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Multi-National Corporations
“It is Easier to Cope With a Bad Conscience
Than With a Bad Reputation”

by Negin Nazi

Guyana Journal, December 2011

PREAMBLE
This paper advocates for a better world that recognizes the significance in protecting the global environment with its finite resources. It also holds the position that the human population can prevent environmental destruction and do more for more than the 1.4 billion people living in absolute poverty.
1 It is conceivable of a world in which everyone is given a chance for a better life – one in which influential actors can embrace visions beyond short term objectives. John Lennon was an idealist. He imagined a world without possessions and with no greed. I am a realist who believes multinational corporations are in a strategic position to implement effective policies precisely because they are leaders in a neo-liberal globalizing world. In order to understand the significance of multinational corporations, it is critical to understand the context of their existence.

The current dominant economic ideology has facilitated many corporations to act irresponsibly. Also, it is paramount to identify characteristics of these powerful actors to understand the importance of their roles in the global economy. Traits of multinational corporations explain the motivation for vague definitions of corporate social responsibility. Fundamental frameworks for global governance like the UN Global Compact help guide good corporate citizenship. I will use corporations and multinational corporations interchangeably.

NEO-LIBERALISM
It is essential for multinational corporations to recognize their responsibility as global actors prospering in a neoliberal world. Neoliberalism is an economic ideology that has fostered the massive growth of multinational corporations not only in the United States but also all around the world. The rich grow richer and the poor grow poorer in present neo-liberal world. In the past 25 years, neoliberal policies have become widespread and with economic integration intensifying. Free markets, free trade and unrestricted flow of capital are perfect conditions that enable corporations to become multinational in a growing borderless world.
2 Permeable borders, with minimal government spending, taxation and regulation, has facilitated multinational corporations to pursue direct economic involvement in various regions. Neo-liberalism promotes foreign investment and supports multinational operations without impeding constraints imposed by government regulations. Global reach and de-regulation are essential for successful corporate operations. But, as a result of globalization, corporations have standardized their operations and multiplied.

GLOBALIZATION
Globalization is a process that facilitates efficiency, control and maximum profit. Globalization is defined as, “mass integration of global actors driven by capitalism, exploitation of resources and producing opportunities to emulate development.”
3 Globalization provides goods and services worldwide. Multinational corporations (MNC) through scientific management have marginalized the value of labor.

Mass integration on a global scale is possible through information exchange. Manuel Castells is best known for his writings on the Information Age, in which he elaborates the importance of network societies that undermine the affect of space and time.
4 Space and time are no longer a hindrance for participating actors who wish to expand their operations. Opportunity to emulate development entails consequences for both the core and periphery. Core countries will maintain development at the expense of their citizens who lose their jobs to foreign workers who provide the same service with lesser pay. The McKinsey Global Institute predicts that “white-collar off shoring will increase at a rate of 30 percent to 40 percent over the next five years. By 2015, roughly 3.3 million service jobs will have moved offshore.”5 Low skilled workers in core countries are replaced by even lower skilled workers of emerging societies. Also, peripheral nations exploit their citizens by producing a dichotomy between the unemployed and employed. The narrator of The White Tiger, Aravind Adiga, explains “in the old days there were one thousand castes and destinies in India. These days, there are just two castes: Men with Big Bellies, and Men with Small Bellies.”6 This dichotomy is similar to the conditions created by neoliberalism.

Neoliberal economic ideologies and globalization entails the rapid flow of information, capital, labor, responsibility and sometimes inequitable consequences. Repercussions are experienced when conglomerates carelessly penetrate regions without calculating human cost. Environmentalists, labor rights activists, and political analysts are known to have unfavorable views about MNCs. They will continue to be scrutinized for forcing populations to endure the effects of decisions made by individuals who are unsympathetic to the realities of their narrow commitments. Narrow decisions fail to consider the human costs of market driven operations. Some operations clearly violate human rights but are systematically ignored in pursuit of profit, disguised as economic development. Usurping natural resources, exploiting workers and creating political instability are general violations that corporations are known to be responsible for.

Multinational corporations have been negatively criticized for extrapolating natural resources from regions they operate in. Their operations create threatening circumstances that jeopardize sustainable livelihoods. Critics recall incidence of mining projects, water shortages and destruction of rainforest to support their claims.

THE CASE OF GUATEMALA
The Mayans of Guatemala have historical ties to their land. The invasion of Mayan territory by mining projects undermined their historical patrimony and very existence. According to Leary, “mining now involves 10% of Guatemalan territory, but 90% of these lands are inhabited by indigenous people.”
7 Goldcorp is a Canadian corporation, the third largest mining company in the world. Guatemala is hosting a gold mining project called the Marlin Project, owned by a Montana Exploradora de Guatemala, a 100% subsidiary of Goldcorp. Montana Exploradora de Guatemala is financed by the International Finance Corporation (IFC), a member of the World Bank Group. The IFC has provided Montana Exploradora de Guatemala a loan of $45 million to continue operations while the remaining costs are financed by Goldcorp.8 Despite, massive protests against mining projects global actors, with state approval, carried out plans for production and ignored 95% of the population. The state functions undemocratically to assure the transfer of surplus and constrains the indigenous peoples through ideology and repression from development. The structure of an underdeveloped country enables mining corporations to continue explorations of natural resources in occupied territory for profit repatriation. Foreign conglomerates continue to take advantage of the structural deficits of a region to maximize profit. These profits are repatriated to offshore banks to avoid taxation from their home countries.

THE CASE OF MEXICO
Like the Mayans, a proportion of people living in Oaxaca were regularly tormented to leave their homes to better accommodate producers. Oaxaca is one of Mexico's prime regions where economic endeavors usually take place. Additionally, it is where mezcal was originally produced. Davies explains mezcal as “an artisan liquor cooked in clay containers, from home-grown agave plant.”
9 Now, a predominant corporation has transformed this traditional beverage to a cosmopolitan item with an international demand that requires massive production at preferably low costs. A high volume distillery requires large amounts of water for cooking and distilling the product but also for cleaning the plant. Consequently, surrounding farmers are forced to pay the price for water shortages. Their livelihoods depend on water and instead of regulating corporate consumption, farmers are coerced to relocate or change their way of life. People of Oaxaca and Guatemala suffer from the super exploitation by multinational investors.

THE CASE OF PERU

“Pueblos en Camino” is an unofficial website that provides a link to an independent blog covering a trajectory of events taking place in Peru. On the blog, a BBC article detailed Peruvian protests to end the destruction of the Amazon. The Amazon has a symbolic meaning as “the lungs of the earth.”
10 The deforestation of the Amazon has led large indigenous groups to join and stand against dominant power. The state has declared a state of emergency and ordered Amazonian tribes to decimate because they have been blocking highways and preventing oil and gas conglomerates to carry out installations. The exploitation and sale of land to foreign conglomerates eliminate a segment of jobs that are known to Amazonian tribes. Peruvian citizens feel obliged to protect their territory and have mobilized to defend their environment. Without the resources derived from the rainforest, tribes will have no means to live and will be forced from relative poverty to absolute poverty. Absolute poverty according to Weber exists when “people are deprived of the basic standards of diet, living conditions, leisure activities, and amenities, which are socially perceived as customary.”11 Amazonian tribes live traditional lives away from industrial environment and maintain their state of living by using resources from the Amazon. By removing the people from their natural element, they were coerced into a situation where they cannot obtain the most basic necessities to survive – best understood as the state of absolute poverty.

Events of extrapolating natural resources as detailed in places like Guatemala, Mexico and Peru should not only concern environmentalists, but also labor rights activists. The status quo of multinational corporations operating worldwide requires a reevaluation. Corporate operations intended to promote development do facilitate cooperation between nation states when they hold out hope to create opportunities to improve living standards. But declared intentions are far from successful implementation. Failed practices in mining projects have led to water shortages and deforestation. Multinational extraction entails a trajectory of events leading to exploited workers and political instability.

CHARACTERISTICS OF A POWERFUL ACTOR
Multinational corporations affect the host countries' inhabitants and their human rights since their countries of origin assume no responsibility. Low wages, bad working conditions, unfair hours, and lack of job security are a few of many problems that result from the activities of multinational corporations. Inevitably, the joint cooperation becomes very one sided. Key actors make decisions based on discretion and usually to their advantage. It is paramount to identify characteristics of a powerful actor to understand how imperative their reaction is in the current global economy. Due to their growth and influence on the world stage, multinational corporations have been identified as pertinent actors that should address global concerns. In 2001, statistics compiled by Sarah Anderson and John Cavanagh determined that 144 out of 200 world's top economic players were corporations, not countries.
12 Westburn, an academic publisher specializing in Marketing, defines multinational corporation (MNC) as “a company with production units in several countries, it markets and manufactures in many countries, makes no distinction between domestic and foreign markets and has a turnover often as large as the national income of some small countries.”13

Wal-Mart Stores, an American corporation founded early 1960s in Arkansas, is no longer a symbol of entrepreneurship and a small town business, but represents a global phenomenon due to its remarkable growth and scale of commercial success. Wal-Mart is a prime example of MNC with the acquired characteristics identified by Westburn to be a powerful actor. It has production units in 70 countries and conducts business with more than 60,000 suppliers.
14 It markets in 14 international countries outside of the United States and does not make a distinction between markets in the US or markets located in China, Argentina, and Canada, etc.15 Wal-Mart has a national income larger than countries like Poland, Saudi Arabia, Norway and Indonesia.16 According to the definition, MNCs have enormous flexibility to impact the economic, political and social conditions of a country in which they operate.

Continued >>


NOTE: This Paper was prepared for Professor Joel Clark UCDC/UCSB, 27 August 2010


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