Glencore – The World’s Worst Transnational Corporation?

Glencore is one of the world’s largest commodities companies – it operates in 150 countries extracting natural resources such as iron and copper, but also has interests in  coal and oil, as well as numerous agricultural products.

Swiss commodities trader Glencore's logo is seen in front of its headquarters in Baar

Glencore – key facts and stats

  • It is registered in Switzerland
  • Has £128 billion in assets (2015)
  • Had a revenue in 2016 of $150 billion
  • Employs 150 000 people globally
  • The CEO is Ivan Glassenberg, who has a total net worth of around $5 billion.
Glencore revenue
Glencore’s total revenue over the last decade  = around $1.6 trillion

Criticisms of Glencore

Below are some arguments and evidence that Glencore is an example of a Transnational Company which is not really interested in promoting development in poor countries, but really just interested in extracting as much as it can for as cheaply as possible. 

Glencore commodities
Glencore – extracting commodities from 6 continents

Glencore has been widely criticized because it has made staggering profits by extracting huge volumes of natural resources out of poor countries. To put the size of Glencore in perspective, the annual revenue of the company is 10 times greater than the GDP of Zambia.

The 2013 video below documents how the company struck a deal with Zambia to mine its copper in which it extracts around $1 billion of copper per year but pays only 8% tax to the government, and gets free electricity for its mines into the bargain (paid for by the government).

This report from War on Want estimates that a combination of poor trade deals and tax avoidance costs the Zambian government $3 billion/ year, or 10% of its GPP. The report isn’t limited to just Glencore, it focuses on other mining companies such as Vedanta, none of these companies comes off as effectively promoting development in poor countries.

Glencore has also come under heavy criticisms for poor health and safety conditions in many of its mines, its record on environmental pollution and benefitting from child labour in the DRC.

Further Sources

Students might like to use these sources to assess the role of the TNC Glencore in promoting economic and social development in poor countries.

Glencore Wikipedia entry (useful for basic history/ stats)

Glencore’s ‘Supporting Development’ page – have a look at Zambia and the DRC.

Glencore paid £30 000 to compensate for a pollution related death – Guardian article

Criticisms of Glencore in Zambia by Facing Finance 

Glencore denies benefitting from child labour in DRC – Guardian article

 

 

 

The Mars Trilogy – Good Sociology Novels!

I thought I’d take the unusual step of plugging a series of novels in this post….

The ‘Mars Trilogy’ by Kim Stanley Robinson (1990s) may well be a work of science fiction, but it’s full of sociological themes. I guess you’d call the genre something like ‘ecological science fiction’ – a lot of his novels are set in a future in which ecological limits play a major role in the story-lines, and the characters, like it or not, cannot escape such limits. Similarly, his novels, although science fiction, tend to imagine a world where corporate capitalism still remains the dominant power in society.

I actually first came across the author thanks to a quote by Naomi Klein in ‘This Changes Everything’, I guess it’s no surprise to find her linking to him, given that capitalism and climate change is her bag too.

In this particular series of novels (Red Mars, Green Mars, and Blue Mars) – the story follows Earth’s settlement of Mars, which starts with the ‘first hundred’ leaving for Mars and establishing a colony, soon to be followed by millions of other settlers.

The novels span about a couple of hundred years, and in the first novel (Red Mars) there’s lots of discussion among the first hundred about how to organise the environmental, social and economic aspects of ‘life on mars’.

A recurring theme is whether they should terraform the planet to make it suitable for human habitation – with views on the matter ranging between ‘Reds’ who want to leave Mars as it is and for humans to just live in ‘tents’, to the fullest supporters of terraforming, who want to turn the environment into one with liquid seas and breathable air.

Robinson also introduces the concept of ‘Aeroforming’ – a small group of the original settlers end up going ‘religious’ believing that the planet and themselves and their children need to co-evolve in a spiritual mutual-evolutionary process, and at various stages throughout the novel, Robinson comes back to the idea that New Mars needs some kind of religion to bind all of the disparate elements together.

Another major theme in the novels is the power of Transnational Corporations – which have become so powerful they effectively control the UN in the early stages of the of novels, but by the end they have effectively taken over whole countries on earth (because of bailing them out of their debts, sound familiar?).

The Transnationals basically see Mars as a place from which to extract resources to be shipped back to Earth, and idea which, in the second novel, is resisted by the third and fourth generation ‘Martians’ (who have never been to Earth) who have grown up in a world run largely on the basis of a ‘gift economy’ (made possible mainly by technological advances) rather than a profit economy.

Over the course of the novels, there are various conflicts between the TNCs, who have their own armed security forces, supported by various countries on Earth (rather than the other way around!) and the Martians, who actually reject the concept of ‘revolution’ because of it’s tainted history on Earth, developing a more selective and targeted, scientifically informed approach to getting rid of the TNCs.

Anyway, that’s a brief summary of some of the political and sociological themes in the novel, which also touches on issues of ageing (early on a treatment is invented that allows people to live well, well beyond 100 years); the issue of global warming (one key event on Earth is the collapse of a major Antarctic Ice Shelf) and obviously the role of technology in human relations (Robinson imagines it as mainly a liberating force); metaphysics (science vs religious frames of knowing the world); and the good old issue of cosmpolitanism (how can different cultures get along!?)

If you’re looking for sci-fi that imagines completely different futures, this isn’t it (so maybe it’s not actually sci-fi?), but if you want something that’s set in a future that seems like it’s a distinct possibility and in doing so reflects on many of the problems we face today, it’s a great read.

Just one criticism – each book is about 700 pages long, and each book IMO would benefit from loosing about 100 pages: too much unnecessary time is spent in ‘characters heads’ while adding little to the plot.

 

 

Goldman Sachs Worried About Rising Wages….

In this recent post ‘ America is getting a raise and Goldman Sachs is freaking out about it ‘ Nick Casella cites an extract from investment bank Goldman Sachs’ daily newsletter ‘ Global Markets Daily’ which indicates that they think rising wages in America will be bad for corporate profits.

“Wages are rising. The ‘wage tracker’ maintained by our US economics team — a composite measure of wage growth based on the four main wage indicators — hit 3.0% year-on-year in the first quarter for the first time in this expansion…. And as our colleagues in equity strategy have recently pointed out, rising wages are a threat to corporate profit margins” (1)

This news letter is an example of a private document as it is only sent to high net wealth investors, who invest in Goldman Sachs’ financial services, and was never meant for public eyes, not being available in the public domain of their web-site.

It’s a nice example of how private (ish) documents can give you an insight into the simple logic of these companies – and this insight seems to suggest that Marxism is still relevant today… this really does seem to be a simple case of the Capitalist class panicking about the working classes (those who receive wages) earning more and thus taking a greater share of wealth they generate.

(1) “Labor Costs and US Equities: Stocks Confront Rising Wages with Economy at Full Employment”, Portfolio Strategy Research, May 9, 2017).

What is Economic Globalisation?

Economic Globalisation involves the global expansion of international capitalism, free markets and the increase in international trade, a process which has accelerated since the 1950s.

Nearly every country on earth now imports and exports more from and to other countries than it did immediately after World War Two, and even ex-communist countries are now part of the global capitalist economy.

Britain for example imports around 60% of its food, with only 40% of the food supply being grown in Britain, and if you take a look around any class room, or any living room, and you will probably find that the majority of products were imported from somewhere else.

This post focuses on four key aspects of economic globalisation: global supply chains, the growth of Transnational Corporations, and the increasing importance of the post modern, weightless economy.

This post has been written primarily for students studying the Global Development option for A-level sociology.

The emergence of global Commodity chains

Manufacturing is increasingly globalised as there are more worldwide networks extending from the raw material to the final consumer. The least profitable aspects of production – actually making physical products, tend to be done in poorer, peripheral countries, whereas the more profitable aspects, related to branding and marketing, tend to be done in the richer, developed, core countries.

The role of Transnational Corporations (TNCs) is particularly important

TNC logos

TNCs are companies that produce goods in more than one country, and they are oriented to global markets and global products, many are household names such as McDonald’s, Coca Cola and Nike. The biggest TNCs have annual revenues which are greater than the economic output of middle-income countries. Apple, for example, generates more income than Finland does every year, and many oil companies such as Shell and Exxon-Mobile generate revenue several times that of the poorer countries they extract from.

The global economy is Post Industrial

The global economy is increasingly ‘weightless’ (Quah 1999) – products are much more likely to be information based/ electronic, such as computer software, films and music or information services rather than actual tangible, physical goods such as food, clothing or cars.

The Call Centre is a common ‘post industrial’ work setting, taking over from the ‘factory’ in industrial society. The call centre is ‘instantaneously global – connecting workers immediately to clients, via IT.

The electronic economy underpins globalisation

Banks, corporations, fund managers and individuals are able to shift huge funds across boarders instantaneously at the click of a mouse. Transfers of vast amounts of capital can trigger economic crises.

global electronic economy

Related Posts

A Level Sociology: Global Development Module Overview

Globalisation and its consequences

  • There are Economic, Cultural and Political elements of Globalisation
  • Optimist view of Globalisation
  • Pessimist view of Globalisation
  • Transformationalist
  • Traditionalist
  • Also…
  • Does Globalisation mean the decline of the nation state?

The problems of defining and measuring development and underdevelopment

  • How should we define and measure development?
  • The strengths and limitations of Western notions and categories of development – 1st, 2nd and 3rd World, North-South Divide, World Bank economic indicators (High to Low Income Countries)
  • The strengths and Limitations of using Economic indicators – mainly GNP/ GNI but also GDP, and HPI
  • The strengths and limitations of using Social Indicators – HDI, MDGs and others…

Different theories of development, underdevelopment and global inequality

  • Modernisation Theory – Internal cultural barriers to Development// Official Development Aid, Industrialisation, Capitalism
  • Dependency Theory – Colonialism, Exploitation and Extraction by the West// Breaking Away/ Socialism
  • World Systems Theory – Global Capitalist System – Core – Periphery –Semi-Periphery// Core Nations tend to remain dominant
  • Neoliberalism – Too much aid breeds corruption// More Trade – Deregulation, Privatisation, Low Taxation
  • People Centred Development – No Fixed path to development// Sustainability/ Democracy/ Justice
  • Bottom Billion– Four Traps//Aid and Fairer Trade and Peace

Aid, debt and trade and their impact on development

  • The strengths and Limitations of Official Development Aid
  • The strengths and Limitations of Non-Governmental Organisation Aid
  • The strengths and Limitations of Private Aid
  • The strengths and Limitations of ‘Free Trade’
  • Lots of complex stuff in the criticisms of the above – About Trade Rules! (Dumping/ Subsidies etc.)
  • The strengths and Limitations of Fair Trade
  • Also be ready for a question about ‘Debt’ and development

The role of transnational corporations, nongovernmental organisations and international agencies in local and global strategies for development. (This is done as part of the previous 4 topics!)

Development in relation to industrialisation and urbanisation

  • Arguments for Industrialisation AND Urbanisation (Modernisation Theory)
  • Arguments against Industrialisation (PCD/ Sustainable Development/ Dependency Theory
  • Arguments against Urbanisation
  • Slums (case studies!)
  • Theories – Dependency Theory/ Global Pessimism

Work, employment, education and health as aspects of development

  • How are they different in the developing world
  • How does poor education etc. act as barriers to development
  • How might improving them promote development?
  • Why might western models not be appropriate to the developing world
  • What are the limitations of each of these strategies in promoting development
  • How important each of these development goals is compared to other development goals
  • Relate all of this to theories of development

 War and Conflict in relation to development

  • The nature of conflict in the developing world (small scale civil wars, not big scale techno wars)
  • Causes of conflict in the less developed world
  • How conflict prevents development
  • The role of the developed world in conflict

Gender and Development

  • The extent of gender inequality and oppression of women in developing countries
  • How might promoting gender equality lead to development?
  • How might women be disadvantaged in the process of development?
  • Why do global gender inequalities exist? Modernisation Theory/ Dependency Theory/ Radical Feminism

Population and Consumption in relation to development

  • Intro – Higher Birth rates in the developing world and population growth.
  • Malthusian Perspectives on the causes and consequences of population growth
  • Malthus
  • Paul Erlich’s Population Bomb (Neo-Malthusianism)
  • Criticisms of Malthusianism (alternative perspectives on the causes and consequences of population growth)
    • Science and Technology can feed more people
    • Increasing wealth = decreasing birth rates (Hans Rosling ) Population Growth is due to decreasing death rates – demographic transition, an indicator of increasing wealth!)
    • Dependency theory arguments – ‘Overpopulation’ is only a problem because of resource scarcity caused by the wests overconsumption (land grabs and bio fuels).
    • Uncertainty
  • Explanations of why birth rates are higher in developing countries
  • Strategies for reducing birth rates in developing countries
  • Both of the last two – contrast modernisation and dependency theories.

 The Environment and Development

  • Context – Development has been fundamentally linked to the burning of fossil fuels, industrialisation, urbanisation and high levels of consumption
  • As a result we now face environmental problems (e.g. global warming, deforestation, pollution, toxic waste).
  • These primarily affect developing countries and harm development (outline how!)
  • Since the early 1990s – the concept of sustainable development has become big news – There are some limited International agreements – e.g. Kyoto Protocol/ MDG7.
  • Limitations of sustainable development –
  • Economic growth comes first, protecting the environment second
  • No legally binding international agreements limiting the burning of fossil fuels
  • Perspectives on what we should do about environmental problems
  • Technocentric
  • Ecocentric

Global Development Revision Notes

If you like this sort of thing, then you might like my Global Development Revision Notes

 Global Development Notes Cover53 Pages of revision notes covering the following topics within global development:

  1. Globalisation
  2. Defining and measuring development
  3. Theories of development (Modernisation Theory etc)
  4. Aid, trade and development
  5. The role of organisations in development (TNCs etc)
  6. Industrialisation, urbanisation and development
  7. Employment, education and health as aspects of development
  8. Gender and development
  9. War, conflict and development
  10. Population growth and consumption
  11. The environment and sustainable development

 

Dependency Theory Applied to Gender and Development

Dependency theory and Marxist-Feminists would probably point out that many Transnational Corporations are not interested in helping developing countries. Rather, they simply exploit patriarchal values rather than promoting real equality. They do this through taking advantage of ‘women’s material subordination’ – women put up with worse conditions than men because there is no better alternative other than to return to their roles as mothers and unpaid domestic labourers.

Women’s proportion of global supply chain production workers discloses a range of 65% to 90% women in many global supply chains, most obviously the garment industry, and in some countries it is much higher – in China, 75% of garment workers are women, in Bangladesh the figure is 85%, and it rises to 90% in Cambobdia.

The charity War on Want argues that women workers in ‘sweatshops’ in Bangladesh are exploited by the Corporations that employ them (link), although there is a view that this exploitation is gradually leading to greater emancipation for women (link).

From a Dependency perspective, increased participation in the work force also implies increased hazards for women. Women’s jobs outside the home tend to be the lowest earning, least secure, and most dangerous available in the economy, especially in periods of recession that plague most developing countries.

The following video shows the conditions of women working in Bangladesh. Although they work in hazardous and strenuous conditions, most of these women are willing to work in such environments in order to financially support their families.  http://www.youtube.com/watch?v=2wqBRWa0fno

On April 24, 2013, Rana Plaza, a garment factory outside of Dhaka, Bangladesh, collapsed, killing at least 1,127 workers. Over half of the casualties were women. In Bangladesh, the garment industry is the largest employer of women, a majority of whom live in rural areas where employment is scarce. In addition, these women are often supporting large extended families, and working for the garment industry is often the only option other than working as a farm hand. Jobs in the garment industry do much to elevate the status of women, but they are often left powerless in the face of harassment and dangerous working conditions. The Bangladesh factory collapse is a prime example of how women are often required to take jobs in dangerous industries with little to no recourse of their own. (Uddin, 2013) To read more on the Bangladesh factory collapse, visit http://www.globalization101.org/manufacturing-after-the-bangladesh-factory-collapse.

The dearth of labour laws, or ignorance and lack of enforcement of the labour codes in practice, allow for the exploitation of women. In Guatemala, women constitute 80 percent of the textile factory sector, and thousands of mostly indigenous women provide services as domestic servants. In both sectors, women have only a precarious claim on the rights to Guatemala’s legally mandated minimum wage, work-week length, leave time, health care under the national social security system, and privacy protections. Often, they are subject to physical and/or sexual abuse, according to Human Rights Watch (Human Rights Watch, 2012).

Unfortunately, even the global nature of business does not confer universal rights for these women. Many U.S.-based companies, such as Target, The Limited, Wal-Mart, GEAR for Sports, Liz Claiborne, and Lee Jeans, have contracts with Guatemalan factories and continue to honor them even if the factories break explicit company policy, such as physically examining women to determine if they are pregnant and denying health care to employees. According to Human Rights Watch, strengthening legal protection for women labourers and increasing their access to legal recourse might cement increased participation in the work as a positive development for women.

Source: http://www.globalization101.org/uploads/File/Women/Women.pdf

How Private Aid Foundations Influence Economic Policy in Developing Countries

It could be used in the Global Development topics on ‘Organisations in Development’ or ‘the role of Private Aid in Development’

A flow chart of what’s below would run something like this…

TNCs (pump their profits into their) – Charitable Foundations (who established) – The Council of Foreign Relations (which influences) – The World Bank (which sets the economic policies of) – Developing Countries

Basically Roy argues that in the early 20th century, three of the largest corporations in the world (one of which was Ford) set up Philanthropic (charitable) organisations – In the middle of the 20th century, after World War Two, these organisations were key to establishing the Council of Foreign Relations, the World Bank, the United Nations and the CIA. Essentially, Roy is arguing that US Corporations run the biggest international organisations in the world, which in turn coerce Developing countries into doing what these Corporations want.

The enthralling history of ‘philanthropic foundations’ began in the United States in the early 20th century. Among the the first was the Rockefeller Foundation, endowed in 1914 by J.D Rockefeller, founder of Standard Oil Company.

Rockefeller was America’s first billionaire and the world’s richest man. He believed his money was given to him by God. Among the institutions financed with Rockefeller’s money are the United Nations, the CIA, and the Council on Foreign Relations.

Philanthropic Foundations are non tax-paying legal entities with massive resources with an almost unlimited brief. They are wholly unaccountable, wholly non transparent, and are basically about translating economic power into social, political and cultural capital.

They emerged in the 1920s because it was then that US Capitalism began to look outward for raw materials and overseas markets. Foundations began to formulate the idea of global corporate governance. In 1924 the Carnegie and Rockefeller Foundations formed the Council on Foreign Relations (the CFR), also funded by the Ford Foundation as well. By 1947 the CIA was working closely with the CFR and over the years the CFR’s membership has included 22 secretaries of state, and all eleven of the World Bank’s presidents have been members of the the CFR. The CFR also contributed a grant of £8.5 million to pay for the land in New York on which the United Nations building now stands.

Given that the World Bank has more or less directed the economic policies of the Third World, coercing them to open up their markets in return for loans and aid, and given that the World Bank is steered by the Council of Foreign Relations, which in turn is steered by Transnational Corporations, it seems to follow that it’s TNCs which really have really determined the foreign policies of third world countries over the past few decades.

By the 1950s the Rockefeller and Ford Foundations were funding international educational institutions began to work as quasi-extensions of the US government, which was at the time toppling democratically elected governments in Latin America, Iran and Indonesia.

The Ford Foundation established a US style economics course in Indonesia at the Indonesian University. Elite Indonesian students, trained in counterinsurgency by US army officers, played a crucial part in the 1965 CIA backed coup in Indonesia which bought General Suharto to power. He repaid his mentors by slaughtering hundreds of thousands of communist rebels.

Twenty years later, young Chilean students who came to be known as the Chicago Boys were taken to the US to be trained in neoliberal economics by Milton Friedman and the University of Chicago (endowed by J.D Rockefeller), in preparation for the 1973 CIA backed coup that killed Salvador Allende and brought General Pinochet and a reign of death squads, disappearances and terror that lasted for seventeen years. Allende’s crime was being a democratically elected socialist and nationalising Chile’s mines.

Like all good Imperialists, the Philanthropoids set themselves the task of creating and training an international cadre that believed that Capitalism and by extension the hegemony of the United States was in their own interests.

Corporate foundations also provide scholarships at universities for courses in development studies – and many of these are for people from the middle classes in the developing world – these are the future finance ministers, corporate lawyers and bankers of the developing world. Of course the courses funded are the ones which sing the virtues of neoliberal economic policy, rather than the ones which are critical of neoliberalism.

According to Roy, not only do Philanthropic Foundations control the agendas of International Economic Organisations, governments and education systems, they also control the media and social movements which emerge to protest neoliberal policies – she gives a few examples of how, but probably the best piece of supporting evidence for this point of view is that we don’t question the role of philanthropic foundations in society. When Corporate funded philanthropic foundations first appeared in the United States, there were debates about their accountability, and people suggested that if they had so much money they should maybe raise the wages of their workers instead, nowadays we just don’t question them.

In summary, Roy argues that Philanthropic Foundations are simply a way of using a minuscule percentage of profits to run the world.

A Question to Consider….

The largest philanthropic foundation on earth today is the Bill and Melinda Gates Foundation. Roy points out that it’s odd that Bill Gates*, who admittedly knows a thing or two about computers, is now designing education, health, and agriculture policies, not just for US governments but for governments all over the world.

The question that Roy makes us ask is this – Is Bill Gates really trying to help people through his organisation, or is the Bill and Melinda Gates Foundation really a just a way for Gates to translate his economic capital into global political power, and to make sure that government policies the world over benefit Microsoft?

*Or to refer to him by his full name – ‘The Man Child Bill Gates’.

Sources 

The above post is summarised from Arundhati Roy’s ‘Capitalism: A Ghost Story’ (2014).

What are Transnational Corporations?

We’ve probably all heard of companies such as Walmart, Amazon, Apple, and Shell, and these are all examples of Transnational Corporations – in fact these four all feature in the top 10 global companies by revenue in 2020. Some of the others you may never have heard of because they don’t have such a public face.

But what are Transnational Corporations?

Introduction – Definition and Scale of TNCs

Transnational Corporations are businesses that operate across international borders, though most of them have their headquarters in the USA, Europe and Japan.

According to the United Nations Conference on Trade and Development there were an estimated 77 000 Transnational Corporations in the world in 2007, that’s the most recent data I could find! That had almost doubled since the late 1990s when there were 37 000.

The key characteristics of TNCs are:

  • They seek competitive advantaged and maximization of profits by constantly searching for the cheapest and most efficient production locations across the world
  • They have geographical flexibility – they can shift resources and operations to any location in the world
  • A substantial part of their workforce is located in the developing world, but often employed indirectly through subsidiaries.
  • TNC assets are distributed worldwide rather than focused in one or two countries – for example, 17 of the top 100 TNCs have 90% of their assets in a different country from their head office.

The Huge Economic Power of TNCs

TNCs are economically very wealthy and thus potentially more powerful than many of the world’s nation states.

According to Oxfam, of the top 100 ‘revenue collectors’ in the world, 70 are corporations and only 30 are countries, or nation states. For example, BP is bigger than Finland, while Chevron is bigger than Ireland, and the combined annual revenue of the 200 largest TNCs exceeded those of the GDP of the 182 nation states containing 80% of the world’s population.

Critics remind us that GDP and annual revenue measure different things, so these figures may not show actual differences in economic power, but this aside, the relative economic power of TNCs has grown in relation to nation states over the last few decades, and today TNCs wield much more economic power than they did in the past.

Fobel et al (1980) note that from the 1970s TNCs set about investing significantly in the developing world because of high labour costs and high levels of industrial conflict in the West, which reduced profits.  The investment was greatly helped by developing countries, which actively sought TNC investment by setting up special areas called Export Processing Zones, or Free-Trade Zones, in which TNCs were encouraged to build factories for export to the West.

Free Trade Zones offered incentives such as infrastructure provided by the government (transport links), few planning controls on building, and low taxation. There are now over 5000 free or export processing zones in the world today which employ over 43 million workers, the majority of which are based in China’s territories.

SignPosting

Transnational Corporations are one of the global organisations students study if they choose the most excellent globalisastion and global development option in their second year of A-level sociology.

Immediately after reading this introductory post, you should read the following two posts which explore the impacts of TNCs in developing countries….

Please click here to return to the main ReviseSociology home page!

Sources

Chapman et al (2016) – A Level Sociology Student Book Two [Fourth Edition] Collins.

Arguments and Evidence that Transnational Corporations Harm Developing Countries

Dependency theorists criticise TNCs for extracting resources, exploiting workers and preventing development

Dependency Theorists 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 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:

  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.
  2. 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.
  3. 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.

Signposting and Related Posts

Students must study the role of Transnational Corporations as part of the global development module.

You might like to read this post for more information on TNCs in general: What are Transnational Corporations? (TNCs)

Dependency Theorists are the main critics of TNCs and so the post above is coming from that perspective.

For contrasting views see the following post: Arguments and evidence that transnational corporations promote development

Arguments for Transnational Corporations in Development

Modernisation theory saw TNCs as playing a positive role in helping societies to develop. Rostow (1971) saw the injection of capital as essential in the pre-conditions for take-off phase of development, and he thought TNC’s were one of the institutions which could help kick start the process of development by investing money, technology, and expertise that the host country did not possess.

It is neoliberals, however, who have historically been the real champions of TNCs as the most efficient institutions to kick-start and carry through development in poor countries. In neoliberal theory, economic success is proof of competence – the fact that TNCs have been making goods efficiently at a profit on a global scale for decades, if not centuries, mean that these are the institutions best placed to kick start economic growth in poor countries.

Neoliberals argue that the governments of developing countries need to pull down all barriers in order to create a ‘business-friendly’ environment in order to encourage inward investment from Transnational Corporations.

In Neoliberal theory, corporations will help a country develop in the long term by providing jobs and training. The money earned will be spent on goods and services at home and abroad creating more money to invest and (limited) tax revenue for further development.

A summary of the supposed benefits TNCs can bring to developing countries

  • TNCs bring in investment in terms of money, resources, technology and expertise, creating jobs often where local companies are unable to do so.
  • TNCs need trained workers and this should raise the aspirations of local people and encourage improvements in education
  • Jobs provide opportunities for women promoting gender equality.
  • Encourage international trade which could increase economic growth, access to overseas markets
  • All of the above means that wealth generated from TNC investment and production should eventually trickle down to the rest of the population.
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