Growing Web of Global Capital
By Jerry Harris
Third Wave Study Group
and mergers are growing at an astounding rate and reflect the emergence
of a transnational capitalist class. This class is primarily focused
on world accumulation rather than national markets. To accommodate
their never-ending search for profits new financial structures are
being built. An important development towards this goal is the changing
nature of global stock markets as a tool for transnational investments
A key new strategy
developing among transnational investors is to diversify across
industries regardless of where the corporate headquarters may be.
Says Greg Smith, chief investment strategist for Prudential Securities,
"The really interesting companies are world-class at what they
do, the fact that they are American or Scandinavian is a side issue."(1)
Not all industries have established world integration, but auto,
telecommunications, media, technology, pharmaceuticals and energy
are truly global in nature. This pattern will spread as transnational
capital seeks new areas for investment and growth. As pointed out
by Stefano Cavaglia, head of equity strategy at Brinson Partners,
"The world has changed, and the industry dimension matters
more now than the country dimension." (2)
all possible are the new tools of financial information and production.
Communication technology and the Internet has made possible a borderless
world economy and a 24-hour electronic global stock market. Nationally
based stock markets are experiencing common pressures and opportunities,
and move up and down in closer coordination than ever before. Not
since the Great Depression have markets responded together to the
degree they move today. This underlines their global character,
because the same transnational investment banks and firms are involved
at the same time in similar industries and markets throughout the
also merging in Europe where 11 nations now share the same stock
exchange and interest rates. But even with this level of integration
Sweden's OM Group shocked the business community when they made
a hostile $1.19 billion bid to takeover the London Stock Exchange.
The OM Group has one of the world's most efficient and inexpensive
electronic trading system. Still, the Frankfurt-based Deutsche Borse
will probably either merge with or takeover the London exchange.
Either way, the ongoing process of constructing a common financial
market is on the agenda for transnational capital.
The rise of
global markets has meant a shrinking role for the U.S. stock market.
From 1970 to 1999 market capitalization in the U.S. grew by 2,425%,
but non-U.S. growth surged to 4,999%. This lowered U.S. domination
from 66% of the total down to 49% of the world's $32 trillion in
market capitalization. (3)
pushing stock investments in global industrial sectors is the pace
of cross-border mergers. In the last decade there has been $494.2
billion invested in transnational mergers, with about 75% of these
taking place among corporations in the same business. (4) This is
another aspect of the emerging transnational class. This fundamental
process of building globalized corporations creates the foundation
for worldwide stock investments.
majority of multinational corporations are not thoroughly transnationalized
in terms of their ownership, nonetheless their accumulation is based
on a global strategy of production, labor, and markets. Below is
a chart of some of the largest U.S. corporations with more than
half of their revenues from abroad. (5) It's clear that even an
investor with an "American" strategy who only puts money
into U.S. headquartered corporations on the U.S. stock exchange
still becomes part of the global economy.
In Standard & Poor's index of 500 stocks 80% have revenues from
abroad, and there are 185 major U.S. funds with 70% or more of their
assets in North American corporations with substantial foreign earnings.
(6) Local conditions are still important, and matters such as tax
rates, currency exchange rates, and political stability are all
taken into account. But such factors are also balanced against global
market positions, transnational corporate alliances, and how each
investment fits into a worldwide accumulation strategy.
The value of
currencies is an example of this balancing act between national
and international concerns. Investors need information on how much
revenue is generated in the home market as well as how much comes
from other currency blocks. Volatility in the foreign exchange market
means you can pick the right stock but in the wrong currency. Since
transnational speculators move about $1.7 trillion in currency everyday
a sudden devaluation can ruin a solid investment. Such an international
run caused the Asian crash bankrupting thousands of nationally based
As global structures
become more widespread and entrenched pressures build to push capital
further along the transnational path of development. The force of
the new system creates the conditions for further changes by which
corporations need to compete and survive. Therefore we see changing
methods of investment, ownership and decision making. Progressive
movements need to consider how local conflicts are challenged by
the growing power of the transnational capitalist class. Politics
may be national by nature, but to be relevant they must respond
to changing global conditions.
1. Farrell, Christorper, "The New Global Investor," Business
Week, September 11, 2000, page 160.
3. Ibid, page 162.
5. Der Hovanesian, Mara, "So Who Needs Foreign Investing?,"
Business Week, September 11, 2000. Page 166.
6. Ibid, page 167.