Public Policy Chapter 8
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What was the status of petroleum in the nineteenth century?

  • It was regarded like any other commodity. (correct)
  • It was only used in the military.
  • It was highly restricted by governments.
  • It was considered a strategic commodity.

    • World War I led to a more laissez-faire approach to foreign ownership of companies.

    False

    Which company alarmed British governments due to its size within the oil industry?

    Standard Oil Company

    During the interwar years, several European countries created national __________ companies.

    <p>oil</p> Signup and view all the answers

    Match the following countries with their actions regarding foreign ownership of oil companies:

    <p>Britain = Excluded foreign ownership in banks and defense-related industries France = Created a national oil company Italy = Created a national oil company Spain = Created a national oil company</p> Signup and view all the answers

    Which of the following practices related to oil companies did British governments adopt during the interwar years?

    <p>Support for British-owned oil companies overseas.</p> Signup and view all the answers

    European governments had many restrictions against foreign firms in the interwar period.

    <p>False</p> Signup and view all the answers

    What was the primary concern of governments regarding Standard Oil Company during World War I?

    <p>National ownership of firms</p> Signup and view all the answers

    What action did the West German government take concerning foreign investments when OPEC countries started acquiring shares?

    <p>They asked banks to report impending sales to foreigners.</p> Signup and view all the answers

    The United States had no limits on the percentage ownership by foreign firms.

    <p>True</p> Signup and view all the answers

    Which company faced obstruction in Japan for four years before gaining permission to manufacture computers?

    <p>IBM</p> Signup and view all the answers

    In Japan, the government policies regarding foreign companies were highly __________.

    <p>restrictive</p> Signup and view all the answers

    Match the country with its corresponding government policy toward foreign firms:

    <p>West Germany = Liberal policies with some reports required Japan = Highly restrictive policies United States = No limits on ownership OPEC = Potential acquirers of German companies</p> Signup and view all the answers

    What prompted the West German government to monitor foreign share acquisitions more closely?

    <p>OPEC countries purchasing German company shares.</p> Signup and view all the answers

    Foreign companies in Japan faced no obstructions in the 1950s when attempting to operate.

    <p>False</p> Signup and view all the answers

    What did IBM have to do in return for gaining permission to manufacture in Japan?

    <p>License its basic computer patents to Japanese companies.</p> Signup and view all the answers

    What nickname was given to Margaret Thatcher due to her leadership style?

    <p>Iron Lady</p> Signup and view all the answers

    Ronald Reagan served as the President of the United States from 1980 to 1990.

    <p>False</p> Signup and view all the answers

    What significant economic trend was observed in the United States during Reagan's presidency?

    <p>Deregulation and removal of restrictions</p> Signup and view all the answers

    The Single Market program launched in 1986 in the European Union aimed to facilitate __________ by harmonizing national legislation.

    <p>regional integration</p> Signup and view all the answers

    What was an important aspect of the liberalization process in developed countries during the 1990s?

    <p>Intensified regional integration</p> Signup and view all the answers

    Manufacturing was fully open to foreign direct investment (FDI) during the liberalization process.

    <p>True</p> Signup and view all the answers

    What was the primary policy concern that emerged during the liberalization process?

    <p>Attraction of inward investment</p> Signup and view all the answers

    Match the following concepts with their descriptions:

    <p>Margaret Thatcher = Leader of economic liberalism in Britain Ronald Reagan = 40th President of the United States Single Market = Harmonization of national legislation in the EU Liberalization process = Dismantling of restrictions on trade and investment</p> Signup and view all the answers

    What is a central issue in the relationship between multinationals and governments?

    <p>Jurisdictional asymmetry</p> Signup and view all the answers

    Governments face only a single jurisdiction when dealing with multinationals.

    <p>False</p> Signup and view all the answers

    What was one exception to the entry of foreign firms in the 19th century United States?

    <p>Banking</p> Signup and view all the answers

    During the second half of the nineteenth century, there was a divergence between trade and ______ policies of many governments.

    <p>investment</p> Signup and view all the answers

    Which of the following was a characteristic of the United States' economic policies in the 19th century?

    <p>High levels of protection for domestic firms</p> Signup and view all the answers

    National ownership of firms was prevalent in the 19th century United States.

    <p>True</p> Signup and view all the answers

    What key factor complicates the relationship between firms and governments?

    <p>Different political systems</p> Signup and view all the answers

    Which of the following sectors had restrictions on foreign ownership?

    <p>Nuclear power operations</p> Signup and view all the answers

    Antitrust laws were designed to protect foreign firms from domestic competition.

    <p>False</p> Signup and view all the answers

    Who was the Prime Minister of the United Kingdom from 1979-1990?

    <p>Margaret Thatcher</p> Signup and view all the answers

    Foreign controlled firms were not eligible for the facility security clearance required to bid on US __________ contracts.

    <p>defense</p> Signup and view all the answers

    What was the main reason for the French government's ban on foreign takeovers?

    <p>To prevent foreign control over high technology industries</p> Signup and view all the answers

    What was a reason for the shift away from restrictions on foreign firms during the 1980s?

    <p>Costly failures of previous national strategies</p> Signup and view all the answers

    The Labour government in Britain required extensive monitoring of foreign investors' outcomes during the 1964 to 1970 period.

    <p>False</p> Signup and view all the answers

    What was ICL, and why did it become dependent on another company?

    <p>ICL was a merger of British firms in the computer industry that became dependent on Fujitsu's technology.</p> Signup and view all the answers

    Match the following actions to their impact on foreign firms:

    <p>Federal law restrictions = Limited ownership opportunities Antitrust litigation = Created delays for investors State procurement discrimination = Reduced competitiveness for foreign firms Global capital market trends = Encouraged investment liberalization</p> Signup and view all the answers

    By the 1980s, governments were able to effectively monitor multinational behavior.

    <p>False</p> Signup and view all the answers

    The French government screened inward investments, often involving __________ delays due to foreign takeover proposals.

    <p>lengthy</p> Signup and view all the answers

    What were some sectors where states restricted foreign ownership at the state level?

    <p>Banking and insurance</p> Signup and view all the answers

    What strategy was employed by the French government concerning foreign takeovers?

    <p>Screened investments and delayed approvals</p> Signup and view all the answers

    The French policy of promoting national champions in electronics and computers met with great long-term success.

    <p>False</p> Signup and view all the answers

    What significant action did the Labour government take regarding investments from foreign companies?

    <p>The Labour government sought assurances about employment and investment strategies from foreign companies.</p> Signup and view all the answers

    Match the following countries with their actions regarding foreign takeovers:

    <p>France = Banned foreign takeovers of firms United Kingdom = Sought assurances from foreign investors GE = Tried to acquire Machines Bull ICL = Merged British firms in computers</p> Signup and view all the answers

    Study Notes

    Chapter 8: Public Policy

    • This chapter focuses on the relationship between multinational firms and governments.
    • Tensions arise because the borders of multinationals and nation-states aren't always aligned.
    • Governments deal with economic entities that have ultimate control beyond their borders.
    • Firms face multiple jurisdictions with varying political systems.
    • Jurisdictional asymmetry is central to the conflicts between multinationals and governments.

    8.1 Multinational and Government

    • The relationship between firms and governments has been central to the history of multinationals.
    • Tensions stem from the discrepancy between multinational and national state borders.
    • Governments face economic entities with ultimate control outside their borders.
    • Multinational firms face multiple jurisdictions with diverse political systems.
    • The problem of jurisdictional asymmetry is foundational to the tensions between multinationals and governments.

    8.2 Governments as Hosts

    8.2.1 Developed Economies

    • During the 18th and 19th centuries, European nation-states and their colonies (like the US) developed the capacity to regulate, tax, and monitor individuals and firms within their boundaries.

    • National ownership wasn't a significant policy concern during the 19th century.

    • There were few barriers to foreign firms entering, little control over their behaviour, and limited discrimination against foreign firms in favour of local ones.

    • The latter half of the 19th century saw a divergence in trade and investment policies, notably in the US.

    • The US adopted high levels of protectionism.

    • However, foreign firms could operate in the US with few restrictions, except in the banking sector.

    • Banks were politically sensitive and faced opposition to their widespread presence.

    United States Banking Industry

    • Foreign ownership of banks became progressively more restricted in the US.

    • National Bank Act of 1864 contained rules about branching and directors' citizenship/residency.

    • State regulations made it harder for foreign banks to operate, especially by the 1910s.

    • State level restrictions were also applied in other sectors, such as insurance and mortgage lending.

    • Economic activity in certain areas such as mining and coastal shipping was also restricted.

    European Market

    • In 19th Century Europe, very little restriction existed on foreign companies in London.
    • London acted as the world's largest trading and financial hub.
    • The nationality of ownership wasn't a substantial concern, in contrast to, for example, the United States.
    • Foreign bankers and firms could operate with little to no restriction.

    Petroleum Industry Before World War I (United States vs. British)

    • In the 19th century, the use of petroleum was a commodity similar to many others.
    • Internal combustion engines and warships gave rise to it becoming a strategic commodity.
    • This prompted concern from larger governments such as the British over the dominance of US firms like Standard Oil within the industry, and an attempt to restrict their involvement in the oil-producing regions.

    Interwar, European and Foreign Multinationals

    • During the interwar years, foreign ownership of companies became a more significant issue for many European countries.
    • These countries followed Britain's lead by creating national oil companies.
    • Few restrictions existed in Europe against foreign firms outside of banking and defense-related industries.

    German and Foreign Multinational

    • In Germany during the interwar period, there was debate about foreign influence in the business world. However, this did not translate into policy.
    • For example, the US auto manufacturer General Motors (GM) was allowed to acquire Opel and GE bought a third of the equity in AEG.
    • Nazi Germany's policies regarding foreign companies were tolerant so long as they followed government directives, including the dismissal of Jewish employees.
    • In World War II, enemy-owned business assets in Germany were sequestrated. However, local management in certain cases maintained operations.

    World War II and Afterwards

    • Post-WWII, the US shifted from being a major debtor nation to a creditor.
    • This shift accompanied rising nationalism, which led to major restrictions in several sectors.
    • After 1930 more stringent regulations on countries outside of the Western world came into place relating to foreign ownership.

    War World II and Afterwards (Liberalisation)

    • The 1980s saw a worldwide public policy shift towards the liberalization of foreign firms and the decoupling of national policies from the regulation of international finance.
    • The globalization of the capital markets diminished governmental influence on multinational firms.
    • There has been a decline in the ability of national governments to monitor the behavior of multinational enterprises.
    • The national champion strategy has seen a significant lack of success in Europe.

    Imperialism and Colonialization Era

    • Very few restrictions existed during the pre-interwar years on multinationals.
    • The colonial governments in Asia and Africa generally had similar policies toward foreign investment as their home countries.
    • Sometimes colonial governments favored their home country's business over other nations' firms.
    • Notably in certain strategic sectors.

    Factor Long Term National Differences in Policies

    • Countries with high levels of foreign inward investment were more wary of policies that could result in reciprocal actions from other countries or regions.
    • Those with less multinational investment were more often associated with restrictive policies.
    • National governments' policies toward foreign firms reflected specific national circumstances, including the industrial structure of a country.
    • Cultural and historical influences significantly influenced host government policies.
    • Generally market-oriented economies had a lesser tendency to restrict business operations compared to those with stronger industrial policies.

    Multilateral Regulation

    • The expropriation of foreign property in 1917 initiated the first attempts to establish international regulations on the conduct of host countries.
    • The 1930 Hague Conference on the Codification of International Law was an attempt to address the responsibility of states for damage to foreign entities within their territories.
    • Developing nations often resisted accepting specific international minimum standards of treatment for foreign firms.

    International Trade Organization (ITO)

    • After WWII, there was renewed discussion about establishing a new international organization to handle international trade.
    • The ITO was proposed but never fully enacted.
    • The GATT survived as a framework and eventually morphed into the WTO.
    • Developing nations made numerous qualifications to the ITO proposals, which ultimately led to the failure to establish the organization.

    Organisation for Economic Cooperation and Development (OECD)

    • In the 1970s, the wave of nationalizations of multinationals by developing countries led the OECD to create guidelines for multinational firm behavior.
    • These guidelines established best practices for good corporate governance and business conduct within host economies.
    • These commitments encouraged employee training, and avoided bribery and improper political involvement.
    • However, the OECD guidelines did not become legally binding.

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    Chapter 8: Public Policy PDF

    Description

    Explore the complex dynamics between multinational firms and governments in this chapter. It delves into the tensions that arise due to jurisdictional asymmetry and differing political systems. Understand how these relationships influence public policy and economic control across borders.

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