How to Get Along Overseas: A Word to Businessmen

CLARENCE B. RANDALL

THE striking new thing about the evolving foreign economic policy of the United States is that American free enterprise is rapidly entering the field of diplomacy. For better or for worse, the private dollar and the public dollar are carrying the flag together.

Some fine American companies are making important new friendships overseas for our country, warm and enthusiastic friendships that reflect great credit upon our way of life, which no ambassador or consul, however capable, could possibly duplicate. But sometimes, unhappily, ineptitude in corporate management creates friction which no professional diplomat can fully offset or overcome. In fact, upon occasion the success of our foreign policy in a particular area can be blighted by unenlightened management in an individual American company and by its insensitivity to the national interest in daily decisions.

For the most part, only large corporations have the capital and the courage to strike out boldly into a new area and establish an operation far removed from the home office. These large companies fall into two categories: those which manufacture a product and those which are seeking a raw material essential to their processes. Manufacturing concerns go principally to the mature areas where consumer needs are similar to ours, such as Canada, Mexico, England, or Holland; the extractive industries go to the underdeveloped areas in search of such resources as bauxite, petroleum, iron ore, or manganese.

The problems raised by the activities of these two groups are quite different. The older countries, where the principles governing the accumulation and employment of private capital are well established by tradition, and where private enterprise is the force behind the economic progress of the nation, usually welcome the inflow of American money. In Great Britain, for example, over a billion and a half American dollars have been profitably invested in industry, profitably from both the point of view of the British and that of the stockholders in the United States. The products run all the way from automobiles to razor blades and include such diverse items as sewing machines and bulldozers. American investment gives the Chancellor of the Exchequer a double assist in balancing his trade accounts; it cuts down the imports and swells the exports.

IN SOME of the new countries, however, a different series of problems has to be faced. There the concept of private enterprise for production as distinguished from trade not only may have no established tradition but may be directly antagonistic to the political ambitions of the new leadership. The eager young leaders in the underdeveloped areas have little desire to share with anyone, least of all foreigners, the responsibility for improving the lot of their people. They have supreme confidence in their own self-sufficiency to plan the development of their country’s resources, and their political philosophy is based upon the proposition that the state is the only proper source from which to provide the funds required for investment. They have had no experience with building by voluntary action the individual savings of the people into a pool from which factories can be constructed and operated for profit by private citizens. They therefore take no steps to encourage habits of thrift and are slow to provide the mechanisms by which capital can be accumulated. They are swayed by those who say that while the United States is undoubtedly a great country, a new nation cannot wait for the evolutionary process of private initiative but should follow instead the short-cut methods of the Soviets. The warning that this involves loss of personal freedom falls on deaf ears. Yet such leaders are usually highly intelligent, and their attitudes can be changed if their experience with American private enterprise is favorable.

When a big American corporation, with plenty of capital to spend on a new project that promises handsome dividends, turns its engineers loose in such an area, danger lurks on every hand. Clumsy handling of local situations can damage our international relationships to a degree that is sometimes frightening. You can bulldoze a jungle or a desert, but you cannot bulldoze the people. When you open a mine in Minnesota or drill an oil well in Texas, everybody in the county understands what is going on and approves, but it takes more than sound engineering and modern equipment to bring success to a similar venture in an area where no one understands what is going on and where everyone, including the witch doctor, is ready to believe the worst about foreigners.

Success for such a project lies in creating from the beginning a sense of partnership. Everyone from the chief of state to the humblest member of the smallest village in the area must be made to feel that the undertaking is good for the country and good for its people, as well as for the company. And actions speak much louder than words. In a tropical jungle you cannot take fullpage advertisements in a local paper to explain the corporation’s purposes; first, because there probably is no newspaper, and second, because if there were, the men and women of the village could not read it. And you cannot go about handing out slick brochures prepared by the public relations department. But the most illiterate people know what a better house is, and a school, and a hospital, and are moved to friendship by them provided that the houses and the schools and the hospitals are for the people and not just for the company’s foreign employees.

It is the extractive industries that bear the heaviest burden. When the ruling group in a new area, hard pushed for lack of funds to build the roads and docks required to open up its country or to start irrigation projects or to build power plants, at length grants a concession for the drilling of oil wells or the development of a vast mineral deposit, it at once places a powerful weapon in the hands of the political opposition. That invariably there is such opposition is simply a basic fact of human nature, endemic in every region and characteristic of every race. There are always the outs who are determined to become the ins.

Furthermore, the outs are apt to be more intense in their nationalism than even the ruling group itself, just as an elemental principle of political strategy. The cry of exploitation is at once raised. The “I want to be in” demagogue takes the position that the sacred wealth of the nation, which belongs to all of the people, is being corruptly handed over to the money-mad Americans and that the yoke of colonialism is being replaced by dollar serfdom. None of this escapes the watchful eye of the agents from behind the Iron Curtain, and nationalism soon merges with Communism to place new obstacles in the path of private American investment.

The only antidote in such a situation is genuine partnership and immediate and generous sharing with local capital of both the risks and the opportunities of the project. When the American company encourages the participation of financial interests that are respected in the area and known to be friendly, the battle is half won. Our investors acquire not only partners but advocates for their cause, whose voices will be listened to. They acquire also a built-in protection against subsequent expropriation: seizing the property of Americans is one thing, but seizing the property of those who have had their roots in the area for a long time is not so easily undertaken.

LOCAL capital may come from one of two sources, or from a combination of both. The first is the residents of the country themselves. Almost no area is so backward or underdeveloped that it does not have an elite class which has been educated abroad and which through inheritance has accumulated wealth. Some are very rich indeed. Unaccustomed as they are to the ways of industry and to the corporate form of organization, there is nevertheless always the possibility that they can be persuaded to take a part of the risk and to bring their high personal prestige to the support of the project. Demagogues attack such personalities with caution, for the respect which the people bear toward them is based upon centuries of tradition.

Ordinarily, the best source of local capital is to be found in the aftermath of colonialism. Frequently the new nation which breaks away from a mother country does so from a desire for political autonomy only, while still preserving an affectionate regard for the cultural and economic ties with which it has been associated. Ghana, for example, is still a part of the British Commonwealth.

The mother country may lack the capital and the market required to justify taking on largescale development single-handed, but its businessmen may welcome a chance to share the risk and the opportunity under American leadership. When this occurs, their long years of association with local leaders and their knowledge of local customs become of great value to the new management, and the cold plunge into the unknown is immediately tempered for our people. Some worldlywise American companies are now so sensitive to this circumstance that they will not accept outright control of an enterprise. It is interesting to note, for example, that in the two great mineral projects being planned in French Equatorial Africa by American steel companies neither corporation insisted upon legal control through majority ownership.

Day-to-day operating management of the project is quite a different matter. That has to be given to the American group, and there is seldom any question about it. Where a raw material is involved, it is the capacity of American industry to consume the product that makes the whole undertaking possible, and it is for the best interests of all concerned that the shipments, when made, be fully acceptable to the American market and be locked permanently into that market. No foreign administration could assure that. Similarly, the Americans would not be there at all if they did not possess in high degree the technical competence which the area could not otherwise obtain. It is a fair share of the profits which the host country wishes to make sure of, and not management for the sake of management.

Once committed to the concept of financial partnership, the American company must decide whether to insist that the local capital come from private sources or to consent that it be provided by the state. Here there can well be two opinions. American industry is built on the concept that the welfare of the world in the field of production is best served by private initiative and private responsibility. We cannot use the power of our dollars to force those in other countries who disagree with us to accept our philosophy. If we try, we might do great harm to our foreign relationships. The joining of state capital and private capital in a common undertaking may in fact offer a genuine opportunity for free enterprise to prove its worth.

It is the daily management of the property, however, and not the source of the capital, which determines the effect that the project has upon vital international relationships of the United States. The way that individual Americans behave toward individual residents of the area is the determining factor, and here top management itself must set the tone. Policy cannot be left to the geologists, the engineers, and the other technicians. The social questions must be studied with the same care as the financial and physical problems, and the same disciplined compliance with high standards must be assured.

However illiterate, however unsuited to industrial employment the worker may be, he is a citizen of the host country, and the judgments which he forms as to the conduct of his employer will in the long run determine whether the enterprise wins or loses. It is just that simple. To raise the color bar against him and practice racial segregation, to slander his religious faith, to treat him in any way as an inferior being — these are the roads to ruin. They are also sure defeat for the purposes of the United States in its effort to resist Soviet encroachment into the uncommitted areas of the world. News travels fast, and the bad reputation of one American company can bring blight to our foreign policy over an enormous area.

To enhance the good name of the United States requires great wisdom and infinite patience. To begin with, the native worker will probably not respond to money incentives in the manner that we expect at home. He must, of course, be paid a fair wage, for he is quick to sense discrimination, but at the outset his needs are few, and as soon as he gets enough pay to cover his immediate needs he may want to quit and enjoy his new leisure. He has always worked when he wanted to and stopped when he wanted to. and it takes a long time for him to acquire a disciplined loyalty to the job. Often he is surprisingly quick to learn a particular skill, but this may be an intuitive capacity for imitation. He may not at all understand why he is doing what he does or what relationship his job has to the next man’s job. His beliefs and superstitions may attach themselves unexpectedly to various aspects of his job with the most disconcerting consequences. But all the time he is a person to be reckoned with, because he is a citizen of the host country as well as an employee of the company.

Of all the working tools which management has available for the solution of its social problems in an underdeveloped country, none is more important than command of the local language. The accurate communication of ideas is of prime importance. It is absurd to expect the native worker to learn English in order to find out what his job is. Yet it is exceptional in the remote places of the world to find an American businessman or operating official who can speak fluently the language of the people with whom he must deal each day. The Russians are far better at this than we are. When Ivan is sent to Afghanistan, he talks to the Afghans in the Persian language; when he is in a Muslim area he speaks Arabic; when he goes to Indonesia he has been trained in the specific dialect of the place to which he is being sent.

Everyone in the corporation, from the president down, should make it unmistakably clear to the government of the host country and to the humblest person that the company intends to offer advancement to each worker on merit as fast as he qualifies himself. By this I mean not only the lower boss-of-the-gang type of supervision, but the clerical jobs and, ultimately, the positions of trust in the administrative staff.

Finally, management must stand firm in refusing to touch bribery or corruption. To buy its way into a country or out of a difficulty is both morally wrong and politically dangerous. The American who does so not only tarnishes the good name of his country but submits himself to future blackmail from which there will be no escape.

In all of this, private interest and national interest are inseparably interwoven. The time has now come when the corporate citizen must also carry the flag, and the sooner that each corporate management engaged in overseas operations meets its dual responsibility to both the stockholder and the United States, the smoother will the course of our diplomacy become.