Arguments and Evidence that Transnational Corporations Harm Developing Countries

Marxists are generally critical of the role of TNCs in developing countries. They basically argue that they are part of the neo-colonial project and their main focus is to maximize profit by extracting resources from poor countries as cheaply as possible, paying workers in poor countries as little as possible and externalizing as much of the costs of production of possible (basically not cleaning up after themselves.

The Corporation’ documentary provides an excellent analysis of why corporations commit so much damage against people and plant in the pursuit of profit – they are basically legally obliged to maximise the profits of their share-holders – profit comes first, everything else second, and simply put, it is cheaper to extract, pollute and exploit than to use resources wisely, pay people decent wages or clear up your pollution.

Criticisms of TNCs

Bakan (2004) argues that TNCs exercise power without responsibility. Bakan makes several criticisms of Corporations including:

  1. They pay workers low wages – as with sweat shop labour
  2. They pollute the environment – as with the case of Shell in Nigeria.
  3. They take risks with health and safety, which can result in worker injury and death – as with the case of Union Carbide in Bhopal
  4. They profit from human rights abuses – as with Coca Cola in Columbia.

Transnational Corporations pay workers low wages

This is probably the best known criticism to be leveled at well-known Corporations such as Nike, Adidas and Primark is that they profit from ‘sweatshop labour’ – with the workers who manufacture their products working extremely long hours in poor conditions and for extremely low wages.

In chapter 5 of The Corporation, one researcher calculates that workers at one of Nike’s factories in Indonesia were earning 0.3% of the final selling price of the products they were making. Now, I know there are middle men, but in classic Marxist terms, this is surely the extraction of surplus value taken to the extreme! The anti- sweat shop campaigns are several years old now, but still ongoing.

Of course sweat shop labour is not limited to the clothing industry – the BBC3 series ‘Blood Sweat and T shirts/ Takeaways/ Luxuries’, (3) in which young Brits travel to developing countries to work alongside people in a wide range of jobs, clearly demonstrates how workers in many stages of the productive process, including rice sowing, prawn farming, gold mining, and coffee packing, suffer poor pay and conditions. Many of the goods focused on in this series end up being bought and the sold in the West by Transnational Corporations for a huge mark up, and it is extremely interesting to see the Brits abroad struggling with the injustice of this.

The Daily Mail recently conducted some undercover journalism in a Chinese factory that makes the i-pad – where the report they ‘encountered a strange, disturbing world where new recruits are drilled along military lines, ordered to stand for the company song and kept in barracks like battery hens – all for little more than £20 a week.’ Apparently workers have to endure shifts up to 34 hour s long, and the factory has been dubbed the ‘i nightmare factory’.

Corporations are responsible for causing ecological decline and damage

The evil Coca-Cola corporation is a good example of a company causing environmental decline in India:

It takes 2.72 litres of water to produce 1 litre of coca cola. Now this may sound like a reasonable ratio for such a deliciously sweet beverage, but not if you happen to be a farmer living close by to Coca Cola’s Kaladera plant in Rajasthan, North East India. According to recent independent report, commissioned by coca cola, “[the factory’s] presence in this area would continue to be one of the contributors to a worsening water situation and a source of stress to the communities around,” concluding that the company should find alternative water supplies, relocate or shut down the plant.

The result of coke’s presence in the water depleted region is that local farmers who have lived in the area for decades now have inadequate water supplies to keep their crops watered and there appears to be a clear link between the coca cola Corporation moving into the region and the destruction of the livelihood of the farmers living nearby. Coca Cola, which had an advertising budget of $2.6 billion in 2006, is clearly in a position to compensate these farmers, or relocate to a more water rich area, but chooses not to. Coca Cola’s priority clearly lies in maintaining its sickly sweet image while generating famine and poverty for those living in proximity to its factory.

Another example of a company causing environmental damage is Shell in Nigeria. Watch the brief clip from the Video ‘Poison Fire’ and note down the scale of environmental damage caused by Britain’s biggest company.

Corporations cause illness and death in the pursuit of profit

Union Carbide in Bhopal India is easily the most horrendous example of this…..

In December 1984, an explosion at a pesticide plant in Bhopal India, then owned by the American multi-national Union Carbide, lead to deadly gas fumes leaking into the surrounding atmosphere and toxic chemicals into the ground. That was more than 25 years, but, according to the Bhopal Medical Appeal (1), a toxic legacy still remains.  In addition to the 3000 people that died almost immediately, over the last two and a half decades, there have been a further 20,000 deaths and 120 000 cases of people suffering from health problems, including severe deformities and blindness, as a result of the toxic seepage into the surrounding area from the plant.

Since the disaster, survivors have been plagued with an epidemic of cancers, menstrual disorders and what one doctor described as “monstrous births” and victims of the gas attack eke out a perilous existence – 50,000 Bhopalis can’t work due to their injuries and some can’t even muster the strength to move. The lucky survivors have relatives to look after them; many survivors have no family left.

apparent root cause of the accident was that the plant had not been properly maintained following the ceasing of production, although tons of toxic chemicals still remained on the site.

It wasn’t until 1989 that Union Carbide, in a partial settlement with the Indian government, agreed to pay out some $470 million in compensation. The victims weren’t consulted in the settlement discussions, and many felt cheated by their compensation -$300-$500 – or about five years’ worth of medical expenses. Today, those who were awarded compensation are hardly better off than those who weren’t.

TNCs profit from human rights abuses

In 2003 the Trades Union movement pushed for a boycott of Coke because of the company’s alleged use of illegal paramilitaries to intimidate, threaten and kill those workers who wished to set up a Trades Union at a bottling plant in Colombia.

Campaigners for the Killer Coke campaign have documented a ‘gruesome cycle of murders, kidnappings and torture of union leaders involved in a daily life and death struggle’ at these plants. The bosses at some of Coke’s factories in Columbia have contacts with right wing paramilitary forces, and use violence and intimidation to force unionised labour out of work, and then hire non-unionised labour on worse contracts for half the pay. There have been more than 100 recorded disappearances of unionised labour at Coke’s factories.

Now the Coca Cola Corporation is obviously not directly to blame for this, as Columbia is one of the more violent countries on the planet, and this culture of violence and intimidation is widespread. The company is, however, responsible for making the conscious decision to choose to invest in a region well known for such practices, and failing to either pull out or protect its workers.

The Role of TNCs in Development – Conclusions

 

It is clear that TNCs are not particularly interested in helping poor countries to develop. However, it is not the moral responsibility of these corporations to do so; their primary commitment is to maximize profit for their shareholders.

However, we must be careful not to tarnish all TNCs with the same brush – not all of them are as bad as each-other, and some do have ethical codes of conduct which they apply globally. TNCs are also sensitive to their public reputations, and boycotts supported by well-known charities such as Oxfam have the potential to damage corporate profitability.

It would also be a mistake to dismiss all TNC investment in the developing world as exploitative. TNCs can bring innovation and efficiency into developing countries, and the wages they pay are often more than the wages in local industries.

Finally, there is the fact that TNCs probably aren’t going to diminish in power any time soon, so instead of criticizing them, it might be better to focus on what steps we might take to make the immoral ones behave better.

The following barriers exist to making TNCs work more effectively for development

  1. There is a lack of global control by national governments and agencies such as the United Nations. Quite simply, there is no international body or law in place to regulate the activities of these corporations on a global scale, there is no international minimum wage, for example.
  1. Corporations are globally mobile. Local populations are not. Governments are often reluctant to hold Corporations to account because they will simply move their operations to other countries.
  1. Leaders of governments across the world are part of the same global-political elite circle as the CEOs who run TNCs, so it is not in their interests to regulate them.

 

TNCs – Extension work
Watch ‘The Shock Doctrine’ by Naomi Kline – a depressing account of how TNCs profit from war and conflict, among other things.

 

 

 

 

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