One of the many lessons that has been entrenched over the course of the semester is that the discourse surrounding multinational corporations is changing. One of the themes highlighted regarding this change is how they are emerging as contributors in global governance, which can be defined as “the long history of attempts to shape and regulate an otherwise anarchic international system” (Heng and McDonagh, 2009, p.37). Understanding the concept of risk in relation to global governance provides another mechanism in dissecting why MNCs would concern themselves with such a phenomenon. MNCs, as has been previously discussed, tend to prioritize maximizing benefits for themselves. This takes priority above all other aspects of their dealings, which sometimes concern an appreciation for human rights. This mindset can be seen as beneficial when their interests overlap with that of states. Historically, a key event can help to portray this idea, which occurred on September 11, 2001.

There is no denying that the terrorist attacks on that day made America and the rest of the world uneasy. It also provided an opportunity to discuss the lingering effects and the subsequent aftermath. The concept of “risk” is a troubling one for any citizen in any society, but it is even more worrisome for MNCs. Within the discourse, “one often finds references to “governing by risk and governing terrorism through risk. Clearly, the implication is that risk can bring about new forms of governance, oriented towards reducing vulnerabilities and averting an uncertain future” (Heng and McDonagh, 2009, p.37). In lecture, an example was used in describing how the events of 9/11 set in motion a willingness for MNCs to work with governments. This example, though briefly touched on, still is crucial in modern society as the effect has remained the same. There remains an emphasis on partnership between business and governments in regards to sharing their skills, while the language of stability has transformed into a language of a need among states and MNCs and other actors to avoid “systemic discontinuities” (Crawford, 2019). The promotion of world peace is an interest that overlaps between both governments and non-state actors.

In the world today, this aspect of the course material can still be seen in one of the more complex cases of the current President of the United States being a MNC himself. Society now sees this phenomenon in their everyday life, even considering how certain MNCs (Bechtel) are comprised of political elites.

References

Crawford, R. (2019, January 29). US Power and Multinational Corporations. Retrieved from Political Science 372A: https://blogs.ubc.ca/a12012/files/2019/03/POLI-372A-Lecture-Week-5.pdf 

Heng, Y.K. and Mcdonagh, K. (2009). Risk, Global Governance and Security. In Risk, Global Governance and Security: The Other War on Terror. London: Routledge. 

Throughout the whole term, we’ve been talking religiously on what MNCs were and how they started, and what they’re doing to the world. Multinational corporations are not just private business actors, but also became a big part of overall global governance. This has resulted in making them not only economic actors, but also political. (1). We seem to have this understanding that for most multinational corporations, profit is the main motive and key, and so putting business stakeholders first. However, it is important to understand that this expectation we have of MNCs are “socially shared expectations” (11). However, with CSR, new expectations have risen, leading to my thoughts about the article. To be fair, before reading this article, the opinion that has been formed in my head was that MNCs only care about profit, and nothing else.

The authors of the article, however, have concluded a different argument. Instead of thinking of corporations in this rational way, why not think there is more to them than profit and selfish behaviour, stating that “MNEs are influenced by emerging norms as ideational aspects of social interaction instead of static rationality” (20). What they mean by this is that CSR practices are, in fact, taken seriously within corporations, and that includes the social responsibility being given to them through the emergence of norms, and basic social interaction.

I would be lying if I said this article did not – slightly – change my mind on motives of CSR practices within MNCs. It still baffles me how MNCs in this capitalist, globalized world, would care about anything else other than the profit they get out of consumerist practices. But I guess as Political Science and IR students, we should keep our minds open, and maybe welcome other ideas. The article was very well put, because it did outline some different arguments that could appear, and their answer to it, such as the public relations idea mentioned. For an MNC to fully announce that they will be involved in CSR practices comes great responsibility, and so if they do not follow this statement, they will receive backlash.

With that being said, I still believe that MNCs have a long way to go when it comes to bettering their practices, and making them more ethical. There are problems and scandals that arise daily from companies being caught being unethical (after claiming they were). I’m keeping an open mind, and I believe there is hope. But there is also a long road ahead for the authors’ arguments to be 100% true.

References:

Matthias Hofferberth et. al. (2011)“Multinational Enterprises as “Social Actors”—Constructivist Explanations for Corporate Social Responsibility”Global Society25, 2: 205-226

It is not so often news surrounding Canadian politics manage to outshine the proverbial black hole known as the US political news cycle. The still growing SNC-Lavalin scandal is one of the few Canadian news items that seem to have enough staying power to overcome what can sometimes feel like an American monopoly of our news cycles. As this not SNC’s time in the spotlight, one begins to wonder why it is so adept seemingly at attracting the wrong sort of publicity.

To give some context to SNC-Lavalin, it is prudent to understand what SNC does in  in operational terms besides bribing the sons of Libyan dictators with lavish Toronto condo renovations and attempting to influence the highest levels of Canadian government. SNC-Lavalin’s core lies in its engineering procurement and project management business. In total SNC has over 50,000 employees spread over offices in 50 countries and further operations in 160 total countries, making it a true MNC as defined in this class. This scale of operations makes SNC one of the largest engineering/construction firms in the world, rivaling giants like the infamous Bechtel corporation.

Both Bechtel and SNC are infamous for their roles in many different scandals, so the question must be asked, is there something about the engineering/construction management sectors that makes them so prone to scandalous behaviour? Perhaps something in regards to the nature of FDI within this sector causes these continuous problems. When one analyzes the types of projects that these firms are bidding on, it is often large public sector projects in LDC’s. LDC’s are often more vulnerable to corruption and bribery and as such it is not necessarily a leap why these firms could get used to operating in ways that their home countries see as antithetical to good business practices. SNC for example, has bid and and won a sizable number of construction projects in India and Libya stretching back from the early 1990s till around 2014. many of these projects were later accused of involving bribery, infamously in regards to their attempts to woo Muammar Gaddafi’s son through, among other things, the aforementioned renovations of his downtown Toronto condo, were valued at over $200,000.

Anecdotally, the business practices that became successful for these firms overseas and then later or perhaps unilaterally with the home nation-state, resulted in the accusations of corporate misconduct. While much more evidence is needed, perhaps the poor track record especially of SNC-Lavalin could be explained by a very different operational environment abroad when it was conducting FDI and other forms of international business. The business may have correctly adapted to a very different method of doing business where there is less oversight and the state’s are more vulnerable. SNC may then have begun to use the same rulebook in places where oversight was stronger and the state’s more able tolerate corporation’s allure, as in the case of its home market of Canada.

Sources:

STEAMROLLED: A Special Investigation into the Diplomacy of Doing Business Abroad.

In 2017, Tim Cook, the CEO of one of the worlds biggest MNCs, explicitly demonstrated his power in relation to the US government. He made comments about how Apple keeps large amounts of its profits in overseas tax havens and he will refuse to bring that money back into the US until they lower the tax rate. People are not allowed to do this. But, because Apple is a large and important American MNC, they are able to use loopholes to defer paying taxes. If an American citizen were to publicly announce doing the same exact thing they would likely be persecuted but Apple is allowed to do as they wish, while simultaneously sounding as if they are almost threatening the US government. Cook didn’t just remark that Apple wouldn’t bring the money into the US, but that that Apple wouldn’t bring the money into the US until the US lowered the tax rate on the money. Meaning that if the US wants this money brought back into their economy they will have to cooperate.

In a situation such as this one, it is clear to see the incredibly power of this particular MNC, but it is certainly not an anomaly. The lenient tax policies, lax restraints on capital flow, and overall economic policy of the US has made it incredibly easy for Apple to become a powerful MNC, but rather than be grateful to their home country and bring their profits home, Apple strategically keeps as much money as possible away from the US. This is possible because they are not on a level bargaining field. Apple can do nearly whatever it wants without the US interfering because all in all, the US needs Apple more than Apple needs the US. At this point in Apple’s maturity it could easily be headquartered somewhere else in the world if it felt the US was no longer the best choice. If the US were to lose Apple there would not much they could do except try to coerce them back with more favorable policies. In light of this, it would be easy to adopt the dependency theory. However, it is important to consider that though many American government officials are heavily influenced by MNC wishes, they do not cave to their every demand. On the whole, having a large amount of American MNC activity overseas is still in America’s best interest, even if every MNC is not working in direct tandem with the government. The sheer presence and power of Apple as a corporation does a lot to support traditional American state hegemony, and it does inevitably produce millions of tax dollars for the US government.  

It has become clear from the onset of this course that there is much debate within political science on the importance of MNCs. I for one usually find my beliefs and arguments aligning with that of realists. However, in the case of Multi-National Corporations there is a clear lacking within the realist perspective. This is a hole that Gilpin has seemed to fill from my point of view. Gilpin begins by crediting MNCs as the powerful economic actors which they are and describes the dangers that can befall a nation which does not keep them in mind. By exporting jobs and hollowing out industries, Gilpin argues that MNCs must be taken into account. However, unlike other theorists who believe MNCs should be left to their own devices, Gilpin believes the state must play a strong role in controlling these actors. I found this train of thought quite interesting because it still assumes nation states as the all powerful and supreme actors on the global stage but also recognizes the threat to national sovereignty which MNCs pose. Gilpin proposes constraints such as taxes and trade regulations be put on these companies so that the United States can remain in control of their economic future.

This prompted me to think about the national control which China maintains over their nationalized corporations. Although Gilpin is not proposing for nationalized or socialist enterprises, the aspect of control is shared between both cases. I wonder if a world which is increasingly globalized and economically interconnected, the US may adopt these strategies. Because MNCs are able to move freely from one state to another, the nationalization of industries may become necessary to ensure sovereign economics for a state. Without any sort of constraints or restrictions placed upon nations and their economic back bone, corporations could leave nation states stranded with no source of jobs or taxes. This to me is ironic because the free market capitalist system which has been supported by the US for so long may bite them in the back. with a market so free and with increased mobility, the US may be forced to take on aspects of the socialist policies which they have fought for so long. I would argue the only reason Americans and other western governments supported a free market is because at the time they benefited from it. If these key actors cease to gain the same benefits from a truly fluid global economy, would they also cease to support its functioning. We may already be seeing this in the mercantilist type policies of trump.

Aisha Dos Santos

Reading Juliette Bennetts piece on “Multinational Corporations, Social Responsibility and Conflict” describes the ways in which MNCs should not replace or usurp governments and the way that they function within a state, but MNCs often work with NGOs and governments use their skills to promote stability in a state. But Bennett argues that MNCs can also be a vital force for corruption, but this corruption is not solely placed upon the shoulders of MNC firms because corruption is a vestige of a state lacking a transparent, honest, and accountable institutions and governmental apparatuses. When governments tend to lose grip on order this leads to the decay of accountable and democratic institutions within a state. This then leads to the possibility of the private sector engaging in policy dialogue or in civic institutional dialogue. But with the consistent increase in globalization, their needs to be greater economic inclusion and social justice in its operations, or violent conflict in institutionally weak countries will continue to reoccur (Bennett, 2002, p. 410).

The firms of two large MNCs Odebrecht and Petrobras, that are currently operating within many Latin American countries exemplify this need for transparency in government when engaging with the private sector. The Petrobras and Odebrecht scandals have embroiled business elites and politicians across Latin America, culminating in hundreds of arrests, and billions of dollars in bribes paid (Sabados, 2018). Executives from both Petrobras and Odebrecht, including the latter’s former chief executive, Marcelo Odebrecht, were sentenced to jail time. In April 2017, a U.S. federal court ordered Odebrecht to pay $2.6 billion in fines to authorities in Brazil, Switzerland, and the United States. The company had previously admitted to paying out hundreds of millions of dollars in bribes to officials in twelve countries. Facing financial losses that stem in part from the probe, the two companies have laid off more than one hundred thousand employees (Labrador & Felter, 2018). By October 2018 Lava Jato had resulted in more than two hundred convictions for crimes including corruption, abuse of the international financial system, drug trafficking, and money laundering. More than a dozen other corporations and multiple foreign leaders have also been implicated in Lava Jato (Labrador & Felter, 2018). This displays the ways in which states and heads of their government have the tendency to engage in clientelistic practices with corporate executives of MNCs through politically corrupt practices in the form of political bribery. Bennett’s article displays the way that MNCs have a reach that can exercise and operate across borders, should bear the responsibility for the effects of their operations on local environments.

Works Cited

Bennett, Juliette. 2002. “Multinational Corporations, Social Responsibility, and Conflict”.

(New York: Journal of International Affairs). P. 393-410.

Labrador, Rocio Cara, Felter, Cara. (2018). “Brazil’s Corruption Fallout”. (Council on

Foreign Relations).

Sabados, Katarina. (2018). “Brazil: Petrobras CEO Guilty in Odebrecht Corruption Case”

(OCCRP: Organized Crime and Corruption Reporting Project).

Aisha Dos Santos

POLI 372A

Susan Strange’s “Rethinking Structural Change in the International Political Economy: States, Firms, and Diplomacy” made me reflect upon the ways in which differing domains of studies in international business and international relations have tried to study the structural changes of the world economy, but they have neglected to realize that structural changes have moved beyond the spheres of finance and domestic production. These structural changes account for why we are beginning to see multinational corporations affecting the diplomacy between the state and other competing states. States are now competing with other states over multinational corporation firms because they realize that due to the internationalization of production it has acted as a catalyst towards the industrialization of the developing world. Developing countries now want to industrialize at rates that catch up with already developed countries. This exemplifies the ways in which realist state-centric theories have come to dominate the lens through which behaviors within the international system are coming to be studied, but with this rapid globalization of industrialization in the world’s economy and the emergence of MNCs, these phenomenon are really displaying the gaps that these theories have not been able to fully rationalize .

What I have gained from this reading is that social scientists have a tendency to use empirical data and scientific tools to study states and the global political economy. Social scientists desperately need to broaden their research focus towards ways that recognize the ways in which new technologies have increased the globalization of production, and this internationalization has led to industries being produced in states around the world. This can be attributed to trade and tariff barriers being gradually struck down, the mobility of capital increases, and the lowering costs of transborder transport of goods/services. Social scientists need to become more aware of this activity occurring in the free market, and the ways competition amongst producers has lowered costs to consumers in both the developed and underdeveloped world. This has offered a variety of goods and services and this competition in the market has gradually increased the income of workers. Therefore,, states are beginning to see the benefits resulting from this industrialization even in traditionally socialist states. These factors have contributed to states forging diplomatic relations not only between states themselves, but have widened their diplomacy towards firms, because states are realizing that capitalizing and persuading a firm to locate in their home state is an advantageous venture. This changing of diplomatic arrangements displays the way that states that are no longer the main power drivers in the international economic and political system. I think this can be attributed to the breaking down of regulations and economic barriers, and this increased competition in the free market has made alliances between states and firms attractive, due to a payoff that benefits both parties. It seems that they need each other, whether they agree to it or not, due to the nature of globalization and the liberalization of international finance.  

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.

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 Davos 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.

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.