16
GLOBAL FINANCE
after tax cuts in 1981 the US recession ended, federal receipts rose
throughout the 1980s despite the tax cuts, and inflation fell during the
period. Opponents counter that the national debt increased by $2trn
between 1983 and 1992 and argue that higher tax rates would not have
dampened economic growth.
Today, there is still much disagreement over the competing macro-
economic theories. They are difficult to test conclusively because there
is not enough data the half century since WWII is simply too short a
period of time. The different theories are also difficult to standardize
in ways that allow them to be tested against one another. In short,
macroeconomics is still a young science and there is much left to learn.
THE EVOLUTION OF MULTINATIONALS
Although multinationals appeared in the early 1800s it was not until the
1870s that MNCs developed in a form that we would recognize today.
Technological developments and organizational innovations allowed
the creation of vast global enterprises, most of which were based in
Europe. Some of these, such as British American Tobacco, Nestlī
e and
Michelin, are still major corporations today. In the late nineteenth
century, these MNCs were principally focused on gaining control of
commodities in the colonies with which to supply products at home
and for export. They were not yet a major force on the business scene,
however, with much international business being dominated by cartels.
MNCs came into their own after WWII. US firms entered foreign
markets in force, but concentrated mainly on developed countries,
rather than on the raw material producers of the prewar era. US MNCs
employed large numbers of skilled workers, advertised massively, and
had intensive R&D programs.
By the 1970s, MNCs began to change as Japanese and European
companies began to flex their muscles. Japanese firms began to
use newly industrialized countries (NICs) as ``export platforms'' for
their products while European companies entered the US market and
increased their ownership of US firms. As a result of the rapid growth
of newly industrialized countries since 1980, a new generation of
multinational firms have appeared in Asia (in particular, from Taiwan,
Singapore, Hong Kong, and South Korea) and to a lesser extent in Latin
America.
