“IMAGINING OTHER…”

To give an overview of the extent of third world poverty, introducing discussion of the causes, especially in relation to the role of Multinational Companies, and reviewing different viewpoints as to what should be done.

Students should understand the nature and extent of the third world’s problems, and the role of multinational companies in particular. In the light of an understanding of explanations of the causes, students should be able to propose appropriate solutions.

Summary:

1. What is the third world? – problem of terminology - the reality of poverty:

(a) GNP per capita and inequalities (internal and external)

(b) health, life expectancy etc

(d) education and skills

(e) women

(f) invisibility

2. Brief historical background

(a) why Britain and Europe industrialised first

(b) why other countries did not catch up

3. Different views on the extent of the problem:

(a) the gap is bad and worsening – is due to external factors (colonialism, unfair trade) and reflected in dependency and debt – at current rates of growth the poor will never catch up

(b) gap is not bad, any differences are due to internal factors (corruption etc), solution is modernisation (especially of the mind)

(d) different views on international trade:

4. More global issues:

The World Bank – Globalisation – World Trade Organisation

5. Multinational/Transnational Companies

(a) General points:

(i) for and against

(ii) origins and purpose

(iii) power

(iv) economic aspects

(v) adverse internal impacts in third world

(b) Specific examples:

ITT – Nestle - Union Carbide and Bhopal - Cape Asbestos – Shell - De Beers

Haliburton et al

Ilusu Dam (Turkey)

6. Solutions proposed:

(a) Trade – free or fair? Debt – cancel or adjust? Aid – no use?

(b) Empowerment, self-reliance, resistance to globalisation

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SOCIAL RESPONSIBILITIES OF BUSINESS IN THE "THIRD WORLD"

1. Introduction: what is the third world?

The problem of terminology

Originally the expression “third world” was meant to indicate that group of countries which had most recently industrialised. Thus, the “first world” simply meant the countries of Europe and England, where industrialisation took place from the 18^th century (with preparations for it going much further back- see below).

The second group of countries to industrialise were the “communist” countries – the USSR and Eastern Europe. Here industrialisation started late in the 19^th century. China followed the communist route from 1945 and began to industrialise after this.

However, it soon became apparent that the word “third” is ambiguous, and there was resentment at the implication that these countries were somehow inferior. Hence, alternative terminology has been proposed, although none has been found that is entirely satisfactory:

- we can speak of “less-developed countries” (LDCs), but “less” again suggests “backward” or “inferior”. Moreover, writers such as Barry Commoner (1980) pointed out that the USA and other countries were not simply “developed” but “over-developed”!

- again, if we say “developing world” the question arises: isn’t everywhere developing?

- around the time of the Brandt Commission Report (Common Crisis, 1983) the distinction was drawn between the North (developed) and the South (less developed) – since it happens (geography does play a part, as we shall see) that the majority of less developed countries are to be found in the southern hemisphere.

- more recently, especially in the New Internationalist, the expression the majority world is used, since probably two thirds of the world’s population are to be found in “underdeveloped” countries (Sachs, W 1997)

- finally, since the first area of the world to “develop” was western Europe, there is a widespread usage of “the west” to refer to Britain, Europe and the USA – I shall often use this expression myself, but this still leaves open the question what to call the rest!?

We do need to be aware, then, that there are different “labels” which imply different points of view, and some can be seen as condescending or pejorative. I hope that it will be accepted that when I use the phrase “third world” there is nothing pejorative intended!

A final point to note is that in the last part of the 20^th century further subdivisions appeared, as some of the original “third world” began to show signs of rapid growth. We can now identify the following groups of countries: (C Huhne, Guardian 1988)

- China and India: these are growing and largely self-reliant. China’s growth rate was 6 – 7% in the 1990s, according to the World Bank 2004 report, (Ashley Seager, Guardian 17/11/04)

- The so-called “tiger economies” of Asia (Korea, Taiwan, HK, Singapore) are now newly industrialised.

- Africa itself is sub-divided, with countries such as African: Tanzania, Zambia described as low-income African. Here there is hardly any growth, (2% in the 1990s, could be 4% in 21^st century, WB) but the population is increasing.

- Sub-Saharan Africa is the poorest region of the world.

- In Latin America there are highly-indebted middle income countries such as Argentina and Brazil, where there has been growth (as a result of loans), but this has recently slowed down.

Finally, the World Bank has recently adopted the category: Highly Indebted Poor Countries (HIPC) (World Bank 2001-03)

The reality of poverty.

(a) Poverty

Absolute Poverty:

The most noticeable thing about the third world is that it is poor. To give an idea of the extent of poverty it is often pointed out today that almost half the world’s population, i.e. 2.8 billion people live on less than $2 a day, and over a billion live on less than $1 per day. (Ellis 2001) The Global Policy Forum has a table showing trends between 1981 and 2001, of the proportion of the world’s population that is living on less than $1 a day, at 1993 purchasing power parity (PPP).

see: www.globalpolicy.org.socecon/develop/tables/dollaraday.htm

To put this in other terms, 1.3 billion people live in absolute poverty, without access to food and clean drinking water. (Jacobs 1996) 12.2 million children die before they are five every year, 95% from poverty-related illnesses. (UNDP 1994)

Relative Poverty: although some writers do not like to use the concept of relative poverty (since, for one thing, in a very rich country those at the bottom are relatively poor, but may be far better off than the majority of people in a poor country), I believe that it is important to be able to show the uneven distribution of income, wealth and resources. When we do make comparisons, for example of G.N.P. per capita between countries, this is very revealing, showing huge inequalities.

What is more, though also a contentious issue, these figures when expressed as trends, can show how the gap between the wealthy and the poor across the world is in many places worsening (see 3 below):

UNDP: ratio of the income of the top 25% of the world’s population, to that of the bottom 25%:

1960: 30:1 1990: 60:1 1997: 74:1

Put another way, the 20 richest countries’ per capita income in 1960 was 18 times that in the poorest 20, and in 1995 this had worsened to 37 times (Ellis 2001, World Bank 1995).

Specifically: (Statistics from New Internationalist)

G.N.P. per capita: (US $, 1986):

U.S.A.: 3,980 U.K.: 1,790 India: 100 Ethiopia: 70

Another telling comparison is given by the charity Concern: what the average British child spends on crisps and sweets in a year on the way to and from school i.e. £1 per week or £365 per year - would supply a family in Malawi with grain for the same time. (Concern, in Guardian 7/12/04)

Or: Westerners spend $37 billion a year on pet food and perfumes. The UN says that would provide education, food, health care, water and sanitation for all those deprived of the basics (Larry Elliott and Victoria Brittain, Guardian 9/9/98, based on World Bank 1997).

Poverty means more than simply lacking money. Other features of third world poverty can be illustrated by other comparisons:

(b) Infant mortality, inhabitants per doctor

(Stats. from New Internationalist)

Around 10,000 babies under a month old die every day – some 4 million a year according to articles in Lancet - nearly 3 million could be saved by 16 interventions costing $4 billion. (cf. $900 billion per annum on arms worldwide) (Sarah Boseley, Guardian 4/3/2005)

Premature delivery of babies causes deaths in poor countries, where only 10% live (whilst in rich countries 90% live). The main causes of death for premature babies are: infection, malaria, HIV (and adolescent girls are more likely to lose babies). Premature delivery is increasing – in rich and poor countries, as women choose when to deliver: but the problem is that estimates of the 40 week point (at which babies can be delivered safely by caesarean) are not reliable. (Sarah Boseley, 3^rd May, Guardian – reporting on study carried out by US March of Dimes Foundation; Partnership for Maternal, Newborn and Child Health; Save the Children and WHO). 1 million of the 15 million premature babies born each year are likely to die, and deaths can be prevented with inexpensive treatments.

INFANT MORTALITY: (per 1,000 births):

U.K.: 19 US: 21 Chile: 92 India: 139 Tanzania: 160

INHABITANTS PER DOCTOR:

U.K.: 860 US: 650 Chile: 2,320 India: 4,830 Ghana: 13,310

(c) diet: calories consumed (World Bank 1997, in Guardian 9/9/98)

Between 1970 and 1995, calories consumed per capita per day in Sub-Saharan Africa rose hardly at all:

from 2,225 to 2,237

For Industrial countries the figure rose substantially:

from 3, 016 to 3,157

(d) illiteracy, education, skills

Clearly the inhabitants of the majority world cannot make any advance without education – and yet this is another area where provision is lower where it is needed most. Along with education goes the ability to control one’s own life, but The Peters Atlas of the World (1989) graphically illustrates that throughout the south there is a lower rate of participation in legislation than in the north.

As if this was not enough of a problem, there is actually a brain drain from developing countries to Europe and North America – skilled and professional workers leave the poorer countries in search of better jobs in the developed world. The proportion going from China, India, Brazil is only 5%, but from Caribbean and Africa from half to 75% of all qualified professionals leave the country! (OECD 2004, Larry Elliott, Guardian 6/12/04)

(e) position of women

Women are far from being treated equally, throughout the world, but again it is in the developing world that we see the most exploitation. The Peters (1989) Map shows, for example, that women are responsible for over 70% (and up to 100%) of the housework in developing countries.

On average, women care for more children – 5 or more per woman – than in the north (in the USA it is 2 or less). Naturally, where infant mortality is high, and wages are poor, the more children you have the more chance they have of surviving and the more they can do to bring an extra income into the family. Population growth slows down with development.

In Jacobs (1996, p 29) the organisation Population Concern points out that in Ethiopia only 3% of women are using modern family planning methods, as against 71% in the UK. Women represent 70% of the world’s poor, and two-thirds of those who are illiterate.

(f) “invisibility”

There is an evident tendency in the developed part of the world to be pre-occupied with ourselves, and to think of what is happening to us as most important. To some extent, of course, this is true of everyone, but the problem goes deeper than this, since western science and technology are believed to be the best way of dealing with all sorts of social issues. As implied above, when discussing the very terminology used, it is implied that “the third world” must “catch up” with the rest of the world – and that to do so they will eventually adopt the advanced countries’ way of thinking, especially their science and technology. Yet, who are we to say that other cultures’ different philosophies of life, politics, medicine, etc are inferior to ours?

This sense of our cultural superiority manifests itself in many ways – one of which is “globalisation”, where western ways of life are spreading throughout the world. The other result is that we pay little attention, in the media especially, to the majority part of the world. Or when disasters occur in the third world we do not give anything like as much space in newspapers etc as we do when they happen “at home”.

As an example, take the AIDS crisis: 90% of HIV positive people live in developing countries; 13.2 million children are Aids orphans; and by 2010 one in four adults of working age in 10 African nations will have died of Aids. If this were happening to white Europeans or Americans would it not be front-page news all the time?

Some writers are trying to address this “invisibility” – currently in London there is a play running called Stoning Mary, by Tucker Green. In this, several scenarios are acted out which clearly must be the kind of events that would happen to black people, and yet the (black) author has chosen to have them acted out by whites. The aim is to get the audience thinking about just this “invisibility” of black people’s problems. (One scene involves a couple, both of whom have AIDS, but who can only afford one prescription; another is of a child soldier returning to his family; the third portrays two sisters, the youngest of whom has been condemned to be stoned to death. The author says: “Look at Rwanda. It just fell out of the news. Or Zimbabwe. We’re always hearing about what is happening to the white farmers, but what about the black political activists who are also being killed? Where are the news stories about them?” (Interview with Tucker Green Guardian April 2005)

Mutually Reinforcing Dimensions

As will be stressed again when we deal with inequality, and as we pointed out in relation to the different components of the world system when talking about the environment, it is important to note how each element in the picture interacts with and reinforces the others. Thus, poor education and lack of participation must be a contributory factor in the prevalence of fanatical groups involved in civil conflict, as well as in the frequency with which dictatorial rulers can be found in developing countries. Poor health, poor nutrition, and poor education are also clearly linked.

2. BRIEF HISTORICAL BACKGROUND.

(a) Why did Britain & Europe industrialise first?

The “common sense” view, held by too many in the west, is that we showed some kind of superiority – for example in breaking away from religious superstition and “discovering” science.

Whilst it is clear, by definition, that the application of science, in technology, led to the industrial revolution, we need to go behind the events to understand how the changes came about.

What we then find, in my view, is that there was a considerable degree of “luck” involved. First, there were geographical factors, and the easy availability of the resources needed: coal and iron ore were in close proximity, with waterways to enable transporting of raw materials and finished goods. Britain being a small island, with a temperate climate, also helped. By comparison, Russia, which had the resources, was much later developing because of the hostile climate and the vast distances between centres of population and the raw materials. If we consider the continent of Africa, with its heat, and the difficulty of travelling across the country, and where there is little coal and iron ore; or Asia, with its regular floods and heavy rain, we can see how it was less likely that industrialisation would occur.

Other factors which helped in Britain and Europe were very much local events, for instance the Protestant Reformation. This was a split in the Christian Church, intended as a purely spiritual movement, but which by a roundabout route led to people wanting to work hard and at the same time to save the wealth they had created. Hard work, and success in this life could be interpreted, according to Calvinism, as a sign that God had favoured you; on the other hand, it was sinful to indulge in excesses or luxuries – a simple, plain life was a Godly life. The consequent savings meant investment in more business. (Tawney, 1922 – published in Pelican 1938)

Once manufacturing did get under way, it was then easier to get economies of scale, and gains from research and development in the form of innovations, than it would be in agriculture.

Most importantly, the west not colonised (the colonising of course was done by the west of the south). This was one factor that strengthened our political and economic regimes. It is often said that we had political stability early in our historical development, and that this contributed to our industrialisation – however, the regimes in the third world might have shown similar stability had it not been for our intervention! Moreover, we gained enormously from the taking of slaves and precious materials from the countries we colonised.

The final point to make, and it cannot be over-emphasised, is that industrial growth, once it started, took over 200 years to produce a developed economy. The rate of growth was, in fact, quite slow: during this time, for example, British growth was only 1.5 – 2.5 % per annum. In other words, it is quite unrealistic to expect less developed countries to suddenly change and “catch up”.

(b) Why other countries fell behind:

We must, of course, reject the simplistic view that the peoples of the third world are “inferior” – whilst noting that this was once especially at the height of empire) a widely held view.

Rather, it seems to me, there is a simple answer, and that is that colonialism and imperialism did untold damage to the third world and prevented these countries from developing as they well might have done.

Although there is a general and vague awareness of slavery, there is probably little recognition in the west of its extent. The “trade” – taking suitable potential workers from West Africa especially, to labour in the West Indies and America, so that they could produce cotton and sugar for consumption in Britain and Europe – obviously meant the loss of a potential labour force in Africa. It lasted from 1450 to the 19^th century, and during that time between 10 and 28 million Africans were forcibly sold into slavery. At the height of trade, Britain shipped 300,000 a year across the Atlantic, crammed into slave ships, and of these 1 in 10 died on the way. (www.spartacus.schoolnet.co.uk/slavery.htm)

To give just one illustration of the plundering of resources, gold and silver were taken from Latin America to Europe – so much being taken that it caused inflation!

Colonisation also affected the distribution of work around the world, producing an international division of labour: The colonies produced raw materials, which were then turned into manufactured goods by the developed countries. In theory, the colonies would gain from selling the raw materials, and they would be able to buy manufactured goods in return. This is known as the “comparative advantage” theory (see below). However, the developing countries clearly lost out: not only because they were not able to set the price for their gods, but they were in fact often stopped from developing their own manufacturing (for example, Indian cotton weaving) since this would be in competition with western industry (cotton in Manchester for example). Moreover, when money was earned, it was consequently invested in “primary” activities - mining or plantations – and not in new developments; this unbalanced and distorted the economies of developing countries, and the workforce remained unskilled. These problems are with us to this day. (Donaldson 1986)

3. CONFLICTING VIEWS:

(a) “the gap” is worsening: (Donaldson "Worlds Apart" 1986)

GROWTH RATES - 1850 - 1960:

Population Income Output

Industrial World: 26% - 28% 35% - 78% 2,000%

Developing World: 74% - 72% 65% - 22% 300%

Thus, the industrial world has just over a quarter of the world’s population, but its share of income has gone up from 35% to nearly 80%, and its economic and industrial output has increased enormously. Conversely, the developing – or majority – world’s income has gone down and its output has only increased by a fraction of that of the developed world.

Donaldson’s view (and that of the majority of economists, it has to be said) is that the gap between the rich and poor countries is due to external causes, e.g. colonialism and unfair trade (see below). They describe the current problem as one of "dependency". That is, the developing countries have been prevented from constructing their own manufacturing, so they are dependent on the rest of the world for manufactured goods; the west has also produced new chemical fertilisers, insecticides etc for its agriculture, and the developing world has to buy them; there is a shortage of money in the third world, so it is the west that lends them money. Thus in many ways, the third world is in a position of both inequality and dependence. (There is more on this at 4 below, see also UNDP – Human Development Report 1999)

Some writers in fact go so far as to say that the poor may never catch up with the west: they speak of “the growth illusion” (Douthwaite 2001). Thus, if African countries grew at 1% per annum (equal to the 1960s rate) it would take them 273 years to catch up with British income, and 343 years to catch up with America (meanwhile of course, British and American income may also rise!). Sachs (1997) makes a similar point: the poorest 33 countries would take nearly 500 years to catch up. For writers such as W. Sachs (see also below 6 b) this means questioning the whole notion of “development” and “growth” as understood by western countries.

In more recent times, prominence has been given to the debt crisis. The problem of third world countries having difficulty repaying their debts first became an issue in the early 1980s: commodity prices (which, as pointed out above, have been set by the purchasers) fell. Also oil became cheaper which at the time helped the economies of the developed countries, but did not help those third world countries lucky enough to have oil (Nigeria for example). At the same time, as part of a continuing process, the west was finding more and more ways to replace the raw materials from the third world, and the growth of “new technology” meant that less resources were needed anyway (e.g. less copper for electrical wiring). (C. Huhne, Guardian Sep. 1988)

Western banks had been frankly careless in lending to developed countries: they hoped for a good return on the loans, without considering whether the countries concerned would in fact grow sufficiently rapidly. Developing countries took out more loans as they got into more difficulties, and all the time interest payments were accumulating.

From the 1980s, there was actually a net transfer of money from less developed countries to the North - amounting to ca. $30 billion a year. In other words, interest payments were outstripping new loans.

1980/81: $42 billion transferred from north to south

1989: $52 billion transferred from south to north

In 1999: the south paid $1,680 more than they received in new loans.

For every dollar in grant aid to developing countries, more than $13 comes back in debt repayments. (World Bank, 2001-3, IMF 1996-03, OECD statistics, cited in New Internationalist 365, March 2004)

In some countries the debt was in excess of their GNP - for example Egypt, Laos. The consequence has been discussion of postponing re-payments, re-scheduling, or even cancelling the debts of some of the poorest countries.

(b) The “gap is not so bad.

Opposed to this view, some argue that the idea of a gap is not satisfactory: how do you measure it? You might take the average wage, or GDP per capita, or you might compare the poorest in two countries: each method would produce a different result. (Bauer 1981).

The second part of this argument is that it is wrong to question economic growth, especially trade, since this is the only way that developing countries are going to be helped.

Finally, and in some ways the most controversial aspect of this point of view: if countries are less developed or “backward”, this is due to internal causes i.e. cultural factors such as corruption, and market "imperfections". By this is meant that the market is not sufficiently free, because the state or trade unions influence it. Bauer suggested that these countries need "modernisation" (especially "of the mind"). Recently, the British government has said that something must be done about corruption in Africa before aid can be effective. (World Bank – growth is good for the poor, Dollar and Kraay 2000; see also Bauer 1981):

Of course, some of this has some validity: there is excessive corruption in parts of the third world, and civil conflict (e.g. in Ethiopia and Sudan) has held up the possibility of development. According to Huhne (1998 loc cit) Ethiopia spent nearly twice as much on arms as on education in late ‘80s – while life expectancy 43, only 6% had access to clean water. However, the response is that these conflicts have their origins at least in part in colonialism, or in interference by outside powers (Ethiopia was never colonised, but has been the site of a “proxy war” between the USA and the Soviet block).

(c) The concept of development is wrong (Sachs 1996)

Gustavo Esteva, in Wolfgang Sachs’s Development Dictionary, chapter 1, argues (that ever since US President Truman first used the phrase “underdeveloped areas” (when he was inaugurated, in 1949) a “euphemism” was created that has been “used ever since to allude either discreetly or inadvertently to the era of American hegemony. From then on, for “third world “peoples to start thinking of their “development” is for them to “undermine confidence in oneself and one’s own culture”. History, he says, has been reformulated in Western terms. Despite attempts to shift its meaning, the concept of development has always been tied to growth of GNP, and therefore to western ideas of progress. Finally, if the initiatives for change in the third world come “out of the diverse cultures and their different systems of values” if it were “endogenous”, then there is no inevitability that it would lead to “development”.

(d) Different views on international trade:

The basic conflict here is between so-called "comparative advantage theory”, originating with David Ricardo in the 18^th Century (which says that we will all gain if each country does what it is best at), and the more modern “dependency theory” (which argues that in practice the LDCs have become dependent on the more developed countries, for reasons outlined above, and largely because competition has not been fair). There is still disagreement between those who press for "free trade” and those who argue the terms of trade are unfair. Poor countries are dependent on a narrow range of commodity exports – as UNCTAD points out: 3 commodities account for 75% of total exports in each of the 48 poorest nations (Wayne Ellwood, in NI, Dec. 2004). To illustrate the problem of declining commodity prices: between 1997 and 2001 the combined price index of all commodities fell by 53% (that is, raw materials lost half their value in comparison with manufactured goods).

Trade liberalisation alone, i.e. the removal of barriers so trade flows more freely and becomes more attractive to third world producers, would only make things worse, Ellwood argues: if exports are encouraged, (rather than, say growing for the internal market, or diversification) this can lead to over-production and therefore lower prices!

There is a great deal of hypocrisy going on as well, since rich nations, whilst advocating free trade, in fact became rich by using tariffs to protect their domestic industry. They also currently put up higher tariffs against materials and goods from the developing world than the latter can put on imports from developed countries.

Moreover, developed countries subsidise their farmers to an incredible degree: The CAP (the EU’s Common Agricultural Policy) subsidizes sugar beet exports by 300% - and the US pays its cotton farmers (accounting for 40% of the world market) a 100% subsidy.

Therefore, whilst reducing the tariff barriers that we put up, and cutting subsidies to our producers, would produce a more level playing field, there would still remain the system of competition in which small third world producers would be up against western “agribusiness”. Just to give, and quoting Ellwood, a few examples: “just two companies, Philip Morris (Altria) and nestle, control more than half the world market in roasted and instant coffee. Four companies, Cargill, Tyson, ConAgra and Farmland National control 81% of the global beef market”. How can Mexican agriculture possibly compete with this?

Update: 22/10/2006: Observer Media and Business: Heather Stewart

Proportion of “south-south” trade and foreign direct investment is increasing – according to research by UNCTAD, from $4bn in 1985 to $61 in 2004.

China and India most significant.

Stats:

Latin American Investment: Internal: $2,701mln

External: Africa $16mln; Asia $754mln;

Asia: Internal: $47,881mln

External: Latin America $403mln; Africa $$1,201mln

Africa: Internal: $2,105

External: $Latin America $21mln; Asia $702mln

Also new generation of MNCs based in developing countries, e.g. Tata (Indian) which has made a £5bn bid for Anglo-Dutch steelmaker Corus.

4. A BRIEF WORD ON RELEVANT GLOBAL ISSUES:

World Bank and IMF.

As the Second World War came to a close, discussions took place amongst the Allies as to how to deal with the world economy. (I have noted above President Truman’s first use of the concept of “underdevelopment” in 1949). Amongst them was the English economist Keynes, who argued for a global financial system, with a fund for developing countries, and strict controls on the movement of capital across borders. Instead, the US point of view, for free movement of all goods and capital, won the day, and the World Bank, and the International Monetary Fund (I.M.F.) were set up.

These bodies between them have exercised more and more control over the world’s economy. Influenced by those who believed in free trade and monetarism, they have set conditions on any loans, which are called "Structural Adjustment Policies". These involve privatisation and the cutting back of state, i.e. public, expenditure. Naturally, the poor throughout the world have not benefited from these policies – in Egypt, schools were no longer free, even in the UK workers’ wages were held back and public funding of schools, universities and even hospitals was cut.

Voting rights go with economic wealth, with the consequence that almost two thirds of the votes in both these organisations go to developed world countries. The recent appointment of the controversial neo-liberal Paul Wolfowitz as chair has alarmed many. (see George Monbiot, Guardian 5/4/2005, and www.monbiot.com)

GLOBALISATION.

Jacobs (1996, p 45) defines globalisation as “the growing integration of the world economy and the increasingly international reach of modern communications.” What that means in practice, to many observers, is the ever wider spread of American and developed world financial and technological control. For example, agribusiness is pushing for more use of genetically manipulated of crops, and this is running counter to both local and ecological diversity (Vandana Shiva). As noted below, the distinctive lifestyles and cultures of indigenous peoples are threatened.

WORLD TRADE ORGANISATION

Set up more recently, its main aim is to promote “free trade”. The chief concern that observers have is that the proposed rules on intellectual property will work in the interests of the developed countries, and their TNCs (see below), thus preventing poor countries from making generic copies of drugs against Aids, and they are also likely to endanger national attempts to protect environmental and social standards, since it will treat these as “barriers to trade”. (Jacobs 1996 p. 58)

In March of 2005, the Indian government passed a law – in order to comply with the WTO’s intellectual property regime, making it illegal to copy patented drugs. (Guardian, 32/3/2005) The cost of treating an Aids patient had gone down over the past 10 years, to $200, because of the availability of cheap generic (“copied”) drugs – previously it had cost $15,000!!

(see www.unaids.org/en/geographical+area/by+country/india.asp)

5. MULTINATIONAL/TRANSNATIONAL COMPANIES:

(a) general points:

Before making more detailed points, it is worth noting that views on multinational companies (MNCs or TNCs) are polarised:

(i) for (i.e. qualified support!): (e.g.) Luthans and Hodgetts

It is interesting to read how these authors approach the subject, since their target readership is management and would-be managers. First they note that there are advantages to the host country when a multinational company establishes itself there: “[it may] help solve such diverse problems as substandard housing, insufficient diet and food supplies, and economic instability…. It helps the economy of the host country…. Taxes and salaries and the product or services provided can help substantially”.

Then they note the problems that the MNC may encounter. For example, there may be trade restrictions imposed by the host country, and hostility to the MNC. This they attribute to a variety of causes: nationalism, fears concerning outside influence, cultural differences, opposition to social welfare projects embarked on by the MNC. “Very few MNCs have enough credibility to overcome the fears and suspicions of some of the host country’s population.” By not trying to evaluate whether or not these fears are justified, and by noting that they are only held by “some” of the population, Luthans and Hodgetts seem to me to duck the real issues. The implication is that if the MNC can overcome these fears its operations can only be of value, and not harmful, to the host country.

(ii) against: (e.g.) Barnet and Muller 1975, Donaldson 1986

Other authors note the many ways in which multinationals work to the advantage of the home country. Because they have international mobility, they can choose where to locate their subsidiaries, and make good use of differences in countries’ tax regimes – as well as tax havens. Thus companies can avoid paying tax on profits by arranging their finances (through transfer pricing) in such a way that any profit appears in a country where there is no tax, and by making losses in countries where they would be taxed.

These critics also stress the relative power of MNCs when compared to national governments, and the lack of an international framework of legislation, let alone a supra-national authority, to regulate them.

(ii) Origins of TNCs (or MNCs):

When we go into the historical origins of multinational companies (as they are most commonly called), and when we take into account the economic reasons for their having grown, it seems to me that the evidence accumulates for their acting primarily in the interests of the developed world. The definition of a multinational – or trans-national – company is that it has a base in a “home” country, but has established subsidiaries abroad in “host” countries. If we want to stress that such companies do not entirely escape from national boundaries, but have a loyalty to their country of origin – which I believe is the case – then we will prefer to call the trans-national (TNCs),

The reasons a company might have for setting up a subsidiary abroad include:

- to control markets & supplies: it is easier and cheaper to oversee and manage a foreign market and foreign suppliers, if you are located in the relevant country

- to cut costs: it is cheaper to produce overseas than to export; labour is cheaper and less well-organised (e.g. for safety standards) or unionised (in some countries – Singapore, Indonesia - favoured by TNCs, trade unions have been illegal!)

Supporters of TNCs argue that they provide jobs. This is of course true, but a complex problem arises, since the wages will be low in comparison to the home country, but may be high in relation to local rates. If workers are paid too much they begin to form an elite, and what economists call dualism can be created (i.e. creating or exacerbating differences in the standard of living within the local population). It should be stressed also here that the main problem in developing countries is rural poverty, and the setting up of a business based on e.g. wiring components into electrical products, is not going to help!

Most complaints against TNCs, however (Nike GAP) have been because of low wages and sweatshop working conditions. One argument that supporters can use here is to say that sweatshops are a necessary stage in the evolution of the economy of developing countries. (Norberg

A more telling issue is that whilst local labour is used it is for low/unskilled work, and managers are taken mainly from the home country.

Another point made by supporters is that they generate money which will benefit the host country’s economy. However, apart from the points made above about transfer pricing and tax evasion, it has turned out (!) that doing business in the third world generates better profits: 25% of US overseas investment is in third world, but this generates 50% of US’s profits on investment. (Reference mislaid).

(iii) power and control:

As mentioned already, one of the main causes for concern over TNCs is to do with their sheer size, and the power that gives them, which goes beyond economics and into the political sphere. If we measure the economic activity of the largest institutions in the world, we find that some 29 of the top 100 economies are TNCs not nations (Litvin 2003). The two issues here are: the use of its political power by a TNC to manipulate nation-states (see below), and the lack of an international body powerful enough to regulate them.

(iv) economic/financial power:

The point has already been made that TNCs return their profits to the home country – in other words, most investment by TNCs is in the developed world, which must exacerbate the gap between rich and poor nations. The dominance of TNCs in particular fields is also a cause for concern, since it eliminates competition: thus TNCs dominate in oil, motors, computers, electronics, chemicals, and drugs.

On the other hand it must not be forgotten, as The Economist supplement March '93 pointed out, whilst the top 100 TNCs control 40-50% of world cross-border assets, this only amounts to 16% of all assets. (In other words, much is produced and traded within national boundaries). Moreover, the international flow of money is more significant; which simply suggests to me that we should be watching out for financial institutions abusing their power in future!

(v) cultural colonialism:

One of the most significant negative effects of TNCs is the exporting of “western” products and ways of life to other cultures. Some observers already talk of “McDonaldisation”, as the “fast food” habit spread around the world. The same could be said for Coke, cigarettes, and infant formula (see below). These “western” products are often presented to people in developing countries as “superior”, whilst at the same time consumers in the developed world are trying to deal with the problems of obesity, cancer and heart disease that are the by-products of this kind of consumption!

On the other hand, Thomas Friedman, in a new book (2005), argues (provocatively!) that there have never been wars between countries that have McDonalds chains! (see also below on globalisation)

Two further serious issues must be noted: first, that in many developing countries marketing techniques are used which are not allowed in the West (advertising cigarettes, using old slogans that are now discredited such as “Guinness is good for you”); second, the sale (i.e. dumping!) of products such as pharmaceutical drugs which have been banned in the developed world. (see Shaw et al 6^th edition 1995, p 28–30). Ironically, at the same time, many drug companies actually charge more in the developing world for a basic product such as aspirin!

(b) Examples:

The best way of illustrating these problems is to give some concrete examples. TNCs have been accused of a “catalogue of disasters” (Hartley 1993), of which here is a selection:

ITT (International Telephone and Telegraph Company): (see Hartley 1993 ch 6, Sampson 1973)

In 1970 the people of Chile elected a socialist government, led by Salvador Allende. Chile was an important source of copper for such companies as ITT (used in electrical wiring), and the company – as well as the US government – feared that Allende might nationalise the copper mines and take over a phone subsidiary it had in Chile. ITT then contributed (with the CIA) to the overthrow of Allende, by fomenting discontent that existed among his opponents (e.g. lorry drivers) and among the military. A coup resulted, led by General Pinochet. Allende died in an attack on the presidential palace, and Pinochet went on to establish an extreme right-wing dictatorship, murdering and torturing thousands of political opponents. Attempts are ongoing, since Pinochet fell from power, to put him on trial for crimes against humanity. It is hardly a coincidence that Milton Friedman, (whose statement is often quoted, that corporate social responsibility is a subversive doctrine, and the only business of a firm is to make profits for its shareholders) was an economic advisor to general Pinochet. (Note: Hartley gives a milder version of this story!)

NESTLE: (see Hartley, 1993 ch 10, Hoffman et al 2001 p 503)

For many years now – since the early 1970s in fact - there has been pressure on Nestle to change its approach to marketing “infant formula”, i.e. dried baby milk. It was criticised (initially by War on Want, the British charity) for selling the product in unsuitable environments, for example refugee camps and parts of Africa, where there would be a lack of clean water, ways of sterilising bottles etc, and where the women would not necessarily have the education to read all the instructions on the bottle. Sadly, if the powder is mixed incorrectly, or the containers are unclean, children can develop diarrhoea and this can be fatal. What was worse, the company was using its promotions staff dressed as nurses to help persuade women to buy the product. Doctors were given free gifts. There was a legal case when critics accused Nestle of killing babies, and although Nestle won, it was a PR disaster, since the company was advised to change its marketing approach. A boycott of Nestle was organised, and organisations such as the World Health Organisation (of the UN) tried to intervene, by for example drawing up codes of practice. Critics allege that Nestle broke the code many times, and say that self-regulation is not enough.

UNION CARBIDE: (Hartley 1993 ch 11)

In 1984 there was an explosion, followed by a large cloud of gas drifting across the area, at the Union Carbide factory, making pesticides, just outside Bhopal (a state capital with approaching a million inhabitants) in India. 2,500 died immediately, at least 300,000 were injured, and 20,000 cattle killed. More victims died in the aftermath, (possibly as many as 20,000) as the poisonous gas (methyl isocyanate) affected their lungs – and children were born afterwards with defects. This was the world’s worst industrial accident. It is likely that lax safety arrangements were allowed in the plant – such as would not have been allowed in the US (but see Hartley 1993 ch 3 concerning the same company’s pollution at Ohio valley in America!). There followed a shameful dispute between the company and the Indian government over who was to blame (the company even blamed a non-existent Sikh extremist who was alleged to have attacked the plant!) and who should provide compensation. The dispute ran on, and 20 years later (2004) the victims are still trying to get adequate compensation. The Indian government has spent at least $40 million. It has not passed without notice in India that after 9/11, victims’ families received quite generous compensation very quickly. Are Indians not worth the same as Americans?

Other issues arise here such as the question as to whether India needs these artificial chemical pesticides – often these products are sold as a result of the so-called “green revolution” (Shiva 1991) when western companies sold new breeds of rice etc, and then increased the developing countries’ dependence by getting them to buy the fertilisers and pesticides they were told were necessary to get the best results.

CAPE ASBESTOS:

Asbestos is an effective but dangerous insulating material, (a mineral, made from a kind of rock) that at one time was widely used in the construction industry (and to line the brakes of cars). However, it was soon discovered that should the tiny particles get into your lungs you would develop a kind of cancer called mesothelioma. This kills the victim slowly, affecting the circulation and making the limbs swell up, as well as making it harder and harder to breathe. There have been many cases in different parts of the world of individuals falling ill as a result of exposure to asbestos, and of course building workers and those who mine and prepare asbestos are most at risk. Cape is a major producer of asbestos, and had a mine and plant in South Africa: thousands of South African mine workers, and their relatives (think of a wife washing her husband’s overalls…) have fallen ill and made claims against the company. However, the company has refused to compensate. We actually have the ridiculous and criminal situation whereby victims in the UK have been told (after a House of Lords ruling) that they can claim, whilst South African victims cannot! (see previously, on the worker). Incidentally, this case is “close to home” for UEL, since the company’s HQ was at Barking.

BARCLAYS:

One of the earliest examples of consumer resistance to unethical behaviour by large companies came when there was growing pressure on apartheid South Africa. International opinion condemned the “separate development” policies of the white government, which in practice meant that blacks were crowded into the poorest rural areas, while whites lived in luxury. The rules were so strict that inter-mixing in relationships and marriage was forbidden, and schools and hospitals - even ambulances – etc were segregated. Barclays had branches in South Africa, and of course argued that it was paying decent wages. However, campaigners began to argue that they should not be there at all, since they were propping up apartheid, and the wage levels were scrutinised. It was found (the UK Parliament had a debate on this) that Barclays were not always paying even the “threshold” wage! In the end, it was the National Union of Students’ withdrawal of their funds, together with churches and other bodies threatening to do the same, that made Barclays climb down.

More recently (New Statesman 12/8/2002) lawyers are building up a case for a “class-action” against companies that made a profit from apartheid (having succeeded in getting compensation for victims of Nazism). The other companies being accused include: ICL, Credit-Suisse, UBS, Citicorp Inc, Deutsche bank, Daimler Chrysler, Siemens, and IBM!!!

SHELL: NIGERIA:

In the Niger Delta, Shell has been extracting oil for some time. The resultant pollution (oil leaks ruining the land, gas flares poisoning the air) has been a cause for anger on the part of the local Ogoni people. Protests have been put down ruthlessly, with many killed by police and – it is alleged, by paramilitaries employed by the company and armed by the government. A great deal of public outcry occurred when the Nigerian government arrested a group of demonstrators and put them on trial. Despite international pressure, the “leader” Ken Saro-Wiwa was executed.

The UN questioned the legitimacy of the Saro-Wiwa trial, to no avail. It is alleged that there has been widespread brutality against the Ogoni, involving torture and the destruction of villages. (See www.archive.greenpeace.org/comms/ken/murder.html and Na’Allah 1998)

Update 2013: the son of the executed Ken Saro-Wiwa, also called Ken, is now a presidential aide; he alleges that the theft of vast quantities of oil from the pipeline ‘is on and industrial scale, and involves commodity traders, international [criminals] and a whole network of people. There are some allegations that the oil companies themselves are implicated.’ See John Vidal in The Observer, 06.10.13: http://www.theguardian.com/global-development/2013/oct/06/oil-theft-costs-nigeria

Note: other ‘updates’ on the environment are at: updates on the environmental movement.

NIKE & GAP: (see Klein 2000, and Hari, J: Independent 26/12/2003).

The campaign against these companies’ practices has also gained world-wide notice. The issue is “sweatshop labour”. Television programmes and newspaper reports exposed the extreme conditions of workers, especially in south-east Asia (Vietnam, Korea, Hong Kong) making trainers for pitiful wages, whilst the trainers sold for exorbitant prices in the UK and America. The other aspect of this is the way that such companies can move around the world when criticism catches up with them. The New York based trade-union Unite found there were now sweatshops in Lesotho and Bangladesh. In 1990s Nike made shoes in South Korea, but when the country became more democratic, Nike shifted its operations to Indonesia – then to China and Vietnam. It has also been revealed that the Nike Vice-President wrote secretly to the Vietnamese government attacking trade unions for wanting more rights! Phil Knight of Nike is worth over £12 billion.

COCA COLA (from The Ecologist, Apr. 2004):

This company set up a plant in Kerala, south India, producing over 1 million bottles a day; it drew water from the underground water-table, with the result that some 20,000 rice farmers have been affected by water shortages. The water also became toxic, probably as a result of the company’s giving away waste to farmers to use as sludge. The waste has been found to contain lead, cadmium, and chromium, all poisonous heavy metals. In order to deal with any possible complaints from local people, the company managed to get the laws concerning shareholder rights altered, so that Indian shareholders lost any say in the company’s workings! Again, widespread protests have been held, supported by the writer Vandana Shiva.

This is not the first time Coca Cola has been accused of unethical activities: in Florida, July 2001, it was accused of using paramilitary death squads to murder, torture, kidnap and threaten union leaders in Columbia, in order to force the Sinaltrainal trade union out of one of its plants! The Columbia Solidarity Campaign called for boycott.

In South Africa, Coca Cola has been accused of discriminating against HIV positive employees.

In Panama, in May 2003, it was fined $300,000 for polluting Matasnilllo River. Not a good record!

BAE (British Aerospace): - (research by Susan Hawley reviewed by Rob Evans in Guardian)

This company, encouraged by the British government, has a history of trading with Saudi Arabia. This country is looked on favourably by the UK and the USA – perhaps because it is such a good arms customer? – despite a record of human rights abuses. BAE is accused of bribery, running slush funds, procuring prostitutes etc. The Al Yamamah deal shows that the British Export Credit Guarantee department (ECGD) underwrites overseas contracts, but allows bribery and corruption to go unchecked.

DE BEERS: (Guardian newspaper, Nov 8th & 9th, 2000)

In central Africa there has been a series of tragic and complex conflicts involving Rwanda, Congo and Uganda. In addition, Angola and Sierra Leone are in danger of being torn apart by ugly civil conflict (often a legacy of the cold war, when the Americans and the Russians supported opposing sides!). A favourite method of dealing with opponents in Sierra Leone is to cut off their hands or feet. An important part in the financing of guerrilla armies is played by diamonds. De Beers is involved in diamond mining in this part of the world, and is therefore accused of supporting dictators such as Mobutu in the Democratic Republic of Congo, and guerrillas (UNITA) in Angola and Sierra Leone. The diamond trade in Africa worth $42 billion a year.

HALLIBURTON:

I will give more on this company in the next chapter, on inequality, (see link) but here the point is that it is one of a group of companies (The Carlyle group, Chevron Texaco) that have extensive Saudi interests. This means that prominent US politicians (James Baker, Dick Cheney, Condoleeza Rice) are involved both in making US foreign policy, and in benefiting from their role (current or previously) in these companies, (according to Amnesty International, and Rosemary Hollis at the Royal Institute of International Affairs, from Oliver Morgan in Observer 5/10/2003).

Update: pharmaceuticals:

From: Ben Goldacre – Bad Science – Guardian Apr. 28^th 2007. (Ben Goldacre has an e-mail address if you have any other examples of bad science: bad.science@guardian.co.uk).

The availability of drugs to fight HIV/Aids in the “third world” has become a major issue. In Thailand, for example, more than half a million people are living with HIV, and 120,000 have Aids.

Moreover, according to the WHO, more than half the transmissions come from sex workers – involving 2 million women and 800,000 children under 18 – and, Ben points out, much of this trade is servicing western men.

The US drug company Abbott produces a powerful drug Kaleta, for which it charges $2,200 a year in Thailand this figure is roughly the same as the gross national product per capita. How many people in Thailand are going to be able to afford this? The Thai government wanted to make the drug themselves for their own poor. The 2001 Doha declaration and the WTO TRIPS agreement say that this would be perfectly legal. Abbott however has retaliated by withdrawing Kaleta and six other drugs!

On pharmaceuticals see also: Chapter 5 link.

6. VIEWS ON SOLUTIONS TO THIRD WORLD PROBLEMS:

(a) Trade, debt and aid

Trade:

(i) Neo-liberals and those generally on the political right argue for more trade. As with other areas of “social responsibility”, this viewpoint puts most emphasis on the “free market” being allowed to work itself out. The most firm neo-liberals might accept that trade barriers put up by developed countries against the third world are unfair. In practice they don’t seem to see this (cf. Friedman, 2005). This is the equivalent of what I have come to call the “Rely on business” position.

This viewpoint is hostile to aid, since it smacks of government handouts and the nanny state! With regard to debt, you will probably find the neo-liberals rather quiet, since presumably they do not want the banks to lose their profits.

(ii) Some on the right, and most of those on the left would press for better terms of trade. Many NGOs (non-governmental organisations – including pressure groups and interest groups) work for better terms, and may call this “fair trade”. (As suggested above, without re-structuring the power relations in the market I do not see how trade can be entirely fair, even if barriers are removed). Since governments would have to agree on these changes to trade rules, this position is an example of what I call “Regulating business”. The attitude to aid would probably be favourable, since governments want to look as if they are doing something – though it might, like the current government, call for reforms (via regulations) abroad as a condition of further aid.

(iii) When outside pressure is brought to bear, such as using consumer boycotts, to improve the terms of trade, or pressure on governments to increase aid, or to alleviate the debt burden – most likely through cancelling debt - this is what I call “Restraining business”, and it represents a “centrist” position politically, though some pressure groups and social movements have radical aims in mind (see b below).

To give a specific example, (alongside such well-known groups as Greenpeace) an organisation called “ATD Fourth World”, an international organisation of NGOs, argues that human rights include freedom from poverty, and calls on states and businesses to recognise and implement the UN Declaration on human rights.

As an instance of a victory, the Ilisu (or Ilusu) Dam project, which threatens the homes of thousands of Kurds in Turkey, is likely to be abandoned owing to financiers dropping out as a result of oppositional pressure.

Since 2003 there has been a campaign against the dam, and several construction companies, including Balfour Beatty, have backed out. (see www.ilisu.org.uk though I note that the latest information only relates to 2003; research on this project and the Baku-Tbilisi-Cyhen (BTC) oil pipeline, which also has human rights implications, is to be found on the science and society site of Goldsmith’s College: www.goldsmiths.ac.uk/csip/source/research.html).

(iv) The most radical position within the capitalist system calls for fair trade for self-reliance: a number of organisations work on this basis (or claim that they do) – e.g. "Traidcraft". Also the "Global Partnership" for fair trade, holds exhibitions publicising and selling goods from small businesses that work in the third world, employing local labour at the best possible conditions. Here, terms of trade would also be very significant, and fairness would be needed, but also the small businesses would have to be able to compete with the giants, which seems to me to call for re-structuring of power-relations etc. With regard to debt, this position would presumably argue for cancellation; however, since we are talking about the setting up of small alternative businesses, there would not be a call for loans from the developed world in the first place!

Another organisation that might come under this category is:

The Intermediate Technology Development Group. This approach was mentioned when I dealt with the environment. Since intermediate, or alternative, or soft technology is designed to put power into the hands of those using it (rather than remote experts), it is said to be ideal for developing countries. The ITDG does in fact assist third world countries with specific forms of appropriate technology.

In the “third world” itself, there are interesting initiatives such as Grameen Bank in Bangladesh: (from Randeep Ramesh, in Dhaka, in Guardian 27/12/2006).

Set up by Muhammad Yunus in the mid-seventies, the Grameen Bank lends small amounts of money (micro-credit) to the poor – at a manageable interest rate, rather than the high rates charged by traditional banks, which were preventing poor villagers from improving their lot. The aim is to enable them to “lift themselves” out of poverty. (It seems to me to resemble the Big Issue philosophy, originated by John Bird). Prof. Yunus and the Grameen Bank were awarded the Nobel Prize in 2006.

Yunus pays himself the same salary as a state bank would pay, (though he could command much more as the head of a private bank), i.e. $450 dollars a month ( = £230) – as his aim is to help the poor not to make money for himself.

There are now 100 million micro-credit borrowers throughout the world. Grameen (meaning “village” in Bengali) lends $1bn to 7 million poor people, mostly women. The repayment rate is 99%, though many loans are refinanced rather than repaid. Bank profits were over $20mln in 2006. The Bank’s own figures show that 58% of their borrowers have crossed the poverty line.

However, there is still widespread poverty in Bangladesh – around 20 million people live in poverty. Yunus argues that poverty has been reduced by 10% in five years, and that Bangladesh will meet the UN Development Goal of reducing poverty by 50% by 2015.

The philosophy is to lend not to give, and beggars have been recruited as customers, by Bank staff, by giving interest-free loans of $12 to buy “cookies or toys” to sell. They have lent to 84,000 beggars, and more than 5,000 have quit begging.

The Bank also supplies villages with solar power, and promoted a low-cost yoghourt with Danone, and has branched out into mobile phones (as a profit-maximising venture at this stage). Yunus has been asked to start a Grameen bank in China – the first foreign bank in the country.

These examples, since they amount to new kinds of business still competing and trading within the system, I call “Restructuring business”. Under this heading it is worth noting that trade within the developing world is increasing – see Update at top of this document.

(b) empowerment for self-reliance, and resistance to globalisation:

The equivalent of my label “Replacing business”, this seems to the more radical-minded to be the only real solution. I have given a separate heading here since it is important to say something about the anti-globalisation movement, although this goes wider than a concern for the third world (and will be dealt with more thoroughly next time).

Best known of the anti-capitalist, or anti-globalisation groups, is the EZLN or Zapatistas. They were set up in Mexico in 1994, at the point in time when the North American Free Trade Agreement (NAFTA) was signed. Representing poor peasants in the Chiapas region of mexico, one of their slogans is “Ya basta!” “Enough!” They find their already perilous existence threatened by so-called free trade – an estimated one million jobs were lost in Mexico as a result of free trade agreements which involved the privatisation of factories, railroads, airlines etc. (New Internationalist 374, Dec. 2004). The Zapatistas fight back, declaring they have “nothing to lose – no money no jobs, no freedom from outside interference, and no right to elect our own rulers”.

An international organisation which helps indigenous peoples threatened with extinction is Survival International – see next week, and website given in References.

Finally, an example of a possible success: the Xingu National Park in Brazil which covers area the size of Belgium, has been put aside for indigenous peoples (14 different tribes) to run themselves. The government helps protect the land from cattle ranchers and loggers (I found this information in an issue of The Big Issue! – it was taken from an article in the Brazilian journal Veja – you might try www.brazilmax.com).

(c) Business: what is the role of business in this???

(i) Enlightened business practice:

As an example, perhaps, of CSR good practice, Colgate-Palmolive make donations to the peoples of Xingu, 20,000 donations of toothbrushes and toothpaste a year!

On the other hand, there is quite some way to go, simply to remove unethical practices in the third world (whether on the part of TNCs or governments). Salil Tripathi points out (reviewing Litvin 2003, in the New Statesman 19/5/2003) that:

“Companies can indeed play a role in solving some problems by agreeing not to offer bribes (the BAE scandal is relevant here!) and not to employ forced labour and avoiding being complicit”. (My emphasis added).

However, Tripathi adds: “beyond that, the primary responsibility of tackling [what Litvin calls the “admittedly chronic problems” of] child labour, corruption, poverty and inequality, is that of the governments”. (My emphasis again).

(ii) innovative business solutions:

1. Shell: Shell Foundation (independent charity funded by Shell group… see the website given below) paper: “Enterprise solutions to poverty” – “most routes out of poverty start with enterprise” – market economy, based on both large and small enterprise, is central to job creation, growth and sustainable development (Simon Caulkin, Observer 13/3/2005).

Shell argue that it is wrong to assume that the only thing that business brings, when considering its social responsibility, is money. Business has resources in the form of knowledge and skills, so what it can contribute is the ability to help the poor, by teaching them how to exploit scarce aid resources to meet the needs of the market. The whole basis of business, from this point of view, is “to transform social need into: economic opportunity and economic benefit, productive capacity, human competence, and well paid jobs and wealth”. This is not new, says Caulkin, since the management writer Peter Drucker was saying this was the real social responsibility of business, 20 years ago!

Donors also should think in terms of investing not giving. Those given grants should be held accountable for their promises, and donor-managers should be judged on the growth of pro-poor enterprises and whether benefits flowed to poor people as a result. Moreover, relationship (of companies in poverty partnerships) should be a business one i.e. returns being generated to the companies in valued form and at scale appropriate to the risk. Businesses should respond to the needs of the poor, not impose their own CSR agenda (says Caulkin).

2. NIIT, a computer trading and software services company in New Delhi, India, put a kiosk in a wall with free internet access to any passer-by. Children (between 6 and 12 years old) have been the main users, learning how to operate it as they used it – and these are slum children, who often are not literate or even knowing what a computer is called. NIIT won the prize for social invention of the year, 2000, from British Institute for Social Inventions. (See: Institute of Social Inventions 2000, reviewed in Guardian by David Cohen, 17/10/2000).

3. Imfundo (Ndebele for acquiring knowledge): this is a UK government initiative, linking IT experts from public and private sectors, to identify ways of bringing IT to train teachers in Africa, & to bridge the “digital divide” (between developed and undeveloped countries). Companies involved are: Cisco Systems, Marconi and Virgin. (Mark Atkinson, Guardian 17/10/2000)

Likewise Dot.force – this was set up at the Okinawa G8 summit in 2000. It comprises two IT experts from each country to advise politicians on steps needed to minimise the “digital divide” between developed and underdeveloped countries. Vernon Ellis, International Chairman of Accenture, giving the New Statesman Lecture, July 2001 asks “Can Global Business be a Force for Good?” and answers in the affirmative. He says he can see “an increasing trend for business to acknowledge its relationships with the rest of society… reflected in a range of concepts and initiatives by business to demonstrate its value to society. They include charitable giving, partnerships and projects with voluntary organisations, and social and community audits of its activities.” He warns that if these projects are too vague they will attract accusations of simply being PR, and he describes Dot Force as a significant initiative. Technology, he says, can bring about self-sustaining development in the third world, provided the conditions are right, and he identifies “five pillars on which sustainable development can be built”:

Infrastructure - a basic communications infrastructure,

Policy – overall policy environment (balancing liberalisation with ensuring government revenues)

Education and training – including of course basic literacy and numeracy

Local relevance – affordable content and software in local languages

Entrepreneurship (“above all”)” – and this is where companies like Accenture come in, with their accumulated expertise….

************************************************************************************************

A final word:

According to Oxfam, the world spends:

$50 – 60 billion per annum on development,

$300 billion on agricultural subsidies in developed countries, and

$900 billion worldwide on arms.

The "third world" – sources and indicative reading:

See also: Booklist for CSR

Adams, W.M: (1990) Green Development, Routledge - an alternative view of development, linking it with protection of the

environment.

Barnet, R.J and Muller, R.E: Global Reach, Jonathan Cape, (1975) - a classic text on multinationals

Bauer, P (1981) Equality, the Third World and Economic Delusion, Weidenfeld - a right-wing viewpoint

The Brandt Commission: Common Crisis, (1983), Pan – for the UN, originated the north-south distinction

British Institute for Social Inventions, (2000) Book of Inspirations – for information on NIIT

Commoner, B (1980) The Closing Circle, Bantam - one of the first books to blame US-led advanced technology for the

environmental crisis.

Donaldson, P: Worlds Apart, Pelican, (1986) - easy-to-read introduction to the economic theories of development and the

"development gap"

Dollar, D. and Kraay, A: Growth is Good for the Poor (World Bank) 2000 – self-explanatory!

Douthwaite, R, (2001): The Growth Illusion - How Economic Growth Enriched the Few, Impoverished the Many and

Endangered the Planet , Green Books – ditto!

Ellis V, Accenture, Enterprise or Exploitation? Can Global Business be a Force for Good? (NS 11/7/2001) – Accenture

participates in Dot.force

Friedman, T (2005) The World is Flat: Brief History of the Globalized World in the 21^st century, Allen Lane (reviewed,

Guardian G2 21/4/2005) – how globalization makes the world more peaceful.

Harrison, P: (1993) Inside the Third World, Penguin (first published 1979) - powerful description and analysis

Harrison, P: (1983) The Third World Tomorrow, Penguin, - similar

Hartley, R.F: (1993) Business Ethics, violations of the public trust, John Wiley, – includes MNC cases cited above

Hawley, Dr S: Turning a Blind Eye: Corruption and the UK’s ECGD, the Corner House – role of government in allowing

Corruption

IMF, World Development Outlook, 1996-03

Jacobs, M. (1996) (for the Real World Coalition): The Politics of the Real World, Earthscan – links third world (and other)

problems with our own economy and politics

Klein, n (2000) No Logo, Flamingo – already mentioned under the consumer topic: company logos are taking over our lives,

but we can fight back.

Lall, S (2004) Stimulating industrial competitiveness in sub-Saharan Africa, OUP – on the problem of technology and

competition in development

Litvin, D (2003?) Empires of Profit: commerce, conquest and corporate responsibility, Texere.- thorough on origins of MNCs

and their links with colonial powers – mild recommendations

Luthans F and Hodgetts F (1984) Social Issues In Business (4^th edition)

Na’Allah, Abdul-Rasheed, Ed. (1998) Ogoni’s Agonies – contains much Ogoni poetry as well as the story of Ken Saro-Wiwa

Norberg, J (2003?) In Defence of Global Capitalism – growth and globalisation essential to help the poor

OECD (2004) Counting immigrants and expatriates in OECD countries (see www.oecd.org)

Oxfam, (2004) Paying the Price, see www.oxfam.org

Peters’ Atlas of the World

Prahalad, CK, The Fortune at the Bottom of the Pyramid, FT Prentice Hall – why does big business not get involved in pro-poor

enterprise? (It doesn’t see the opportunity)

Preston, P.W: Theories of Development, Routledge, (1982) - gives a thorough overview of different points of view and

theoretical perspectives on development

Sachs, Jeffrey D (2005) The End of Poverty, Penguin – argues that if governments of developed countries adhere to their

promise to donate 0.7% of GDP to development we could end world poverty.

Ed. Sachs, W: The Development Dictionary, Zed Books, (1996) – challenges accepted definitions of terms such as

development, from a radical pro-"third world" point of view

Sampson, A: The Seven Sisters, Hodder and Stoughton, (1975) - an account of the power of the large oil companies, with

especial relevance to the "third world"

Shiva,V (1989) Staying Alive, Zed Books – on the role of women in ecology and protecting the environment (7^th impression

2002)

Shiva, V (1991) The Violence of the Green Revolution, Zed Books – how the promise of assistance turned sour, also contains

Vandana’s ideas on biodiversity

Tawney, R.H. (1922) Religion and the Rise of Capitalism, Pelican (from 1938)

UNDP (United Nations Development Project) – Human Development Reports, various years.

World Bank, Global Development Finance 2001-3

List of Web sites cited:

www.atd-uk.org - charity assisting the Fourth World

www.marketplaceindia.org and www.justiceclothing.com - fair trade clothing

www.shellfoundation.org - charity funded by Shell

www.survival-international.org or www.survival.org.uk - protecting indigenous peoples

www.geocities.com/alt_politics/EZLN.html or www.ezln.org - in Spanish, but go to English chronology (only 1994 – 98)

www.globalpolicy.org.socecon/develop/tables/dollaraday.htm - how many people live on a dollar a day

www.spartacus.schoolnet.co.uk/slavery.htm - basic information on slavery

www.monbiot.com - Goerge monbiot’s site

www.unaids.org/en/geographical+area/by+country/india.asp - information on India

www.archive.greenpeace.org/comms/ken/murder.html - on Ken Saro-Wiwa

www.ilisu.org.uk - in the Ilisu (or Ilusu) dam protest

www.goldsmiths.ac.uk/csip/source/research.html - on the BTC (Baku-Tbilisi-Cyhen) Oil Pipeline

www.oecd.org

www.oxfam.org

www.brazilmax.com - on the Xingu National park

Links:

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