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Why Transnationals Thrive

by on December 22, 2011

They say Capitalism is a free market system.

We call our system Capitalism, but few informed people these days seem to believe that we have free markets.

Global Markets more look like closely cooperating Cartels. Big Oil, Big Pharma, Big Banking.

All these firms compete for a bigger part of the market. They buy each other up, if one of them fails.
That looks like competition.

But the real story is how they cooperate to keep the markets for themselves.
They own the ‘regulators’. And they own the politicians who write the ‘regulations’. These ‘regulations’ have only one goal: keeping new competition at bay.

How does it work? If you are for instance Big Pharma, you have your regulators create rules that make it extremely expensive to enter the market with a new product. You call it: ‘necessary testing to prove it’s safe for the public’.

So then it costs hundreds of millions to get a new drug to the market. And very few have that kind of cash at hand.

Even ‘scientists’ have established that very few people own all these corporations. So even though there are nominally a handful of corporations in each major industry, they are owned by the same interests.

Why are these Transnationals so big?

There are two major issues.
In the first place, Transnationals are financed by the Money Power, and normal people are not.

The Money Power finances two kinds of people: those it owns, or those it wants to own.

The other issue is less well understood.

Consider this:
Most complex goods and services are created in production chains.
This can be organized in two ways.

You can have a consortium of small and midsized businesses cooperating. In construction that would mean a contractor will hire the masons, the electricians, the architects and buy the raw materials.
This contractor will have to pay these people (organized in other businesses) in dollars and usually he will have to borrow the necessary capital from a bank. In this way he will incur capital costs, aka interest.

It transpires, that in construction, which is very capital intensive, capital costs can amount to up to a mind boggling 75% of total production costs.

The second way of organizing production is to buy up the entire production chain. This is how Transnationals work. The entire (or a large part of the) product or service is created within the organization itself.

Within the Transnational there are many business units, basically working independently from each other, but controlled by the Head Office. They preferably buy from each other or are forced to do so by HQ.

But they don’t pay each other with dollars. No, Headquarters just keeps books: the goods and services the Business Units deliver to each other are registered and mutually crossed off where possible.

So for this trade, no dollar is required. Considering the fact that these firms turn over tens of billions per year, this is far from a moot point.

In this way the Transnational does not incur the high costs for capital that a production chain of many small businesses would.

And it is a law of nature that those with the lowest cost for capital win.

These are the two reasons Transnationals dominate international markets.

When small business would be able to cooperate in production chains financed with interest free capital, they would be far more competitive.

That’s why we need a free market for currencies. In a free market for currencies, the cheapest will prevail. To be cheap, they’d have to offer interest free credit.

This will allow everybody to gain access to capital markets at virtually no cost. And this will allow small and medium sized businesses to do away with the hopelessly inefficient bureaucracies of Big Business.

I’m indebted to Hank Monrobey for explaining this basic process to me

See also:
For Self Determination we need Free Currencies
The Problem with Transnationals and what to do about it

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