letter from C h i l e " 
from the U.S. Missioners in Latin America. 

5. Cf. "Resolution on the 25th Anniversary of the Universal 
Declaration of H u m a n Rights," United States C a t h o l i c Conference, 
November 1973. 

6. Ronald Muller, " T h e Multinational Corporation: Asset or 
I m p e d i m e n t to W o r l d l u s t i c e , " in Poverty, Environment and 
Power—CICOP 1973. (Available from the D i v i s i o n of Latin America, 
United States Catholic Conference.) 

Also, Muller and Barnet, Global Reach: The Power of the 
Multinational Corporations ( N e w York: Simon and Shuster, 1974). 

Also, "Implications of Multinational Firms for W o r l d Trade and 
Investment and for U.S. Trade and Labor." Report of the Subcommittee 
on International Trade of the U.S. Senate Finance Committee, February 
1973. 

Also, "Investigations of Conglomerate Corporations." Staff report of 
the Antitrust Subcommittee of the H o u s e judiciary Committee, lune 
1971. 

Also, U . N . E c o n o m i c and Social Affairs Department, Special Inquiry, 
" T h e G r o u p of Eminent Persons," 1972-73. 

7. Cf. Robert S. McNamara, Address to U N C T A D , April 14, 1972 
(Santiago, Chile). 

8. The inadequacy of the development strategies of the industrialized 
nations is underscored in Partners in Development, edited by Lester B. 
Pearson, 1969. The report acknowledged on the one hand that foreign 
capital is " s i m p l y not available to finance many of the investments w h i c h 

6 



are a prime need in developing countries—schools, roads, hospitals, 
irrigation." O n the other hand, foreign aid programs are seriously 
misleading: "It is not u n c o m m o n to hear the total flow of resources to 
developing countries referred to as something w h i c h the rich countries 
'give' to the poor. Nothing c o u l d be further from the truth, or more 
misleading...The flow of private capital...undertaken for commercial 
reason (has) no more the character of aid' w h e n (it flows) to developing 
countries than w h e n (it flows) between industrialized countries." 

9. In the period between 1950 and 1965, U.S. private corporations 
invested $3.8 billion in Latin America. Part of the profits were retained in 
Latin America to increase the total investment of the companies 
concerned; part of the profits were, remitted to the United States. From 
this investment of $3.8 billion, no less that S I I . 3 billion in profits were 
remitted home to the United States, while the profits retained locally 
increased the investment of $3.8 billion to $10.3 billion. (Cf. "Balance of 
Payments Statistical Supplement," Revised Edition, Department of 
C o m m e r c e , Washington, D.C., 1963. Also, Survey of Current Business 
issues, 1962-65. It is important to note with respect to the concentration 
of profits in the hands of a few corporations ( w h i c h in turn are 
controlled by a few people) that in 1966—the end of the period referred 
to above—more than one half of American profits from abroad went to 
but 16 firms. Arthur MacEwan, " C o m m e n t on Imperialism," American 
Economic Review, May 1970, p. 246. 

10. A n t h o n y Sampson, The Sovereign State of I.T.T. ( N e w York: Stein 
& Day, 1973). 

11. " A m e r i c a n G r o u n d Transport." Study submitted to the 
Subcommittee on Antitrust and M o n o p o l y of the U.S. Senate ludiciary 
Committee, February 1974, pp. 16-23. 

12. Pope Paul VI, A Call to Action, 1971, no. 44. 
13. This proposition was initially stated in Pope Pius Xll's Christmas 

Message of 1941, and cited again by Pope John X X I I I in Pacem in Terris, 
n. 124. 

14. President Richard M. Nixon's State of the U n i o n Address, 1972: 
" W e will act to defend our interests whenever and wherever they are 
threatened, any place in the world." 

15. Secretary of State D e a n Rusk told the Senate Foreign Relations 
Committee that "...our influence is used whenever it can be and 
persistently through our aid discussion and in direct aid negotiations to 
underline the importance of private investment." U.S. Senate Hearings on 
the Foreign Assistance Act, 1962. 

16. Cf. Peruvian Bishops' Conference, " L a lusticia en el M u n d o , " 
1969: "Like other nations of the Third World, w e are the victims of 
systems that exploit our natural resources, control our political decisions, 
and impose on us the cultural dominations of their values and consumer 
civilization....The more we try to change, the stronger the forces of 
domination become. Foreign interests increase their repressive measures 
by means of e c o n o m i c sanctions in the international markets and by 
control of loans and other types of aid. News agencies and the 
communications media, w h i c h are controlled by the powerful, d o not 
express the rights of the weak; they distort reality by filtering information 

7 



in a c c o r d with their vested interests." 
Cf. Mexican Bishops' Conference, Pre-Synod Paper, 1969: " B y its past 

and present superiority in technology, in the socio-political area, and in 
business and finance, the U n i t e d States exercises a big-power d o m i n a n c e 
over M e x i c o that makes us, as a bordering and overshadowed neighbor, 
an extension of its o w n system." 

Cf. C h i l e a n Bishops' Conference, Pre-Synod Paper, 1971: " W e see 
that nationalization presents many new moral problems because it 
involves a poor country facing companies that have their headquarters in 
one of the richest and most developed countries....This is a problem that 
touches not only e c o n o m i c morality but w o r l d peace because of the 
reaction, in this case, of spokesmen of the U n i t e d States Government, 
w h o have threatened measures that c o u l d affect many countries." 

17. C E L A M D o c u m e n t o n Peace, " T e n s i o n s Between Classes and 
Internal C o l o n i a l i s m , " Medellin, 1968. 

18. Recognition of the interrelatedness of U.S. domestic and 
international policies is a major theme of Bishop James S. Rausch's 
"Statement on Proposed Reforms of U.S.Overseas Investment and Trade 
Policies for the 1970's," presented to the Ways and Means Committee of 
the U.S. House of Representatives, June 1973. 

19. " W h e r e Shall the People Live?" United States Catholic 
Conference, 1972. 

20. Mark J. Green, et a/. Ralph Nader's Study G r o u p , The Closed 
Enterprise System ( N e w York: Grossman, 1972). Also, Morton Mintz and 
Jerry C o h e n , America, Inc., ( N e w York: Dial Press, 1971). 

21. Letitia U p t o n and N a n c y Lyons, " B a s i c Facts: Distribution of 
Personal I n c o m e and Wealth in the U n i t e d States" ( C a m b r i d g e Institute, 
1878 Massachusetts A v e n u e , Cambridge, M A 02140). 

22. U p t o n and Lyons, op. c/'t. 
23. C a m p a i g n for H u m a n Development, "Poverty Profile," United 

States Catholic Conference, 1972. 
24. " D i s c l o s u r e of C o r p o r a t e O w n e r s h i p . " R e p o r t of the 

S u b c o m m i t t e e s on Intergovernmental Relations, a n d Budgeting, 
Management, and Expenditures, U.S. Senate Committee on G o v e r n m e n t 
Operations, March 1974, p. 10. 

25. Ibid., p. 11. 
26. Pope Paul VI, op. cit 
27. Pope Paul VI, Populorum Progressio, n. 26. 
28. Roman Synod of Bishops, lustice in the World, 1971. 

8 



Additional reprints available 
at cost upon request 

Division of Justice and Peace 
United States Catholic Conference 
1312 Massachusetts Avenue, N.W. 

Washington, D. C. 20005