Though MNC’s are a uniquely American creation, most countries now have their own variations of corporations. While the US government does not directly coordinate with its MNCs, other countries such as Japan have used institutional tools and laws to grow their MNCs and prevent inward FDI.

After the Second World War, the United States under the General Douglas MacArthur began the occupation and reconstruction of Japan. One of the main tasks was breaking up the former imperial family conglomerates , or Zaibatsu. Zaibatsu were family owned conglomerates that dominated the Japanese marketplace. Born out of the desire to not rely on foreign firms to transport their military, the Japanese monarch offered favorable contracts to local firms that grew into the Zaibatsu firms. For example, as Miyashita and Russell explain, Zaibatsu firms held enough power to force then Prime Minister Kato to drastically cut the military budget, which costs the armed forces of three army divisions. Seeing the Zaibatsu as the main factor of Japan’s militaristic government, the US occupying forces chose to break up the firms and nationalize their assets into the contemporary keiretsu.

The keiretsu business model is an association of companies formed around a central bank, stockholders, and a central trading company. Japanese firms use the keiretsu business model to skirt anti-trust laws and change how MNCs interact with each other. US MNC’s will only work together and share resources during strategic alliances to maintain their respective independence. However, the keiretsu model promote resource sharing, with firms looking out for each other , instead of competing with each other to allow simultaneous expansion into the global market.

Theorist have called the rise of Japanese a miracle, theorist Chalmers Johnson has called it less so. The idea of a miracle can be attributed to the notion of orientalism, and the fascination of unprecedented growth in the Asian continent. What Johnson attributes the rise of the Japanese firm to the MITI , or Ministry of International Trade and Industry. What MITI did was use targeted public policy that selected vulnerable global markets. Using previously purchased licensing agreements and shared resources, Japanese firms have created a competitive advantage not relying on natural resources, but cheap high-quality goods that rival there US counterparts. In summary, the Japanese miracle is actually one of targeted public policy. Through a centralized bureaucracy, Japanese firms share resources and look out for each other to target vulnerable markets and create a competitive advantage. By restricting inward FDI, MITI also allowed the growth of their MNCs to go unchallenged, while simultaneously pushing into global markets.

Owen Tsang

Sources:

Miyashita, K., & Russell, D. (1994). Keiretsu: Inside the Hidden Japanese Conglomerates.

In the 1970’s, Chevrolet released an advertisement of the integral nature Chevrolet has on the American way of life. The phrase “baseball, hotdogs, apple pie, Chevrolet” implies that Chevrolet is as uniquely American as the aforementioned commodities. By extension this advertisement shows how MNC’s are a uniquely American invention. After the Second World War, the United States was put in a unique position to establish the post-war order. Through the Bretton Woods System, the United States avoided creating an international regime of investment policy. In doing so, the growth of the US MNC largely went unchecked, particularly during the Marshall Plan and European reconstruction.

As Gilpin argues, MNCSs and the US government do not exclusively cooperate together. However, MNC’s are subject to favorable public policy and regulations. This is because MNC’s and the US government operate on a mutually beneficial relationship. The spread of US MNC’s is the spread of American capitalism and ideology. In doing so, the US consumer culture expands further into foreign countries, able to do so by the lack of international investment policy.

One US based theory on the spread of US consumerism the Product Cycle Model by Raymond Vernon. The PCM follows the birth , growth , maturation, and decline of the product. With the example of the TV, RCA held the monopoly on the TV market. Utilizing patented proprietary technology, RCA was able to fend off competition to grow and mature their product in the domestic market and expand into the foreign markets. Yet , the TV as a product is still in high demand in the USA. The difference is in that Japanese and Korean brands now control a larger chunk of the market. What this shows is that consumerism is more embedded into the American social fabric than specific MNCs. Given the lack of coordination between MNC’s and government, it shows how government prefers to have inward FDI’s and market competition based on the principles of liberal capitalism. Therefore, it can be said that MNC’s re bi-products take advantage of the consumerist nature of the US social fabric. However, the relationship is not reciprocal, where consumers prefer market diversity instead of a single , monopoly-based choice. This desire for diversity is what Japanese MNC’s take advantage of in their initial investments into US markets in the 1970’s.

Owen Tsang

Sources:

Crawford , R. (2019 , January 22). Week 4 US Power and Multinational Corporations. University of British Columbia, Vancouver BC. Retrieved March 4th , 2019 , from https://blogs.ubc.ca/a12012/files/2019/02/POLI-37A-Week-4.pdf

Gilpin , R. (1975). Corporate Expansionism and American Heremony. In R. Gilpin , US Power and the Multinational Corporation. Retrieved February 2019

Spero , J., & Hart , J. (1997). The Mulitnational Corporation and the Issue of Management. The Politics of International Economic Relations, 110-112.

Active Measures and Scandal

Do MNCs use Soviet propaganda techniques to improve damage control?

When MNCs find themselves in hot water, it does not seem to be an unfair assumption that preservation of their profits is a high priority. Damage control is thereby also a high priority. Damage control involves the spreading of a message, that counters or otherwise softens the repercussions of the truth. In terms of expertise for spreading counter-information, few have the prowess and experience that could even begin to match Russia/The Soviet Union (except maybe the USA). The KGB and its successor, the FSB have maintained efforts to spread misinformation since their inception through a program called “Active Measures” and its successor programs (US Information Agency 1992). Currently one of the most effective “Active Measures” is the international TV network Russia Today (RT). This widely available TV channel, (not) so secretly funded (Pisnia 2017) by the FSB is a pristine example of how to effectively spread misinformation, through the use of some of the key tenants for doing this as developed through the “Active Measures” program. RT very effectively showcases one of the key tenants for creating plausible misinformation, through wrapping the misinformation around a “kernel of truth”. The kernel of truth in RT’s case is the accurate, high quality reporting they tend to do on a daily basis. The misinformation is mixed in between this high quality reporting so as to create an air of truth. Denial is another key facet of “Active Measures” as exemplified by Vladimir Putin’s consistent and unforgiving denial of things that would otherwise seem trivially obvious such as the “Little Green Men” invasion of Crimea and even denied that flight MH-17 was shot down by a surface to air missile system supplied to pro-Russian separatists by Russia but instead claimed it was shot down by Ukrainian fighter jets. To many of us in the west, such denial seems pointless but it creates enough doubt for plausible deniability to exist.

We move then from Soviet/Russian propaganda to scandalous MNCs and specifically Nestle and its baby formula scandal. Did Nestle, inadvertently or otherwise, use at least some of the core tenants of “Active Measures” in an attempt to subvert the truth and protect profits? Anecdotally, it seems plausible. Beginning with the mixing of misinformation around a kernel of truth. Nestle payed nurses or actors pretending to be them, to be go into hospitals and spread the notion that formula was better for infants than their mother’s milk. So wrapped around a kernel of truth, namely, the medical authority and bearer of truth that the title of nurse can bestow upon someone (especially in LDC’s where common medical knowledge is unlikely to be strong). Through this technique of sewing truth and lies into the same narrative, and then using denial to create enough doubt, Nestle can be seen to have carried out a very effective Soviet style campaign.

We see then that MNC’s are able to, inadvertently or otherwise create truthful narratives with misinformation woven in combined with the outward denial from the MNC itself that anything is going on, in essence recreates a soviet style misinformation campaign that can be remarkably effective. In the case of Nestle, we see the effectiveness through the lens that not only do they still operate as the same corporate entity, but their profits grow on a year to year basis. In concluding, we see that propaganda, like many other things, is no longer and has not been for some time, a proprietary function of the nation state, but rather a tool for any organization to use to advance their interests.

Bibliography

Pisnia, N. (2017, November 15). Why has RT registered as a foreign agent with the US? Retrieved April 3, 2019, from https://www.bbc.com/news/world-us-canada-41991683

US Information Agency. (1992, June). Soviet Active Measures in the “Post-Cold War” Era 1988-1991. Retrieved April 3, 2019, from http://intellit.muskingum.edu/russia_folder/pcw_era/index.htm#Contents

Over the last several years, human rights abuses and labour standard  malpractices by multinational corporations have taken to the spotlight. Notably, a number of factory fires and collapses in export processing zones in Southeast Asia have been advocated for by the media, bringing much needed attention to the global consumer and international community. One example was the Rana Plaza collapse in Bangladesh in 2013 that left over 1,000, majority women, dead. It was reported that just that morning, a number of women complained about the buildings seemingly deteriorating structures and pleaded for someone to look into it. Much to the shock of the international world,  human rights abuse mechanisms and functioning trade unions were, and continue to be, nearly inoperable in many of these regions.

The Ruggie Principles were proposed to measure and strengthen the human rights performances of the business sector around the world. The “Protect, Respect, Remedy’ has been used as a framework for business and human rights.  Importantly, various studies have been conducted on business malpractices globally to consider whether corporations can be trained to recognize that working with the United Nations is positive.

A large scale comparative study conducted by Toffel (2015) produced positive data that supports Ruggies hypothesis. There are functioning accountability mechanisms to support that corporations can be trained to behave better through corporate social responsibility in respect to global labour standards. They found that suppliers are more likely to adhere to global labour standards when they are embedded in states that participate actively in International Labour Organization treaty regime and have stringent domestic labour law and high levels of press freedom. They also found that suppliers perform better when they serve buyers located in countries where consumers are wealthy and socially conscious. These findings suggest the importance of overlapping state, civil society, and market governance regimes to meaningful transnational regulation (Toffel 2015).

Therefore, Ruggies principles are relevant to the critical conversation over the relationship between multinational corporation accountability and state accountability. MNCs are complex international actors with rent seeking capabilities but exhibit certain elements of corporate social responsibility. To make Ruggies principles more meaningful, conversation on multinational corporations must continually adapt to consider a multiplicity of actors (state, global consumers, media, NGOs, people affected by externalities) and seek to hold each powerful actor accountable for the protection of workers and citizens.

Complimentarily, Keck and Sikkink produced interesting research on Transnational Advocacy networks in International and Regional Politics. Network is an appropriate term to describe the conditions under which increased social responsibility upon MNCs might be achieved. Networks allow us to consider the role of media, churches, trade unions, consumer organizations, intellectuals, NGOs, governments, foundations, local social movements, and a myriad of social and political actors. These international actors have widely divergent policies and goals, but their social priorities may place pressure upon larger and more powerful international and domestic actors to implement CSR.

A significant shift in global thinking would be to consider multinational corporations as sources of governance, in the way that we see states this way. Ruggies principles are in part are asking us to shift our way of thinking. Rather than seeing MNCs and states as separate units, considering the relationship between the two as nuanced, dependent, and equally capable of supporting and respecting the protection of internationally proclaimed human rights. Further, by considering a myriad of actors, appropriate accountability mechanisms for human rights abuses and labour standards will influence the state-MNC relationship towards a more socially responsible unit.

Toffel, M. W., Short, J. L., & Ouellet, M. (2015). Codes in context: How states, markets, and civil society shape adherence to global labor standards. Regulation & Governance,9(3), 205-223. doi:10.1111/rego.12076

Crawford, R. (2019). MNC’s and the Evolution of Global Governance (Lecture). Multinational Corporations & Globalization. 

Tzur Shupack

MNCs are complex. Do they cause exploitation, do they manipulate or control the government? I think that capitalism, and mercantilism before it, set up MNCs to exploit the third world and influence government policy. The history of modern MNCs start in the US with the Santa Clara vs. Southern Pacific Railroad and in England with the companies act of 1862. While Crawford argues that MNCs originate here, and I mostly agree with this, it’s important to see how MNCs had their networks of power and control prior to the 20^th century. MNCs built off the production and distribution networks of the state associated companies, the United Fruit Company was originally a state associated company, and then it was fully privatized by the late 19^th century. The United Fruit Company used their historical connections with Latin America, and the power of the American state to assume control over monopolies in natural resources in Guatemala. In the early 20^th century United Fruit Company had control over the rail, mail, and electricity. The United Fruit Company had access to gain these monopolies due to the fact that dictators controlling Guatemala gave the united fruit company cheap contracts over these resources for bribes. The United Fruit Company essentially used the influence and power of the American empire to maintain market control over much of Latin America. This is important to see because even before the Guatemalan coup the United Fruit Company had political and economic leverage over the US and Guatemala, due to historical factors such as imperialism and colonization. Yet the reaction that MNCs don’t really influence governments because sometimes governments hurt MNCs profits is looking at too narrow of a scope. An example of Governments not doing foreign policy action at the behest of MNCs is the oil interests in the first gulf war. A study showed that the oil interests influence as a reason for the gulf war was the 4^th most relevant factor. However, this scope is looking at violent foreign policy, not general foreign policy which includes trade treaties. Additionally, this example doesn’t even suggest that the government didn’t have the oil interests in mind, but that these oil interests weren’t the most critical factors influencing the war. I would respond to these criticisms by focusing on US trade policy, which resoundingly supports MNCs profits and control, especially as indicated by the TPP under the Obama administration.

The UN Global Compact was designed to encourage the commitment of corporations to upholding ten principles relating to corporate social responsibility; included are the abolition of child labour, abiding by international human rights and active efforts towards fighting corruption in all forms.

The voluntary nature of the program has led to questions of its effectiveness. The consequences of firms failing to provide Communication on Progress reports (COPs) or violating the sustainable development principles is their removal from the Global Compact, but not much else. The relaxed nature of the initiative has resulted in cries of “bluewashing,” the belief that firms partner with the Global Compact to bolster their public image with little actual effort towards upholding the Compact’s principles. The cost to firms of bluewashing, and being caught, appear to be small; there are no legal repercussions to a violation of the principles or failing to provide regular reports.

While removal from the Global Compact appears to be a fairly harmless punishment, a study by Amer (2018) finds that companies that are listed on the Global Compact’s website for their failure to comply and subsequent removal from the organization experience a fall in their trading returns in the days immediately following. Taking a sample of approximately 120 companies that were listed as non-compliant in 2008 or 2011, the researcher finds the presence of an average 1.6% abnormal fall in returns in the five days following the event of non-compliance being made public by the Global Compact.

These results have some significance. First, investors appear to penalize companies that join and fail to comply with the Global Compact principles. Second, given that there is a lack of monitoring and forced compliance, this outside influence of private actors can have a considerable impact on motivating compliance and increasing the costs of bluewashing to firms. The Guardian reports that hundreds of companies are removed from the Global Compact each year for their failure to comply; awareness of this financial penalty could help in bringing down the number of noncompliant firms and force companies to be accountable for their promise of corporate social responsibility.

Sources

Amer, E. (2018). The Penalization of Non-Communicating UN Global Compact’s Companies by Investors and Its Implications for This Initiative’s Effectiveness. Business & Society, 57(2), 255–291. https://doi.org/10.1177/0007650315609303

“Cleaning up the Global Compact: Dealing with Corporate Free Riders.” (2012). The Guardian. https://www.theguardian.com/sustainable-business/cleaning-up-un-global-compact-green-wash

The people of Haiti started protests against President Jovenel Moïse’s government in June last year and these protest continued till March this year. These protests took place in major cities of the country demanding an investigation of the funds received from Venezuela, an end to the rising prices of consumer goods in the country and the resignation of their President and Prime Minister. Their demands were responded with reductions in prices and repression but none of the two dignitaries resigned. However, due to the continuous uprising, the United Nations stepped in the back the military in an attempt to restore peace in the country. As a result, several people were killed and injured in this attempt to counter the protests.

Haiti became and independent country just about 20 years ago and ever since has been a target of powerful nations like the United States who backed up the people currently in power to overthrow their predecessors who tried to put an end to the social inequality in the country. The US has invaded Haiti in the past and created a domestic army to suppress the masses of the country. The US supported the François “Papa Doc” Duvalier who terrorised the country and set up his own paramilitary force. He was succeeded by his son, “Baby Doc” after his death and he tried to establish Haiti as a massive export processing nation by exploiting peasants from the rural population and bringing them to cities. Since then the US and the ruling class of Haiti together have made continuous efforts to take advantage of the masses of the nation and in turn have created tensions among the masses. The workers, peasants and the poor people of the country have been suffering for years, leaving a major portion of the population as undernourished and impoverished. “The World Bank estimates that 59 percent of the nation’s 10.5 million people live below the official poverty line of $2.41 a day, while a shocking 24 percent survive in extreme poverty defined as less than $1.23 a day.”

Haiti and its people have been caught in this continuous cycle of oppression and have failed to achieve any success over the years. Therefore, this uprising from the people was surely not a surprise. It is the job of the UN to defend the people of Haiti in this situation, not just as peacekeepers during these revolts but in the form of concrete administrative measures towards bringing a change in the government.

Reference:

Smith, A. (2019, March 05). Why Has Haiti Risen Up Once Again? Retrieved from https://truthout.org/articles/why-has-haiti-risen-up-once-again/

Earlier this year, Microsoft pledged $500 million dollars towards housing in Seattle. The primary focus of this is to provide middle and low income housing for workers in the area because, as we know, where tech companies congregate, housing becomes less accessible. Our prime example is San Francisco, where, according to an Uber driver I had while I was in the city last year, someone searched months for a place to live, only to end up renting a tent in someone’s backyard for $900 a month.

What Microsoft is doing here is Corporate Social Responsibility. The concept is relatively new and not thoroughly defined but we can say that at its bare minimum, it’s the actions a corporation takes to improve the surrounding areas of the space it occupies. It is in the best interest for a corporation to step in and provide funding for causes when a city or the state may not be able to, especially since they’re not being taxed in a way that would help offset the effect of their presence.

That statement is a double edged sword. In, ‘Microsoft Cannot Fix Seattle’s Housing Crisis,’ Tammy Kim explains how the city of Seattle tried to propose a head tax for corporations above a certain threshold operating in the city, but when one of the biggest tech companies, Amazon, threatened to leave, city council pulled the mandate. We heard about this in lecture, who the very nature of an MNC is that it can leave whenever it likes, even though it would prefer not to, but we see in the Amazon-Seattle situation, that the MNC had the upper hand.

Even if a state instated mandatory CSR, like India, the corporations contributions would have to be voluntary and self-reported, so a corporation can very well get away with doing nothing if they so choose, but as mentioned, it’s in their best interest to help where they can. This pledge of $500 million dollars is a good start, but unless it’s put in the right direction, who’s to say it won’t be wasted. Kim states that the money that Microsoft is pledging will end up in the hands of developers that will cater to richer renters or buyers, worsening the problem. She also brings up the concern that $500 million might not even get you as much as one would think it does.

Kim, E. Tammy. “Microsoft Cannot Fix Seattle’s Housing Crisis.” The New York Times. January 19, 2019. Accessed April 01, 2019. https://www.nytimes.com/2019/01/18/opinion/microsoft-seattle-housing.html.