Multinational Corporations- The cost of business in a global world
The multinational corporation is one of the most ubiquitous and influential organizations of our age. There are many differing opinions on the definition of what a multinational corporation is. For our purposes, a multinational corporation will be defined as a corporation which invests in, acquires raw materials and resources from, and/or manufactures products in two or more nations.
Multinational corporations generate immense profits, and own and control an incredible share of the world’s production assets. “A rough estimate suggests that the 300 largest TNCs
own or control at least one-quarter of the entire world's productive assets, worth about US$5 trillion. TNCs' total annual sales are comparable to or greater than the yearly gross domestic product (GDP) of most countries... Itochu Corporation's sales...exceed the gross domestic product of Austria, while those of Royal Dutch/Shell equal Iran's GDP. Together, the sales of Mitsubishi and General Motors are greater than the GDPs of Denmark, Portugal, and Turkey combined, and US$50 billion more than all the GDPs of the countries in sub-Saharan Africa.” (Greer and Singh, emphasis added) The amount of MNCs, along with the money they make, is also astounding: “There are over 40,000 multinational corporations currently operating in the global economy, in addition to approximately 250,000 overseas affiliates running cross-continental businesses. In 1995, the top 200 multinational corporations had combined sales of $7.1 trillion
, which is equivalent to 28.3 percent of the world's gross domestic product. The top multinational corporations are headquartered in the United States, Western Europe, and Japan; they have the capacity to shape global trade, production, and financial transactions.” (Referenceforbusiness.com) It shouldn’t be too surprising to note that the top MNCs come from the northern hemisphere (generally synonymous with “the western world” for our purposes). The relationship between northern nations and MNCs with nations from the southern hemisphere is often ugly.
What accounts for the economic dominance of the multinational corporation of the global stage today? Why do corporations wield the power to “shape global trade” in such ways? Why are the dominant global players primarily of European and American origin? There are several factors.
Although MNCs do much to circumvent, avoid, and overpower the Nation State, typically, and historically they have enjoyed the favor of government powers in their home states, and are courted by developing and third world governments eager for investments. That the MNC enjoys preferential treatment by governments while simultaneously subverting and weakening the power of governments, is a peculiar, but easily understood phenomenon.
The rise of the multinational corporation is tied to the history of colonialism. Throughout the early colonial period of the 1500s-1700s, as european powers expanded their reach to regions across the globe, they brought their native companies to the new lands. The european corporations were seen as “agents of civilization” and were important to developing trade relationships between these new markets and the old world. (referenceforbusiness.com) The British East India Company became a true behemoth. Formed to take advantage of the asian spice trade by a group of London businessmen, “It gradually became a commercial body with gigantic resources, and by the force of unforeseen circumstances assumed the form of a sovereign power...” (Landlow) The British East India Company came to become an “imperial power in its own right,” with its own military and navy, often acting as de-facto ruler of territories larger than its home nation, until reigned in by the crown in the 1800s. (Landlow)
The industrial revolution served to intensify the global aims of corporations. Innovations in manufacturing and transportation spurred this on, and state support of global expansion by corporations, particularly by the United States and Western Europe was the rule. American foreign policy from the 1890s through the World War II period, as illustrated by Michael Mann in “American Empires, Past and Present” and others gives us a striking series of examples of the marriage of the state and expanding MNC power.
In 1893, under the premise of promoting democracy, the United States Overthrew Hawaii’s Queen. When President Grover Cleveland investigated the causes of the Hawaiian revolution, it was determined that the “American minister to Hawaii had conspired with the businessmen to overthrow the queen.” (Digitalhistory.edu) Despite the allegedly democratic aims of the overthrow, “In 1894, Sanford Dole, who was beginning his pineapple business, declared himself president of the Republic of Hawaii without a popular vote.” Dole and Del Monte (both American fruit companies) were the primary beneficiaries of the revolution, usurping thousands of acres of land to create fruit plantations. (Gerson, 6-10)
An entire history of American intervention on behalf of corporate interests, albeit much bloodier, mirrors the Hawaiian ordeal in Central and South America in this same period. In the period of 1898-1934, The US Marines invaded Honduras seven times, Nicaragua five times, Cuba four times, The Dominican Republic on four occasions, and various other nations numerous times, leaving a massive death toll and brutal regimes friendly to American business in their wake. (Sunshine, 32) Notable corporations who lobbied for these interventions and benefitted from them included Alcoa, Standard Oil, United Fruit, Domino Sugar, and others. This tradition of “gunboat diplomacy” in the name of democracy, but essentially for the benefit of multinational corporate interests carries on today: No bid contracts for western MNCs in the reconstruction process and the auction of natural resources to western MNCs have been trademarks of both the current Afghani and Iraqi wars, both fronts in the “war on terror.”
That European and American multinational corporations have such dominance today is a matter of historical precedent. Contrary to neoliberal “the world is flat” sentiments of an evened playing field, exemplified by economist Thomas Friedman, the world seems to only be flat if the northern hemisphere and the southern hemisphere are playing on two separate boards.
Equally important to the rise of the multinational corporation has been its ability to influence, or reap the benefits of the policies of international trade organizations, agreements, and bodies such as the International Monetary Fund (IMF) and World Bank. Agreements such as NAFTA and GATT were shaped under heavy influence from top multinational corporations, and organizations like the World Trade Organization (WTO) serve to push a pro-business, neoliberal economic agenda. (Greer and Singh)
International “Free trade” is the sacred mantra of the multinational corporation. However, just as an unregulated free market has historically lead to monopoly, anti-democratic worker repression
, insidious political influence by corporate interests, and troubles with worker health, environmental troubles, and increasingly reduces wages and employment benefits in America, the same is true of a world free market- but on a grander, and less regulated scale, and often with much more dire consequences.
Often, political democracy is packaged automatically with the notion of unrestricted free markets. The sentiment of those who see exporting democracy to the developing world appears to be that a “free country” MUST, by definition, also have a “free market.” To some extent, this is a logical argument in theory. In practice, however, a “free society” or “democracy” is actually often just so many code words for laissez faire economic policy and the ability of MNCs to freely exploit the market of said nation
. What government is in power in this country is insignificant to the freedom loving MNC, so long as it benefits from diminished taxes, reduced government encumbrances, and without other profit diminishing restrictions.
An MNC is likely to receive diplomatic and military assistance from its “home” state in its quest for profits, but this is not always completely necessary. Often, the “host” state- the foreign government the MNC seeks to do business in, will bend over backwards to attract investment. One such example of this are the increasing development of “Special Economic Zones” and “Special Administrative Regions.” (Ritzer, 124) These zones characterize the MNC’s lack of concern for freedom in other aspects of the host society- they are often located in countries with totalitarian governments, otherwise restricted markets, and notoriously horrible human rights records. These zones are essentially cordoned off areas where control over investment, labor, and administration is essentially vested in the multinational corporations that do business there. Naomi Klein has characterized these zones as “denationalized:” under the control of the western MNCs who’ve set up shop there- Nike, IBM, Old Navy, etc. The wages paid in these zones are often well below subsistence levels. These zones are characterized as sweat shop labor- unskilled, with terrible working conditions which violate international human rights. Pollution is incredibly problematic and living conditions are wretched. Corporations will leave or reconstitute in order to take advantage of tax holidays enabling them to import raw materials and export finished products completely or relatively untaxed. MNCs will deflect blame for the conditions in these areas as either the responsibility of the sub-contractors they’ve hired to manufacture there, or of the nation-state (which has already relinquished most sovereignty over the region in question.) (Ritzer 124-5)
With this rudimentary understanding of the rise of the multinational corporation, we can begin to answer some of the questions posed in the introduction with regards to the MNC. In what ways do MNCs negatively affect the sovereignty of Nation-States? What are the MNC’s effects upon the environment, human life, and social stability?
Thus far we have seen it demonstrated that a multinational corporation derives great benefits from working with home governments to force open markets and with host governments all too eager to collect tax revenue and investment capital from these MNCs. But, as one might expect, the MNC also benefits from reducing the power and relevancy of the Nation-State at home and abroad. Through trade agreements and organizations, and by use of its immense power and influence as an economic powerhouse, the MNC rebuffs state power at every turn in clever ways, often to the detriment of society, and at severe cost to life and environment.
Proponents of international trade agreements often argue that such agreements will have no negative or erosive effect on domestic law. Across the world, however, examples of the WTO and GATT treaty’s stifling effect on domestic policy are too numerous to count. Take the example of Dolphin safe Tuna and American law. After a two decade consumer boycott, laws were passed in America that inevitably illegalized the sale of Tuna which did not conform to strict safety standards which protected Dolphins. However, over time, pressured by fishing corporations, governments brought complaint to GATT and subsequently the WTO over the restriction of free trade caused by the Dolphin safe laws. Inevitably, the Clinton administration buckled- the Dolphin safe label would remain on cans of tuna, but unsafe tuna would be allowed into the USA anyways. Dolphin levels continue to deplete in dramatic numbers. (Commondreams.org)
Although there are dozens, if not hundreds of additional examples of multinational corporations using the WTO as a foil to supersede or override the laws of Nation-States, perhaps none are as baldly calloused and inhuman as the example of Gerber Baby Food corporation versus the nation of Guatemala. In the 1980s, to combat infant mortality in Guatemala, the country enacted a law that limited the ways in which baby formula manufacturers could market themselves to mothers and forced these manufacturers to place notices on their packaging stating that breast feeding is more healthy for the infant. The law worked, and infant mortality rates dropped dramatically in Guatemala. Gerber however, was not pleased. It refused to comply with the law and inevitably took its case to the WTO. Under pressure, the Guatemalan government changed its laws- and infant mortality rates have been steadily on the rise ever since. (Montague)
Here in America and in western Europe, our homegrown multinationals work to minimize nation-state power by convincing populations and politicians that government simply does not work. This is generally how it works: Politicians who’ve been given sizable campaign contributions work to slash budgets on public programs, then when these programs have been so anemically funded that they could no longer possibly function properly, the politician declares that the “system is broken” and that the government had its chance and failed, its time to step aside and let industry work its magic. The psychological ramification for voters: a decreasing confidence in governments to solve problems. The polls reflect this lack of confidence, and politicians respond to what they see as voter (or consumer) demand, and respond with increasingly less ambitious, less socially focussed agendas. Problems are not tackled by the government, grow worse, and more develop. The government continues to be seen as an inept force, and the “snake eats its own tail” as it were.
Overseas, the multinational doesn’t have to convince the population that the government is inept. Through “structural adjustments” administered by the IMF or World Bank, or through economic pressures exerted on these small nations by the most powerful of MNCs, privatization is simply forced on desperate developing Nation-States. The multinational corporation of today sees everything as a commodity to be bought and sold. An area which has had a particularly dreadful effect on the poor in the southern hemisphere is the commodification of water.
MNCs are scrambling to privatize the world’s water supply. When given the opportunity to privatize the water, the multinationals jack the prices up 80-100% on average, and the safety and quality of the water decreases. (Lendman) “Over two-thirds have no access to clean water, and an estimated 25,000 people die daily as a result. The World Health Organization (WHO) attributes contaminated water to 80 per cent of all sickness and disease worldwide. In the last decade alone, the number of children killed by avoidable diarrhea illnesses exceeded the death toll from all armed conflicts since WW II. Every eight seconds, a child dies from contaminated water.” (Lendman) When a corporation gains control over a nation’s water supply, citizen access drops dramatically due to the economic hardships. This creates immense human tragedy, and obvious social tensions.
The most famous example of water privatization creating social turmoil is the instance Bechtel Inc. versus Bolivia, in what amounted to a “water war.” The water supply to be privatized was in the arid, desert-like Cochabamba region of Bolivia. In 1999 the World Bank recommended privatization of Cochabamba's water. "Bank officials directly threatened to withhold $600 million in international debt relief if Bolivia didn't privatize Cochabamba's public water system.” (VanOverbeke) “After International Water [Bechtel] took over the water services in Cochabamba, the monthly water bill reached $20 in a city where the minimum wage is less than $100 a month. These increases forced some of the poorest families in to literally choose between food and water ($20 is nearly the cost of feeding a family of five for two weeks).” (VanOverbeke) Protests inevitably developed, and the Bolivian government stepped in on behalf of Bechtel, declaring martial law and killing four citizens in the process. In the end however, Bechtel was kicked out of Bolivia and the water supply was renationalized. Many nations have not had it so lucky.
Other notable areas where commodification can kill the poor include aggra-business and pharmaceuticals. “With respect to their influence on global agriculture, MNCs control 80 per cent of land worldwide which is cultivated for export-oriented crops, often displacing local food crop production... Additionally, because MNCs control much of the world's genetic seed stocks as well as finance the bulk of biotechnology research worldwide, they are poised to reap large financial rewards from patenting life forms.” (Greer and Singh) The Dhoha Declaration technically enables poor nations to develop generics of expensive western drugs for reasons of public health (not for profit), but at every turn “Big Pharma,” western governments and international trade organizations are making it more and more difficult for the third world to get cheap drugs. As a result, people are dying. (outsourcing-pharma.com)This barely scratches the surface.
Environmental consequences produced by the multinational corporation have been devastating. A lack of international regulation practically encourages sloppiness, enables the use of harmful chemicals in the developing world that have been outlawed in first world nations, and at the very least does nothing to inspire responsible environmental stewardship by the MNCs. As a result of this “casual” approach to international environmental issues, a laundry list of maladies can be attributed to the operation of MNCs across the world. The Union Carbide (a Dow Chemical subsidiary) disaster in Bhopal, India was the worst in history. An explosion and toxic gas leak killed 3,800 people within a day, and had long lasting residual health effects on the local population. Dow attempted to distance itself from legal responsibility immediately. Dow abandoned the site, neglecting to clean up the mess. Hazardous chemicals continue to affect the area and its water supply to this day. (Broughton) The recent BP offshore oil disaster and the less recent Exxon Valdez disasters have had negative environmental impacts that are hard to quantify, but are assuredly severe. Oil disasters around the world, such as in China and Nigeria, have been dealt with even less efficiently. “Twenty MNCs account for about 90 per cent of the sales of hazardous pesticides. MNCs also manufacture most of the world's chlorine- the basis for some of the most toxic...synthetic chemicals known such as PCBs, DDT, dioxins and furans, chlorinated solvents, and thousands of other organochlorine compounds. These chemicals' impacts on health include: immune suppression; birth defects; cancer; reproductive, developmental, and neurological harm; and damage to the...organs. As a group, MNCs lead in the export and import of products and technologies that have been controlled or banned in some countries for health and safety reasons. For instance, 25 per cent of total pesticide exports by TNCs from the US in the late l980s were chemicals that were banned, unregistered, canceled, or withdrawn in the US itself.” (Greer and Singh) This is but the briefest list of environmental calamities that come with the cost of “doing business” in the world for multinational corporations.
1 TNC- transnational corporation. As defined by Greer and Singh, matches this writer’s definition of MNC. It is worth noting that the source material for their statistical data comes from the 1990s, all indications are that the wealth of the MNC has only grown, despite the world wide economic crisis.
2 Figure of 7.1 trillion dollars is assumed to be $USD.
3 For a thorough, if biased history of corporate monopoly and worker’s repression in the USA, a reading of CH. 11-13, “A People’s History of The United States” By historian, social activist, and WWII veteran Howard Zinn should prove insightful.
4 The notion of freedom in the modern world is an interesting problem. While modern freedom was in so many ways defined by enlightenment philosophers such as John Locke (who did devote much time to defining proprietary freedom and rights) and the vanguard of the American Revolution, it would appear that every western politician since Reagan and Thatcher has defined freedom in the liminal terms of the market place (in action and policy), whilst paying only lip service to the broader enlightenment principles of liberty. An interesting problem, but off topic for the issues at hand.
No comments:
Post a Comment