Multinationals And Globalization Essay, Research Paper

Multinationals and Globalization

Before one dwells more into the issue of globalization, one must first understand the meaning of it. The term means almost the very opposite to what it suggests. Global seems to mean universal, transcending national boundaries, and this implies a notion of good will, co-operation and unity. But in reality, what globalization means is that the frightening power of major corporations such as Nike, Sony, McDonald s etc, are taking over a country s natural resources, manufacturing, finance and cultural or entertainment undertakings all for their personal wealth. These multinationals are growing at a rapid pace as shown in figure 1 (the annual number of multinationals have doubled between the years 1992 and 1997). In some cases, these large companies are actually worth significantly more than the countries themselves (see figure 2). These giants or multinationals today control the economy of many nations, including Canada and many developing nations, thereby controlling the political destiny of the countries themselves. The main points of globalization stated in the book Globalization, Democratization, Multilateralism include:

1) THE RULE OF THE MARKET. Liberating “free” enterprise or private enterprise from any bonds imposed by the government (the state) no matter how much social damage this causes. Greater openness to international trade and investment, as in NAFTA. Reduce wages by de-unionizing workers and eliminating workers’ rights that had been won over many years of struggle. No more price controls. All in all, total freedom of movement for capital, goods and services. To convince us this is good for us, they say “an unregulated market is the best way to increase economic growth, which will ultimately benefit everyone.” 1

2) CUTTING PUBLIC EXPENDITURE FOR SOCIAL SERVICES like education and health care. REDUCING THE SAFETY-NET FOR THE POOR, and even maintenance of roads, bridges, water supply — again in the name of reducing government’s role. Of course, they don’t oppose government subsidies and tax benefits for business 2 .

3) DEREGULATION. Reduce government regulation of everything that could diminish profits, including protecting the environmental safety on the job 3 .

4) PRIVATIZATION. Sell state-owned enterprises, goods and services to private investors. This includes banks, key industries, railroads, toll highways, electricity, schools, hospitals and even fresh water. Although usually done in the name of greater efficiency, which is often needed, privatization has mainly had the effect of concentrating wealth even more in a few hands and making the public pay even more for its needs 4 .

5) ELIMINATING THE CONCEPT OF “THE PUBLIC GOOD” or “COMMUNITY” and replacing it with “individual responsibility.” Pressuring the poorest people in a society to find solutions to their lack of health care, education and social security all by themselves — then blaming them, if they fail, as “lazy.” 5

By completely centralizing the world s local economies into a global economy through multinationals, country s local economies and industries are being decimated, their environment is also being destroyed and would increase the exploitation of workers in sweatshops.

As was stated before, greedy corporations or multinationals are simply ravaging local industry and businesses of underdeveloped countries. Once the multinational moves in, many problems arise since they are being backed by international cartels. Take for example an airplane company known as Air India, which is the country’s government-run international airline. AI has been subject to foreign cartel pressure, and the airline’s market share in the country’s international traffic is now down to 16 percent 6 , far below Lufthansa and British Airways. Baldev Raj Nayar of McGill University, in Montreal, Canada, has just completed a study of aviation in India that finds that the government has discriminated against Air India in favor of foreign airlines. Similarly, the government could have rationally regulated domestic aviation while reforming Indian Airlines (IA), the domestic public sector carrier known for its poor service, and dismantling its monopoly. Instead, the government allowed fly-by-night operators to come in, form a cartel, grab the most profitable routes from IA and indulge in predatory pricing. Once these operations move in, they basically take over the country s market share within that industry. The result of this is complete and total job loss.

As Indian industry has weakened, approximately 200,000 workers have lost their jobs, some 125,000 workers in the industrial portion of the public sector alone 7 . In response to these heavy structural adjustment costs, the government promised a comprehensive program to build a “safety net.” The government set up a World Bank-financed National Renewal Fund (NRF), to retrain workers and to create alternative employment and develop new technologies. But the NRF is no more than an inefficient means of financing voluntary retirement schemes for relatively small numbers of workers 8 . A study by the Maniben Kara Institute of Labor Studies in Bombay has found that only half of the workers laid off under the NRF program find new employment. The others simply join the ranks of the 20 million to 25 million people who are still unemployed 9 .

Also the environment has suffered the same fate due to the overwhelming power of multinationals. Many countries have been dumping industrial waste in the lap of underdeveloped countries again, due to the multinationals. Take for example, India. India is quickly turning into a major dumping ground for the North’s wastes. According to Greenpeace, India imported 5 million kilograms of metal waste and 2.85 million kilograms of metal scrap from Australia in the first half of 1994. Last year, Australia exported 346,000 kilograms of used lead-acid batteries to India, almost three times what it exported in 1992. India imported 74,000 kilograms of plastic waste in 1993, almost 25 times the amount imported in 1990. India also receives huge quantities of toxic waste from the United States, Canada, Germany and Britain. In 1993 alone, the United States shipped more than 7.8 million kilograms of plastic waste, 26.8 million kilograms of tin waste, 917,000 million kilograms of lead ash and 14,500 kilograms of lead-acid batteries to India. From January to May 1993, Britain shipped India 250,000 kilograms of ash, 2.5 million kilograms of copper waste and 500,000 kilograms of lead waste, plus 1.1 million kilograms of other metal wastes. Canada contributed 960,000 kilograms of copper waste, a million kilograms of lead waste and 106 million kilograms of copper waste in 1992. Not to be outdone, the U.S. exports of scrap metal to India weighed 1.7 billion kilograms in 1990. A year earlier, Germany sent India 2 million tons of metal wastes. Another concern for the environment are big chemical-creating factory disasters. The worst industrial disaster of this century was caused by the Union Carbide Corporation, USA in Bhopal, the capital of Madhya Pradesh, a city with about one million people. Over 40 tonnes of Methyl Isocyanate and other lethal gases including Hydrogen Cyanide, leaked from Carbide’s pesticide factory in the northern end of the city killing over 8,000 people in its immediate aftermath and causing multisystemic injuries to over 500,000 people. The number of deaths has risen to over 16,000 in the subsequent years and there appears no end to the physical and mental suffering caused by exposure to the poisonous gases. Breathlessness, diminished vision , loss of appetite, pain, menstrual irregularities, recurrent fever, persistent cough, neurological disorders, fatigue, weakness, anxiety and depression are the most common symptoms. Research findings on chromosomal aberrations suggest that the future generations of the survivors will possibly carry ravages of the industrial toxins. Union Carbide continues to withhold toxicological information on the leaked gases thereby impeding medical treatment. The majority of those affected by the gases are people who earned their livelihood through hard physical labour and today their economic condition forces them to continue with their jobs, thus exposing themselves to further health risks. Little has changed in the living environment of the survivors, most of whom live in congested slums without facilities for safe drinking water, sanitation and clean air. Judicial systems in both USA and India have failed to ensure adequate compensation and justice for the survivors. The settlement amount, an average of US $ 940 for each survivor, paid by Union Carbide resulted in a nominal loss to its shareholders of merely 50 cents per share. Compensation sums awarded for personal injury have been unjust and inadequate and in over 90% of cases the victims have received only about 15,000 rupees 10 (or about $430). Nearly two hundred thousand persons directly affected by Union Carbides gases remain to be compensated. For a large number of the victims the sums received as compensation have been spent in repaying debts incurred in medical treatment in the last several years. Officials of Union Carbide who have been charged with manslaughter and other criminal offences are absconding from Indian courts where criminal proceedings against them been pending for the last six years. Every week in a public park in the city, hundreds of gas-affected women hold public meetings calling for the trial of the prime-accused Warren Anderson, former Chairman of the corporation. For further clarification on the effect on the environment, take a look at figure 3. While the environment is being massacred (represented by the trees being destroyed shown in the illustration), the multinationals are gaining millions of dollars (represented by the money wagon shown in the illustration).

In developing countries like India and Pakistan, many multinationals have come and set up their business operations so they can get cheap labor, cheap land and of course more money. Since the mobility of capital is deemed as the most important by the globalization process, the various national laws created to protect citizens, such as labor and environmental, are increasingly being known as barriers to trade and therefore, illegal. Nations with low labor costs compete with each other to attract foreign investment by transnational/multinational corporations and the result is downward leveling, a cumulative drop in various labor and environmental standards. Those with the lowest labor costs win in their efforts to attract foreign investment. The result, child labor.

Child labor is a serious problem with over 250 million working all over the world. It is nothing but shameless exploitation and greediness by huge faceless corporations. Take for example, the corporation that everybody loves, Nike. There has been has a lot of evidence that suggests that they have been using child labor practices. In a report done by the respected broadcasting network, CBS, Nike has been using these practices in developing nations such as Vietnam, the Philippines and Indonesia (see figure 4 for actual locations of these countries). CBS interviewed former employees of Nike, Thuy and Lap who were workers at the plant in Vietnam. They have made claims of physical abuse by their superior also that you must meet the production quota before you can go home. There also have been reports that similar horrible conditions have been found and confirmed in many Nike plants in China from Hong Kong Christian Industrial Committee and Asian Monitor Resource Center. There also was a document that was leaked out of Nike to the New York Times that suggests the exploitation of workers. In this inspection report that was prepared in January for the company’s internal use only, Ernst & Young wrote that workers at the factory near Ho Chi Minh City were exposed to carcinogens that exceeded local legal standards by 177 times in parts of the plant and that 77 percent of the employees suffered from respiratory problems 11 . The report also said that employees at the site, which is owned and operated by a Korean subcontractor, were forced to work 65 hours a week, far more than Vietnamese law allows, for $10 a week 12 . The Tae Kwang Vina factory, which was also inspected by Ernst & Young, is one of Nike’s larger plants. It has 9,200 workers and makes 400,000 pairs of athletic shoes each month at Bien Hoa City, some 25 miles northeast of Ho Chi Minh City, formerly Saigon. The Ernst & Young report painted a dismal picture of thousands of young women, most under age 25, laboring 10 1/2 hours a day, six days a week, in excessive heat and noise and in foul air, for slightly more than $10 a week. The report also found that workers with skin or breathing problems had not been transferred to departments free of chemicals and that more than half the workers who dealt with dangerous chemicals did not wear protective masks or gloves. But remember, Nike is not the only transnational corporation that does this, they are one of the only the ones that actually got caught. Other corporations like Reebok, Addias etc. do the same thing. Remember, these companies only design their sporting equipment, not manufacture them. Economic progress can be severely impaired by the large-scale employment of children. Child labor increases poverty and hampers development by driving wages down, putting adults out of work and denying education to the future workforce.

As you can see globalization through transnational/multinationals is an incredibly huge problem. Why do these massive corporations continue promote this if it affects so many people of developing nations? Sure, globalization unites the world in many ways and somewhat creates opportunities for many, but at what cost?