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 MULTINATIONALS

Edited by Asim Erdilek

MULTINATIONALS AS MUTUAL INVADERS
AS MUTUAL
INVADERS
Intra-industry Direct Foreign Investment

Edited by
Asim Erdilek

ROUTLEDGE LIBRARY EDITIONS:

MULTINATIONALS

ISBN 978-1-138-24286-9

,!7IB1D8-cecigj!
www.routledge.com  an informa business
ROUTLEDGE LIBRARY EDITIONS:
MULTINATIONALS

Volume 1

MULTINATIONALS AS
MUTUAL INVADERS
 MULTINATIONALS AS
MUTUAL INVADERS
Intra-industry Direct Foreign Investment

Edited by
ASIM ERDILEK
First published in 1985 by Croom Helm Ltd
This edition first published in 2017
by Routledge
2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN
and by Routledge
711 Third Avenue, New York, NY 10017
Routledge is an imprint of the Taylor & Francis Group, an informa business
© 1985 Asim Erdilek
All rights reserved. No part of this book may be reprinted or reproduced or utilised
in any form or by any electronic, mechanical, or other means, now known or
hereafter invented, including photocopying and recording, or in any information
storage or retrieval system, without permission in writing from the publishers.
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infringe.
British Library Cataloguing in Publication Data
A catalogue record for this book is available from the British Library

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ISBN: 978-1-138-24284-5 (Volume 1) (hbk)

Publisher’s Note
The publisher has gone to great lengths to ensure the quality of this reprint but
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IUlTINATIONAlS AS
MUTUAl INVADERS=
INTRA-INDUSTRY DIRECT FORIEGN INVESTMENT

Edited by
ASIM ERDILEK

CROOM HELM
London & Sydney
 © 1985 Asim Erdilek
Croom Helm Ltd, Provident House, Burrell Row,
Beckenham, Kent BR3 lAT
Croom Helm Australia Pty Ltd, First Floor, 139 King Street,
Sydney, NSW 2001, Australia

British Library Cataloguing in Publication Data

Multinationals as mutual invaders.
1. Commerce
2. International business enterprises
I. Erdilek, Asim
382 HF1008
ISBN 0-7099--0935-7

Typeset by Mayhew Typesetting, Bristol, UK

Printed and bound in Great Britain
by Billing & Sons Limited, Worcester.
CONTENTS

List of Figures and Tables

Acknowledgements
Introduction Asim Erdilek 1
1. Intra-industry Production as a Form of International Economic
Involvement: An Exploratory Analysis
John H Dunning and George Norman 9
Comment Raymond Vernon 29
Comment Paul R. Krugman 33
2. The Determinants of Intra-industry Direct Foreign Investment
Alan M. Rugman 38
Comment Irving B. Kravis 60
Comment Donald J. Rousslang 64
3. Intra-industry Direct Foreign Investment, Market Structure,
Firm Rivalry and Technological Performance
Edward M. Graham 67
Comment Jean-Fran9ois Hennart 88
Comment William F Finan 94
4. Antitrust Policy and Intra-industry Direct Foreign
Investment: Cause and Effect
Philip Nelson and Louis Silvia 97
Comment Robert G. Hawkins 123
Comment William W. Nye 125
5. US Direct Foreign Investment and Trade: Theories, Trends
and Public-policy issues Rachel McCulloch 129
Comment Bela Balassa 151
'
Comment Gene M. Grossman 155
6. National and International Data Problems and Solutions
in the Empirical Analysis of Intra-industry Direct Foreign
Investment Frank G. Vukmanic, Michael R. Czinkota and
David A. Ricks 160
Comment Robert E. Lipsey 185
Comment Harvey E. Bale, Jr 189
Contents

References 193
Notes on Contributors 204
Index 205
FIGURES AND TABLES

Figures

3.1 Present Values of Expected Quasi-rents and Expected

Costs in Product Innovation Without Oligopolistic
Collusion 72
3.2 Present Values of Expected Quasi-rents and Expected
Costs in Product Innovation With Oligopolistic
Collusion in Domestic Markets 73
3 .3 Present Values of Expected Quasi-rents and Expected
Costs in Product Innovation With Oligopolistic Rivalry
in International Markets 75

Tables

1.1 A Typology of Two-way International Economic

Transactions 11
1.2 Two-way International Transactions: Significance of
OLI Determinants (Some Illustrations) 13
2.1 Relationships of Key Terms 41
2.2 A Model of Intra-industry Trade and Direct Foreign
Investment 42
2.3 Vertical Integration of Oil MNEs 48
2.4 Intra-industry Trade by Country 52
2.5 Ranking of Industries by Percentage of Intra-industry
Trade 52
2.6 Ranking of Industries by Percentage of Intra-industry
Direct Foreign Investment 53
2.7 A Comparison of the Performance of the World's Largest
Multinational Enterprises, 1970-9 57
4.1 Numbers of Hart-Scott-Rodino Pre-merger Filings,
1978-82 103
4.2 Incidence of Clearance and Second Requests for 762
Hart-Scott-Rodino Filings in 1981 104
Figures and Tables

4.3 Number of FTC Orders and Complaints Involving

Acquisitions and Joint Ventures, Financial Years
1980-2 105
4.4 Number of Department of Justice Cases Instituted
Involving Acquisitions and Joint Ventures, Caletrdar
Years 1980-2 106
4.5 Indirect Structural Effects of US Antitrust Laws on
Intra-industry Direct Foreign Investment: Effects
on Inward DFI of the United States 111
4.6 Indirect Structural Effects of US Antitrust Laws on
Intra-industry Direct Foreign Investment: Effects on
Outward DFI of the United States 112
6.1 Comparison of Selected National Data Collection Systems 163
6.2 BEA Company Surveys of Direct Foreign Investment in
the United States 170
6.3 BEA Surveys of US Direct Foreign Investment Abroad 171
6.4 Data on Direct Foreign Investment in the United States
Generated by the BEA Surveys 1 74
6.5 Data on US Direct Foreign Investment Abroad Generated
by the BEA Surveys 175
To Rolf R. Piekarz
ACKNOWLEDGEMENTS

This volume owes its existence directly to the 22 contributors, whose

papers and comments it includes, and indirectly but crucially to the
support of two institutions and several persons. I would like to express
my thanks to all the contributors as well as to:
(1) Case Western Reserve University (CWRU) for granting me a two-
year leave of absence (1981-3) at the US National Science Foundation
(NSF), during which I monitored the NSF's Research Programme in
International Economic Policy,
(2) the NSF for providing the indispensable financial and organisational
assistance for much of the research underlying this volume,
(3) Dr Rolf R. Piekarz of the NSF's Policy Research and Analysis
(PRA) Division for sharing, encouraging and guiding my interest in the
research on intra-industry direct foreign investment (IDFI), and Drs
Eileen L. Collins, Susan Cozzens, Carole E. Kitti, Alan I. Rapoport and
Eleanor Thomas of his staff for their generous support.
( 4) Minnie H. Mills and Carole Grider of the NSF, Charm.ion Getter,
Carolyne Jones, Cheryl Kominek and Carol Thomas of CWRU for their
typing and administrative aid, and Atif Cezairli of CWRU for his re-
search assistance.
MULTINATIONALS AS MUTUAL INVADERS
INTRODUCTION

Asim Erdilek

This volume contains the six papers and twelve comments that were
commissioned for and presented at a US National Science Foundation
workshop on intra-industry direct foreign investment (IDFI), on 21
April 1983, in Washington, DC. The workshop, which I organised and
chaired, was attended by about 70 persons, consisting of academicians,
US policy-makers and officials of international organisations. The
purpose of the workshop was to examine the analytical, policy-relevant
and empirical aspects of IDFI, some of which had been explored
earlier by Dunning (198lb), Erdilek (1976, 1982a, 1983), Flowers
(1976), Graham (1974, 1978), Hymer and Rowthorn (1970) as well as
a few others.
IDFI can be defined as the two-way DFI by multinational enter-
prises (MNEs), based in different countries, in each other's home
markets, to produce goods and services that are close substitutes in
either consumption or production, and thus can be classified in the
same industry. IDFI is a subset of cross-DFI (CDFI), which can be
defined as total two-way DFI, with its constituent one-way OFis occur-
ring in either the same industry or different industries. 1 Clearly, like
intra-industry trade, which is an alternative form of market interpene-
tration across national boundaries, IDFI depends on the 'industry'
definition of the statistical classification used. Its empirical significance,
when measured in the same way as intra-industry trade, is expected
to be inversely proportional to the level of industry disaggregation or
the degree of industry homogeneity. This definitional and statistical
relativity of IDFI is actually not much more bothersome than that of
DFI in general when, for example, we try to distinguish DFI from
portfolio foreign investment. Unfortunately, a certain amount of
arbitrariness is unavoidable.
IDFI, like intra-industry trade, between the United States and
other Western industrialised countries has increased substantially since
the early 1970s (Dunning, 1981 b). It has become a much more import-
ant part of CDFI, which has also risen significantly (OECD, 1981;
Erdilek, 1982a).2 Therefore, IDFI now calls for further theoretical and
empirical research which should be assisted by the pioneering studies
1
2 Introduction

in this volume.
Both the determinants and effects of IDFI have raised important
policy-issues in (1) market structure, competition and antitrust, (2)
research (R) and development (D), innovation, technology transfer and
diffusion, and (3) foreign trade and DFI, all of which pertain to the
current debate on national industrial policies (NIPs). 3 Indeed, some
individual developed countries' independently formulated and competi-
tively pursued NIPs may well be checked and frustrated by the global
orientation of MNEs that are 'mutual invaders' in those countries. IDFI
can not only have a significant influence on the outcomes of NIPs, but
also can itself be affected by them. Some countries may well try to
exploit IDFI as a means of undermining each others' NIPs, for example,
via violations of the national-treatment principle, coupled with claims
of extraterritoriality. IDFI can, therefore, be viewed as yet a higher
level of economic (as well as political and social) interdependence
among Western industrial nations in our time, which seriously compli-
cates the meaning of their individual 'international competitiveness'
vis-a-vis one another.
Focusing on the possible effects of IDFI, we can elaborate the three
major areas of public-policy concern mentioned above, in terms of the
following questions:

(1) What are the likely effects of IDFI on competition among firms,
especially MNEs, and on the implementation of antitrust policies? For
example,
(i) Is IDFI a likely substitute for international cartelisation?
(ii) Does IDFI reduce industrial market concentration?
(iii) Do mutual acquisitions (via IDFI) of weak firms (in contrast to
green-field investments) by strong ones improve productive effi-
ciency and financial viability of the former or do they increase
concentration and reduce competition?
(iv) What are the problems of reciprocal extraterritoriality created
by IDFI with regard to different national antitrust regulations?
(2) What are the likely effects of IDFI on technological positions of.
firms and industries? For example,
(i) Does IDFI stimulate or does it hinder world-wide R and D,
innovation, technology transfer and diffusion?
(ii) Under what circumstances does one country gain or lose in
industrial development relative to other countries as a result of
the IDFI activities of its own MNEs and the foreign-based
MNEs?
 Introduction 3

(3) What are the likely effects of IDFI on the volume, pattern and
balance of foreign trade? For example,
(i) If IDFI leads to greater volume of intra-firm (as opposed to
inter-firm) trade, does it also reduce the effectiveness of indivi-
dual DFI-partner countries' trade policies in achieving national
(either micro or macro) economic objectives, for example, in-
creases in output, employment and exports?
(ii) Does IDFI, by substituting local production for trade mutually
(often under either actual or threatened import restrictions)
alleviate either inter-industry or intra-industry (but inter-firm)
trade frictions between DFI-partner countries?
(iii) Does IDFI itself distort global production and trade patterns
under either market imperfections or government-imposed per-
formance requirements?

I should note, however, that not all serious students of DFI yet
agree that IDFI is a particularly significant economic phenomenon
deserving of special attention, apart from that accorded seperately
and independently to its constituent one-way DFis. Even a few of the
twelve comments included in this volume express a certain degree of
scepticism about the theoretical and/or empirical content of IDFI.
They tend to view IDFI merely as a corollary to the existing models
of DFUn general. They also doubt that it can be easily identified and
measured. (Of course, the same could have been said of intra-industry
trade before it began to receive a decade or so ago what is by now
widespread attention. Furthermore, although one-way DFI can be
analysed by a firm-level theory only, IDFI by definition involves at
least two parent-firms and thus would seem to require an industry-
level theory as well.) None the less, during the workshop, a consensus
emerged that IDFI, like intra-industry trade, especially intra-firm trade,
needs to be researched for both academic and public-policy purposes.
Of course, the reader should decide this issue for himself or herself
on the basis of the analysis and evidence presented here. In any case,
this volume should benefit its readers by providing them with greater
insight into the still increasing globalisation of industries and inter-
dependence of national industrial policies.
The first two chapters in the volume, by Dunning and Norman and
by Rugman, are both· primarily concerned with the determinants of
IDFI in the general analytical framework of international economic
involvement. Dunning and Norman offer an elaborate two-dimensional
taxonomy of such involvement, following a general-equilibrium approach
4 Introduction

and utilising Dunning's 'eclectic', that is, ownership-location-internalisa-

tion (OLI) theory of DFI as a unifying paradigm. After discussing the
analytical relationships between IDFI and other forms of international
economic involvement, for example, inter-industry DFI and intra-
industry trade, Dunning and Norman speculate that IDFI may be 'the
final stage in the evolvement of international economic transactions'
and that it, together with its complement intra-firm trade, may 'con-
tinue to flourish and grow in significance'.
The two comments, by Vernon and by Krugman, on Dunning and
Norman's chapter both articulate fundamental criticisms of the mainly
static taxonomic approach. Vernon is critical of that approach for
neglecting the dynamic, strategic and oligopolistic aspect of IDFI,
that is, the 'sequential behavior of the firm interacting with other
firms'. In particular, he stresses the major importance of uncertainty
as a motive for IDFI. He also draws attention to significant intra-firm
learning-by-doing in the dynamics of inter-firm rivalry. Krugman, on
the other hand, criticises the Dunning-Norman approach, first, for
deriving the causes of ID Fl from its effects (instead of the other way
around), and second, for defining IDFI as two-way investment in
industries whose products are close substitutes in either consumption
or production. Krugman prefers to define IDFI as 'an extension of
control' via 'two-way exportation of technological know-how' due
primarily to economies of scale and economies of scope. But his
definition may be considerably more difficult to operationalise in
measuring and modelling IDFI.
Rugman follows, in his chapter, a less general-equilibrium-oriented
and more micro (firm-level) approach than that of Dunning and
Norman. He treats their location (L) component of the OLI theory
as an exogenous country-specific advantage (CSA) and combines the
ownership (0) and internalisation (I) components into his firm-specific
advantage (FSA). Rugman traces the emergence of both one-way DFI
and IDFI, as well as their 'natural companion' intra-industry trade
(which, for simplification, he prefers to identify entirely with intra-
firm trade), to either natural or government-induced market-imperfec-
tions that increase firms' transaction-costs. He presents recent empirical
evidence from several industries and countries, for example, MNEs
producing pharmaceuticals in Canada, in support of his theoretical
analysis.
The first comment on Rugman's chapter is by Kravis who finds
neither Rugman's internalisation-based theory nor the dynamic oligo-
polistic-rivalry theory of IDFI general enough. He argues that a more
 Introduction 5

general theory must explain: (i) the country-location of parent firms,

(ii) why parents establish or acquire affiliates, that is, why some firms
become MNEs, and (iii) the interactions between home- and host-
country characteristics. From these three components (only the second
of which Rugman emphasises), he derives four interesting hypotheses -
waiting to be empirically tested - about IDFI determinants. In the
second comment, Rousslang, too, is critical of Rugman's exogenous
treatment of the CSAs and the FSAs. Furthermore, he takes issue with
some of Rugman's favourable conclusions on the efficiency and welfare
implications of IDFI.
Graham's chapter is concerned primarily with the effects of IDFI
on market structure and inter-firm rivalry, in terms of the dynamic
criterion of product innovation, that is, introduction of new products
by rival firms as a time-dependent corporate strategy. He adapts a
model previously developed by Scherer (1967, 1980) to an essentially
game-theoretic analysis of inter-firm rivalry and IDFI in globally
oligopolistic industries. One of them is the tyre industry, which Graham
examines in some detail. He also discusses three major public-policy
issues of IDFI from the viewpoint of the United States both as a home-
and as a host-country.
Hennart's comment focuses on the lack of generality of Graham's
game-theoretic analysis of IDFI in terms of oligopolistic rivalry
(through 'exchange of threats'). He provides interesting evidence from
the history of international business for his criticism. His conclusion
that IDFI is 'the sign of increased world-wide rivalry in most industries',
is, however, in broad agreement with Graham's analysis. Finan, in his
comment, on the other hand, argues that Graham's analysis needs to be
sharpened (especially by distinguishing more clearly among alternative
modes of overseas market-entry) and qualified in order to deal with the
specific issues raised by the IDFI. He emphasises that there can be
significant exceptions to Graham's general conclusions, especially as
regards the pro-competitive effects of IDFI.
The· Nelson and Silvia chapter surveys the largely uncharted and
somewhat forbidding territory of the interactions between US anti-
trust policy and IDFI. Naturally, and perhaps frustratingly, it raises
more questions than those it answers. But as such, it provides plenty
of potentially rewarding research directions and ideas to those who
wish to explore and exploit the territory further.
Hawkin's comment reflects the 'frustrating' nature of Nelson and
Silvia's chapter. Hawkins does recognise, however, that Nelson and
Silvja are attempting a 'complex and burdensome' analysis in order to
6 Introduction

shed some light on 'one of the more important unresolved economic

policy issues facing the United States'. Nye, on the other hand, directs
his comment at elaborating several of the many issues raised by Nelson
and Silvia, instead of bemoaning the present lack of definite con-
clusions. Furthermore, Nye, like Hawkins but in greater detail, em-
phasises the differences in national antitrust policies across countries
as an important element in the analysis of antitrust and IDFI inter-
actions.
McCulloch, in Chapter 5, examines the relationship of IDFI with
foreign trade. She begins with a critical review of the theoretical frame-
works underlying the Dunning-Norman and Rugman chapters. She
endorses Rugmail's emphasis on internalisation as the primary explana-
tion of IDFI but disagrees with his interpretation of that concept. Her
interpretation, treating internalisation as a risk-management strategy,
is based more directly on the seminal contribution by Coase (193 7).
Then, after noting the primarily positive, that is, descriptive approach
of the 'eclectic' (OLI) theory which underlies the Dunning-Norman
taxonomy, McCulloch offers an alternative taxonomy of her own.
She argues that her five-category classification of the stimuli for DFI
is more suitable for normative, that is, prescriptive analysis. Indeed,
she devotes a greater part of her attention to analysis of public-policy
issues, especially those pertaining to linkages between DFI and trade
(for example, substitutability versus complementarity between them).
Her suggestions for future research, however, cover both nonnative and
positive unanswered questions.
Balassa, in his· comment, registers his several, primarily empirical
disagreements with McCulloch's analysis of DFI and IDFI stimuli. He
focuses on IDFI between the United States and the European Econo-
mic Community, drawing heavily from his earlier ideas in Balassa
(1966), within the framework of dynamic oligopolistic rivalry across
national boundaries. Grossman, in his comment, supports McCulloch's
analysis on the whole and elaborates further some of her ideas, regard-
ing especially diversification and reduction of uncertainty (via internali-
sation) as DFI motives. Moreover, he emphasises ' ... the extent to
which formal model-building and hypothesis-testing on aspects of
DFI have fallen behind more casual modes of theoretical and empirical
analysis'.
In the final chapter of the volume, Vukmanic, Czinkota and Ricks
take up the problems of empirical IDFI analysis, focusing primarily on
the imperfections in national and international data. Although their
concern is mainly with the US data, they also present a comprehensive
 Introduction 7

survey of non-US data sources. They conclude with several suggestions

to improve the collecting and processing of DFI data and to provide
researchers with better access to those data.
Lipsey, in his comment, points to several shortcomings, especially
omissions of the Vukmanic-Czinkota-Ricks chapter (for example, in
the survey of DFI-data sources). Moreover, he is critical of what he
considers to be an overemphasis on US-data issues and an unwarranted
pessimism about obtaining internationally comparable DFI data. He is
also sceptical about some of the recommendations of Vukmanic,
Czinkota and Ricks for generating more and better data. Overall, he
advocates a much more selective approach to collecting data for study-
ing IDFI. Bale, in his comment, besides repeating some of Lipsey's
criticisms, emphasises the administrative and financial constraints that
the US Government faces in offering researchers more and better DFI
data. He acknowledges that both private researchers and public-policy
makers are often frustrated with the imperfections in the official data
on DFI. However, he suggests that private-sector (business andlabour)
resources can make a better contribution to alleviating that frustra-
tion.
In conclusion to this introduction, let me again stress the largely
exploratory nature of the chapters and comments contained in this
book. Thus, it is not surprising that there is much on which the 22
contributors disagree with each other. The reader may find this
somewhat disconcerting but also rather stimulating. After all, what
better evidence could he or she be offered for the existence of a
theoretical as well as an empirical research agenda that is worth his or
her serious consideration?

Notes

1. Whether CDFI and IDFiare defined as occurring between a given country

and the rest of the world (that is, all its DFI-partner countries combined) or
between that country and its individual DFl-partners separately does make a
difference. Although the former (and broader) definition is symmetrical with
the more common definitions used in international trade analysis, much of the
discussion in this volume indicates that the latter (that is, bilateral) definition
may be more appropriate in many cases for either theoretical or empirical analy-
sis. Whether we like it or not, bilateralism ('reciprocity') in international econo-
mic transactions, especially DFI, has increased in importance since the late 1970s.
2. The ratio of the stock of US total inward DFI to the stock of US total
outward DFI rose from 18 per cent in 1970 to 45 per cent in 1982. With in-
creased (broadly defined) CDFI, the United States has become themostimportant
8 Introduction

host- as well as home-country in the world, in terms of the absolute sizes of its
total inward and outward DFI stocks, respectively.
3. National industrial policy (NIP) is essentially a microeconomic but amor-
phous concept. It implies less than full confidence in the efficacy of free markets
to allocate resources efficiently. It refers to any form of national co-ordination
or central allocation of industrial resources under government guidance (incen-
tives or directives) as a means to increasing a country's international competitive-
ness. NIP is supposed to refurbish ailing old ('sunset') industries ('losers') and
nurture ('target') healthy young ('sumise:) industries ('winners'). Thus, it is
expected to facilitate an economy's transition from 'low-techology' industrialisa-
tion to 'high-technology' industrialisation (that is, to achieve 'reindustrialisation'
by 'restructuring').
The interest in NIP is often tied with the concern about the global 'high-
technology' race among the United States, the European Economic Community
and Japan (Wall Street Journal, 1 February 1984, p. 26). NIP connotes a more
active and direct government involvement than 'positive adjustment policy' which
has been advocated for its members by the Organisation for Economic Coopera-
tion and Development (OECD}. In the final analysis, it could be argued that
every country actually has had either a fonnal or informal NIP, that is, a set of all
the industry-specific actions or non-actions in areas such as taxation and sub-
sidisation, antitrust, Rand D, trade and DFI.
1 INTRA-INDUSTRY PRODUCTION AS A FORM
OF INTERNATIONAL ECONOMIC
INVOLVEMENT: AN EXPLORATORY ANALYSIS

John H. Dunning and George Norman

Introduction

This chapter examines some of the determinants of intra-industry

international production 1 within the broader context of a unified
(or eclectic) paradigm of international economic involvement. 2 First,
it presents a typology of inter-country economic transactions. Second,
it suggests an analytical framework by which the extent and character
of these transactions can be identified and explained. Third, in arguing
that intra-industry production has common features with other forms
of international commerce - and particularly those of intra-industry
trade and inter-industry production - it uses a building-block approach
to hypothesising about recent trends in this kind of multinational
enterprise (MNE) activity (Erdilek, 1982a).

A Taxonomy of International Economic Involvement

To some extent, all typologies reflect the purposes for which they are
designed. Our classification of international transactions is no excep-
tion. In particular, we shall focus attention on two sets of variables
most germane to our interests.
The first is the similarity or difference in the nature of outward and
inward transactions of a country. In practice, these range on a con-
tinuum from those which are completely independent of each other
to those which are completely substitutable for each other. 3 In our
analysis, we shall adopt a threefold classification. Inter-industry
economic involvement embraces cross-border transactions in different
goods,4 and is substantially, if not solely, based on the unequal distri-
bution of immobile factor endowments. Intra-industry transactions
incorporate those in identical or closely similar goods, and are based,
not on the above criteria, but on the extent to which different locations
enable the gains of plant concentration and specialisation, and those
9
10 Intra-industry Production

arising from the common ownership of multiple activities, to be ex-

ploited. Inter-intra industry involvement embraces trade iri broadly
similar goods and reflects some of the characteristics of each of the
two other kinds.
The second group of variables relate to the mode or organisation
of the transactions used by economic agents. 5 These also vary along
a continuum ranging from arm's-length transactions conducted in
the spot market to internal transactions within the same organisation.
Again, we shall illustrate the two extremes and one intermediate
mode, namely, contract or co-operative transactions. These latter
embrace such arrangements as subcontracting, management agree-
ments, franchising, licensing, etc. They incorporate some of the features
of the market, for example, they are conducted between independent
parties; and some of those of hierarchies, for example, there may be
some influence or cuntrol exerted by one of the parties over the other.
The above classification suggests a 3 X 3 matrix and this is set out in
Table 1.1.
Each of the nine cells illustrated may be further divided into sub-
cells. In Table 1.1 we have identified two additional criteria. One
measured vertically, relates to what is traded. Here, we make the dis-
tinction between assets, and/or asset rights and-products (which may
range from intermediate to final commodities and services). For
example, foreign production involves the intra-firm transfer of assets
(capital) and asset rights (technology), 6 while spot market trade em-
braces off-the-shelf transactions in products between independent
firms at arm's-length prices. The second criterion - measured horizont-
ally - is the trading environment. This consists both of the market
structure in which goods and assets are internationally transacted
(for example, rtumber of firms, product differentiation, barriers to
entry, etc.); and the extent and form of non-market (for example,
government) intervention. While we shall acknowledge that these
market imperfections· may influence the transactions classified to
any one of our ·nine cells, we shall consider these explicitly only in so
far as they affect the two main classifications.

An Analytical Framework for Evaluating the Determinants of the

Different Forms of International Economic Involvement

Using the typology of Table 1.1, it is possible both to group inter-

national transactions into the categories commonly discussed in the
 Table 1.1: A Typology of Two-way International Economic Transactions

- - - - - - - Organisation of Transactions - - - -
Spot Markets . Contracts Hierarchies

Perfect-+ Imperfect Comp. Perfect-+ Imperfect Comp. Perfect-+ Imperfect Comp.

A B c
Arm's-length transactions Contract transactions Internalised transactions
Assets No cross-hauling No cross-hauling (e.g. of similar
Portfolio Investment kinds of technology) Direct foreign
Inter- Licensing, management contracts, See general investment
industry etc. theories of / _ JVs -4 100%
DFI and - - - - - - - -
international
H-0-S production
/ Neo-factor Neo-techno- Subcontracting Intra-firm
Products trade logy product- (See explana- trade
c
"'
0
l cycle trade tions of Watanabe
·.;::; et al.)
o·
111
c"' D E F
111 Moving towards Vertical and
Some cross-hauling of
i= Assets broadly similar assets/ As above (see explanations of plant special i- horizontal direct
~
0 Inter- products Lall, Telessio, Contractor, sation within foreign invest-
c intra- Mixture of Alchian and Demsetz et al.) hierarchies ment
0 industry l H-0-S trade
- (Burenstam- Intra-firm trade
Product• Linder, Dreze, (Helleiner and
Gray, Krugman, Lavergne, Lal I)
Barker explana-
tions) l
G H
Cross-hauling of identical Cross-hauling of identical or Importance of economies of
1~1 Intra-
Assets or closely similar assets/
products
closely similar assets/products
Some control/influence exerted
synergy and transaction-cost
minimising
industry (Dreze et al. in contract (See explana- Horizontal direct
and Grubel & Cross-licensing, e.g. in chemical tions of / foreign invest-
l Trading Lloyd, Brander, industry Williamson, ment
Products Oligopolies Finger, Hesse Cross-subcon- Caves, Teece, MNE oligopolies
et al. explana- tracting as in Casson, etc.) Intra-firm trade
tions) auto industry
12 Intra-industry Production

literature and to suggest an analytical framework for identifying their

determinants. 7 Table 1.2 sets out these characteristics using the frame-
work of the eclectic paradigm of international involvement (Dunning
1981 a). This asserts that the extent, structure and form of a nation's
international economic involvement will depend first on the en-
dogenous competitive advantages of its firms relative to those of other
nationalities - the so-called ownership (0)-specific advantages; second
on the structure of its own resource endowments and other charac-
teristics exogenous to its firms, for example, consumer needs and
tastes, market structure, government policy, etc. - the so-called
location (L)-specific advantages - and third on the organisation of
international transactions, and, in particular, the advantages of admini-
stering these transactions within the same firm, that is, internalisation
(I) advantages, rather than using external markets. Although the OLI
framework of analysis has so far been used mainly to explain one-way
foreign production, there is no reason why it should not be used to
explain other forms, and the totality, of a nation's international
involvement.
At a micro level, for a firm to export to or produce in a foreign
country, it must generate output from assets which it is able to acquire
and utilise at least as, if not more, successfully than its competitors.
The literature identifies two kinds of assets, namely, those which are
immobile in their use, for example, land, and those which are spatially
transferable, for example, technology and most kinds of human capital.
It also distinguishes between· assets which are exclusive or proprietary
to their owners, and those which are accessible to all economic agents.
The former are referred to as ownership (0)-specific assets. 8
For trade in goods to take place, there must be some reason for
assets to be used in a country other than that in which their outputs
are consumed. In some cases, trade is solely determined by the geo-
graphical disposition of location (L)-specific but non-exclusive assets,
in others, by a mixture of L- and 0-specific assets. But it is also
axiomatic that these assets are employed by the firms which own or
acquire them, for example, 0 advantages are internalised rather than
leased to foreign firms.
However, since mobile assets do not need to be exploited in their
country of origin, other forms of involvement might be preferred to
trade in the products embodying them. In particular, two options may
be possible. First, the rights to these assets may be sold on the spot
market or by contract to foreign firms. Alternatively, their export may
be internalised via DFI. But in some cases, there may be no market for
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them striped and splashed and dotted with puttycolor and blue and
green of camouflage paint. A man in a motorboat waved his arms.
The men in khaki slickers huddled on the gray dripping deck of the
transport begin to sing
Oh the infantry, the infantry,
With the dirt behind their ears ...
Through the brightbeaded mist behind the low buildings of
Governors Island they can make out the tall pylons, the curving
cables, the airy lace of Brooklyn Bridge. Robertson pulls a package
out of his pocket and pitches it overboard.
“What was that?”
“Just my propho kit.... Wont need it no more.”
“How’s that?”
“Oh I’m goin to live clean an get a good job and maybe get
married.”
“I guess that’s not such a bad idear. I’m tired o playin round
myself. Jez somebody must a cleaned up good on them Shippin
Board boats.” “That’s where the dollar a year men get theirs I guess.”
“I’ll tell the world they do.”
Up forward they are singing
Oh she works in a jam factoree
And that may be all right ...
“Jez we’re goin up the East River Sarge. Where the devil do they
think they’re goin to land us?”
“God, I’d be willin to swim ashore myself. An just think of all the
guys been here all this time cleanin up on us.... Ten dollars a day
workin in a shipyard mind you ...”
“Hell Sarge we got the experience.”
“Experience ...”
Apres la guerre finee
 Back to the States for me....
“I bet the skipper’s been drinkin beaucoup highballs an thinks
Brooklyn’s Hoboken.”
“Well there’s Wall Street, bo.”
They are passing under Brooklyn Bridge. There is a humming
whine of electric trains over their heads, an occasional violet flash
from the wet rails. Behind them beyond barges tugboats carferries
the tall buildings, streaked white with whisps of steam and mist,
tower gray into sagged clouds.

Nobody said anything while they ate the soup. Mrs. Merivale sat
in black at the head of the oval table looking out through the half
drawn portières and the drawingroom window beyond at a column of
white smoke that uncoiled in the sunlight above the trainyards,
remembering her husband and how they had come years ago to look
at the apartment in the unfinished house that smelled of plaster and
paint. At last when she had finished her soup she roused herself and
said: “Well Jimmy, are you going back to newspaper work?”
“I guess so.”
“James has had three jobs offered him already. I think it’s
remarkable.”
“I guess I’ll go in with the Major though,” said James Merivale to
Ellen who sat next to him. “Major Goodyear you know, Cousin
Helena.... One of the Buffalo Goodyears. He’s head of the foreign
exchange department of the Banker’s Trust.... He says he can work
me up quickly. We were friends overseas.”
“That’ll be wonderful,” said Maisie in a cooing voice, “wont it
Jimmy?” She sat opposite slender and rosy in her black dress.
“He’s putting me up for Piping Rock,” went on Merivale.
“What’s that?”
 “Why Jimmy you must know.... I’m sure Cousin Helena has been
out there to tea many a time.”
“You know Jimps,” said Ellen with her eyes in her plate. “That’s
where Stan Emery’s father used to go every Sunday.”
“Oh did you know that unfortunate young man? That was a
horrible thing,” said Mrs. Merivale. “So many horrible things have
been happening these years.... I’d almost forgotten about it.”
“Yes I knew him,” said Ellen.
The leg of lamb came in accompanied by fried eggplant, late corn,
and sweet potatoes. “Do you know I think it is just terrible,” said Mrs.
Merivale when she had done carving, “the way you fellows wont tell
us any of your experiences over there.... Lots of them must have
been remarkably interesting. Jimmy I should think you’d write a book
about your experiences.”
“I have tried a few articles.”
“When are they coming out?”
“Nobody seems to want to print them.... You see I differ radically
in certain matters of opinion ...”
“Mrs. Merivale it’s years since I’ve eaten such delicious sweet
potatoes.... These taste like yams.”
“They are good.... It’s just the way I have them cooked.”
“Well it was a great war while it lasted,” said Merivale.
“Where were you Armistice night, Jimmy?”
“I was in Jerusalem with the Red Cross. Isn’t that absurd?”
“I was in Paris.”
“So was I,” said Ellen.
“And so you were over there too Helena? I’m going to call you
Helena eventually, so I might as well begin now.... Isn’t that
interesting? Did you and Jimmy meet over there?”
 “Oh no we were old friends.... But we were thrown together a
lot.... We were in the same department of the Red Cross—the
Publicity Department.”
“A real war romance,” chanted Mrs. Merivale. “Isn’t that
interesting?”

“Now fellers it’s this way,” shouted Joe O’Keefe, the sweat
breaking out on his red face. “Are we going to put over this bonus
proposition or aint we?... We fought for em didnt we, we cleaned up
the squareheads, didnt we? And now when we come home we get
the dirty end of the stick. No jobs.... Our girls have gone and married
other fellers.... Treat us like a bunch o dirty bums and loafers when
we ask for our just and legal and lawful compensation ... the bonus.
Are we goin to stand for it?... No. Are we goin to stand for a bunch of
politicians treatin us like we was goin round to the back door to ask
for a handout?... I ask you fellers....”
Feet stamped on the floor. “No.” “To hell wid em,” shouted
voices.... “Now I say to hell wid de politicians.... We’ll carry our
campaign to the country ... to the great big generous bighearted
American people we fought and bled and laid down our lives for.”
The long armory room roared with applause. The wounded men
in the front row banged the floor with their crutches. “Joey’s a good
guy,” said a man without arms to a man with one eye and an artificial
leg who sat beside him. “He is that Buddy.” While they were filing out
offering each other cigarettes, a man stood in the door calling out,
“Committee meeting, Committee on Bonus.”
The four of them sat round a table in the room the Colonel had
lent them. “Well fellers let’s have a cigar.” Joe hopped over to the
Colonel’s desk and brought out four Romeo and Juliets. “He’ll never
miss em.”
“Some little grafter I’ll say,” said Sid Garnett stretching out his long
legs.
 “Havent got a case of Scotch in there, have you Joey?” said Bill
Dougan.
“Naw I’m not drinkin myself jus for the moment.”
“I know where you kin get guaranteed Haig and Haig,” put in
Segal cockily—“before the war stuff for six dollars a quart.”
“An where are we goin to get the six dollars for crissake?”
“Now look here fellers,” said Joe, sitting on the edge of the table,
“let’s get down to brass tacks.... What we’ve got to do is raise a fund
from the gang and anywhere else we can.... Are we agreed about
that?”
“Sure we are, you tell em,” said Dougan.
“I know lot of old fellers even, thinks the boys are gettin a raw
deal.... We’ll call it the Brooklyn Bonus Agitation Committee
associated with the Sheamus O’Rielly Post of the A. L.... No use doin
anythin unless you do it up right.... Now are yous guys wid me or aint
yer?”
“Sure we are Joey.... You tell em an we’ll mark time.”
“Well Dougan’s got to be president cause he’s the best lookin.”
Dougan went crimson and began to stammer.
“Oh you seabeach Apollo,” jeered Garnett.
“And I think I can do best as treasurer because I’ve had more
experience.”
“Cause you’re the crookedest you mean,” said Segal under his
breath.
Joe stuck out his jaw. “Look here Segal are you wid us or aint
yer? You’d better come right out wid it now if you’re not.”
“Sure, cut de comedy,” said Dougan. “Joey’s de guy to put dis ting
trough an you know it.... Cut de comedy.... If you dont like it you kin
git out.”
 Segal rubbed his thin hooked nose. “I was juss jokin gents, I didn’t
mean no harm.”
“Look here,” went on Joe angrily, “what do you think I’m givin up
my time for?... Why I turned down fifty dollars a week only yesterday,
aint that so, Sid? You seen me talkin to de guy.”
“Sure I did Joey.”
“Oh pipe down fellers,” said Segal. “I was just stringin Joey
along.”
“Well I think Segal you ought to be secretary, cause you know
about office work....”
“Office work?”
“Sure,” said Joe puffing his chest out. “We’re goin to have desk
space in the office of a guy I know.... It’s all fixed. He’s goin to let us
have it free till we get a start. An we’re goin to have office stationery.
Cant get nowhere in this world without presentin things right.”
“An where do I come in?” asked Sid Garnett.
“You’re the committee, you big stiff.”
After the meeting Joe O’Keefe walked whistling down Atlantic
Avenue. It was a crisp night; he was walking on springs. There was a
light in Dr. Gordon’s office. He rang. A whitefaced man in a white
jacket opened the door.
“Hello Doc.”
“Is that you O’Keefe? Come on in my boy.” Something in the
doctor’s voice clutched like a cold hand at his spine.
“Well did your test come out all right doc?”
“All right ... positive all right.”
“Christ.”
“Dont worry too much about it, my boy, we’ll fix you up in a few
months.”
“Months.”
 “Why at a conservative estimate fiftyfive percent of the people you
meet on the street have a syphilitic taint.”
“It’s not as if I’d been a damn fool. I was careful over there.”
“Inevitable in wartime....”
“Now I wish I’d let loose.... Oh the chances I passed up.”
The doctor laughed. “You probably wont even have any
symptoms.... It’s just a question of injections. I’ll have you sound as a
dollar in no time.... Do you want to take a shot now? I’ve got it all
ready.”
O’Keefe’s hands went cold. “Well I guess so,” he forced a laugh. “I
guess I’ll be a goddam thermometer by the time you’re through with
me.” The doctor laughed creakily. “Full up of arsenic and mercury
eh.... That’s it.”
The wind was blowing up colder. His teeth were chattering.
Through the rasping castiron night he walked home. Fool to pass out
that way when he stuck me. He could still feel the sickening lunge of
the needle. He gritted his teeth. After this I got to have some luck.... I
got to have some luck.

Two stout men and a lean man sit at a table by a window. The
light of a zinc sky catches brightedged glints off glasses, silverware,
oystershells, eyes. George Baldwin has his back to the window. Gus
McNiel sits on his right, and Densch on his left. When the waiter
leans over to take away the empty oystershells he can see through
the window, beyond the graystone parapet, the tops of a few
buildings jutting like the last trees at the edge of a cliff and the tinfoil
reaches of the harbor littered with ships. “I’m lecturin you this time,
George.... Lord knows you used to lecture me enough in the old
days. Honest it’s rank foolishness,” Gus McNiel is saying. “... It’s rank
foolishness to pass up the chance of a political career at your time of
life.... There’s no man in New York better fitted to hold office ...”
 “Looks to me as if it were your duty, Baldwin,” says Densch in a
deep voice, taking his tortoiseshell glasses out of a case and
applying them hurriedly to his nose.
The waiter has brought a large planked steak surrounded by
bulwarks of mushrooms and chopped carrots and peas and frilled
browned mashed potatoes. Densch straightens his glasses and
stares attentively at the planked steak.
“A very handsome dish Ben, a very handsome dish I must say....
It’s just this Baldwin ... as I look at it ... the country is going through a
dangerous period of reconstruction ... the confusion attendant on the
winding up of a great conflict ... the bankruptcy of a continent ...
bolshevism and subversive doctrines rife ... America ...” he says,
cutting with the sharp polished steel knife into the thick steak, rare
and well peppered. He chews a mouthful slowly. “America,” he
begins again, “is in the position of taking over the receivership of the
world. The great principles of democracy, of that commercial
freedom upon which our whole civilization depends are more than
ever at stake. Now as at no other time we need men of established
ability and unblemished integrity in public office, particularly in the
offices requiring expert judicial and legal knowledge.”
“That’s what I was tryin to tell ye the other day George.”
“But that’s all very well Gus, but how do you know I’d be
elected.... After all it would mean giving up my law practice for a
number of years, it would mean ...”
“You just leave that to me.... George you’re elected already.”
“An extraordinarily good steak,” says Densch, “I must say.... No
but newspaper talk aside ... I happen to know from a secret and
reliable source that there is a subversive plot among undesirable
elements in this country.... Good God think of the Wall Street bomb
outrage.... I must say that the attitude of the press has been
gratifying in one respect ... in fact we’re approaching a national unity
undreamed of before the war.”
“No but George,” breaks in Gus, “put it this way.... The publicity
value of a political career’d kinder bolster up your law practice.”
 “It would and it wouldn’t Gus.”
Densch is unrolling the tinfoil off a cigar. “At any rate it’s a grand
sight.” He takes off his glasses and cranes his thick neck to look out
into the bright expanse of harbor that stretches full of masts, smoke,
blobs of steam, dark oblongs of barges, to the hazeblurred hills of
Staten Island.
Bright flakes of cloud were scaling off a sky of crushing indigo
over the Battery where groups of dingy darkdressed people stood
round the Ellis Island landing station and the small boat dock waiting
silently for something. Frayed smoke of tugs and steamers hung low
and trailed along the opaque glassgreen water. A threemasted
schooner was being towed down the North River. A newhoisted jib
flopped awkwardly in the wind. Down the harbor loomed taller, taller
a steamer head on, four red stacks packed into one, creamy
superstructure gleaming. “Mauretania just acomin in twentyfour
hours lyte,” yelled the man with the telescope and fieldglasses....
“Tyke a look at the Mauretania, farstest ocean greyhound, twentyfour
hours lyte.” The Mauretania stalked like a skyscraper through the
harbor shipping. A rift of sunlight sharpened the shadow under the
broad bridge, along the white stripes of upper decks, glinted in the
rows of portholes. The smokestacks stood apart, the hull lengthened.
The black relentless hull of the Mauretania pushing puffing tugs
ahead of it cut like a long knife into the North River.
A ferry was leaving the immigrant station, a murmur rustled
through the crowd that packed the edges of the wharf. “Deportees....
It’s the communists the Department of Justice is having deported ...
deportees ... Reds.... It’s the Reds they are deporting.” The ferry was
out of the slip. In the stern a group of men stood still tiny like tin
soldiers. “They are sending the Reds back to Russia.” A
handkerchief waved on the ferry, a red handkerchief. People tiptoed
gently to the edge of the walk, tiptoeing, quiet like in a sickroom.
Behind the backs of the men and women crowding to the edge of
the water, gorillafaced chipontheshoulder policemen walked back
and forth nervously swinging their billies.
 “They are sending the Reds back to Russia.... Deportees....
Agitators.... Undesirables.” ... Gulls wheeled crying. A catsupbottle
bobbed gravely in the little ground-glass waves. A sound of singing
came from the ferryboat getting small, slipping away across the
water.
C’est la lutte finale, groupons-nous et demain
L’Internationale sera le genre humain.
“Take a look at the deportees.... Take a look at the undesirable
aliens,” shouted the man with the telescopes and fieldglasses. A
girl’s voice burst out suddenly, “Arise prisoners of starvation,” “Sh....
They could pull you for that.”
The singing trailed away across the water. At the end of a
marbled wake the ferryboat was shrinking into haze. International ...
shall be the human race. The singing died. From up the river came
the longdrawn rattling throb of a steamer leaving dock. Gulls
wheeled above the dark dingydressed crowd that stood silently
looking down the bay.
II. Nickelodeon

A
nickel before midnight buys tomorrow ...
holdup headlines, a cup of coffee in the
automat, a ride to Woodlawn, Fort Lee,
Flatbush.... A nickel in the slot buys chewing
gum. Somebody Loves Me, Baby Divine,
You’re in Kentucky Juss Shu’ As You’re Born
... bruised notes of foxtrots go limping out of
doors, blues, waltzes (We’d Danced the
Whole Night Through) trail gyrating tinsel
memories.... On Sixth Avenue on Fourteenth
there are still flyspecked stereopticons
where for a nickel you can peep at yellowed
yesterdays. Beside the peppering shooting
gallery you stoop into the flicker A Hot Time,
The Bachelor’s Surprise, The Stolen
Garter ... wastebasket of tornup
daydreams.... A nickel before midnight buys
our yesterdays.

R
uth Prynne came out of the doctor’s office pulled the fur tight
round her throat. She felt faint. Taxi. As she stepped in she
remembered the smell of cosmetics and toast and the littered
hallway at Mrs. Sunderlands. Oh I cant go home just yet. “Driver go
to the Old English Tea Room on Fortieth Street please.” She opened
her long green leather purse and looked in. My God, only a dollar a
quarter a nickel and two pennies. She kept her eyes on the figures
flickering on the taximeter. She wanted to break down and cry.... The
way money goes. The gritty cold wind rasped at her throat when she
got out. “Eighty cents miss.... I haven’t any change miss.” “All right
keep the change.” Heavens only thirtytwo cents.... Inside it was
warm and smelled cozily of tea and cookies.
“Why Ruth, if it isn’t Ruth.... Dearest come to my arms after all
these years.” It was Billy Waldron. He was fatter and whiter than he
used to be. He gave her a stagy hug and kissed her on the forehead.
“How are you? Do tell me.... How distinguée you look in that hat.”
“I’ve just been having my throat X-rayed,” she said with a giggle.
“I feel like the wrath of God.”
“What are you doing Ruth? I havent heard of you for ages.”
“Put me down as a back number, hadn’t you?” She caught his
words up fiercely.
“After that beautiful performance you gave in The Orchard
Queen....”
“To tell the truth Billy I’ve had a terrible run of bad luck.”
“Oh I know everything is dead.”
“I have an appointment to see Belasco next week.... Something
may come of that.”
“Why I should say it might Ruth.... Are you expecting someone?”
“No.... Oh Billy you’re still the same old tease.... Dont tease me
this afternoon. I dont feel up to it.”
“You poor dear sit down and have a cup of tea with me.
“I tell you Ruth it’s a terrible year. Many a good trouper will pawn
the last link of his watch chain this year.... I suppose you’re going the
rounds.”
“Dont talk about it.... If I could only get my throat all right.... A thing
like that wears you down.”
“Remember the old days at the Somerville Stock?”
“Billy could I ever forget them?... Wasnt it a scream?”
“The last time I saw you Ruth was in The Butterfly on the Wheel in
Seattle. I was out front....”
 “Why didn’t you come back and see me?”
“I was still angry at you I suppose.... It was my lowest moment. In
the valley of shadow ... melancholia ... neurasthenia. I was stranded
penniless.... That night I was a little under the influence, you
understand. I didn’t want you to see the beast in me.”
Ruth poured herself a fresh cup of tea. She suddenly felt
feverishly gay. “Oh but Billy havent you forgotten all that?... I was a
foolish little girl then.... I was afraid that love or marriage or anything
like that would interfere with my art, you understand.... I was so
crazy to succeed.”
“Would you do the same thing again?”
“I wonder....”
“How does it go?... The moving finger writes and having writ
moves on ...”
“Something about Nor all your tears wash out a word of it ... But
Billy,” she threw back her head and laughed, “I thought you were
getting ready to propose to me all over again.... Ou my throat.”
“Ruth I wish you werent taking that X-ray treatment.... I’ve heard
it’s very dangerous. Dont let me alarm you about it my dear ... but I
have heard of cases of cancer contracted that way.”
“That’s nonsense Billy.... That’s only when X-rays are improperly
used, and it takes years of exposure.... No I think this Dr. Warner’s a
remarkable man.”
Later, sitting in the uptown express in the subway, she still could
feel his soft hand patting her gloved hand. “Goodby little girl, God
bless you,” he’d said huskily. He’s gotten to be a ham actor if there
ever was one, something was jeering inside her all the while. “Thank
heavens you will never know.” ... Then with a sweep of his
broadbrimmed hat and a toss of his silky white hair, as if he were
playing in Monsieur Beaucaire, he had turned and walked off among
the crowd up Broadway. I may be down on my luck, but I’m not all
ham inside the way he is.... Cancer he said. She looked up and
down the car at the joggling faces opposite her. Of all those people
one of them must have it. Four Out of Every Five Get ... Silly,
that’s not cancer. Ex-lax, Nujol, O’Sullivan’s.... She put her hand
to her throat. Her throat was terribly swollen, her throat throbbed
feverishly. Maybe it was worse. It is something alive that grows in
flesh, eats all your life, leaves you horrible, rotten.... The people
opposite stared straight ahead of them, young men and young
women, middleaged people, green faces in the dingy light, under the
sourcolored advertisements. Four Out of Every Five ... A trainload
of jiggling corpses, nodding and swaying as the express roared
shrilly towards Ninetysixth Street. At Ninetysixth she had to change
for the local.

Dutch Robertson sat on a bench on Brooklyn Bridge with the

collar of his army overcoat turned up, running his eye down Business
Opportunities. It was a muggy fog-choked afternoon; the bridge was
dripping and aloof like an arbor in a dense garden of
steamboatwhistles. Two sailors passed. “Ze best joint I’ve been in
since B. A.”
Partner movie theater, busy neighborhood ... stand investigation
... $3,000.... Jez I haven’t got three thousand mills.... Cigar stand,
busy building, compelled sacrifice.... Attractive and completely
outfitted radio and music shop ... busy.... Modern mediumsized
printingplant consisting of cylinders, Kelleys, Miller feeders, job
presses, linotype machines and a complete bindery.... Kosher
restaurant and delicatessen.... Bowling alley ... busy.... Live spot
large dancehall and other concessions. We Buy False Teeth, old
gold, platinum, old jewelry. The hell they do. Help Wanted Male.
That’s more your speed you rummy. Addressers, first class
penmen.... Lets me out.... Artist, Attendant, Auto, Bicycle and
Motorcycle repair shop.... He took out the back of an envelope and
marked down the address. Bootblacks.... Not yet. Boy; no I guess I
aint a boy any more, Candystore, Canvassers, Carwashers,
Dishwasher. Earn While You Learn. Mechanical dentistry is your
shortest way to success.... No dull seasons....
 “Hello Dutch.... I thought I’d never get here.” A grayfaced girl in a
red hat and gray rabbit coat sat down beside him.
“Jez I’m sick o readin want ads.” He stretched out his arms and
yawned letting the paper slip down his legs.
“Aint you chilly, sittin out here on the bridge?”
“Maybe I am.... Let’s go and eat.” He jumped to his feet and put
his red face with its thin broken nose close to hers and looked in her
black eyes with his pale gray eyes. He tapped her arm sharply.
“Hello Francie.... How’s my lil girl?”
They walked back towards Manhattan, the way she had come.
Under them the river glinted through the mist. A big steamer drifted
by slowly, lights already lit; over the edge of the walk they looked
down the black smokestacks.
“Was it a boat as big as that you went overseas on Dutch?”
“Bigger ’n that.”
“Gee I’d like to go.”
“I’ll take you over some time and show you all them places over
there ... I went to a lot of places that time I went A.W.O.L.”
In the L station they hesitated. “Francie got any jack on you?”
“Sure I got a dollar.... I ought to keep that for tomorrer though.”
“All I got’s my last quarter. Let’s go eat two fiftyfive cent dinners at
that chink place ... That’ll be a dollar ten.”
“I got to have a nickel to get down to the office in the mornin.”
“Oh Hell! Goddam it I wish we could have some money.”
“Got anything lined up yet?”
“Wouldn’t I have told ye if I had?”
“Come ahead I’ve got a half a dollar saved up in my room. I can
take carfare outa that.” She changed the dollar and put two nickels
into the turnstile. They sat down in a Third Avenue train.
“Say Francie will they let us dance in a khaki shirt?”
 “Why not Dutch it looks all right.”
“I feel kinder fussed about it.”
The jazzband in the restaurant was playing Hindustan. It smelled
of chop suey and Chinese sauce. They slipped into a booth.
Slickhaired young men and little bobhaired girls were dancing
hugged close. As they sat down they smiled into each other’s eyes.
“Jez I’m hungry.”
“Are you Dutch?”
He pushed forward his knees until they locked with hers. “Gee
you’re a good kid,” he said when he had finished his soup. “Honest
I’ll get a job this week. And then we’ll get a nice room an get married
an everything.”
When they got up to dance they were trembling so they could
barely keep time to the music.
“Mister ... no dance without ploper dless ...” said a dapper
Chinaman putting his hand on Dutch’s arm.
“Waz he want?” he growled dancing on.
“I guess it’s the shirt, Dutch.”
“The hell it is.”
“I’m tired. I’d rather talk than dance anyway ...” They went back to
their booth and their sliced pineapple for dessert.
Afterwards they walked east along Fourteenth. “Dutch cant we go
to your room?”
“I ain’t got no room. The old stiff wont let me stay and she’s got all
my stuff. Honest if I dont get a job this week I’m goin to a recruiting
sergeant an re-enlist.”
“Oh dont do that; we wouldn’t ever get married then Dutch.... Gee
though why didn’t you tell me?”
“I didn’t want to worry you Francie.... Six months out of work ...
Jez it’s enough to drive a guy cookoo.”
 “But Dutch where can we go?”
“We might go out that wharf.... I know a wharf.”
“It’s so cold.”
“I couldn’t get cold when you were with me kid.”
“Dont talk like that.... I dont like it.”
They walked leaning together in the darkness up the muddy
rutted riverside streets, between huge swelling gastanks,
brokendown fences, long manywindowed warehouses. At a corner
under a streetlamp a boy catcalled as they passed.
“I’ll poke your face in you little bastard,” Dutch let fly out of the
corner of his mouth.
“Dont answer him,” Francie whispered, “or we’ll have the whole
gang down on us.”
They slipped through a little door in a tall fence above which crazy
lumberpiles towered. They could smell the river and cedarwood and
sawdust. They could hear the river lapping at the piles under their
feet. Dutch drew her to him and pressed his mouth down on hers.
“Hay dere dont you know you cant come out here at night
disaway?” a voice yapped at them. The watchman flashed a lantern
in their eyes.
“All right keep your shirt on, we were just taking a little walk.”
“Some walk.”
They were dragging themselves down the street again with the
black riverwind in their teeth.
“Look out.” A policeman passed whistling softly to himself. They
drew apart. “Oh Francie they’ll be takin us to the nuthouse if we keep
this up. Let’s go to your room.”
“Landlady’ll throw me out, that’s all.”
“I wont make any noise.... You got your key aint ye? I’ll sneak out
before light. Goddam it they make you feel like a skunk.”
 “All right Dutch let’s go home.... I dont care no more what
happens.”
They walked up mudtracked stairs to the top floor of the
tenement.
“Take off your shoes,” she hissed in his ear as she slipped the key
in the lock.
“I got holes in my stockings.”
“That dont matter, silly. I’ll see if it’s all right. My room’s way back
past the kitchen so if they’re all in bed they cant hear us.”
When she left him he could hear his heart beating. In a second
she came back. He tiptoed after her down a creaky hall. A sound of
snoring came through a door. There was a smell of cabbage and
sleep in the hall. Once in her room she locked the door and put a
chair against it under the knob. A triangle of ashen light came in from
the street. “Now for crissake keep still Dutch.” One shoe still in each
hand he reached for her and hugged her.
He lay beside her whispering on and on with his lips against her
ear. “And Francie I’ll make good, honest I will; I got to be a sergeant
overseas till they busted me for goin A.W.O.L. That shows I got it in
me. Once I get a chance I’ll make a whole lot of jack and you an
me’ll go back an see Château Teery an Paree an all that stuff;
honest you’d like it Francie ... Jez the towns are old and funny and
quiet and cozy-like an they have the swellest ginmills where you sit
outside at little tables in the sun an watch the people pass an the
food’s swell too once you get to like it an they have hotels all over
where we could have gone like tonight an they dont care if your
married or nutten. An they have big beds all cozy made of wood and
they bring ye up breakfast in bed. Jez Francie you’d like it.”

They were walking to dinner through the snow. Big snowfeathers

spun and spiraled about them mottling the glare of the streets with
blue and pink and yellow, blotting perspectives.
 “Ellie I hate to have you take that job.... You ought to keep on with
your acting.”
“But Jimps, we’ve got to live.”
“I know ... I know. You’d certainly didn’t have your wits about you
Ellie when you married me.”
“Oh let’s not talk about it any more.”
“Do let’s have a good time tonight.... It’s the first snow.”
“Is this the place?” They stood before an unlighted basement door
covered by a closemeshed grating. “Let’s try.”
“Did the bell ring?”
“I think so.”
The inner door opened and a girl in a pink apron peered out at
them. “Bon soir mademoiselle.”
“Ah ... bon soir monsieur ’dame.” She ushered them into a
foodsmelling gaslit hall hung with overcoats and hats and mufflers.
Through a curtained door the restaurant blew in their faces a hot
breath of bread and cocktails and frying butter and perfumes and
lipsticks and clatter and jingling talk.
“I can smell absinthe,” said Ellen. “Let’s get terribly tight.”
“Good Lord, there’s Congo.... Dont you remember Congo Jake at
the Seaside Inn?”
He stood bulky at the end of the corridor beckoning to them. His
face was very tanned and he had a glossy black mustache. “Hello
Meester ’Erf.... Ow are you?”
“Fine as silk. Congo I want you to meet my wife.”
“If you dont mind the keetchen we will ’ave a drink.”
“Of course we dont.... It’s the best place in the house. Why you’re
limping.... What did you do to your leg?”
“Foutu ... I left it en Italie.... I couldnt breeng it along once they’d
cut it off.”
 “How was that?”
“Damn fool thing on Mont Tomba.... My bruderinlaw e gave me a
very beautiful artificial leemb.... Sit ’ere. Look madame now can you
tell which is which?”
“No I cant,” said Ellie laughing. They were at a little marble table
in the corner of the crowded kitchen. A girl was dishing out at a deal
table in the center. Two cooks worked over the stove. The air was
rich with sizzling fatty foodsmells. Congo hobbled back to them with
three glasses on a small tray. He stood over them while they drank.
“Salut,” he said, raising his glass. “Absinthe cocktail, like they
make it in New Orleans.”
“It’s a knockout.” Congo took a card out of his vest pocket:
MARQUIS DES COULOMMIERS
Imports

Riverside 11121
“Maybe some day you need some little ting ... I deal in nutting but
prewar imported. I am the best bootleggair in New York.”
“If I ever get any money I certainly will spend it on you Congo....
How do you find business?”
“Veree good.... I tell you about it. Tonight I’m too busee.... Now I
find you a table in the restaurant.”
“Do you run this place too?”
“No this my bruderinlaw’s place.”
“I didnt know you had a sister.”
“Neither did I.”
When Congo limped away from their table silence came down
between them like an asbestos curtain in a theater.
“He’s a funny duck,” said Jimmy forcing a laugh.
“He certainly is.”