It’s fairly standard practice in A level sociology to teach that transnational corporations are basically evil and harm developing countries. I subverted this a little bit today and got students to make presentations assessing this view.
The instructions were quite simple:
Outline four case studies of corporations harming developing countries.
Outline three to four imitations of the above evidence/ criticisms of the view that Corporations harm developing countries.
Suggest what strategies might be adopted to make TNCs more effective agencies of development.
Here are some of the posters they knocked up… there’s some excellent work here!
Dependency theorists criticise TNCs for extracting resources, exploiting workers and preventing development
Dependency Theoristsare 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 externalising 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 Transnational Corporations
Bakan (2004) argues that TNCs exercise power without responsibility. Bakan makes several criticisms of Corporations including:
They pay workers low wages – as with sweat shop labour
They pollute the environment – as with the case of Shell in Nigeria.
They take risks with health and safety, which can result in worker injury and death – as with the case of Union Carbide in Bhopal
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
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.
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.
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.
British Home Stores was one of the best known high street retail stores in Britain for many decades, employing thousands of people, but in 2016 it went bankrupt, with a massive £550 million deficit in its pensions fund, and it seems Philip Green has a lot to do with this.
Philip Green bought British Home Stores in the year 2000, for £2 million. At the time, the store was failing, mainly due to its inability to keep up with the retail competition. Philip Green (in fairness to him) did turn the store around from being a failing company to a profitable enterprise in the early years of his ownership, but then he went to extract more money out the company than it was actually making, causing its ultimate collapse a decade later.
In total, over the next 15 years, Philip Green and his family extracted almost £600 million from the store in dividends, rental payments and interests on loans, £100 million of which went to fund their new super yacht named ‘Lion Heart’.
Green was very clever about the way he extracted money – it was technically his wife’s companies which owned most of BHS, and so it was his wife who received the millions of pounds in dividends payments , and because his wife was based in Monaco, a tax haven, she (and thus he) effectively paid no tax on those dividends. Between 2002 and 2004, shareholders extracted just over £422m in dividends, most of which went to Green’s wife.
Another strategy Green used was to sell off all the freeholds on which the BHS stores stood – to another of his wife’s companies, which were based in Jersey, another tax haven. This company then charged BHS rent for being on the land that BHS had previously owned. This amounted to several millions of pounds over the years, and again, all of this was tax free because Jersey was another tax haven. In total, the Green family collected £151.4m in rent using this strategy.
Things started to go pear shaped after the financial crash of 2008,, following which the pension fund had a £140 million deficit, which had grown to £225 million by 2015.
It was at this point that Green sold British Home Stores to a little known investment company for £1 – he agreed to pay in £40 million to the pension fund and gave then tens of millions in other sweeteners, knowing that he was effectively saving himself at least £150 million by passing on the pension-debt to this new company.
Retail Acquisitions failed to keep the company afloat, resulting in the eventual bankruptcy of the company, the closure of every single BHS store in the UK, thousands of job losses and, after a further year of no-profit, a massive £551 million deficit in the pension fund, which 20 000 people are members of.
Meanwhile, Philippe Green continues to enjoy the benefits of the nearly £600 million he extracted from the company during his time in charge, and it’s estimated that his wife’s property company is still currently earning about £20 million a year in rentals from the old BHS freeholds.
Focuses on how crime is a ‘natural outgrowth of the capitalist system and how the criminal justice system works for the benefits of elites and against the lower social classes.
Marxist criminologists see power being held by the Bourgeoisie and laws are a reflection of Bourgeois ideology. The legal system (lawyers, judges and the courts) and the police all serve the interests of the Bourgeoisie. These institutions are used to control the masses, prevent revolution and keep people in a state of false consciousness.
For the purposes of Second Year Sociology, the Marxist perspective on crime may be summarised into four key points:
Capitalism is Crimogenic –This means that the Capitalist system encourages criminal behaviour.
The Law is made by the Capitalist elite and tends to work in their interests.
All classes, not just the working classes commit crime, and the crimes of the Capitalist class are more costly than street crime.
The state practices Selective Law Enforcement – The Criminal Justice system mainly concerns itself with policing and punishing the marginalised, not the wealthy, and this performs ideological functions for the elite classes.
Key Sociologists associated with this perspective are William Chambliss (1978) and Laureen Snider (1993). Examples of more contemporary theorists include Professors Tombs and Whyte (See later).
Capitalism is Crimogenic
Many Marxists see crime as a natural ‘outgrowth’ of the capitalist system. The Capitalist system can be said to be crimogenic in three major ways –
Capitalism encourages individuals to pursue self-interest rather than public duty
Capitalism encourages individuals to be materialistic consumers, making us aspire to an unrealistic and often unattainable lifestyle.
Capitalism in its wake generates massive inequality and poverty, conditions which are correlated with higher crime rates.
Capitalism, self-interest and crime
The first reason that Capitalism is Crimogenic is because it encourages individuals to pursue self-interest before everything else.
Marxist Sociologist David Gordon says that Capitalist societies are ‘dog eat dog societies’ in which each individual company and each individual is encouraged to look out for their own interests before the interests of others, before the interests of the community, and before the protection of the environment. If we look at the Capitalist system, what we find is that not only does it recommend that we engage in the self-interested pursuit of profit is good, we learn that it is acceptable to harm others and the environment in the process. Please see KT’s blog post – ‘On The incredible immorality of corporate greed’ for referenced examples of Corporations acting immorally in the pursuit of profit.
Marxists point out that in a Capitalist society, there is immense competitive pressure to make more money, to be more successful, and to make more profit, because in a competitive system, this is the only way to ensure survival. In such a context, breaking the law can seem insignificant compared to the pressure to succeed and pressures to break the law affect all people: from the investment banker to the unemployed gang member.
Marxists theorise that the values of the Capitalist system filter down to the rest of our culture. Think again about the motives of economic criminals: The burglars, the robbers, and the thieves. What they are doing is seeking personal gain without caring for the individual victims.
Capitalism, materialism and crime
Secondly, Capitalism is Crimogenic because it encourages us to want things we don’t need and can’t afford
Companies such as Coca Cola and McDonald’s spend billions of dollars every year on advertising, morphing their products into fantastical images that in no way resemble the grim reality of the products or the even grimmer reality of the productive processes that lie behind making their products. Advertising is a long way beyond merely providing us with information about a product; it has arguably become the art of disinformation.
It is doubtless that corporations benefit through advertising, and modern Capitalism could not exist without the culture of consumerism that the advertising industry perpetuates, and activities have pointed to many downsides. One of the most obvious is that the world of advertising presents as normal a lifestyle that may be unattainable for many people in British Society.
For those millions who lack the legitimate means to achieve the materialist norm through working, this can breed feelings of failure, inadequacy, frustration and anger at the fact that they are working-but-not–succeeding. In short, Advertising creates the conditions that can lead to status frustration, which in turn can lead to crime.
Merton and Nightingale have pointed out that for some the desire to achieve the success goals of society outweigh the pressure to obey the law, advertising only adds to this strain between the legitimate means and the goal of material success.
Capitalism, Inequality and Crime
Thirdly, Capitalism is Crimogenic because it creates inequality and poverty
The Capitalist system is one of radical inequality. At the very top we have what David Rothkopf calls the ‘Superclass’ , mainly the people who run global corporations, and at the very bottom we have the underclass (in the developed world) and the slum dwellers, the street children and the refugees in the developing world.
The Sociologists Zygmunt Bauman points out that the super wealthy effectively segregate themselves from the wealthy, through living in exclusive gated communities and travelling in private jets and armoured vehicles with security entourages. If people can afford it, they move to a better area, and send their children to private schools. However, this doesn’t prevent the poor and the rich from living side by side.
Marxists argue that this visible evidence of massive inequalities give people at the bottom a sense of injustice, a sense of anger and a sense of frustration that they are not sharing in the wealth being flaunted in front of them (the flaunting is the point is it not?) As a result, Capitalism leads to a flourishing of economic crime as well as violent street crime.
William Chambliss even goes so far as to say that economic crime ‘’represents rational responses to the competitiveness and inequality of life in capitalist societies”. As we have seen from previous studies. Drug dealers see themselves as innovative entrepreneurs. So internalised is the desire to be successful that breaking the law is seen as a minor risk.
Marxists hold that more egalitarian societies based on the values of the co-operation and mutual assistance, have lower crime rates, as can be evidence from Bruce Parry’s visit to the extremely egalitarian Island of Anuta
Does Capitalism encourage competition over co-operation?
Does exploitation lie at the heart of the Capitalist system?
Does Capitalism encourage us to be selfish consumers?
Does Capitalism cause crime?
The Law benefits the elite and works in their Interests
Basic Marxist theory holds that the superstructure serves the ruling classes, thus the state passes laws which support ruling class interests.
Evidence for this can be found in the following:
Property rights are much more securely established in law than the collective rights of, for instance, trade unions. Property law clearly benefits the wealthy more than those with no property. William Chambliss has argued that ‘at the heart of the Capitalist system lies the protection of Private Property. Consider the fact that there are roughly 100, 000 people recognised as homeless in the United Kingdom1, and 300, 000 houses lying empty2. The rights of the property owners to keep their properties empty are put before the rights of the needy to shelter.
Laureen Snider (1993)argues that Capitalist states are reluctant to pass laws which regulate large capitalist concerns and which might threaten profitability. Having tried so hard to attract investment the last thing the state wants to do is alienate the large corporations. The state is thus reluctant to pass – or enforce – laws against such things as pollution, worker health and safety and monopolies.
While the lack of regulation in these areas is obvious in the third world, in most of Europe, there are many laws protection the environment and health and safety, but fines for them are relatively low, and, until 2007, no individual member of a corporation could be prosecuted for damaging the environment or endangering worker safety through corporate practise.
A further recent example which could be used to support this is the deregulation of financial markets prior to the financial crisis of 2008 and subsequent ‘credit crunch’ and economic recession. The activities of the vast majority of bankers and financiers were not seen as illegal and, far from being prosecuted, many grew rich through the payments of large bonuses.
Also, People have unequal access to the law. Having money to hire a good lawyer can delay trials, meaning the difference between being found not guilty or guilty, and influence the length of one’s sentence and the type of prison one goes to. Thus for Marxists, punishment for a crime may depend and vary according to the social class of the perpetrator. Poorer criminals tend to receive harsher punishments than rich criminals. As evidenced in one of the examples above, Mark Thatcher received only a suspended sentence for assisting mercenaries in a military coup against a democratically elected government.
Discussion Question: Can you think of any other ways in which the law works in the interests of the elite?
White Collar Crime and Corporate Crime
Marxists argue that although they are hidden from view, the crimes of the elite exert a greater economic toll on society than the crimes of the ‘ordinary people’. Laureen Snider (1993) points out that the cost of White Collar Crime and Corporate Crime to the economy far outweighs the cost of street crime by ‘typical’ criminals. Two contemporary organisations: Multinational Monitor3 and Corporate Watch4, specialise in documenting the illegal activities of corporations.
In the section below we look at two types of white collar crime – Fraud and Health and Safety infringements. Both of these sound either terribly complex or terribly unexciting (or both) which means people are generally uninterested in hearing about them, and this general lack of public interest is something which helps the elite get away with an incredibly high level of criminality.
White Collar Crime: Crimes committed in the furtherance of an individual’s own interests, often against the corporations of organisations within which they work.
Corporate Crime: Those crimes committed by or for corporations or businesses which act to further their interests and have a serious physical or economic impact on employees, consumers and the general public. The drive is usually the desire to increase profits.
The Cost of Financial Crime (Fraud)
Organisations such as Corporate Watch and…. Multinational Monitor, suggest that Corporate Fraud is widespread. The General Accounting Agency of the USA has estimated that 100s of savings and loans companies have failed in recent years due to insider dealing, failure to disclose accurate information, and racketeering. The cost to the taxpayer in the USA of corporate bail outs is estimated to be around $500 billion, or $5000 per household in the USA.5
The US district judge Denny Chin described the fraud as “staggering” and said the “breach of trust was massive” and that a message was being sent by the sentence. There had been no letters submitted in support of Madoff’s character, he said. Victims in the courtroom clapped as the term was read out.
Madoff pleaded guilty to 11 counts of fraud, theft and money laundering. The sentencing, in what has been one of the biggest frauds ever seen on Wall Street, was eagerly anticipated. Described by victims in written testimony as a “thief and a monster”, Madoff has become an emblem for the greed that pitched the world into recession. Nearly 9,000 victims have filed claims for losses in Madoff’s corrupt financial empire.
Madoff masterminded a huge “Ponzi” scheme. Instead of investing client’s money in securities, it was held with a bank and new deposits used to pay bogus returns to give the impression that the business was successful. At the time of his arrest in December, he claimed to manage $65bn of investors’ money, but in reality there was just $1bn left.
Corporate America has suffered a series of massive frauds during the past decade, including scandals at Enron, WorldCom, Tyco and more recently the financial empire run by Texas billionaire Allen Stanford. Former WorldCom chief Benrard Ebbers is serving 25 years for accounting fraud. Former Enron chief executive Jeffrey Skilling was sentenced to more than 24 years in prison although the sentence was overturned. He remains in prison awaiting resentencing.
Discussion Question: Are crimes such as fraud more harmful to society than violent crime?
The Ideological Functions of Selective Law Enforcement
David Gordon argues that the police mainly focus on policing working class (and underclass) areas and the justice system mainly focuses on prosecuting working and underclass criminals. By and large the system ignores the crimes of the elite and the middle classes, although both of these classes are just as likely to commit crime as the working classes.
Gordon argues that the disproportionate prosecution of working class criminals ultimately serves to maintain ruling-class power and to reinforce ruling class ideology (thus performing ‘ideological functions’ for the ruling class.)
According to Gordon ‘selective law enforcement’ benefits the Capitalist system in three major ways:
By punishing individuals and making them responsible for their actions, defining these individuals as ‘social failures’ we ignore the failings of the system that lead to the conditions of inequality and poverty that create the conditions which lead to crime.
The imprisonment of selected members of the lower classes neutralises opposition to the system.
The imprisonment of many members of the underclass also sweeps out of sight the ‘worst jetsam of Capitalist society’ such that we cannot see it.
We may also add a fourth benefit, that all of the police, court and media focus on working class street crime means that our attention is diverted away from the immorality and greed of the elite classes.
5 The Documentary: The Corporation has a very good section on the extent of corporate crime
‘The real criminals in this society are not all the people who populate the prisons across the state, but those people who have stolen the wealth of the world from the people’ (Angela Davis, former leader of the Black Panthers).