Latin America In-Corporated

Multinationals and Development: a Bad Idea?

Utopia or dystopia? The imaginary of a more “developed” Latin America. Taken from a 1965 brochure on the Alliance for Progress by the U.S. Chamber of Commerce, p. 19.

In November 2021, Samantha Power, the administrator of the United States Agency for International Development (USAID), presented the agency’s “New Vision for Global Development” to the audience at Georgetown University. As suitable for celebrating a 60-year anniversary, she took a look back in history to 1961 when USAID was founded under the Kennedy government as an effort to spread freedom, prosperity etc. to the world (that is a fancy way of saying “No second Cuba!”). However, one of the main problems in development then and now, according to Power, was the lack of speed with which help could be delivered due to bureaucratic and governmental inertia. To accelerate things, USAID would now increasingly need to focus on the support and the abilities of multinational corporations like Coca Cola or Starbucks:

So today, I’m pleased to announce we intend to launch a centralized, flexible fund devoted to private sector engagement. Coupled with critical bureaucratic reforms, this will allow us to be far more nimble and strategic in mobilizing businesses around the world to advance our core priorities.

For me, a historian of science who spends a lot of time thinking about the idea of “development,” such appraisals of private businesses’ abilities in combination with words like “flexible” sets the imperialism-alarm bells ringing. USAID, of course, is not alone in its call for using the network of private businesses to ensure unbureaucratic help. In fact, the idea of establishing such a platform began more than 60 years ago, when New York Senator Jacob Javits launched a private-corporation development initiative in 1961 as an alternative to the governmental efforts represented by the Kennedy administration. Officially established in 1964, it came to be known as ADELA, short for Atlantic Development Group for Latin America, and it managed to bring together the biggest multinational corporations of its time in a common effort. Taking a closer look at how this platform was set up and run helped me understand some of the deeper implications of relying on multinationals’ development powers.

Put benevolently, ADELA provided an unbureaucratic way to “foster socio-economic progress in Latin America” and to “eliminate poverty.”  Put realistically, in my opinion, ADELA serves as a prime example of imperialist and neo-colonialist aspirations on multiple scales by large private corporations under the label of “development.” Now, ADELA was not USAID. Important differences in mission and structure existed, most notably that ADELA tried to distance itself from the idea of aid, opting instead for an approach based on investment. Keeping these distinctions in mind, the historical case of ADELA still sheds light on the potential implications and power dynamics of relying on “a centralized, flexible fund for private sector engagement,” set up by USAID.

Before joining Power (writ large or small) on her journey all the way to the early 1960s, which were marked by the launch of the UN’s first “Development Decade,” as well as Kennedy’s “Alliance for Progress,” we should make a stop in 1974 at the United Nations Office in Geneva. There, on a November day, a group of twenty eminent persons from politics, government and economics had assembled for a hearing concerning the UN’s role in the relations between multinational corporations and “developing” countries. In order to come up with a viable recommendation for the UN, the group (including Jacob Javits) had themselves invited around 40 experts from public administration, academia and multinational corporations to provide statements about the impact of these corporations on development and international relations.

One of these informants at the UN headquarters was Giovanni Agnelli, principal shareholder of a company called Fabbrica Italiana Automobili Torino, FIAT in short, and at the time Italy’s richest man. Unsurprisingly, Agnelli made the case that the UN should refrain from imposing strict regulations on multinational corporations and instead endorse voluntary codes of ethics to prevent violent escalations like the military coup in Chile (backed by multinationals) the previous year. Instead of restrictions, the opportunities offered by large corporations like his own should actively be endorsed in order to contribute to development in the Third World. So, in 1974, a time when the intervention into policy formulation by CEOs of large automobile concerns proceeded in a bit less blatant way compared to now, Agnelli argued,

We have almost become one world economically, but we are still far from being one world politically. The absence of a government on a world basis has left mankind with a multiplicity of contrasting and unsolved problems which are pressing us daily. In a sense, the network of multinational companies represents in embryonic form the central nervous system of an emerging global economic order. Global planning to assure the most efficient and equitable use of resources is desperately needed to cope with these problems. But it is hard to see how they can be solved without the management skills, the technical know-how, the financial resources and the worldwide co-operative networks that multinationals possess.

This statement captures a world-view likening the planet with a body which is paralyzed by an inadequate in-corporation of all its parts. The world-body should actively be unified, starting with Latin America. According to Agnelli, to be able to do good and to free the world from this state of paralysis, the dynamic power of multinationals, these parts of the world’s central nervous system, should not be hampered. To push this vision forward, he had helped launch the ADELA investment company about a decade earlier.

When thinking about the idea of the benevolent corporation, it’s important to remember that in the 60s and 70s, the network Agnelli referred to wasn’t just a nervous system—it was also a nervous system. Threats to its operations came from both sides of the Atlantic. In Latin America, big corporations faced very real risks, like attacks from revolutionary groups or, even worse, having their industries nationalized by uncooperative governments. In Europe, the threat was embodied by France’s president, Charles de Gaulle, whose more nationally-focused, protectionist policies made it harder for the European “nerve fibers” to expand into other regions. This created issues for U.S. foreign interests too, since they relied on European investments in Latin America to avoid shouldering the entire development burden alone. As Jacob Javits said in a 1962 speech, “The plain fact is that in Latin America, the U.S. needs Europe now—and Europe should step up in the same spirit as the U.S. did in 1947 with the Marshall Plan.”

One treatment for curing all these diseases was the establishment of ADELA, a company designed to attract investments in Latin America from the Northern Hemisphere, with a focus on European corporations. Javits and Agnelli weren’t the only big names involved when ADELA got up and running in 1965. Hubert Humphrey, who would later become U.S. vice president under Johnson, was one of its major advocates, and Peter Drucker—one of the most influential management thinkers of the 20th century—served as the main consultant. To drum up capital, Fiat’s Aurelio Peccei and Texaco’s Warren Wilhelm went on a mission to pitch the idea to hundreds of potential investors. Wilhelm, interestingly, had just become a father—his son would later become New York mayor Bill de Blasio. Peccei, on the other hand, would go on to found the famous Club of Rome. His work for ADELA shows that even before his involvement with this “environmental organization,” he was focused on the environment and the climate; that is the business environment and the investment climate. Because this was what ADELA was all about: to show that big multinational corporations in a combined effort can help small Latin American entrepreneurs in setting up their businesses in a more effective and rapid way than governmental action ever could. In fact, it was this curious blend of development mentality, environmentalism and capitalism all unified in the person of Peccei, that first drew me to researching ADELA.

Latin America as a project: Allocation of ADELA investments in 1974. Taken from the Bulletin Ten Years ADELA, stored at the Rockefeller Archive Center.

Before effectively launching this “private enterprise explosion,” as Javits put it, the concept had to be presented to the U.S. Congress Joint Economic Committee in 1964. The records from this hearing are quite telling: Javits, Peccei and Wilhelm stressed that ADELA would invest in middle-sized businesses in Latin America, since these were less prone to nationalization than larger operations like mines or power infrastructure. ADELA would enter as minority investor into local businesses, offering capital and know-how for strengthening a Latin American entrepreneurial class and counteracting unemployment, which would in consequence enhance the investment climate and ultimately prevent the spread of communism. Quoting from the Congressional Record,

Senator JAVITS. Will you agree with me, Dr. Peccei and Mr. Wilhelm, that the decisive breakthrough in saving Latin America from going the Communist way is perhaps more dependent on what the private enterprise system will be able to accomplish in the next 10 years than anything else? Mr. PECCEI. Indeed, sir. That is crucial.

And in case the carrot way would not work effectively enough, ADELA’s proponents were confident that the stick—denying investment help to unruly governments—would do the trick. After all, they had behind them “the whole of the capital exporting sector of the free-world industrialized countries.” (Wilhelm). This was not an overstatement: during its heyday in the 70s, ADELA had managed to bring together almost 250 multinational corporations—almost half European—as shareholders: Fiat, General Electric, Unilever, Coca Cola, Procter & Gamble…You name it.

The quest to “eliminate poverty” and promote progress was designed to benefit these corporations by highlighting their social contributions while giving them control over which countries were rewarded for their friendly investment climate. Whether this mission was ultimately successful is questionable, especially considering the wave of industry nationalizations in the 1970s and ADELA’s bankruptcy in the early 80s.

What I found striking, though, is that the imperialist ambitions of influencing Latin American government policies under the guise of development were mirrored by how things actually played out on the ground, as highlighted by an account from a former employee.

If ever there was a book that deserved the label “I read it so you don’t have to,” it’s Viva Adela! Life, love and laughter in Lima and Latin America. Written by an executive in 2016, this is advertised as providing “a light-hearted account of the Adela life in Latin America in the 1960s.” Judging from the blatant sexism and racism expressed in this account, the “light-heartedness” most probably was confined to the male, non-Latinx employees at the ADELA headquarter in Peru. “And if ever there were a quote that exemplifies the persistence of colonial logic in the field of development, it is the British author’s reasoning for joining the company:

After all, I reasoned, my father’s father had run Nigeria for a time, and my mother’s grandfather had run a large part of India in the good old days of the Raj, so why shouldn’t I go and help organize and improve Latin America?

This account also reveals that only male bachelors were employed, not based on their qualifications or knowledge of the Spanish language but for their “sophistication with the fairer sex,” whereas female “secretary staff was chosen on the basis of their physical attractions.” This macho spirit was only matched by the suspicion towards local business owners who were seen as abusing the company’s good will. Racist displays of superiority were exemplified by an episode when an Adela official addressed the finance minister of Trinidad and Tobago by saying, “We big, strong, company, Adela […] Come, help, you small miserable country.”

The self-portrayal by ADELA staff: white businessmen in suites taking over the development agenda. Taken from a brochure by ADELATEC stored at the Rockefeller Archive Center.

The list of disrespectful behavior could easily go on, but that’s not the point. My skepticism about multinational corporations and their efforts to improve life in Latin America and beyond isn’t based on isolated examples of sexism, racism or classism. Instead, the example of ADELA teaches us how for “development,” the dynamism of private businesses comes along with neo-imperialist tendencies; be it in its initiation or on the ground; be it in the 1960s or in the 2020s; be it ADELA or USAID.