Neoliberalism has been promoted across the globe by Western governments and institutions as the dominant model through which increasingly globalized capital moves. As we’ve discussed in lecture, Westernized countries have disproportionately benefited from these institutions, structures and policies because they have been the primary architects. Although these models have contributed to a rise in living standards for much of the globe, there exists an exhaustive amount of people and communities that face negative aspects of globalization—particularly exploitation and dispossession which can take on many different forms—and are actively resisting these forces which continue to dispossess them. So, what do MNCs, free markets and FDI mean for people in vulnerable communities? It’s been occasionally touched on in a few of our lectures, for example we recently discussed how difficult it is to extrapolate legitimate evidence that shows some rural communities in Latin America are facing questionable practices by MNCs who carry out extractive resource operations (Crawford, 2019). In Gerardo Munarriz (2008) article, he also touched on important points of Western institutions and Eurocentric models of International Law and their implications for some of the most vulnerable communities existing today. Institutions such as the World Bank and international legal frameworks have assisted in the expansion of MNCs (particularly mining companies) into rural indigenous communities within Latin America, without proper consideration or consultation with these communities, ultimately resulting in a dispossession of their land and resources which are essential to their way of life (Munarriz, 2018). Although it wasn’t the primary focus of Munarriz’s article or our discussions, I was prompted to consider how these vulnerable communities take on MNCs and the neoliberal policies that accelerate the destruction of their community, heritage and livelihood; Furthermore, what does this dispossession and resistance look like first hand?

Although there are many examples of Canadian mining companies in particular engaging in questionable tactics to secure natural resources in Latin America, the case of a rural farming community in Azacualpa, Honduras provides a recent example that has been somewhat well documented. In brief, the community has long been facing the exhumation of bodies from a centuries-old community cemetery by Minerales de Occidente (MINOSA), a gold mining subsidiary of Aura Minerals (Canadian), who is expanding its open pit operations into the cemetery (Geis, 2018). The community has expressed discontent and cited that MINOSA has been involved in cutting cash bribes with single members of families in exchange for their consent to exhume bodies (Geis, 2018). Most notably, Geis’ article points to an attempt by the community to make use of the Honduran legal system in order to have their claims and concerns heard, hopefully preventing the further exhumation of bodies. However, struggles with the legal process have been apparent and community organizers mentioned that judicial officials have failed to have a clear understanding of the problems (Russel, 2018). In response, the community has continued to engage in acts of physical resistance by occupying the cemetery to prevent further exhumations.  In this case and many others, it’s apparent that property rights of MNCs have trumped the generational claims communities hold to the land and resources, creating serious tensions. People are willing to put their lives on the line to protect what’s sacred to them. The fate of the cemetery and community is still uncertain. However, considering the forces and policies that stand in support of Aura minerals, it’s likely that this community may see the excavation of the entire cemetery so that Aura minerals can access gold deposits below it.

The Azacualpa case gives a clearer example of the exhaustive struggles that vulnerable communities go through when resisting forces of globalization and the expansion of a mining MNC that stand as a threat to their community, heritage and way of life. In the Azacualpa case, the impacts faced by the expansion of the mine have gone as far as to disrupt the ancestors of families who are meant to be laying in their final resting places.

Crawford, R. (2019, March 28). Retrieved from Political Science 372A.

Geis, H  (2018, May 28) Honduran villagers take legal action to stop mining from digging up graves for gold. 2018 The Guardian. Retrieved Oct. 30, 2018: (https://www.theguardian.com/environment/2018/may/28/honduran-villagers-take-legal-action-to-stop-mining-firm-digging-up-graves-for-gold)

Munarriz, G. 2008. Rhetoric and reality: The world bank development policies, mining    corporations, and indigenous communities in latin america. International Community     Law Review 10 (4): 431-43.

Russel, G & Rights Action (2018, September 2) No to aura minerals destruction of azacualpa  cemetery. [Blog] retrieved from: https://mailchi.mp/rightsaction/no-to-aura-minerals-destruction-of-azacualpa-cemetery?fbclid=IwAR0LwdjLiKMZjDS9eoVD7-KJDE-0pSy22aZrZ0CGkcYWSyDGtiyAZHx7TZ0

The topics of ‘state capitalism’ and ‘state owned enterprises’ (SOEs) have occasionally been brought up in lecture, but in those few incidences they were dismissed shortly after only a brief mention. This seems to be partially because SOEs haven’t entirely fit our definitional criteria for what is considered a ‘multinational corporation;’ and second to that, they provide unique and complicated cases which could easily be the focus of an entire week’s worth of lectures and material—so it’s likely time is also a factor. That is to say, I haven’t found that SOEs are being dismissed as unimportant, rather they have been nudged to the sidelines for the sake of convenience and haven’t been given the attention they deserve. In giving SOEs further consideration, it’s apparent that unique challenges emerge from their presence and I believe they should be discussed more frequently in relation to the impacts they have on states and security, as well as the issues they create in relation to MNCs and the global markets through which they operate.

Countries that use state capitalism (e.g. China, India and Russia) and operate SOEs have very real implications for MNCs who are based in home countries that rely on free markets to determine their outcomes. When placed in a global playing field together, these differing economic ideologies begin to develop many tensions in relation to the state, security and what has primarily been considered a liberalized global economy in which MNCs operate. For example, SOEs coming from China are heavily subsidized by the government which grants them flexibility and perks that privately owned MNCs don’t experience. Due to these large subsidies, SOEs are able to outbid privately owned MNCs by paying above market prices for contracts in the global marketplace, which can result in an artificial increase in the global price of commodities (Bremmer, Pg. 136). State subsidization also allows SOEs to do business in countries that have precarious political climates and other concerning factors that make it too risky for privately owned MNCs to invest. Chinese SOEs in particular will engage in FDI in countries that are being sanctioned by the West, which means that Western MNCs aren’t able to access these markets yet some SOEs are (Bremmer, Pg. 136). This example may also have implications for global security because Western efforts to curb malicious behaviour by states in the international community are then disrupted by FDI from SOEs, which, in some cases, clearly follows a different set of rules and is able to bypass sanctions.

What does it then look like for MNCs who rely on market forces to determine their outcomes when they engage in FDI in a country that operates under a state capitalist model? MNCs attempting to take advantage of the growing Chinese market have faced many unique challenges when operating in a host country that uses state capitalism. Within China, MNCs have experienced a more stringent use of anti-trust and anti-corruption laws by the Chinese government (Tse & Pan, 2014) who unfairly targets foreign MNCs in order to give a competitive advantage to its own SOEs (Tabeta, 2018). So, SOEs not only expand into the global market and disrupt forces which determine the outcomes of most MNCs, but when MNCs attempt to operate within countries that use state capitalism they— quite obviously—face even tougher challenges in their operations.

Security concerns for states also arise over the geopolitical nature of SOEs which comes from the close ties they have to their home countries. China’s BRI (Belt and Road Initiative) and the 16+1 initiative provide wonderful examples of projects involving billions in FDI by Chinese SOEs (Xinyu, 2018) that has grabbed the attention of many Western countries, some of which stand directly in the path of the project. Through government funding and state-owned banks, SOEs are able to take on risky infrastructure projects and investment in struggling European countries (primarily in Eastern Europe) that may not seem economically viable in the eyes of Western institutions such as the World Bank; In addition to this, the 16+1 initiative is then developing cultural and political ties with Eastern European states while also leveraging BRI infrastructure projects into some Eastern European countries. Many analysts have seen this as a divide and conquer strategy by China that seeks to fracture the EU (Godement, 2018). So, in this case, through SOEs and state-owned banks we see politically motivated FDI leading to genuine concerns for the stability and security of the EU. Another recent example has been the case of Huawei. Huawei is not necessarily an SOE, but due to the fact that China has a history of state capitalism, in which corporations are closely tied to the state, security concerns have arisen for countries now considering whether or not to allow Huawei to have access to their telecommunications networks. This is due to concerns of spying and information gathering that could potentially be carried out by the Chinese government through Huawei.

Unique challenges come from these entities that can move like MNCs yet sometimes carry politically motivated objectives that pose real threats and uncertainty to states. The tensions and challenges created by SOEs and state capitalism continue to be quite relevant when considering the operation of MNCs and states in the contemporary political and economic climate. Although SOEs and other aspects of state capitalism have flown under the radar over the duration of the course, I find that the challenges provided by SOEs and state capitalism are quite intriguing and may be deserving of slightly more attention and discussion.

References:

Bremmer, Ian. 2010. The end of the free market: Who wins the war between states and corporations?. New York: Portfolio.

Godement, F. “Tump cannot bring Europe and China together.” July 6, 2019 European Council on foreign relations. Available:    https://www.ecfr.eu/article/commentary_trump_cannot_bring_europe_and_china_together

Tabeta, S. China’s decade-old antitrust law still vexes foreign companies. August 2, 2018. Nikkei Asian Review. Available at: https://asia.nikkei.com/Economy/China-s-decade-old-antitrust-law-still-vexes-foreign-companies

Tse, E and Pan, P. Is the golden age for multinationals in China over? August 28, 2014. The South China Morning Post. Available at: https://www.scmp.com/comment/article/1581467/golden-age-over-multinationals-china

Xinyu, T. Centeral SOEs managing over 3,000 projects under BRI. November 12, 2018 China Daily. Available at: http://www.chinadaily.com.cn/a/201811/12/WS5be9103ea310eff30328812f.html

In class, we covered the discussions between horizontally and vertically integrated MNC’s, but I wanted to take a special look at a conglomerate that recently grew enormously in size due to a recent acquisition.

The Walt Disney Company recently acquired 20th Century Fox, including their film and television studies, various stakes in different international networks and the streaming service Hulu. While some politicians have praised the merger, others have come out staunchly against it, stating that “threatens to put control of even more television, movie, and news content into the hands of a single media giant” (Variety, 2017). Disney’s acquisition of this company has resulted in their status as the largest media conglomerate in the world.

Disney’s status as a media mogul is a hot topic of conversation and a clear example of the ability for MNCs to internalize competition rather than directly conflict with them (Spero and Hart, 1997). Aside from 21st Century Fox’s status as a rival, it also held notable items that would’ve strengthened Disney’s future media plans. With the recent jump toward streaming services, Disney required a large repertoire that would draw consumers from standards like Hulu and Netflix, before the acquisition, Disney branded media would’ve barely sweetened the deal. Now, Fox television, ABC, and Disney television all are under the control of a single corporation, with significant discretion for their ability to restrict or permit what can be shown. Disney+, a recently announced streaming service designed to be a competitor to Netflix, will receive a significant boost in content from this acquisition, borrowing greatly from Hulu’s library of family oriented content. When supplemented with various additions of original content, Disney+ will be a strong competitor in streaming services, an arena that are previously seen as difficult for media companies to rival tech companies like Netflix.

Disney’s ability now to influence media in the United States and beyond is potentially problematic given their ability to influence or steer industry forces based on what interests are held. With over 39% in theatrical market share forecasted for following their merger, smaller films and directors may begin to be crowded out of the market, as the sheer size of their operations strangle existing studios (Variety, 2017). Theatres already feel the significant burden that is accommodating Disney films however their retaining of studies such as Fox Searchlight point to the inclusion of smaller directors in these larger corporations.

Disney began as “Laugh-O-Gram”, however with their substantial marketshare and limited debts, they’re laughing now.

References

Spero, Joan, and Jeffery Hart. The Multinational Corporation and the Issue of Management. New York, NY: St. Martin’s, 1997.

Johnson, T. (2017, December 15). Disney-Fox Deal Lands at Uncertain Time for Antitrust Enforcement. Retrieved March 17, 2019, from https://variety.com/2017/politics/news/disney-fox-deal-antitrust-enforcement-1202637338/