Out of the Blue: How to get Expelled From the UNGP

As discussed in this week’s lecture, the United Nations Global Compact (UNGC). launched in 2000, is a policy initiative for businesses “committed to aligning their operations and strategies with ten universally accepted principles,” an enterprise that continues to work toward the adoption of sustainable practices in the global business sector. But the program has its limits and critics. Like similar initiatives in the past the program is voluntary, and many worry that companies can figuratively wrap themselves with the UN flag to distract attention from human rights or labor abuses, poor environmental performance, or corrupt activities. Non-governmental organizations, for example, have long criticised the UNGC for its absence of effective monitoring and enforcement provisions.

What happens to noncompliant firms? was a question posed a couple of times in lecture. First, noncompliance needs to be understood in the context of the UNGC’s mission and design. Because member companies are promising to adopt sustainable business practices, noncompliance is defined not by past or current reputation, but by failure to file an annual “Communication of Progress”(COP) report. Any firm two years in arrears is likely to be expelled, and in 2014 alone, 657 companies were tossed out the the program. That said, in the latter half of 2014 the UNGC took on 729 new members, and membership continues to grow steadily. Bottom line: “bad” companies are bad in the sense that they don’t report, and the worst penalty they face is expulsion. There is some evidence to suggest, however, that wary investors may make delisted participants pay a short term price in terms of share value.

In the 17 year history of the UNGC several thousand firms have been delisted, but very few of these companies are household names and brands, though some are subsidiaries of well known firms (e.g. KPMG Dominicana, HQ Dominican Republic). The vast majority of these companies,  like KPMG Dominicana, have 150 or fewer employees. This suggests that the UNGC initiative has not yet penetrated down through organizations’ subsidiaries, and it is widely recognized that pushing the sustainability agenda through the value chain remains a huge challenge.



This Just(in): Trudeau puts Cranium Ahead of Uranium

While clearly a  selfie-inducing natural celebrity in ways that Stephen Harper can only imagine, our new PM has taken pains to distance himself even further from his predecessor in the more compelling area of actual policy, telling the World Economic Forum in Dimages-1avos Switzerland, “my predecessor wanted you to know Canada for its resources. I want you to know Canadians for our resourcefulness.” This is a nice piece of word play–a cleverly crafted sound-bite. Well done Liberal speech writers. So what exactly does this mean?

It appears to mean that, in stark contrast to his father, Trudeau-the-younger no longer regards Canada’s natural resources as the most vital part of its economy.  Unlike his father, whose National Energy Policy put indigenizing  Canada’s oil industry at the very heart of a larger nationalist vision, Justin seems inclined to regard natural resources and the ecological price inextricably linked to their development as passé . But this is more than just a son’s a coming-of-age defiance of his father. From Confederation onward, Canadian’s of every political persuasion have thought of their economy almost exclusively in terms of oil, logs, potash, iron-ore, coal, natural gas, uranium, and so forth. There have always been  vigorous and sectarian debates about ownership and control of these resources, but nobody ever really disputed their seemingly eternal connection to Canada’s prosperity, even its nationhood.

As Peter Evans (1997) suggests (in “The Eclipse of the State? Reflections on Stateness in the Era of Globalization,” World Politics, 50) the future prospects of the territorially-grounded, extractive state remain unclear, even in an era of unprecedented globalization. He also reminds us that the realities of world politics are never entirely divorced from politics, and that the ideological pendulum now swinging away from the notion that states can be effective instruments for the achievement of collective goals may one day swing in the opposite direction.

It’s only right that a young leader endorse the resourcefulness of a young nation, and express confidence in the intellectual power of his generation. Knowledge is a growing and vital part of a wider sharing-economy, and as FDI diversifies Canadians ought not to rest unduly on their somewhat unflattering traditional role as one of the world’s “hewers of wood, and drawers of water.” (The origins of this phrase, after all, resides in the Bible’s depiction of a curse pronounced against the descendants of Canaan!) But it would be wise to remember that natural resource wealth has always been a core part of Canada’s economy regardless of party platforms and, that if Canada is losing interest in its resources, others are not. China’s state-owned companies, for example, are in the midst of an investment spree designed to secure mines, cropland, and raw materials, something that a weak Canadian dollar will surely help to facilitate. For now at least, there is far more interest in our uranium than our cranium (e.g. see http://www.mining.com/china-eyes-canadian-uranium-miners-report/).




Truth or Trump(ery)? The Re-emergence of a Realist American Foreign Policy in ‘The Donald’s’ bid for The White House

While few academic fields are better than International Relations (IR) at inspiring ideas of fundamental change, resistance to fundamental change remains one of IR’s most consistent and remarked upon features. This paradox appears to underly Ethan Kapstein’s remark that Realism “continues to define the discipline” even as it remains “deeply and perhaps fatally flawed.” The great strength of Realism is its ability to rise above the morass of allegedly new actors and issues that populate discourse about world politics, something accomplished by its insistence on state centred analyses, and highly efficient reduction of all actual or potential political action to concerns about power and national interest. But this is also the Achilles heel of Realism, an approach easily reduced to caricature or dismissed as “an anti-political apology for brute force and cynicism” (Rob Walker). Realism, while a seemingly natural view can, even when it seems most relevant, induce feelings of shame in its advocates.

But to what extent does Realism remain “a cornerstone of International Relations theory”? The evidence in this regard is mixed, and a major survey of the relationship between pedagogy, scholarship, and international policy finds that only 16% of American political scientists (and 16% globally) self-identify as Realists, as compared to 20% constructivist, 20% liberal, and 26% non-paradigmatic. This stands in contrast to the survey’s identification of a high literary output devoted to Realism, suggesting that some political scientists may be publicly embarrassed by their Realism, but privately committed to its salience.

But to what extent have academic Realists shied away from endorsing political figures and policies that, in theory, are consistent with a Realist worldview, and is such reluctance a function of the embarrassing reality that such postures and politicians are likely to package politically realist pronouncements on foreign policy with politically embarrassing, socially questionable, and controversial pronouncements in general? Two almost prototypical examples of this phenomenon are Vladimir Putin and Donald Trump. Realists (e.g. John Mearsheimer) have embraced Putin as a Realist despite his controversial leadership. Trump, however, is another matter who, despite a remarkable rise to political prominence, ability to capture the attention of an American public increasingly worried about national security, and emergence as the only presidential candidate in recent memory to articulate a consistently Realist foreign policy, has yet to be taken seriously by academic Realists.

Yet it is possible to identify an increasingly and specifically Realist content in Trump’s foreign policy pronouncements, albeit  packaged with “massive unfavorables” (Drezner) that mean academic Realists will likely be too embarrassed to endorse, or openly help to shape, a feasible Trumpian Realist foreign policy any time soon. The contrast with Putin is useful, and suggests that it is easier for American Realists to embrace or identify with non-American practitioners of their craft, opening the door to exploration of the distinction between what is politically viable, and what is politically correct.


Is Turnabout Fair Play? The Inward FDI Story in the US

Jonathan Crystal’s article “A New Kind of Competition” draws attention to a simple but under-studied reality: the US, like other advanced industrial states, is more than simply a source of foreign direct investment. The sheer preponderance and market power of US MNCs in the modern era may blind observers to the reality that America has emerged not merely as a host for FDI but, in absolute terms, the largest host in the world. While the massive size of the US domestic economy means that debates about “foreign ownership” are nowhere near as strident as they have been elsewhere (Canada in the 1960s and 70s for example) the response of domestic constituents like workers and local producers has been an increasingly important part of the story of MNCs and US power. One of the apparent paradoxes of the increased politicization of inward FDI in the American heartland is the reality that much of it has been stimulated by an essentially political imposition of trade barriers to protect many of the same domestic producers now “threatened” by foreign firms. While Crystal’s major purpose is to explain how domestic interests are translated into policy demands, and the way social demands are shaped by domestic political structures, it might be argued that the US is simply coming to terms with realities long experienced, in typically more extreme forms, by other host societies. Is turnabout fair play?


MNCs: Perception and Reality

In “MNCs, Social Responsibility and Conflict” Juliette Bennett writes:

“The international business community will increasingly need to promote greater economic inclusion and social justice in its operations, or it will be blamed for contributing to the conditions that lead to violent conflict. That may not actually be the case, but the perception is a fact of life in our rapidly shrinking world” (http://info.worldbank.org/etools/docs/library/57510/bennett_article.pdf)p. 410.

Should MNCs, or any actors, be expected to act on the basis of perceptions, even if it “may not actually be the case” that the perception is correct?


Donald Trumps Himself in Taking a Bite out of Apple

There are a great many things that GOP hopeful Donald Trump will never understand. But who could have guessed that a self-proclaimed business guru with sights on runniimagesng the most important economy in the world would fail to grasp the basic principles behind the globalization of production? In case you missed it, “the Donald” decided to observe Martin Luther King day by… well, not observing Martin Luther King day, and attacking an American icon of a different sort: Apple. “We’re going to get Apple to build their damn computers in this country instead of other countries,” Trump yelled to his Liberty University audience, and in one sentence demonstrated a unique understanding of both the concept and actual words “free enterprise.” Trump is not the first to jump on the end-outsourcing bandwagon to score political points, but his apparent failure to recognize that the very existence of companies like Apple—and empires like his own—depends on the existence of a profit maximizing, globally mobile manufacturing system is rather like FIFA head Sepp Blatter failing to understand that he could not lead a war on corruption. Too bad FIFA can only issue 8 year bans to its own president.

Trump’s latest outburst contains the usual dose of xenophobic venom, invoking the notion that it is somehow unAmerican and unsavoury for an American company to outsource its workforce to the Chinese. Either Trump is trying to score political gains by playing to right wing bigots, or is woefully ignorant of the reality that even a US president cannot legislate changes to a global economy. Or both. Trump surely knows that the business of business is business, regardless of nationality, and that Apple—who once prided itself on its homegrown production—is simply following the same logic and global supply chain as virtually every other MNC.

According to the New York Times, Apple estimates that it would take up to 9 months to find enough qualified engineers in the US to make iPhones, whereas in China, it takes 15 days. That’s called the globalization of production Donald, something that even you can’t change.


Image: Wikimedia commons


What’s so Special about Special Economic Zones?

Export processing zones (EPZs) are defined by the World Bank as follows:

fenced-in industrial estates specializing in manufacturing for exports that offer firms free trade conditions and a liberal regulatory environment (World Bank, 1992:7)

Relatively rare in the early 1970s, these zones (also known as Free Trade Zones or free ports, and more specifically as maquilas in Mexico, Special Economic Zones in China, and more pejoratively as “zones of exploitation” by their many critics) EPZs now number roughly 4000.  These zones have always been heavily concentrated in the newly industrializing economies of Asia and in Mexico, but can now be found in 130 countries.  According to the International Labor Organization (ILO) there are now 124 EPZs in China alone. EPZs play a substantial role in the economic plans of all states that utilize them, and can account for a substantial proportion of a host state’s manufacturing employment. In one extreme case, Mauritius, the entire territory of the state is zoned for export processing, effectively rendering the country as a whole an EPZ.

Why are these zones so popular?

It is easy to see why MNCs might find EPZs attractive, but what’s in it for the host states? There are numerous objectives, not always met, but articulated around three basic goals:

  1. to achieve much needed foreign exchange earnings through the promotion of non-traditional exports;
  2. to create jobs (address unemployment or under-employment particularly for female workers)
  3. To attract foreign direct investment (FDI) and (hopefully) create spillovers related to technology and knowledge, creating catalysts for indigenous entrepreneurship (the eventual production and export of genuinely local nontraditional products)

The explosion of these zones has coincided with the increasingly pragmatic, liberalized investment climate from the 1980s forward, pushing most states (and especially developing economies) to court MNCs. Because EPZs are enclaves or special arrangements isolated, geographically and politically, from the greater economy of the state, they are subject to different, fewer, and often far more lax to nonexistent regulatory controls. From the perspective of authoritarian states like China, this allows for substantial but controlled economic liberalization without the potential for spillover democratic reforms in the state/society as a whole.

EPZs are controversial because, in the very poorest states especially, they can appear to present MNCs with pre-bundled, one-stop-shopping-opportunities for worker, environmental, and other forms of exploitation. The sheer preponderance of these zones can put a downward pressure on wages, working conditions, and environmental standards perpetuating a “race to the bottom” as poor states continually compete for mobile MNC capital.  It has been shown, for example, that EPZs can be ranked in a vertical tier, with a tendency for some forms of labour intensive manufacturing to flow down from first tier states (the Asian tigers for examples) to second tier (Indonesia, Malaysia, Philippines, Thailand) and third tier (Bangladesh, China, India, Pakistan, Sri Lanka) if and when working conditions in first and second tier states threaten to improve. One troubling barometer of this downward race is that the percentage of female workers (high in all EPZs) increases substantially as investments move toward the poorest zones:

  • First tier EPZs (HK, S Korea, Singapore, Taiwan) 60% to 70% female on average
  • Second Tier (Indonesia, Malaysia, Philippines, Thailand) 85% female on average
  • Third Tier (Bangladesh, China, India, Pakistan, Sri Lanka) 90% female on average


This said, while the globalization of production can lead some MNCs to transfer production to countries where wages are low and working conditions suspect, the vast majority of FDI continues to flow where the investment climate is most favourable. It must be remembered that states, not MNCs, hold the ultimate responsibility for social policy, and political and economic stability. The suppression of wages and labour conditions in some zones can attract some business, but is often a cover for (or symptom of) political instability and corruption. Over the long term, the most effective and reliable inducement to FDI is political and economic stability. EPZs can obviously offset some of these concerns in the short term but those states and MNCs that choose to pursue “sweatshops” as a path to development may be engaged in an immoral and ultimately self-destructive practice that ignores the reality that, in the longer term, FDI in labour-intensive industries can and should lead to higher wages and better conditions.


Regulation and Corporate Activity in the Post-World War II era: A Tale of Two Regimes

Despite its status as the most deeply institutionalized era of global political-economic relations in history, the world order emergent at the end of the Second World War left the activities of Multinational Corporations (MNCs) largely unregulated. At first envisioned as a triumvirate of organizations – an International Bank for Reconstruction and Development (IBRD, better known as the World Bank), International Monetary Fund (IMF), and International Trade Organization (ITO) — the last of these institutions never materialized, leaving trade practices to the improvised arrangements of the General Agreement on Tariffs and Trade (GATT) until the birth of the World Trade Organization in 1995. While the ill-fated ITO envisioned measures for both the protection of investment and expansion of global commerce, the ad hoc arrangements of the GATT were unsuited to these functions, leaving both MNCs and their critics to fend for themselves.

It is important to emphasize that neither the proposed ITO, or eventual WTO, intended to do more than stimulate and expand trade and MNC investments, something the latter actors proved more than capable of doing on their own. At the international level, and among the industrialized states whose interests were best advanced by the postwar system, there would be no serious attempt to regulate MNCs again until the negotiation of a draft Multilateral Agreement on Investment (MAI) in 1995-1998. Negotiated between member states of the Organization for Economic Cooperation and Development (OECD) this ill-fated initiative signaled a desire to return to aspects of the project left incomplete by the collapse of the ITO 40 years earlier. To put it ironically, international investment appeared to be choking on its own success, and regulation contemplated as a way of ensuring a more predictable, systematic, and uniform set of multilateral rules in an increasingly unwieldy proliferation of MNC activities. The MAI, in other words, was a sort of regulatory framework premised on enshrining and stabilizing deregulatory values. One obvious and controversial way to make investment more predictable, for example, would be to protect the rights of MNCs from being infringed in the foreign jurisdictions in which they operate, effectively ending the capacity for signatory states to discriminate in favour of their own businesses.

Consistent with the qualified laissez-faire attitude of the embedded liberalism at the heart of their system, the affluent and dominant states of the postwar era have consistently construed “regulation” less as a control than an enabler, a synonym for efficiency, economic development, and expanded wealth. By definition, this sort of regulation cannot entail the control of MNC activities. However lamentable to its architects, nothing essential was lost with the death of the ITO or MAI. In fact, the continued perceived absence of an investment regime almost paradoxically signals the strength and presence of the investment norms preferred by the advanced industrial states. Following Stephen Krasner’s widely used definition, regimes constitute “principles, norms, rules, and decision-making procedures around which actor expectations converge” and, in the Anglo-American led world of MNCs, those expectations have consistently converged around the notion that big business should either be left to its own devices, or helped to be further left to its own devices.

This version of regulation stands in marked contrast to the notion that states, individually or in concert, have a right to curtail, control, or manage foreign corporate activities in their territory deemed inconsistent with national economic and political objectives. From this perspective the globalization of economic activity so clearly perpetuated by, and conducive to the interests of, MNCs is not inevitable but political; host governments retain both a right and responsibility to ensure that foreign companies contribute to national development. While the vast majority of MNC investments occur among and between the member states of the OECD, MNC activities were more overtly political in LDC states, and beginning in earnest in a 1964 United Nations Conference on Trade and Development (UNCTAD), a group of 75 developing states (known nevertheless as the Group of 77!) announced an agenda to promote equality in the economic and social order and advance the interests of the developing world. By the time these broad objectives crystalized in 1974 into a set of demands called the New International Economic Order (NIEO), MNCs had been identified as one of the greatest impediments to development.

It is important to remember that the “third” or developing world is not the monolithic bloc that appears in introductory international relations courses and textbooks. Singapore, for example, shares a Southeast Asian neighourhood with the Philippines and very little else; with the benefit of hindsight, this Asian tiger had no genuine interest in the confrontational rhetoric it endorsed in the 1970s. It is also important to be aware that OECD member states are not immune to the idea that MNCs pose challenges to national economic development and political autonomy: Canada, France, Mexico, and Japan have a history of screening, regulating, and even dissuading FDI. By the 1970s it was clear that MNCs were perceived as a potential threat by many states, and a necessary instrument of development by other states, and these competing evaluations of the question of regulatory control did not always fall neatly along the textbook divisions of international political theory. Not surprisingly, however, it was the major capital exporting states (the places from which the most influential and powerful MNCs came — the US, Great Britain, the Netherlands, and West Germany) that most clearly supported the status quo.

In the 1960s and early 1970s the Realist notion that international relations existed as an anarchical system in which states were left to their own devices was yet to be seriously questioned, and the idea that states should control and confront MNCs in order to promote national interests could appear as conventional wisdom. It was obvious, however, that most industries were oligopolistic, with powerful MNCs in oil, bauxite, copper, plantation crops, and a host of other industries figuratively (and literally?) holding producer states over a barrel. The Westphalian guarantee of juridical independence was cold comfort to states that either lacked genuine autonomy, or pushed back against and/or nationalized MNC operations only to find that these giants could prevent newly indigenous production from making it to market, and might even push to undermine or change the policies or leadership of a host state. In Chile, both of these things happened.


Unilateral Regulation

Nevertheless, the 1970s was a decade of largely unilateral confrontation with MNCs, fueled by the development of strong nationalist sentiments in many countries, some of which invoked memories of past corporate interference, and others which sought to use MNCs as an expedient distraction for unpopular government policies or leaders. In developed economies MNCs were sometimes used as a rallying call for nation-building, and Canadian Prime Minister Pierre Trudeau was particularly fond of this strategy. In France and Japan, inward FDI could pose threats to national champions and import substitution industrialization respectively. Each of these countries demonstrated reservations about unregulated inward FDI, but only Canada (National Energy Policy 1980) was willing to move in the direction of nationalization. In LDC states, however, confrontations were often more overt, and between 1960 and 1976 71 countries nationalized 1,369 enterprises in a range of industries, but concentrated in extractive sectors.


Multilateral regulation

Less frequently states can combine to present a common, typically regional, response to MNCs, the classic example of which is the robust code of conduct embedded in the Andean Pact 1969. By the late 1980s, the Andean Pact was evolving into a Regional Trade Agreement (RTA) with a more pragmatic attitude toward MNCs, and a growing interest in political integration among the member states of Bolivia, Colombia, Peru, and Ecuador, as signaled by its new characterization as the Andean Community (1996). In the 1970s, however, the Pact was the best example of how the perils of unilateral confrontation with MNCs could be mitigated by the simple principle of strength-in-numbers.

Other multilateral initiatives exist, including the OECD code (Guidelines for Multinational Enterprises 1976) but this initiative is not strictly regional, and is aimed less at curbing unsavory MNC activities in host states than ensuring that MNCs from (and in) OECD countries can be as unfettered as possible in pursuing their business objectives.
Universal Codes     

The holy grail of international regulation might be described as a mandatory, enforceable set of rules applicable to all areas of MNC activity, and presided over by a near universally-membered intergovernmental organization like the UN or one its affiliated bodies. The International Labor Organization (ILO) with its systematically articulated codes might be the nearest available approximation to this vision, but its lack of enforcement capacity give it all the authority of Sisyphus commanding his boulder to roll to the top of the mountain. More optimistically, and pragmatically, it has been suggested that, while such a regime might never be attained, regulations might emerge on an industry-by-industry basis creating a patchwork of norms that could eventually create a more universal normative framework. The World Health Organization/UNICEF code on breast milk substitutes in the wake of the Nestlé case is sometimes offered as evidence for such optimism. For all practical purposes, however, universal codes remain more an ideal than reality. But the UN system has proven adept at helping to shape and ground a universally available framework for reconciling human rights and MNC activities, as demonstrated in the modest gains of the Global Compact and the evolving “UN guiding principles” advanced by special envoy John Ruggie. But this initiative is better understood in the evolving notions of MNC responsibility discussed below, and not in the essentially outmoded idea of governmental or intergovernmental management.


The New Pragmatism

Prior to the 1980s, the failure to achieve effective regulation of MNCs at the international level led numerous states, unilaterally or multilaterally, to impose controls of their own on foreign corporations operating in their territory. This had led to confrontation and some gains, the most obvious of which were OPEC and the International Bauxite agreement, outcomes that demonstrate that the MNC oligopolies in some industries (in these cases oil and aluminum) could be challenged. But in most industries and cases states were left to fend for themselves, and their unilateral policies seldom achieved their objectives. The era of confrontation had seemed to run its course, and the tide shifted away from a perceived need to keep MNCs at bay, to a recognition that they were often the only viable source of foreign capital.

To what extent was this shift a function of empirical realities? to what extent was it a function of ideology? Had the world changed as much as the rhetoric of globalization suggested, or were states being persuaded to accept a policy of increased corporatization of the world as a necessary fact? Whatever the truth, it seemed clear by the 1980s that states had lost the political capacity, economic power, or ideological freedom to act and think in a manner contrary to the perceived wisdom that corporate expansion was at best a panacea for all economic woes, and at worst a necessary evil. This “consensus” had begun to transcend US or British foreign economic policy, and was becoming part of the mantra of increasingly influential IGOs like the IMF, World Bank, and soon to be reborn GATT. By start of the 1990s, Bill Clinton was able to proclaim that “globalization is not a policy choice” but a “fact,” Tony Blair’s to advance the notion that globalization is both “irreversible and irresistible,” and Susan Strange compelled to assert that “the only thing worse than being exploited (by MNCs) is not being exploited.” This “new pragmatism” did not derive from a sudden affection for MNCs. Nor did it need to involve a capitulation to the politically expedient rhetoric of economically dominant states. It spoke as much as anything to the perception that the confrontations of the past had achieved nothing, and that MNCs were a crucial, and often only, source of development capital.


Where are we now?

The 1960s and 1970s was an era of MNC expansion and conflict in host societies, centred mainly in the less developed world.  The 1980s, by contrast, was characterized by a new pragmatism that pushed hitherto suspicious states into closer collaboration with foreign companies. Whether expressed for or against greater openness to FDI, debates from 1945 onward were framed by assumptions for or against the continued relevance of a state-centric paradigm. But by the 1990s, the globalization of production and finance (itself largely a product of MNC activities) appeared to place states and MNCs on a more or less equal footing. With power comes responsibility, and MNCs were now being pushed to recognize a greater role in confronting global issues. Corporate Social Responsibility (CSR) became the catch phrase for this new ethos. For the first time MNCs were being asked to do more than desist from creating or exploiting inequities in host societies: they were being asked, and in some cases asking themselves, to address and help rectify social ills.

One symbol and catalyst for this change was the United Nations Development Program’s 1994 Human Development Report. In this report the traditional Realist notion of international security was challenged by a much more amorphous “human security” paradigm. It had become obvious that the footloose MNC was far more adapted than the state to thrive in an era of globalized economic networks. It was now acknowledged that MNCs, like other nonstate actors, were also better suited than states to the emerging idea that the proper focus for security should be the individual and that striving for national, regional, and global stability made as much sense for business as it did for foreign policy. Clearly the potential for MNC abuses is large in weak states and/or zones of conflict (e.g. the eastern margins of the Democratic Republic of Congo, Nigeria, Sudan, Irian Jaia, Colombia, Ecuador, Angola, New Guinea). But just as clearly, it is argued, MNCs can and should be part of the solution and in many instances are one of the only effective institutional entities present. Companies like Talisman, Shell,  Occidental, Texaco, Barricks, DeBeers, and Freeport-McMoran, accused in the past of exacerbating conflicts and inequalities,  now show an increased willingness to cooperate with governments, civil society, and the UN in implementing business strategies that reconcile profits with sustainability, development, and human rights.

There is little evidence of altruism in this shift. Just as numerous LDCs in the 1980s came to see MNCs as the only dance partners available (however often or clumsily they landed on their toes) MNCs since the 1990s have shown an increasing pragmatism. There are strong political and economic incentives at play reflecting the reality that the very successes of MNC expansion have unleashed many of the forces that can now be arrayed against them. The advent of global communications, for example, itself largely a product of corporate innovation, is a double edged sword, enabling on the one hand unprecedented and worldwide corporate control and coordination of industrial production, while on the other hand giving rise to social media and civil society networks well placed to monitor, and increase public awareness about, working conditions in what was once the shadowy periphery of global business. The notion of CSR has had less to do with the awakening conscience of global commerce than its growing realization that MNCs are increasingly vulnerable to bad press. Long before the world wide web, the successful consumer campaign against Nestlé (by revenue the biggest food company on the planet) had shown this vulnerability. Confronted with increasing advocacy campaigns and lawsuits – many in the context of the widening application of a long disused piece of American legislation called the Alien Tort Claims Act—MNCs have never had more compelling reasons to understand their human rights obligations.

Now, as always, MNCs inspire the creation of numerous voluntary codes of conduct. What has changed is that the number of codes has increased dramatically, and many of them promulgated by MNCs themselves. These codes, led first by US MNCs, are wide ranging but place a particular emphasis on the social and environmental impact of business activities. There are many sorts of codes, with a wide array of stakeholders, and recent scholarship has catalogued a complicated typology ranging from vague declarations of corporate norms, to fairly robust and precise principles of self-regulation. Not surprisingly, there is much discussion surrounding the limitations, implementation, and motives of these codes, which now (as always) remain voluntary. For one thing the sheer number of MNCs means that, for the time being, codes must be limited to sectors where MNCs are most likely to be American or European, particularly sensitive to brand image and corporate reputation, and whose business activities have a high level of visibility in the developed countries from which they derive. The bottom line, however, is that there is more than one bottom line, and that one of the prices of increased power for MNCs is increased responsibility.



MNCs, Environment & Culture: Extractive industries, agribusiness, & water

As noted at the start of the course, extractive industries are among the most visibly destructive and obviously exploitative areas of MNC activity. Forestry MNCs in Irian Jaya, the Philippines, and throughout Southeast Asia have contributed to a staggeringly rapid and widespread depletion of rain forests. And mining activities are intrinsically dangerous and destructive, bringing numerous MNCs into confrontations with host societies, their citizens, and advocates. These are obvious examples of the environmental/cultural impact of MNCs. These impacts, however, are often more subtle.

The increasingly concentrated nature of MNC dominated business is a familiar theme is this course. Nowhere is this more controversial than in the recent concentration and global vertical integration of agriculture. The rising prominence of agri-business (MNCs that specialize in various aspects of food production and distribution) has come to entail increasing corporate control of the food production cycle, extending from the proprietary creation and sale of seeds/crops, fertilizers, pesticides, to the distribution and retail sales of vast quantities of foodstuffs—often in MNC run supermarkets. Potable water too is well on the way to becoming an oligopolistic, MNC dominated industry. The rapid privatization of foodstuffs and water, along with deepening vertical control, means that MNCs are increasingly coming to control access to some of the basic necessities of life.


Export Processing Zones

EPZS are especially common in the following industries: garments/textiles, electronics, footwear/sporting apparel, toys, and pharmaceuticals.  Critics of these enclaves claim that the “trickle down” benefits touted by liberals are arrested or irrelevant in zones of exploitation. This is alleged because of a state-to-state competition for MNC investment that can drive wages, benefits, and worker conditions down—a socalled “race to the bottom.” Needless to say liberals dispute this is many cases, evidence for which is Raymond Vernon’s “obsolescing bargain theory” (discussed in course readings). On balance, however, EPZs among the poorest nations tend to be related to policies of last resort—the notion that “the only thing worse than being exploited is not being exploited” (Susan Strange). This leaves critics (e.g. NGO human rights groups, non-liberal economists, economic nationalists, citizen coalitions…) to wonder whether the social costs of EPZs can outweigh the promised benefits. Just what those benefits are (or whether they exist) is a question best evaluated on a case-by-case basis. What works for China, Indonesia, or Singapore, for example, is not necessarily the same for the Philippines, Guatemala, or Honduras.