Challenges posed by MNCs

There are however many reasons to think that the MNCs are not problems-free for the host societies; they are rather harmful both in terms of social and economic development and undermining cultural diversity. Let us see how it happens:

Conflicts of Interest: MNCs being commercial in nature seek profit optimization. They have all the interest in achieving the best rate of return on invested capital, gaining market share and ensuring their long term competitiveness. Supporting the host country's economic and social development are not their objectives. This leads to the conflict of interest on some very fundamental issues like repatriation of profits, patents, and major operational decisions. While MNCs believe that it is justified rather essential in order to recover the overhead costs they have incurred at their headquarters (e.g. for research and development) as well as to corporate profits as repayment for financial risks; for host countries it is often considered a drain on limited foreign exchange and a burden on the balance of payments.

Similarly host countries in order to keep the costs lower wish to avoid patent costs, while the companies want to ensure patents and licensing fee as their legitimate right associated with their research effort. The host governments may like the MNCs to operate keeping in view the social, economic and political needs of the societies and communities, whereas the MNCs make their choices based purely on economic criteria. Discussing this issue the UN Committee on Trade and Development in one of its report cites the example, “—one finds Coke and Pepsi are available in poor areas in the third world but not clean water, Mines such as those operated by Rio Tinto, despoil the land and water that is central to the livelihood of poor communities. Corporate driven globalization has pushed countries to grow luxury crops for consumption abroad not staples to feed the hungry at home”.

Increasing Materialism and Consumption: The development, as being promoted is the name of mere material gains. Comforts of life are being turned into needs and necessities and happiness and satisfaction are being associated with luxuries of life and acquiring them. Thanks to MNCs, “consumption culture” has overtaken almost the whole world, and after the developed world it is taking in its grip the societies of developing and least developed countries at a very fast pace. The presentation and cosmetic changes matter the most. Whether a product is really needed or not, how is it being presented determines its sale. The models change very fast and the older one lose relevance in a short span of time. If the model is not new, the packing is changed to give the product a new look and create new demand. This results into an overwhelming impact on societies. The following points are reflective of this impact.

Life Style and Patterns: Departmental stores and shopping malls/plazas are cropping up - further adding to the consumption culture and living beyond means. Eating and the food habits are also changing. Fast and junk food are increasingly popular. Eating out, late night parties, alcohol, cigarettes, refrigerators groaning with processed foods and international branded munchies or instant meals is the lifestyle of those regarded as the most successful. It is time of ‘use and throw’. A race against time is on. Instant drinks, quick relief, fast traveling, quick communication are the signs of success. Dress and clothing styles as well as priorities don’t match with what used to be. The vibrant fashion industry, with fashion shows, catwalks and other means of aggressive marketing is leading this change.

Excessive Expansion of Credit: Credit culture is changing the attitude towards loan. Taking loans is no more considered as unwise or a matter of shame and an indicator of weak economic condition. The capacity to take loan is now considered a status symbol; it is being encouraged to facilitate obtaining luxuries of life. The credit in fact has become an important part in the life. The availability of easy credit, consumer financing, credit cards and personal loans by the banks to the middle class is promoting a culture of living beyond means. The life styles are changing with it, and not for the better importantly.

Simple living v/s ostentatious living: It is the result of this living beyond means culture and the race to acquire luxuries equating those with the needs that simplicity is vanishing from the life. Consequently, a sense of deprivation is mounting among those who can not keep up buying the entire lot of products coming across or being marketed. Those who don’t have access but do have desires of their own, feel left behind and disparity among people, groups and even regions is increasing.

Emphasis in education used to be on developing a balanced personality with stress on ethical and social values and character building. Developing intellectual and human qualities with an ambition to work for a value based improvement in the society happened to be the prime objective. This has been replaced with a focus on money both on the supply side - the service providers - and on the demand side the students and the parents.

Corruption and Crime: Greediness, disparities and sense of deprivation, along with the race to acquire new products is also giving rise to corruption, crime, use of illegitimate sources of income and other criminal activities. The focus is to acquire the money whichever way it comes; even through illegal means if it is not available through legitimate sources to fulfill the material needs. On their part MNCs also corrupt people in order to capture markets.

Healthcare Attitudes: The impact on health care is also very significant. Now is the time of jogging shoes, mineral water and vitamins while traditional ways of fitness are vanishing. Multiple options have made patients impatient. They expect better service in their health requirements, beyond just diagnosis and treatment, more so when “third party cashless payment” via credit cards or health insurance is the norm. Focus from in-patient treatment is shifting to preventive healthcare. But the increase in life-style diseases has neutralized the effect on medical bills.

Working patterns revolve around hectic routines, targets and deadlines resulting in stresses and pressures. There is no time left for leisure and even for family members and children. A destructive lifestyle has led to a host of medical crises: sexual problems from over-performance at work and not in the bedroom, stress, mid-life crisis, ulcers, nervous dis-orders, hypertension obesity, cardiac disease, diabetes - all lifestyle-related diseases are on the rise. No doubt today’s men are more concerned with degenerative and manmade diseases like HIV, or lifestyle diseases and problems stemming from unhealthy diets, smoking and the absence of peace of mind. An AC Nielson Life Choices survey across urban India found that working women were buying food and drinks out of home (snakes, take-away and dining out) five times a week. Parallel with the rise in out-of-home dining was an increase in population weight gain.

The Brain Drain: The term Brain drain is commonly applied to the talent going towards other countries in search of seeking greater incomes. MNCs are involved yet in another kind of brain drain. With their capacity to pay they can hire the most qualified and experienced talent available in the society. And it is no secret that MNCs have no loyalty for the countries or nations they operate in. Instead, they are more inclined towards generating as much revenues and profits as possible, and then send the same to their headquarters in the country of origin. Those working with MNCs consider themselves as part of an elite class associated with global community. Consequently most of them develop a culture that makes them less relevant to their own societies.

Glamour Culture - Changing Perceptions: The campaigns run by the MNCs to introduce and promote their products do influence minds of the people, particularly the children and the youth. The people presented in these campaigns are considered the role models for the future generations. Here the ethical and moral dimension has no place; the role models are presented from the glamour world, the models from the film industry, actors and actresses, singers, fashion designers etc. occupy the first place. Through sponsorship and financial help, events, festivals and programs like beauty competitions, music concerts, stage plays etc. are supported that help create an environment to induce people to more spending on the products they are marketing. The importance of foreign (English) language increases in a given society with the spread of MNCs’ operations as they mostly operate among the classes equipped with the English language skills and hire and promote the people from the same groups.

Promoting Non Issues: Importantly, the poor are not the target of MNCs. And any slogans for the poor carry little weight for them. This is because poor has no buying power and it will be self deception to believe that poor or their issues can be a priority for global corporations. They basically target middle classes with increasing buying powers and try to change their priorities in everyday life, consumption and spending.

MNCs and large corporations establish closer coordination with intellectuals, legislators, media and certain NGOs to highlight specific issues that suit their businesses the most. In the same context, they also use their influence for the desired legislation.

It is in the interest of large corporations that their products get increased entry and markets in various countries. For this purpose, such issues are highlighted in any specific country, group of countries or region that makes the domestic industry un-competitive by removing the advantages of cost of production it has.

Negative Marketing: Closely monitoring the marketing and advertisement campaigns of various products of large business corporations, one comes across the harsh reality that how cheating and lying has been made acceptable norm and institutionalized in the name of introducing the product. People’s minds are brainwashed with false claims and a world full of dreams. Exaggeration is common with emphasis on easy money and easy access to comforts. Local products are ridiculed.

Business Promotion through Charity: No doubt certain MNCs are involved in charitable and welfare work in the host societies as well. They, for instance, provide scholarships for studies abroad, sponsor intellectual activities and support the civil society organizations. Yet the amount of charity as compared to the profits they earn is quite insignificant. More importantly the charitable and welfare work revolves around such activities that directly or indirectly result in various kinds of gains for the corporations spending money for that purpose. The most common example relates to the Pharmaceutical industry. In the name of promoting research, awareness and help to the needy the companies present to the doctors and other medical professionals huge amounts of money by sponsoring various activities. The objectives are quite clear. It is not the welfare of the patient but a favor from the doctor to prescribe the company’s medicines, which is the motivating factor behind these gestures.

While making charity and welfare spending, MNCs prefer the economies that best suit their corporate interests. A study of the leading 23 multinational companies show that they contributed a total of $ 19.79 million for 2005 earthquake in Pakistan. It was negligible as compared to the same companies’ contribution for Tsunami ($ 142.39 million) and Katrina ($ 99.27 million.) Considering the contribution per displaced person in the three disasters, the difference is enormous. For every person displaced by the earthquake in Pakistan they provided only 6 dollars, while the amount for a person displaced in Katrina(US) was over 330 dollars.

Promoting Non Issues: Importantly, the poor are not the target of MNCs. And any slogans for the poor carry little weight for them. This is because poor has no buying power and it will be self deception to believe that poor or their issues can be a priority for global corporations. They basically target middle classes with increasing buying powers and try to change their priorities in everyday life, consumption and spending.

MNCs and large corporations establish closer coordination with intellectuals, legislators, media and certain NGOs to highlight specific issues that suit their businesses the most. In the same context, they also use their influence for the desired legislation.

It is in the interest of large corporations that their products get increased entry and markets in various countries. For this purpose, such issues are highlighted in any specific country, group of countries or region that makes the domestic industry un-competitive by removing the advantages of cost of production it has.

Negative Marketing: Closely monitoring the marketing and advertisement campaigns of various products of large business corporations, one comes across the harsh reality that how cheating and lying has been made acceptable norm and institutionalized in the name of introducing the product. People’s minds are brainwashed with false claims and a world full of dreams. Exaggeration is common with emphasis on easy money and easy access to comforts. Local products are ridiculed. Children and youth are the special targets while exploitation of women as a commodity to project the products is increasingly affecting the existing value framework of the societies.

Business Promotion through Charity: No doubt certain MNCs are involved in charitable and welfare work in the host societies as well. They, for instance, provide scholarships for studies abroad, sponsor intellectual activities and support the civil society organizations. Yet the amount of charity as compared to the profits they earn is quite insignificant. More importantly the charitable and welfare work revolves around such activities that directly or indirectly result in various kinds of gains for the corporations spending money for that purpose. The most common example relates to the Pharmaceutical industry. In the name of promoting research, awareness and help to the needy the companies present to the doctors and other medical professionals huge amounts of money by sponsoring various activities. The objectives are quite clear. It is not the welfare of the patient but a favor from the doctor to prescribe the company’s medicines, which is the motivating factor behind these gestures.

While making charity and welfare spending, MNCs prefer the economies that best suit their corporate interests. A study of the leading 23 multinational companies show that they contributed a total of $ 19.79 million for 2005 earthquake in Pakistan. It was negligible as compared to the same companies’ contribution for Tsunami ($ 142.39 million) and Katrina ($ 99.27 million.) Considering the contribution per displaced person in the three disasters, the difference is enormous. For every person displaced by the earthquake in Pakistan they provided only 6 dollars, while the amount for a person displaced in Katrina(US) was over 330 dollars and for Tsunami over 91 dollars. The figures make the MNCs priorities quite clear when it comes to charitable spending.

Human Rights: Exploitation of workers by large business corporations is a common phenomenon. Most Workers are exposed to hazardous and inhuman conditions, over exertion and financial abuse. Citing the case of Indonesia UN Committee on Trade and Development portrays the pathetic living conditions of the workers:

“Companies such as Reebok, Nike, and Levi Strauss have exploited the human labor; workers live in deteriorating , leaky, mosquito-infested apartments and only earn a mere $39 a month for producing thousands of products worth well over $100 each. — The cheap labour is suffering from inhuman living conditions and illegal wages”.

This is despite many of the world’s largest business associations, including the International Chamber of Commerce have endorsed the UN Secretary General’s ‘Global Compact’ a mechanism asking for self regulation by the companies. It is however clear as reported by the UN Research Institute for Social Development (UNRISD) that “there is a danger that corporate self regulation as well as various partnership arrangements are weakening the role of governments, trade unions and stronger forms of civil society activism”.

Family Fabric: The culture and life style changes coming in with the spread of MNCs influence in the society are proving lethal for the family fabric of host societies. Overspending and living beyond means is creating economic pressures and developing tensions and stresses within families. Various indicators prove that women working with the MNCs and other big organizations are under stress when entering in to marriages and bearing children. Parents have little time for their family particularly children. One out of six women in the world opts out of natural birth, according to the World health Organization (WHO).This trend was earlier specific to mostly the developed countries. It is also becoming norm in developing societies where non-medical factors are pushing up Caesarean rates. Discussing the issue an Indian expert Damayanti Datta, comments:

Is it a new sociological change, many ask, with the city-bred, modem woman trying to skip the ‘inconvenience’ of a protracted labor? The reason is “caesareans are less painful, more dignified and you’re more in control of your life”. The impact of working environment is so strong that “nearly 80 per cent of C-section deliveries were reported to have taken place after 5 p.m. Also, C-section rates peaked just before weekends”. The tendency is that women try to “schedule a pregnancy in sync with career requirements, family compulsions, and even holidays”.

How to Move Forward?

Like any development in human society the MNCs have both negative and positive sides. There are problems even the most developed societies of the world are facing with MNCs. That is precisely the reason why we see a strong and very vibrant global justice movement organizing demonstrations whenever there are conferences and meetings related to ongoing process of globalization. Nevertheless it is a fact that these MNCs have contributed a lot in the growth of countries now known as developed. The reason being they (both societies and MNCs) have progressed side by side along with each other. It has been an evolutionary development and there are now strong institutions; legislating bodies, regulatory agencies, judicial system, and consumer societies to check and maintain the balance from within. In case of developing host societies a rather uneven contest is taking place. This needs to be addressed.

Khalid Rahman

Source: Essays on Muslims and the Challenges of Globalisation, Institute of Policy Studies, Islamabad. Republished with permission.