Bello on Multinationals and IMF Dominance

[Robert Weissman <rob@essential.org>]

The TNC World Order:  Will It Also Unravel?

By Walden Bello

Discussant: Walden Bello, PhD, professor of sociology and public
administration, University of the Philippines; Co-dirctor, Focus on the Global
South, Chulalongkorn University Social Research Institute, Bangkok, Thailand;
author, A Siamese Tragedy: Development and Disintegration in Modern Thailand
(London: Zed Press, 1998); and former member of the Board of Directors,
Greenpeace International.

Prepared for the Democracy, Market Economy, and Development Conference, Seoul,
Korea, Feb. 26-27, 1999.


     I would like, first of all, to thank the Government of the Republic of
Korea and the World Bank for inviting me to share my thoughts as a discussant
on the topic “Corporate Governance, Business Ethics, and Market Order.”  Ten
minutes only, I have been told, and I intend to obey.  But before going on, I
would like to say that, for the most part, the World Bank is still part of the
problem rather than the solution in Southeast Asia and the South as a whole.
The recent cautious departures from the neoclassical orthodoxy that we have
witnessed in the last few years are definitely welcome, but the bigger question
for us when we hear the institution’s hesitant regrets for its past approaches
is:  Is there not something terribly wrong when an institution with a staff of
over 6,000 of the so-called “best and the brightest” sticks to a fundamentally
flawed development strategy for over 25 years?
     But enough.  I am not here to give the co-sponsor of this meeting a hard
time.  I would like to begin by quoting from a recent editorial from the
Economist which asserted that “the economic pain being imposed [by global
capital markets] on the ex-tigers is out of all proportion to the policy errors
of their governments.”  The same judgment has been expressed, though in much
stronger fashion, by Prime Minister Mohamad Mahathir, who has bewailed the
massive destruction of the national wealth of Asian countries that never
deserved such a reward for 30 years of hard work.  Mahathir, indeed, goes
beyond the Economist to brand the rollercoaster movements of speculative
investors, which have bankrupted domestic businesses, thrown people out of
work, and forced huge segments of the population below the poverty line, as
crimes against humanity.
     The sudden collapse of the economies of East and Southeast Asia is, to
many of us from the global South, the most spectacular recent example of the
irresponsibility that accompanies the lack of regulation
Corporate Crimes
 and lack of accountability of corporate capital.  But it is neither  new nor
surprising.  The last few years have provided many other stark examples of what
Ralph Nader would term corporate criminality, resulting in the widespread
perception that transnational corporations, be they hedge funds like the
Quantum Fund, or oil companies like Royal Dutch Shell, today pose the greatest
threat to global stability and global welfare.  Indeed, to many corporate crime
is a far greater threat than Saddam Hussein!
     A cursory survey of recent corporate crimes would include Shell’s role in
the ecological devastation of Ogoniland in Nigeria, Mobil’s complicity in the
extrajudicial execution of suspected separatists in Aceh in Indonesia, Nike’s
exploitation of cheap Asian female labor to build a corporate empire, Shell’s
deep-sea dumping of the oil rig Brent Spar, Mitsubishi’s role in the
destruction of rainforests in Southeast Asia, and Nestle’s systematic campaign
to promote infant formula in place of breastfeeding, resulting in long-term
negative impact on millions of babies.  The list goes on and on.
Resisting Regulation: An Old Story
     The current efforts to impose some minimal controls on global financial
flows have evoked the same strong resistance that met earlier efforts to
regulate the conditions of production, trading, and advertising of
transnational corporations (TNCs).  One recalls the way, in the 1970’s,  the
TNCs, using the political clout of their governments in the North, were able to
scuttle efforts within the United Nations to create a Code of Conduct for
Transnational Corporations.  Indeed, transnational corporate pressure was able
to emasculate the UN agency that was set up to formulate such a code--indeed
convert it, according to one commentator, from a Center on Transnational
Corporations to a Center for Transnational Corporations. What codes of conduct
have been enacted, such as the one to govern the marketing of infant formula by
Nestle and other food giants, have either evoked minimal compliance or have
simply been flouted.
     Indeed, the tentative regulatory efforts of the seventies gave way in the
eighties and early nineties to a drive to institutionalize a global order that
would sweep away the remaining state constraints on TNCs.  The Uruguay Round,
which was mainly formulated to promote the interests of the transnational
corporations of the US, European Union, and Japan, has been the most radical of
these efforts.  Bringing down tariffs was only the tip of the iceberg.  The
GATT-WTO Agreement also:
- eliminated the use of trade policy as a means of industrialization by the
less developed countries under the TRIMs (Trade Related Investment Measures
Agreement) and through the banning of quotas;
- foreclosed the strategy of industrialization via imitation that had been used
by earlier industrializers through the strict TRIPs (Trade-related Intellectual
Property Rights) Agreement—a code that could
have been crafted by Bill Gates himself!
- facilitated the penetration of the hitherto protected services sector of
developing countries by TNCs specializing in services through the GATS (General
Agreement on Trade in Services); and
- incorporated agriculture into GATT-WTO to facilitate the penetration of
developing country agricultural markets by agro-corporations marketing highly
subsidized agricultural products.
The IMF and the TNCs
     The IMF has, in the recent past, become not simply a global macroeconomic
manager but a mechanism to restructure Asian economies along the lines
preferred by US transnationals.  While it is the Fund’s wrongheaded
deflationary policies that have drawn the most attention, central to its
adjustment package for Korea, Thailand, and Indonesia have been measures of
radical deregulation, liberalization, and privatization designed to destroy the
complex of state activism, industrial policy, and strategic trade policy that
US transnationals had long regarded as obstacles to their ability to compete in
these markets.
     As many observers, including former US Federal Reserve Board director
Lawrence Lindsey have noted, the IMF conditions incorporate the long-time US
bilateral agenda for these countries.  Speaking of the Fund’s program in
Thailand, the US Trade Representative Charlene Barshefsky asserted,  “the Thai
government’s “commitments to restructure public enterprises and accelerate
privatization of certain key sectors…will enhance market-driven competition and
deregulation…[and] create new business opportunities for US firms.”  On Korea,
her words are equally revealing of the agenda of US transnationals:
 Policy-driven, rather than market-driven economic activity…meant that US
 Industry encountered many specific structural barriers to trade, investment,
and
 Competition  in Korea.   For example, Korea maintained restrictions on foreign
ownership
 and operation, and had a list of market access impediments…The Korea
stabilization
            package, negotiated with the IMF in December 1997, should help open
and expand
 competition in Korea by creating a more market-driven economy…[I]f it
continues
 on the path to reform there will be important benefits not only for Korea but
also
 for the United States.

     That the US strategy to use the IMF programs as a battering ram for TNC
interests has been all too successful is indicated by the fact that US and
European companies were able to mount $31 billion in takovers of Asian
companies last year, or a fourfold increase over the figure for 1997.     Is it
any wonder that so many Asian business now subscribe to the conspiracy theory
that Washington and Wall Street engineered the financial crisis to destroy
Asia’s rising business class?
Signs of Hope?
     But even at the height of the ascendancy of unfettered capital, there are
some positive signs.
     First of all, awareness of the underside of transnational capital is more
widespread today than at any other time.  The image of the transnationals as
being agents of progress and human welfare is now viewed as a cynical joke or
as the self-serving propaganda of the transnationals’ public relations
consultants—thanks partly, it must be underlined, to  one of the most
influential educational devices around: the UNDP’s Human Development Report,
which has, year after year, documented worsening trends in the growth of
poverty, income distribution, and access to vital resources.
     There is a severe crisis of corporate legitimacy, even in the North, where
people increasingly correct you if you bring up the old statement that 80 per
cent of the world’s resources are consumed by the 20 per cent of the world’s
people that live in the North.  No, they tell you, most of that 20 per cent are
themselves exploited by the top 1 per cent.  Some sea change is at work when
even Time Magazine begins to run exposes on what it calls “corporate welfare
queens.”  As we all know in the case of Eastern Europe and currently in
Indonesia, severe loss of legitimacy is a precondition for deep-seated change
in power structures.
     Second, strong pressures from civil society have, in recent years,
resulted in the negotiation of multilateral environmental agreements (MEA’s),
among them the Montreal Protocol on the Ozone Layer, the Kyoto Convention on
Climate Change, the Biodiversity Convention, and the Basel Convention on the
Toxic Waste Trade.   These conventions undoubtedly leave much to be desired.
The US corporate lobby, for instance, was able to prevent deeper cuts in
greenhouse gas emissions during the Kyoto conference.   In most of the
conventions, the TNC lobbies were able to remove explicit condemnations of
their activities.  And compared to the well-developed and funded institutional
mechanisms of the WTO, the MEA’s have very weak and vague enforcement
mechanisms.  Nevertheless, the MEA’s provide a good springboard to legally
assert the priority of social and environmental concerns over trade,
investment, and market considerations.
     Third, bold and innovative campaigns that have mobilized global civil
society civil have been able to put transnationals on the defensive, as in the
case of Nestle, Nike, and Shell.   The Greenpeace campaign against Shell’s
dumping of the Brent Spar in the North Sea, in particular, exposed so many of
the vulnerabilities of giant TNCs and will long serve as  a textbook for civil
society movements taking on TNCs.
     One must note some recent victories, though these may be limited:  an
international campaign that has been able to stalemate the TNC’s effort to get
the OECD to enact a Multilateral Agreement on Investment, which would swep away
most of the last remaining state controls on transnational investment, and the
successful drive to get the US Congress to refuse the US executive “fast-track
authority” to negotiate new trade and investment agreements.
     These campaigns are turning passive consumers who act only in
self-interest into activist citizen-consumers who demand look at more than just
cost and product-related characteristics to determine their purchases but
consider under what social and environmental conditions the commodities are
produced.  The Green Consumer is now a market factor.  Soon he and she will be
joined by the Socially Conscious Consumer, who will demand that products are
turned out by unionized workers who are provided a living wage.
     One must not, of course, exaggerate the meaning of these trends.  And yet
the TNC’s are worried and apprehensive, and the recent charm offensive of the
WTO director general Renato Ruggiero, in which he, along with USTR Barshefsky
and President Clinton, have been talking about transparency, about consultation
with NGO’s, and about persuading people about the benefits of free trade and
investment liberalization rather than imposing these views, is indicative of
the sense of great unease among the TNC elite—a feeling that, much like the
German Sixth Army before Stalingrad in 1942,  they may have reached their
highwater mark.
     Civil society groups have been central in recent efforts to counter the
depredations of the TNCs.  But without a more decisive effort on the part of
governments, creating a new global regulatory structure will come to naught.
In this regard, many of us in the South listen hopefully, though cautiously, at
the recent talk emanating from Europe’s Social Democratic governments and
parties that they plan to rein in corporate activities to better serve social
goals with monetary, fiscal, and social regulations.  If Europe’s Social
Democrats are serious and do not flinch in the usual fashion at a TNC
ideological counteroffensive, then the possibilities of a new global regulatory
structure built on a political alliance of the European Union, Japanese, Asian,
and Southern governments and civil society movements becomes less far-fetched.
     I have no doubt that change will come, though in exactly what fashion and
at what pace is hard to predict.    One cannot, however, discount that the
change may come in the manner of the two biggest suprises of the last half of
the twentieth century, that is that corporate hegemony may unravel in as
dramatic and swift a fashion as the collapse of Soviet and Eastern socialism
and the implosion of the Asian tigers.  But it would definitely be good for
everybody if we did not have to go through a massive crisis like a depression
to drive the world to enact strict controls on these global buccaneers.
     Thank you very much.