The surge of globalization has without a doubt paved ways for international enterprises to flourish and grow. Globalization has created new possibilities for firms to operate and control higher numbers of assets beyond their country of origin and acquire further market share by capturing potential consumers through tapping on untouched markets for new demand, which would certainly define their competitive advantage and sustainability of its future forecast. In a reflective journal article “Big Business and State”, scholar Susan Strange has underlined that the concept of economic power nowadays has evolved, and has begun to undermine the political power of the state – as an economic power is without any borders and/or limit, and thus a global phenomenon while political power and its jurisdiction are limited to the nation’s borders. And because of this, according to Peter Evans, there are many scholars who began to believe that international enterprises such as Amazon, Apple, and Nokia have undermined the power of the ‘sovereign’ hold by many states and governments.  With this, international enterprises and their substantial economic power seems to have changed the degree of importance of governments and their fundamental purpose as a ‘sovereign’

When we talk about globalization, the phenomena of international free trade becomes relevant. It goes without saying that firms engaging in international trade would benefit by achieving specialization and an increase in their competitive advantages relative with other enterprises. But with that being said, I would like to think that despite the advantage gained by some people through international trade, the movement of the phenomena itself could, in fact, induce too much pressure and constraint on governments and firms who lack the resources and competitiveness when compared to big states such as the USA and China. While some countries might be advantaging as economic powers are providing jobs and income to certain people from multiple demographics of countries, some are just not capable. As a result of international trade, deregulation would usually commence for many reasons (Gebelhoff, 2016). One would be to attract FDI to acquire growth and to provide employment to the people, and second, driven by the possibility to acquire world market shares, countries deregulate its market laws to promote the likability of domesticated firms to ‘freely’ conduct their business without much supervision. But ultimately, what would usually occur is that this would leave much of its workforce and industries unprotected and placed in a position high in volatility of markets, and risk of their individual freedom.

As a result of this, governments face a dilemma in understanding its new role as a sovereign. I would like to argue, that despite the capabilities of economic powers to eclipse the sovereign of the state, it shouldn’t undermine the responsibilities and power of the state to maintain the functionality of its domestic market that is filled with the infant and domestic industries, the protection of private and individual property, and most importantly individual freedom as it comprises as an important aspect for economic growth. With that in mind, I would say that it is important for the government to maintain its function as a sovereign to protect its constituents from external shocks and economic forces, should they choose to engage in the international market. An ideology that best describes the governments’ role in conjunction with a strong economic background is Ordoliberalism. An example of this ideology taking place would be Germany, where they have shaped economy based on policies stemmed from an ideology that acknowledges the importance of a sovereign state to maintain the efficiency and competitiveness of economic powers by keeping a check on competition and market shares of its firms within multiple industries to avoid any of them acquiring too much power. An example of such would be their policy of the German Competition Act, which prohibits cartels and the concentration of power. And it is with their responsibility that governments supervise the limits of the ordering principles of the mechanism of its free market and the relation of individuals and firms according to their business of ethics and cooperation in their respective societies.

International enterprises undermining the sovereignty of states is an overstatement. The function and purpose of states remain with only a change of higher responsibility and awareness to protect the people and firms who aren’t engaged in trade in the international market.

Additional sources:

Gebelhoff, Robert. “Are Multinational Corporations Undermining Freedom in Poor Countries?” The Washington Post, WP Company, 13 Sept. 2016, www.washingtonpost.com/news/in-theory/wp/2016/09/13/are-multinational-corporations-undermining-freedom-in-poor-countries/?utm_term=.a8fe8108e6f4.

Patagonia cares about the world. This seems like a big and broad statement to make about a company but Patagonia puts their money where their mouth is and they’re not shy or quiet about it. I want to talk about how Patagonia is doing CSR right.

When I was in high school, everyone was wearing Toms, those shoes that pledged that for every pair you bought, they’d donate a pair to a developing country. I think that was good enough for people to hop onto the bandwagon as it was a thing that they could feel good about. Since the shoes were basically flats and whereas the quality of the shoe wasn’t bad, it’s clear, just by looking at them, the shoes weren’t meant to last. But you feel good about buying another pair because they’ll give a pair to a developing country! And the cycle continues ad infintum.

I had this teacher in high school who made a comment about the shoes that stuck with me. He said something along the lines of, ‘How do we know they even want the shoes? What if there’s a shoemaker in that town that can no longer work?’ This feels very Teach-A-Man-To-Fish but it got me thinking. Did they even want these shoes that wouldn’t last? How much research did they do on the terrain and whether these shoes would even be suitable? Did the people even want the shoes? How much overall waste would this be creating? I remember hearing about how thrift stores would just send unwanted clothing/electronics to Africa and no one there needed them and it was just a redistribution of waste in the end.

So what does Patagonia do differently? They literally tell people not to buy their products. And that increases their sales. This backwards logic is defended with the idea that people should only buy what they need to prevent potential waste. Along with this, they’ll buy back and resell your clothes after they repair it. they make sure their factories are living up to human rights standards. They’re very vocal about their actions. And my personal favorite, they’ll go so far as to sue the president for destroying national monuments.

The best part about this, for me, is that they have a CEO that actually cares about these things, instead of a mandated appointed committee that does the bare minimum to qualify for a CSR nod. So, Patagonia is doing what they can and the world is better for it.

https://www.patagonia.com/corporate-responsibility.html

http://time.com/5052617/patagonia-ceo-suing-donald-trump/

Since his installment as the President of the United States, Donald Trump has been at the very center of widespread media coverage due to his countless controversial outbursts on social media. One such outburst, earlier this year regarding the production of Apple products has attracted the watchful eyes of many political thinkers due to his realist undertone. The POTUS stated that “Apple makes their product in China. I told Tim Cook, who’s a friend of mine … ‘Make your products in the United States'” pointing a finger at CEO Tim Cook for undermining the economic benefits of the US. Subsequently, Trump stated that China was the biggest beneficiary of Apple’s production profits, taking away jobs from Americans and pawning them off to a much cheaper and foreign labor force that does nothing to fuel the American GDP.

Arguably one of the most debated topics in the world of multinational corporations, how do MNCs affect the existence and effectiveness of states? Many scholars throughout the course of political science often find themselves scattered in terms of their alignment with regards to this debate. While Liberals would state that MNCs are in fact strictly beneficial, offering jobs, catalyzing sustainable economic development, and helping the process of globalization along, Marxists and Realists would state otherwise. Marxists believing that while these multinational corporations may in fact be beneficial, there is an extent to which the benefit can be widely accepted; give MNCs too much freedom and power and Marxists would begin to see the owners/managers of these MNCs as a transnational class of elites that practically rule the world through fiscal methods. Realists on another front would state the plain negatives, claiming that these MNCs are undermining the absolute power of state sovereignty.

I wouldn’t be able to argue for which one of these schools of thought is right or wrong, but in terms of which school of thought expresses a fairly balanced perspective in terms of this debate, I’d have to hand it to the Marxists. I’ve always felt that liberal thinking on this matter, while positive and optimistic of the world we live in, sees too much of it through rose-tinted glasses, too much MNC involvement in a state can lead to economic dependencies as seen in Brazil during the 2002 re-elections. Some realists are a little bit too radical for me in terms of state-oriented thinking… Yes, I believe that state sovereignty is most definitely a structure that must be upheld and enforced on a global scale, but it is undeniable that the operation of MNCs does promote the idea of international cohesion and communication. The fact that humanity has gone over 70 years without a world war is not a coincidence, in fact, I’d assert that the fact that humanity has not plunged into a global-scale conflict most definitely has to do with the surge in development of international relations and MNCs do play a major role in that.

To conclude my thoughts regarding this debate of state power vs. MNC power, I’d like to reinstate the fact that while MNCs can bring job opportunities, technology, educational aspects, and most importantly, economic benefit to a host country, their level of involvement in host states must be considered by governments. Too much of a good thing can sometimes lead a vicious cycle of economic dependency in certain regions of the world, world leaders must take into account the premise that money can exit just as fast as it enters an economy.

Sources

Younge, Gary. “Who’s in Control – Nation States or Global Corporations? | Gary Younge.” The Guardian, Guardian News and Media, 2 June 2014, www.theguardian.com/commentisfree/2014/jun/02/control-nation-states-corporations-autonomy-neoliberalism.

One Canadian MNC has dominated international headlines for months, reigniting a conversation on MNC-government relations. SNC-Lavalin, based in Quebec, came under investigation for bribery, regarding recent pursuits of new contracts in Libya. To those even somewhat familiar with SNC, this was relatively unsurprising, as the company had previously been convicted for bribes regarding domestic contracts in cities like Montreal, and has long held an infamous reputation for its questionable business practices. The company, like many other Canadian corporations, survived with relative impunity thanks to its importance as a major employer and economic stimulant. In the case of recent allegations, if convicted, SNC would have been barred from bidding on Canadian government contracts; costing the corporation approximately $10 billion in lost revenue and likely leading to a disastrous end to all Canadian operations.  The corporation quickly mobilized lobbying efforts, resulting in the introduction of the “Deferred Prosecution Agreement” in the last omnibus spending bill, allowing companies like SNC-Lavalin to pay fines, rather than to bar their contracts if convicted. However, much to the dismay of SNC, Canadian prosecutors investigating the company, withdrew SNC’s right to the DPA, under the approval of the Minister of Justice at the time, Jody Wilson-Raybould. However, soon after, Wilson-Raybould was dismissed from her position and accused the Trudeau government of placing excessive pressure on her to give SNC the DPA. Trudeau, despite repeated denials, likely had a vested interest in seeing SNC live through its crisis. SNC is a powerful multinational, providing more thousands of Canadian jobs, most of which exist in Trudeau’s very own riding, and its closure would almost certainly have an impact on Trudeau’s political status.  As the situation continues to unfold, with it come new investigations and a severe PR storm for the Trudeau government to weather, uncomfortably close to the next election.

MNC’s like SNC that can leverage their economic power undoubtedly pose a significant threat to the integrity of government and justice. There is no question that the government and judicial system are separate, and any attempt of the government to place pressure on judicial integrity on behalf of an MNC is troubling. The controversy is a textbook example of the amount of power MNC’s hold today over states and government and the amount of influence attained through lobbying efforts. It is a reminder of the interwoven fabric of government and domestic multinationals, and the unfortunate domino effect created when issues arise in either end of such relationships. It is easy for the skeptics among us to dismiss the scandal as “characteristically bureaucratic” and simply an inevitable by-product of the establishment. Yet, each time such scandals are unraveled in the public eye, a valuable opportunity arises, a chance for Canadians to engage and advocate for change. One can be hopeful that SNC-Lavalin and Trudeau’s misfortune will bring much needed change to the climate of corruption and government favoritism. However, if history is to repeat itself, SNC-Lavalin will likely only live on as a sound-byte used by those vying to replace Justin Trudeau in this falls election.

Works Cited:

Austen, Ian. “The Strange Story Behind the SNC-Lavalin Affair.” The New York Times, The New York Times, 16 Feb. 2019, www.nytimes.com/2019/02/15/world/canada/snc-lavalin-justin-trudeau.html.

Seglins, Dave. “SNC-Lavalin Insider’s Bribery Allegations Spark Probe by Crown Agency That Loaned the Firm Billions | CBC News.” CBCnews, CBC/Radio Canada, 3 Apr. 2019, www.cbc.ca/news/canada/snc-lavalin-export-development-canada-loans-1.5079922.

Seglins, Dave. “SNC-Lavalin Insider’s Bribery Allegations Spark Probe by Crown Agency That Loaned the Firm Billions | CBC News.” CBCnews, CBC/Radio Canada, 3 Apr. 2019, www.cbc.ca/news/canada/snc-lavalin-export-development-canada-loans-1.5079922.

“Why Justin Trudeau Is in Trouble.” The Economist, The Economist Newspaper, 5 Mar. 2019, www.economist.com/the-economist-explains/2019/03/05/why-justin-trudeau-is-in-trouble.

With the rise of globalization, the world has seen a major expansion of the global economy and the number of multinational firms. This has transformed the nature of non-state actors and the relationship between the state and business actors like MNCs. As the global economy expanded, many countries and communities were keen on taking advantage of opportunities for development. However, the activities of many MNCs around the world have been criticized for significant human rights abuses.

According to Ruggie, there is considerable evidence of harsh sweatshop conditions in many labor factories supplying prestigious global brands. For instance, Bangladesh which has a “$29 billion clothing industry, contains sweatshops that pay garment workers only about $0.35 an hour while multinationals like H&M, Walmart and Aldi take advantage of the country’s dismally low minimum wage” (Volodzko). Ruggie also mentions how MNCs have displaced indigenous peoples’ communities without adequate consultation or compensation to make way for oil and gas company installations. This is most apparent in the Americas. For instance, in Canada there is currently a dispute between Indigenous peoples and Kinder Morgan over the Trans Mountain Expansion Project. In fact, the matter is so controversial that it has been taken to court to ensure that Kinder Morgan and the government follow their obligations under the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP) (Kaljur and Jang). Such human right violations have led many to mistrust MNCs even though they have great potential to contribute to the development for all stakeholders.

But there is still hope. MNCs can still deliver significant development and economic growth in many impoverished parts of the world. However, to ensure that abuses such as the ones mentioned above are not repeated, all MNCs should be pressured by states and transnational organizations or movements to adopt or practice measures of Corporate Social Responsibility (CSR) especially in countries that are most vulnerable to MNC exploitation.

The case of Nike is a clear example of how a MNC can adopt or demonstrate CSR and improve their standing as a globally responsible organization of development. According to the Sharon Waxman, CEO of the Fair Labor Association (FLA),Nike for nearly 20 years has demonstrated a steadfast commitment to improving its labor practices by maintaining its Fair Labor Association accreditation. “As Nike has grown the company has expanded its efforts to promote high labor standards across its supply chain.” Big MNCs like Nike can be positive role models in the global economic system regarding labor practices in the global supply chain. Nonetheless, it is imperative thatevery MNC adopt CSR measures to enhance the benefits to all stakeholders and ensure that workers are treated humanely and compensated fairly no matter which country they are located in. To be brief, CSR is an important instrument in the regulation of MNC activities around the world, especially in the most impoverished parts of the globe.

Releases, Press. “Nike Accredited for Fair Labor Practices.” Shop-Eat-Surf, 25 Mar. 2019, www.shop-eat-surf.com/2019/03/nike-accredited-for-fair-labor-practices/.

Ruggie, John. Just Business: MNCs and Human Rights. WW Norton, 2013.

Volodzko, David. “Bangladesh Is Burning and Sweatshops Are the Fuel.” Forbes, Forbes Magazine, 26 Mar. 2019, www.forbes.com/sites/davidvolodzko/2019/03/05/bangladesh-and-the-fire-next-time/#425041a12ca1.

Yates, Andrew. “Why Building A Pipeline on Indigenous Land Is Complicated Even If You Own It.” HuffPost Canada, HuffPost Canada, 5 July 2018, www.huffingtonpost.ca/2018/06/29/building-trans-mountain-pipeline-indigenous-land-complicated_a_23471203/.

With the rise of the American President Donald Trump and his America First policy in World Politics, it seems that international realism is back in full force. From the start of his administration Trump has been a vocal critique of China’s economic policy and has urged American corporations to bring their business back to the United States.

In a recent article, Wattles and Westwood highlight Donald Trump’s efforts to bring Apple back to America by changing the way it makes the iPhone. Essentially, Donald Trump is trying to ensure that an MNC like Apple makes US national interest especially in the area of economic development its priority. Part of Trump’s rationale for bringing Apple back to America is his belief that “China is the biggest beneficiary of Apple — not us.” In other words, Trump is seeking to put America first by forcing Apple to bring the production of Apple products back to the U.S.

What the case of Trump and Apple demonstrate is the ability of states to force corporations to serve their national interests. Trump’s efforts to force Apple to serve American interests and make sure that the money that it is generating in its production process comes back to American pockets is a classic example of mercantilist economics. Such policy fails to recognize the global nature of the supply and production chain of most MNCs in the 21st century. As Wattles and Westwood point out, “The iPhone is produced through a complex, global supply chain. Moving it out of China would be extremely difficult and highly unlikely.” In fact, having Apple produce its iPhones in China is a much more cost-effective approach than bringing that process back to the United States given that it would significantly increase the price of iphones and affect the profits of the MNC. Thus, one of the major reasons why an MNC like Apple produces its iPhones in a country like China is primarily because it is cheaper to do so.

Some have argued that MNCs have become such powerful entities in the international system that they can often erode a state’s sovereignty. While this may be true in the developing world, the case of Apple and Trump is a clear indication that MNCs are or can still fall under the whim of state power. As Gilpin argues MNCs prefer to be stateless. However, States are the primary and most important entities of power in the international system and their sovereignty will always trump that of any other. In other words, corporations as non-state actors in the international system, may have become significant players in the area of business and development yet their activities can always be altered or limited by the authority of powerful states like the United States.

Gilpin, Robert. U.S. Power and the Multinational Corporation: The Political Economy of Foreign Direct Investment. Basic Books, New York, 1975.

Wattles, Jackie, and Sarah Westwood. “Trump Again Says Apple Should Change How It Makes the iPhone.” CNN, Cable News Network, 4 Jan. 2019, www.cnn.com/2019/01/04/tech/trump-apple-china/index.html.

FDI what is it good for? Absolutely nothing? FDI is a confusing thing because it carries with its assumptions and structures which some perceive as equalizing and liberating, whereas others perceive it as destructive and exploitative. As someone who is typically critical of MNCs it is hard for me to imagine FDI as an inherently positive force. Examples of FDI and austerity as pursued by the IMF and world bank hurting third world countries are visible many places. In Jamaica and India, the destruction of the ISI programs, and state protectionist programs and being replaced by FDI, while increasing GDP, has been increasing exploitation of the land and the population. Yet this cannot be said to be FDI’s fault, but rather the fault of the broader liberal and neo-liberal regime which uses FDI as a tool to seemingly undermine state sovereignty. But if this structure and regime is already pre-established, is FDI the actual issue, or is FDI and MNC involvement in the third world a necessary evil as Susan Strange might put it. Susan Strange, a Marxist IR theorist, argues that while FDI and MNC exploitation of the global south is deeply destructive and harmful, yet she pessimistically believes it is currently a necessary evil within the overall immobile capitalist structure. For Susan Strange and Marxist like her, FDI and MNCs provide the base capital and investment to kick start development in the developing world, and therefore through FDI countries and people become less exploited—after they are initially greatly exploited. This argument actually sounds less Marxist than liberal, because rather than attempting to change the world—which is Marx’s main goal—Susan Strange admits defeat in the face capitalism and decides the only way to improve the conditions of the poorest, is for them to be exploited even more. Yet does FDI actually improve the conditions of the global south or decrease them? These questions can’t actually be answered by me, but again I feel that when FDI is used as a way in which to remove more state-centered policies, one allows the global capitalist regime to implement austerity and market-centered policies. This removal of the state power, through state power such as trade treaties and global IO’s, the implementation of FDI—while perhaps not directly negatively affecting the material conditions of the working power—erodes the states capacity to regulate MNCs and capital. As such while FDI may not have a directly negative impact, it may in fact indirectly hurt workers by disempowering the governments which may have protected the workers.

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.