The processes of globalisation have facilitated the destructive impact of TNCs on the environment. They capitalise on the reluctance of governments to enforce environmental laws on them. Even when governments prosecute TNCs for violating environmental regulations they let them off with a slap the wrist, for example, ICI being fined only £51 540 for its pollutive activities, despite an annual profit of more than £630 million. Nike uses bags of sulphur hexafluoride in its trainers as cushions (SF6 has 35,000 times the global warming potential of CO2). Animal Kingdom, a 500-acre addition to Disney World, Florida was built on natural wetland thus leaving animals caught in the wild to die.
Multinationals are criticised for using child labour in some countries where there is ineffective legislation, as a way of cutting costs. According to the ILO, in 1996 73 million children between the ages of 10 and 14 work in the world. There was a storm just before the 1998 World Cup, after footballs bearing the Manchester United club crest were being made by child labourers in India, working for as little as 6p an hour.
child workers in Asia
The scramble by governments to attract TNC investment has resulted in a 'race to the bottom' in working conditions, with the rights of working people sacrificed in order to create the 'most attractive' investment environment. Nike the multibillion sportswear company is regarded as the worst exploiter of workers. In China workers at Wellco Factory making shoes for Nike are paid 16 cents/hour, 11-12 hour shifts, 7 days a week. Nike employs 35,000 mostly female workers in Vietnam, where verbal and sexual abuse are not uncommon for workers. For an eight-hour day they are paid on average $1-60 for making shoes that can retail for up to $165 in the States.
As TNCs use their immense purchasing power to take over local markets, local firms are commonly swept aside. Employers in Malmesbury, England see a bonus in Dyson Appliance’s decision to relocate its factory in Malaysia, in order to remain competitive. A local employer said: “I suppose in a perverse way this might help us.”, because Dyson pays its employees the highest wages in the area, and its relocation would reduce wages.
Most outward foreign direct investment from rich countries is not diverted to poor countries but to other rich countries. In the late 1990s, roughly 80% of the stock of America’s outward FDI was in Canada, Japan and Western Europe, and nearly all the rest was in middle-income developing countries such as Mexico, Brazil, Indonesia and Thailand. The poorest developing countries accounted for only 1% of America’s outward FDI. This means that countries are embracing globalisation at a different pace. The LDCs receive very little funds for investment while the MDCs receive high rates of FDI and can then create more wealth by utilising the funds.
Anti-globalisation protesters in Genoa
The WTO, IMF and WB remain constant points of criticism of globalisation. Their decisions are generally made in private, influenced by the multinational corporations and their allies in the developed countries' governments. Given their corporate bias, many decisions favour expansion of the power, rights and dominance of the largest corporations, at the expense of smaller, local businesses from the communities they serve.
But are there any reasons why globalisation should take place?
These criticisms of globalisation seem to undermine the possibility of any advantages arising out of the process. But there are indeed counter arguments that reveal the benefits to be derive from world trade. One benefit as H. Katrak suggests is that “A country may overcome some of the difficulties of increasing investment from undemocratic resources by participating in international trade.” Globalisation and openness make market access easier. Small firms which have been previously unable to export because of restricted access to foreign markets, or because of the high cost of overcoming administrative or technical barriers, can now sell their products and services abroad. The enlargement of their markets will enable them to produce more and benefit from scale economies, making them even more competitive. The resulting competition increases product quality, widens the range of available goods and keeps prices low.
Globalisation is creating jobs and bringing more prosperity to developing countries which have joined the process. While labour standards in these countries are still lower than in industrialised nations, they are rising. There is considerable evidence that multinationals investing outside their home country or region pay higher wages than local firms, create new jobs at a faster rate, and spend much more on research and development (R&D). While wage differentials will continue between rich and poor countries, they reflect factors like the level of qualification of workers and their relative productivity. Moreover, in answer to the critique of poor working conditions, workers who produce foreign products are grateful for their employment.
Some multinational corporations do contribute to rural and urban development in their host countries. Shell Petroleum, the largest oil producing company in Nigeria has since the 1950s awarded scholarships to students in the oil-producing areas. Chevron spent $27,196,649 in 2000 on charitable contributions worldwide and in 2000 BP Amoco spent a total $81.6 million on social investment in countries where it operates.
Social investment: beneficiaries of Shell’s scholarships in Nigeria
Technology and skill transfer is another benefit which globalisation brings along with it. Information technologies have opened up a huge potential for improving economic efficiency through e-commerce, the internet and the instantaneous delivery of information anywhere in
the world, at any time. IT and telecoms are revolutionising business practices, both within corporations and in their relations with suppliers and customers. The introduction of overseas staff in modern plants in developing countries provides the basis for training a future
workforce. Fedders, a room air-conditioners manufacturer that produces for the US market entered into a joint venture with a Chinese company in order to penetrate into the Chinese market. The Chinese company gets an injection of funds for investment and access to new technologies, while Fedders gets local expertise for its operations in China
Globalisation also allows the expansion of businesses which have come to be seen as very vital to some national economies, and to citizens. Growth markets were embraced with glee in the twentieth century by businesses such as McDonalds and Coca-Cola. They are able to expand and remain competitive by offering franchises to interested businesses. The same advantage offers Fedders the chance to sell in the vast Chinese market and to export to other Asian countries, as well as to foster new relationships with Chinese component suppliers who may be able to meet demand for lower-cost components in US factories. Nevertheless, some groups feel that these multinational presences in their countries conflict cultural norms, as demonstrations by protesters in Russia and India against McDonalds shows.
Conclusion
Globalisation cannot be seen as a one-size-fits-all cure for poverty. But it is part of a broader mix of solutions for poverty eradication involving the international community and the self-help potential of the poor countries themselves. The alternative of complete poverty is far worse than their current situation and is inconceivable to most people from developed countries.
The table below shows how due to globalisation countries have benefited. They have adopted domestic policies and institutions that have enabled people to take advantage of global markets and have thus sharply increased the share of trade in their GDP.
GDP, export and investment growth, average, 1990-97
Source: World Bank, World Development Report, 1998
Some people worry that TNCs have in fact grown too powerful for national governments and the WTO to regulate (e.g. the Chiquita case). The good news is that however powerful TNCs may be, they still respond of public pressure. Consumers can object to their actions by boycotting the products of TNCs…but then who compensates the impoverished workers that may loose their jobs as a result? Therefore, the assertion that globalisation is exploitative cannot be wholly justified because along with exploitation it brings with it some positive change.
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BIBLIOGRAPHY
http://www.afsc.org/nero/jcpenny.htm
