As I have mentioned, modern biotechnology is exceedingly capital-intensive, especially in terms of financial capital. After the founding of Genentech, the first dedicated biotechnology company, in 1978, funding for the biotechnology industry climbed steadily to a peak of $3.6 billion in public equity among some 80 companies in 1991. It dropped precipitously over the next three years, to less than a billion in 1994. This was due perhaps in part to the failure of certain products, delays in government approval of others, and a general decline in stock market activity (Hamilton 1994). Nonetheless, investment shot up again to $4 billion during 1995, and in the first quarter of 1996, another $2 billion was raised. In 1995, nearly 200 of 230 publicly traded biotechnology companies took losses because they spent more on R&D and other activities than what they earned (Hodgson 1996b). Even Amgen, Inc., the most successful dedicated company, spent almost as much on R&D in 1995 as it made in profit: $451.7 million, compared to $537.7 million (Amgen, Inc. 1996). R&D spending has varied considerably between the biotechnology industry's sectors. In 1994, for example, 191 biopharmaceutical companies increased their average spending 34.7% (Glaser 1995). During the same period, 14 major dedicated agricultural biotechnology companies increased their R&D spending only 3.2%. The same "agbiotech" companies had increased their R&D spending 43.6% the year before (Kidd 1995).
In spite of the vicissitudes of venture capital and the losses suffered by the majority of biotechnology companies, the U.S. government, like the governments of Japan and several Western European countries, promotes biotechnology as an industrial policy. Industrial policies differ in detail from one country to the next, but they all serve essentially the same purpose: to spur economic growth through achieving a national competitive advantage. The U.S. government's direct financing of R&D for biotechnology has approximated the public equity raised in the last few years. In 1990 it amounted to $3.4 billion, 85% of which came from the National Institutes of Health (NIH) (OTA 1991). In 1994 it came to $4.3 billion, about 75% of which the NIH contributed (Fox 1996b). In addition to direct subsidies, U.S. promotion of industrial technology involves "indirect" measures, such as tax and trade policies, as well as intellectual property protection. Rarely does the U.S. target a specific industry in its policies. However, the biotechnology industry may prove to be an exception. Not only has the PTO relaxed its standards for biotechnology applications, but other federal agencies, including the Food and Drug Administration (FDA) and the Department of Agriculture, have expedited review and approval processes for biotechnological products (APHIS 1995; FDA 1996). All these measures together make strong incentives for biotechnology companies to take financial risks in hopes of gaining new ground.
In contrast to the U.S., the Japanese government tends to make longer-range plans aimed at bolstering certain industries. In 1981 Japan's Ministry of International Trade and Industry (MITI) announced that biotechnology, as well as microelectronics and new industrial materials, was a key technology for the future. The MITI laid out $58 million for biotechnology R&D in 1990, involving several public-private research projects (OTA 1991). It plans to spend almost exactly the same amount on biotechnology (out of "four key technologies") in fiscal year 1997 (MITI 1996). "Competitive advantage" is measured at the national level, and there are a number of reasons according to which industrial policies are formulated. The obvious one is that governments, to remain popular, seek to attain growth among companies based in their jurisdiction, with the understanding that the profits will be reinvested in the home country to some positive social effect--job creation, infrastructure building, increased public revenues, etc. However, in the the U.S.--and in a growing number of countries--it is not always certain that capital will flow back to the U.S. from transnational corporations (TNCs) with headquarters there. Nevertheless, government spending on "high tech" R&D has started to become an permanent institution, and it continues apace, irrespective of changes of government administration. In this respect, the state may be becoming ancillary to industry. In the last decade, a number of authors have argued cogently that we are entering an era in which the state will play a greater role in sponsoring R&D. (See Harvey 1990 for a survey.)
The bigger, the better
Who will survive under such economic conditions? As early as 1991 the U.S. Congress's Office of Technology Assessment suggested that if biotechnology companies are going to stay afloat, they will require "consolidation": fewer dedicated companies and more involvement of TNCs with broader industrial bases and bigger established markets (OTA 1991). This has been precisely the trend. Since 1991, large pharmaceutical and agrochemical companies have acquired biotechnology, either through contract R&D or complete purchase of smaller biotechnology companies (Hodgson 1996). Fewer companies are opening up stock for public sale: 36 for $935 million in stock in 1993; 14 for $274 million in 1994 (Coghlan 1995). There are a three, basic, mutually compatible, "consolidation" strategies: acquisition by TNCs (an instance of "vertical integration"), "horizontal integration," and consortium formation. The Calgene, Inc., acquisition of Stoneville Pedigree Seeds in 1987 is an example of the first strategy. The Monsanto Company's purchase of a 54.6% interest in Calgene in 1996 is an example of the second. Formation of consortia is a relatively recent phenomenon in the biotechnology industry. The first biotechnology consortia were those the European Union funded starting in the late 1980s. The first consortium in the U.S. was the Diversity Biotechnology Consortium, consisting of seven small biotechnology companies and five research institutions (including departments of three universities). It was conceived to pool resources in researching "molecular diversity" and rDNA-produced drugs. Since then, a number of consortia have been launched in the U.S., most of them with a nucleus in a major company, such as Rhône-Poulenc Rorer or Pfizer Pharmaceuticals. Consortia afford the companies involved flexibility in investment, R&D, and marketing. Some consortia follow a "limited-risk" model, concentrating on single joint projects for a specified period. This means that stockholders need not worry about buying into another company for the long term. Consortia also often agree on marketing and shared intellectual property rights from the outset. In all cases, consortia focus on R&D proven to be productive, rather than on speculative R&D. Small companies entering into a consortium with larger ones may open the way for vertical integration with a "parent" company (Persidis and Persidis 1996).
Three other strategies may help the survival of the biotechnology industry. The first is flexible investment arrangements. A growing number of dedicated companies are allowing stockholders to invest in specific projects, rather than investing in the company as a whole. This encourages investors concerned with the possibility of new products failing, the length of time involved in R&D, and the small returns on many biotechnology ventures (ibid.). A second strategy is the cultivation of relations with governmental and academic institutions. This is done not only to join R&D resources, but also to recruit researchers and managers, and to share educational opportunities, such as internships. Lastly, patent protection of processes and products permits mutually profitable exclusive licensing between companies working on complementary technologies, such as the recent arrangement between Amgen, Inc., and Progenitor, Inc. (Amgen, Inc. 1996).
There are some important differences between the trends in each of the biotechnology industry's sectors. Small, dedicated medical biotechnology companies are perhaps more likely to succeed and remain independent of TNCs for a variety of reasons. These include the great importance of health care to the general public, the amount of funding available from governments (relatively large in the U.S.), their close ties to universities and hospitals, and, not least, their shrewd combination of "bio-prospecting" and IPR protection in speeding up the process of screening biological resources for medically useful compounds and then laying claim to them. Agricultural biotechnology, which long has run in second place to medical biotechnology, is catching up quickly, largely because of recent government approval of many of its products, and because of its global market, consisting in large part of farmers dependent on hybrid seed and chemical and mechanical inputs. The third sector, biotechnological environmental remediation, like much "green" industry, offers short-term technical fixes to recurring environmental problems. "Bio-remediation" has suffered some notable setbacks, such as petroleum-digesting bacteria that do not work (Holmes and Ingham 1994; Kimbrell 1993). Like most green industries, bio-remediation is, at best, likely to hold onto only a small market. More likely it will lose the interest of investors, because it is not growth-oriented, or it will be absorbed by larger companies, some seeking to give themselves a greener image.
In summary, the biotechnology industry is tending towards monopoly--the way of all successful modern industries.
Monsanto: an example of a "winner"
I believe that the Monsanto Company (St Louis, MO) represents the type of biotechnology company that will survive to reap profits. Monsanto matches the OTA description of a company that should succeed: It has industrial operations and substantial markets in every region of the world, especially in the U.S, Western Europe, and Latin America; and it has a broad public investment base (almost 600 million shares) (Monsanto 1996a). Other facts of Monsanto's operation and various strategies it has undertaken will contribute to Monsanto's success.
On December 9, 1996, Monsanto announced that its board of directors had approved a plan to "spin off" the company's chemical business and form two new, separately traded, publicly held companies: a "life sciences" company with $5 billion in sales and a chemical company with $3 billion in revenues. This split in the company was well calculated. First, it isolated Monsanto's biotechnology business from the chemical business, which is $1 billion in debt, afflicted with liability suits, and pressed to cut costs. Second, it makes it easier for current and potential investors to decide whether they want to stay with an established industry like chemical manufacture, or try a more adventurous field like biotechnology. In any event, the split is most likely to provide an incentive for greater investment in each company (Ewing 1996; Mellon, pers. comm.; Monsanto 1996b). It also will result in the loss of 1,500 to 2,500 jobs, or five to nine percent of Monsanto's work force--a classic way to cut costs (Ewing 1996; Monsanto 1996b).
Moreover, Monsanto made certain that not all chemical production will be taken over by the new chemical company. The biotechnology company will include the agrochemical division, which produces Roundup, the herbicide with the biggest sales worldwide (Monsanto 1996b). This means that Monsanto can create complementary markets for Roundup and its genetically engineered "Roundup Ready" crop plants. Monsanto insists that this will alleviate the risks to health and the environment posed by farmers repeatedly treating crops with various chemical herbicides and pesticides. It seems just as likely that introduction of herbicide-resistant crops will prolong dependency on use of agrochemicals, many of them known to be toxic or lethal. Monsanto should be able to find a large market among farmers who already depend on single-crop cultivation of hybrid seed, which requires high levels of chemical input. Furthermore, as Roundup Ready seeds spread through the market (assuming that they are viable), Monsanto will be able to create new dependencies among farmers struggling to compete.
It is significant, in this regard, that less than a month after Monsanto declared its spin-off, it announced that it had reached agreements to buy Holden's Foundation Seed, Inc., Corn States Hybrid Service, Inc., and Corn States International s.a.r.l.--the latter two being exclusive worldwide marketing and sales representatives for Holden's goods. In the words of Monsanto's Chairman and Chief Executive Officer Robert Shapiro: "Holden's germplasm is an important building block. It will provide an excellent delivery mechanism for our biotechnology innovations in corn" (Monsanto 1997: 1). In more poignant terms, it will broaden Monsanto's market base and contribute to Monsanto's massive capital--now some $11 billion dollars in total assets (Monsanto 1996a). Monsanto's huge, internationally deployed capital will almost certainly mean that it will out-compete small agricultural biotechnology, agrochemical, and seed companies--including, importantly, government-owned companies in less industrialized countries. These companies were created to support national agricultural programs.
Finally, Monsanto helps itself by maintaining relations with social and governmental institutions. The Mathematics and Science Education Center of St Louis, Missouri, has been developing the Biotechnology Education Project in the primary schools since 1987. The Project is sponsored and guided by Monsanto, through the Monsanto Fund. Monsanto also keeps good relations with the U.S. government. It was given the Presidential Award for Sustainable Development in 1996, for reducing air and ground pollution on its properties during the previous ten years (Monsanto 1996a). It also has collaborated with the U.S. Agency for International Development and Kenyan scientists to develop a virus-resistant sweet potato (Monsanto 1993).
Global winners and losers
What does this mean at the scale of the global economy? We must first ask: Where are biotechnology companies based? The great majority is based in highly industrialized countries where the greatest concentration of material and financial capital exists, as well as the institutional framework to support and promote R&D in biotechnology. In particular, this means the U.S., Western Europe countries, and Japan. These countries are going to be most competitive in biotechnology and are most likely, at least in the immediate future, to draw the greatest profits from sales of its products. Just as TNCs, horizontally integrated companies, and consortia will be most likely to survive, make profits, and to take over new and different markets--thus being economic "winners" according to prevailing economic logic--so too will industrialized countries, mainly in the Northern Hemisphere, be the "winners" in the biotechnology race.
Let us more closely examine the global impact of agricultural biotechnology. Juma (1989) has suggested that agricultural biotechnology per se could be used to increase edible yields and achieve self-sufficiency in food supply in the less industrialized Third World--that erstwhile realm of contest between "First World democracy" and "Second World communism." He notes that Brazil, India, Mexico, Malaysia, Indonesia, and China, among other Third World countries, have invested public and private funds in infrastructure and R&D for biotechnology, and have engaged in limited production. Putting ecological issues aside, for purposes of argument, such a view does not take seriously enough the historical dynamic of trade between industrialized and less industrialized countries.
Agricultural biotechnology companies with a global reach would have us believe that their chief interest is supplying the world's people with an abundant supply of nutritious food (if not agricultural self-sufficiency). They are fond of reminding us that "[b]y the year 2030, the world's population is expected to double to 10 billion" (Monsanto 1993: 20), necessitating an increase in agricultural productivity--an increase that only genetically engineered plants and animals can provide. This is not the place to consider the contentious politics of population growth and migration, but we will have to look hard at the biotechnology industry's assertion that their high-yield products automatically are going to make more food available to a "burgeoning" population. There is a good case that agricultural biotechnology will mainly aggravate current trends in the polarization wealth and unequal access to food.
Since colonial times, "less industrialized" Third World countries, mainly in the biologically "rich" Southern Hemisphere, have exported their agricultural goods to industrialized countries, mainly in the resource-depleted Northern Hemisphere. (I put "less industrialized" between quotation marks, because, in some respects, these countries were de-industrialized. However, a discussion of this process is beyond the scope of this study.) In the postcolonial era, one of the greatest sources of national revenue among less industrialized countries has been the sale of nonsubsistence agricultural goods of great value to markets in industrialized countries. Such goods include palm oil, cocoa, sweeteners, and various luxury items. "Green Revolution" projects of the 1960s and 1970s, sponsored by highly industrialized countries (especially the U.S.), attempted to substitute high-yield, hybrid subsistence crops, like those used in their own food production, for traditional varieties, ostensibly to help Third World farmers help themselves. These hybrid crops, specially bred for more marketable product, required heavy input of water and chemical fertilizers and herbicides. The transfer of these new technologies of agriculture tended to favor government élites and wealthy land owners, who controlled the most land, had the requisite infrastructure, could afford the start-up costs, and usually had the greatest political representation. Rather than being used for food self-sufficiency, these crops often were sold in the international market, thereby further enriching the already prosperous and eroding the economic power of poor farmers. As a further result, more and more land was turned over to high-yield, single-crop agriculture, and traditional varieties and the systems of their cultivation were "displaced" or destroyed.
Moreover, highly industrialized countries that are major exporters of agricultural goods have turned their agriculture production into a variety of capital-intensive industry, with the help of large government subsidies. Thus they have been able to sell their goods on the international market at prices lower than those in less industrialized countries. Poor farmers, who have often made up the majority of the population of less industrialized countries, sometimes find themselves trying to compete in local markets by selling below cost, and then are unable to buy even "cheap" imported foods. (See Barry 1995, Fowler 1994, Hobbelink 1995, and Shiva 1991, among others, for further discussion.)
Juma is aware of the problems of industrialized agriculture and the global market in agricultural goods. Indeed, he notes, as do the authors cited in the paragraph above, how biotechnology could continue and even exacerbate the trends I have described. Technology in general, he maintains, is going to define future competitive advantage in agriculture. He observes that biotechnology companies have been paying more attention to synthesizing some high-value agricultural products in the laboratory, which may "irreversibly substitute" for imports from the Third World. In addition, crop plants are being engineered for viability in a variety of climates and soil conditions, undermining the once fundamental relationship of agriculture to the land (Juma 1989). As he and others have remarked (q.v. Hobbelink 1995), agriculture first divorced of labor and then separated from the land, will allow those who control the capital and the technologies unprecedented flexibility in deciding which agricultural products to cultivate, when, how, and with what inputs. New, highly restrictive international IPR laws also will come into play. Patents and extended plant breeders' rights will protect genetically engineered crop plants. As these plants and their seeds become increasingly prevalent, they will be available only to those who can afford to pay licensing fees and continually to buy new seed. Those who are able to do so are likely to promote their cultivation and sale further, in order to make their investment back. The effect will be the same as that of the substitution of Green Revolution varieties for traditional cropsÑthe process described above.
One "side-effect" of undermining Third World agricultural in this way--an "externality" in classical economics--is social upheaval, as communities based on traditional agriculture lose their reason for existence, and members are drawn elsewhere in search of a means of survival, increasingly to urban slums. This is widely regarded in the First World as an ineluctable phase of "progress." It is, after all, a by-product of augmenting sheer economic growth. The net result, at an international level, will be that the countries without biotechnology or the means to develop it are going to be at a competitive disadvantage. Even when and if these countries acquire this technology, the poorest people in them, who possess the least land and the fewest tools, are going to be dispossessed entirely--land, livelihood, and community. This would contribute to an unsettling worldwide trend: The differences in wealth between the rich and poor within the boundaries of nation-states are growing faster than that between them (UNDP 1992). Some of these poor will be counted among the "losers," as the biotechnology industry forges ahead. Let us briefly turn our attention to another sector of the biotechnology industry--its global economic impact does not pertain only to agriculture. The advance of medical biotechnology promises to be a scramble for genetic resources and captive markets. Two strategies are at the disposal of medical biotechnology companies, in particular those that produce drugs, rather than concentrate on direct genetic manipulation. The first is to use national and international IPR laws to lay claim to plants, animals, and their derivatives. It exploits, in particular, the detailed knowledge of the medicinal properties of local species possessed by traditional societies in biologically rich and diverse countries. These societies are often economically and politically isolated. This strategy has succinctly been called "bio-piracy," though its proponents prefer to call it "bio-prospecting"--merely an efficient, non-random method of screening for compounds of potential medical use. The second strategy is not unlike that used to promote agricultural biotechnology in the Third World. Combining the GATT 1994 stipulations against "non-tariff barriers" to trade with well subsidized, capital-intensive production, medical biotechnology companies can inundate the markets of countries where pharmaceutical production and distribution have been nationalized (as in Brazil) and outdo the competition, leaving health care to the vagaries of buyers and sellers. Expensive therapeutic drugs are likely to flourish in the sector of society that can afford them, while basic health care is neglected. Crowded leper communities, like those on the outskirts of Bombay, may swell--a phenomenon that hardly anyone attributes to "progress" (q.v. Seabrook 1993).
Athanasiou, in his excellent survey of global political ecology (1996), has elaborated upon an important global economic dynamic which has developed since the fall of Eastern European state-communist régimes: Third World countries, with their resource-based economies weakened, and industrialized, former Soviet-satellite countries (the erstwhile Second World) are competing for the assistance of wealthy countries and corporations, in order to maintain even a semblance of national economies. The East is more attractive to investors not only because the industrial infrastructure is in place, but because, as Chomsky (1994) has explained, workers there have a higher level of modern education and are thus more "trainable." Government environmental regulation, even when it exists in theory, is virtually nonexistent in practice. The "South" (i.e. the traditionally recognized Third World) has had to concede more, and increasingly what it has to concede is bodies and genes. Parts of the legally binding Convention on Biological Diversity (CBD) were drafted by Third World governments and nongovernmental organizations in hopes of linking access to genetic resources to the transfer of technologies appropriate to conserving them. They hoped to preserve the vestiges of their economic leverage on the First World. However, the U.S. government, the leader in promoting biotechnology, has made it clear that it understands the provisions of the CBD to apply only to private entities, and that it has no obligation to provide any kind of assistance to less industrialized countries. Confronted with this opposition and their precarious position in the changing global economy, Third World governments have been capitulating by offering up their genetic resources, in the form of crop breeds and medicinally useful biological species, in exchange for the end product--genetically engineered plants, animals, and biochemicals.
Given Athanasiou's observations, it should be no surprise that the Balkans have become a center of R&D and field testing in agricultural biotechnology. A group of prominent plant scientists and biotechnologists from the region founded the Balkan Plant Biotechnology Network (BPBN) in 1995. The initial participants in the BPBN include representatives of the governments of Albania, Bulgaria, FYR Macedonia, Greece, Romania, Turkey, and Yugoslavia. The BPBN will receive funds from government institutes and seed banks, the European Union (through Greece), and biotechnology companies (Hodgson 1995). In 1996, Bulgaria became the first Eastern European country to provide for the supervision of the release of genetically engineered crops: The new Council for the Safe Use of Genetically Modified Higher Plants follows the European Union's deliberate release directive (90/220) (Hodgson 1996a). How effective the Council will be remains in doubt, since, as Athanasiou reports, the Bulgarian government is in penury, and, in a reactionary swing away from the former communist régime, state regulation of industry has become virtually anathema, since it is regarded as unjust "intervention in the economy." One biotechnology journalist remarked that the establishment of the new body "reflects the need for realpolitik in Eastern Europe. One part of that reality for the former Soviet-bloc nations is that they need to develop technical and trade links in Western Europe" (Hodgson 1996a). If there is a specter haunting wealthy, industrialized countries, it is the "Third World at home." "Capital-intensive," a much used term in this study, is often a palliative way of saying "job-destroying." Small farmers and factory workers in industrialized countries will also be losers in the biotechnology race. Amgen had a worldwide staff of 4,498 in 1996 (Amgen, Inc. 1996). In contrast, the Boeing Company, the worldÕs largest manufacturer of aircraft, still employs about 120,000 people--even after laying off nearly half of its work force in 1995 (Boeing Co. 1996). As industrial jobs are strategically relocated to low-wage countries in Eastern Europe or Southeast Asia, a smaller, technologically skilled "core" work force will develop, surrounded by a "contingent" work force providing services. The latter will be losers not only in terms of wages and benefits, but also in terms of any sense of surety about the future. (Consider "axiom 2" in the introduction to this study: Jobs are more a liability than a necessity in this era of globalization.) The growth of the biotechnology industry contributes to this process. Moreover, those who attempt to compete in the economic arena will be frustrated. Concerted R&D efforts in company laboratories, a consequence of capital monopolization, will prove a tremendous barrier to individual inventors and entrepreneurs operating within biotechnology's purview.
As the world's work force is restructured to meet the exigencies of the capital-intensive, technology-driven global economy, those who have long been the poorest and most oppressed will suffer more: women, ethnic minorities, indigenous peoples and "tribals" living within and between the boundaries of nation-states. Bodies and genes: The Philippines have become notorious for supplying the world with a "cleaning service." Its major export lately has become women, who provide a number of services in wealthier countries. Every year the Japanese consulate in Manila issues over 30,000 nonimmigrant "entertainment visas" to Filipinas (David in Seabrook 1993). The Philippines long has been a target of First World agricultural projects (Fowler 1994; Juma 1989; Shiva 1991).
We should not forget the public relations industry. Neo-liberalism's advocates also have to invest in media technologies to promulgate their version of the economy as the motor of a functional and sustainable society.