Taming the New Multinational Beast

Multinational Monitor September 1997

The hydra-headed multinational corporation monster has sprouted a new head. It is the head of the Third World-based multinational corporation.

This new breed of the beast most frequently originates in Asia, in the Tiger economies of South Korea, Taiwan, Hong Kong and Singapore, and also in Malaysia and Indonesia. But it can also be traced to South Africa-where the official end of apartheid has freed it from a caged existence- Brazil, Mexico and other countries.

In their home countries, these multinational monsters have grown fat from a steady diet of state subsidies, discount resource concessions, repressed labor, protection from foreign challengers and corrupt relations with government officials. To varying degrees, they have also prospered through displays of entrepreneurial skill and managerial ingenuity.

As they have grown, so have their appetites. Now they are foraging throughout the Third World, feeding on Amazon rain forests, minerals in Central Africa, cheap labor from China to Central America-and looking for more.

The emergence of these New Multinationals is in some sense a tribute to the effectiveness of economic protectionism. Unfortunately, in building up economic power, the governments of the middle-income Third World countries did not make meaningful efforts to democratize their economies. The corporations they grew were able to amass tremendous concentrated power. Nor did the New Multinationals' home countries impose meaningful restraints on the new companies. The New Multinationals' executives maintain close and often corrupt ties with government officials. Those policymakers and government bureaucrats operating in good faith have not had time or the resources to build up expertise in regulating corporations. And authoritarian governments suppressed popular movements that could have developed into countervailing influences to offset the power of the new industry titans.

The bottom-line result: the New Multinationals emulate the most predatory practices of industrialized country multinationals. In their home countries, they grew rich by under paying employees, exposing workers to dangerous conditions, polluting the environment, clearcutting forests and dumping untreated mine wastes. To some extent, and varying by country, they are continuing these practices in their home countries. But in the Tiger economies, wages have finally risen too high for labor-intensive factories to compete with lower-wage countries. And in countries like Malaysia, primary forest cover is so diminished that the timber companies can no longer satisfy their appetites there.

In response, and again following the example of industrialized country corporations, the New Multinationals are increasingly going global. And they too are demonstrating that-no matter how ruthless their practices at home- they can exploit workers and the environment beyond their own borders with even greater intensity.

This poses enormous challenges to those committed to reining in corporate power. The New Multinationals are not based in the United States or other countries with comparatively well-developed corporate accountability movements, which means they are immune to many of the protest tactics that have been successful in at least partially reforming corporate practices. Many of the New Multinationals, at least for now, are relatively unconcerned about their image. Their close relationships with home country government officials protects them from government sanction. They typically do not rely on brand names or sell consumer goods in industrialized countries, shielding them from consumer boycotts. And they enjoy multinationals' usual powers: huge leverage over poor country governments and workers, host country governments without the capacity to regulate them and advantages flowing from control of capital and technology.

Increasingly, crusaders for social and environmental justice are going to have to grapple with the New Multinational monster. There are no simple formulas available to tame the beast, but-in addition to the obvious need for labor unions, strong government regulations and citizen movements in host countries-there are some promising strategies and approaches available.

First, industrial buyers-who often are vulnerable to pressure from consumers in industrialized countries-can be held responsible for the activities of their suppliers. Labor rights campaigns have successfully used this approach against shoe and apparel makers, many of which contract with New Multinationals. Brazilian anti-child labor campaigners have gone further, seeking to hold corporations responsible for all items in the "chain of production." This concept can easily be extended to address environmental concerns.

Second, corporate accountability groups are beginning to evolve in the New Multinationals' home countries. Groups like the People's Solidarity for Participatory Democracy in South Korea and the International Labor Resources and Information Group in South Africa are beginning to monitor the overseas operations of their countries' multinationals, and to develop pressure strategies.

Third, the challenge of the New Multinationals points to the importance of reviving the efforts to adopt and implement an enforceable, global code of conduct for multinational corporations. None of these approaches is likely to have immediate success in taming the New Multinationals. But the growing importance of these companies, and the immunity of the companies to many traditional pressure tactics, make more modest and close-at-hand strategies doubly inadequate. It is time to think in terms of bold and far-reaching controls.

Transnational Corporations & the Third World