Whether Multinational Corporations Do Far More Good Than Harm in Developing Countries - Essay Example

Section/# Multinational Firms, FDI, and Economic Growth This paper will discuss the cultural and ethical challengesthat Multinational Corporations face when it comes to the issue of expanding into poverty stricken areas of the globe. Furthermore, the essay will seek to define the responsibilities that corporations have as part of a broader corporate responsibility in the way they behave and interact with their employees/supply chain. Ultimately, the question that develops is whether or not there is a universal moral code that MNC’s should abide by or does the theory of relativism apply where a company should abide by the rules of the country in which it is in. Many corporations continue to have sweatshops in third world countries and workers are often forbidden to talk about the conditions they are forced to work in. Workers are oftentimes encouraged to work long hours in unsafe working conditions for little pay and some are forced to start working at a very young age. Yet, rather than focusing upon the failure of MNCs to address each and every determinant of ethics and/or economic growth, this paper will provide a discussion of whether MNCs in povery striken nations actually raise the standard of living and provide a greater opportunity for development and growth as compared to existing entities/economic structures. Further an analysis of whether or not poor working conditions and certain ethical violations are better than no job at all will also be discussed. Through the further examination of Adam Smith and Jeremy Bentham, it is the hope of this author that the analyst will be more readily able to understand the ethical ramifications that MNCs in economically hard shipped countries face. When one considers an MNC operating within a relatively poor or third world nation, there are a host of images that come to the readers mind. The broad majority of these are of course negative; however, a few scant positive opportunities exist with relation to the term as well. For purposes of this research, this brief analysis essay will consider some of the most relevant pros and cons associated with the existence and operation of MNCs within the developing world. Furthermore, this paper will also seek to engage the reader with the understanding that regardless of the level of exploitation or non-exploitation that may or may not be taking place within the supply chains of many Multi-National Corporations. As such, this essay will attempt to weight both sides of these arguments in an attempt to determine whether exploitation of vulnerable/at-risk individuals and/or societies defines the means or production across the board or whether this means of production actually helps to raise the standard of living in some of the poorest and most economically depressed regions of the world (Shetty, 2014). As a means of fully understanding this question, this author will first consider the fact that almost invariably when one mentions the down sides multinational corporations and their labor supply, the phrase itself is nearly invariably used in conjunction with child-labor. Although this is not the case in all situations, the two terms have become so interchangeably used so as to oftentimes blur the definitions. As such, it is important to understand that a great deal of the goods and textiles that are produced each and every year by sweatshops serving large multi-national companies are indeed produced by child-labor (where child-labor is expressed by labor that has not yet reached 18 years of age). Yet, even within an understanding of this hardship, it must be realized that the development of otherwise poor regions of the world has been made possible as a result of the activities of certain MNCs. For instance, Adam Smith appropriately noted, “No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable” (Retief, 2013). Within such an understanding the hardship that is suffered by the destitute of the third world and impoverished regions elsewhere is partially understood to be a prime reason for why MNCs seek to utilize these regions as a way of garnering cheap labor. But, as history has proven, such an arrangement is oftentimes short-lived. Regardless of the ethical violations or negative consequences that MNCs can have within impoverished regions, the opportunities they offer are invariably far better, albeit still quite bad, for the individuals within such a region. As such, by raising the level of wages, providing unique opportunities, and teaching valuable trade skills, they nonetheless have a powerful impact with regard to developing such areas. One of the greatest difficulties in discussing the issue of child labor in MNCs is the fact that coming up with across the board judgments on such an issue does not adequately relate the entire picture of child labor practices throughout the world. For instance, in Pakistan, child labor is so rife that fully 75% of all MNC laborers are under the age of 14 years of age. Similarly, in other developing nations the figure is far less; oftentimes no even leaving the single digits as far as overall prevalence (Jiun-Shiu & Lovvorn, 2012). However, even the single digits is nothing to be dismissed and still represents a problem that doubtless effects to educational prospects, health, safety, and development of countless tens of thousands of children each and every year. In this respect, the disregard that many shareholders and policy makers of MNCs have with relation to the existence of unfair and immoral MNC practices helps to propagate the very worst impressions and practices regarding such a method of production as can hope to be found (Najafi-Tavani et al., 2014). On the flip side, the life of the standard MNC employee in an impoverished country is arguably better than that which would normally be enjoyed by someone else in the same economic system of the country in question. For this reason, many who support the legal and fair employment practice advocate the existence of MNCs is as a way to boost the overall standard of living and job opportunities that would otherwise exist in t a given economic system. In this way, if one considers the fact that emerging economies oftentimes do not have a high level of development and invariably do not have a well trained or educated workforce, one of the best ways for such a system to gain entry into economic development is to engage their workforce within the production front. However, rather than being viewed as a net good for the economy, one can split the difference and consider the developmental effect that MNCs have for the domestic economy as a type of necessary evil that helps to build the training and workforce base that third world nations so desperately require in order to modernize their own economies and develop a well-trained and agile workforce capable of many means of production. When one considers the plight of the average worker in a third world nation, the truth of the matter can usually be described adequately by relating jobs similar to or concentric around field labor, farming, and heavy manual labor. As such, even though sitting in a sweatshop and performing monotonous takes for hours on end is menial, it oftentimes is far better than the alternative labor that awaits the populations that are being discussed within this essay. Furthermore, when one considers the average rate of pay of the average MNC employee, the first response is to usually become incensed by the extraordinarily low wages that are being paid to these workers. It should be noted that just because wages that are experienced within the MNC are inherently slightly higher than those that would be experienced elsewhere in a traditional domestic economy of a third world nation does not make these wages ethical or fair with respect to the overall amount that the MNC intends on selling the merchandise/apparel for (Hallin & Holmström, 2012). Although it is not the intent of this author to advocate that such a practice is fair or equitable (in fact, it is the authors belief that quite the opposite is true), the fact of the matter is that these wages, as paltry as they may be, are much higher than the wages that await the worker in the general domestic economy for unskilled labor. Similarly, it is the belief of this author that merely because the opportunities provided by MNCs, as exhibited within nations such as South Korea and Vietnam, provide unique and skilled opportunities for a workforce that would otherwise have little if any chance to develop useful skillsets (Qu, 2012). Taking South Korea as an example, MNCs have allowed the country to develop a robust and highly skilled workforce in a relatively short period of time. Conversely, if the nation sought to develop these resources independently, it would likely cost tens of billions of dollars in state subsidized education to effect. However, at a relatively nonexistent local cost, tens of thousands of workers have been trained as skilled laborers in a relatively brief period of time. Much the same can be said with respect to Vietnam. Although the labor that is performed in Vietnam is of course less well paid and more menial as compared to the case of South Korea, it nonetheless has allowed the nation to rapidly integrate with the global economy and its workers to gain key marketable skills. Considering the overall net good or net evil of the MNC, one must further consider the individual economy as a function of what types of jobs are available to the citizenry (Peng & Beamish, 2014). For instance, what is oftentimes forgotten with respect to the MNC that operates in various nations around the world is the fact that although conditions may be poor, wages may be low, safety may be of a secondary concern, and hours may be abnormally long, the fact of the matter is that no one is forcing the workers to take these jobs. As long as correct child labor laws (as defined by the United Nations) are in place and no coercion is made on the part of management to force the workers to produce at a higher volume or higher rate than traditional health and safety regulations permit, such a practice as sweatshops. In fact, sweatshop jobs in many of the developing regions around the world are sought after by the local population. In this way, the researcher can see that although not ideal, the jobs that certain MNCs in certain nations provide are a valuable way for the inhabitants thereof to better their station in life and provide a semblance of a modern lifestyle for their families and their children. This should not be understood to advocate such a practice world-wide. Rather, the intent of the author is to point to nations such as Vietnam and other Southeast Asian “Tiger” economies that have utilized primary MNCs as a means to rapidly train and differentiate their economies (Kolk & Lenfant, 2010). Conversely, a very real drawback to MNCs is the very real and present threat that employee mistreatment and exploitation will occur. Since the owners and managers of MNCs often realize that the livelihood and families of their workers depend on their salary, they are able to have near complete control over the pace and quantity of overall production, a high degree of potential for abuse is extent in nearly every MNC (Liang & Xue, 2013). Due to this fact alone, it is necessary for any would be proponent of MNCs to consider the fact that it is oftentimes the case that these MNCs do not often abide by the same labor laws that exist elsewhere in the world; indeed, they oftentimes do not abide by the labor laws that exist within the host nation. However, due to the fact that the means of forcing compliance with large MNCs is oftentimes extraordinarily difficult, such labor practices are often disregarded or a form of bribery is utilized to encourage the requisite authorities to look the other way. Although an exhaustive report on the net positive and negative aspects for the existence of MNCs operating in poorer regions throughout the globe would require a dissertation length response, the key points and topics that have been discussed within this brief analysis help the reader to understand that the true nature of whether sweatshops themselves a net good or a net evil is a highly nuanced question that is dependent on the nature of the individual sweatshop, the cultural and governmental norms that dictate the degree to which child labor is practiced, the pays sale that is involved, the extent to which the sweatshop helps the given economy to modernize and retool/retrain an otherwise under-educated and little-skilled workforce, and the way in which management respects the employees. For these reasons, the question of whether a sweatshop is good or bad cannot simply by answered and/or dismissed but must necessarily require a nuanced and thoughtful approach that factors into account each and every one of the factors that have herein been enumerated upon. Bibliography Boyle, B, & McDonnell, A n.d., Exploring the impact of institutional and organizational factors on the reaction of MNCs to the global financial crisis, Asia Pacific Business Review, 19, 2, pp. 247-265, Social Sciences Citation Index, EBSCOhost, viewed 19 March 2014. Hallin, C, & Holmström Lind, C 2012, Revisiting the external impact of MNCs: An empirical study of the mechanisms behind knowledge spillovers from MNC subsidiaries, International Business Review, 21, 2, pp. 167-179, Business Source Complete, EBSCOhost, viewed 19 March 2014. Jiun-Shiu, C, & Lovvorn, A 2012, The Impact of MNCs Home Country Politics on Host Country Nationals Organizational Commitment, Journal Of Marketing Development & Competitiveness, 6, 3, pp. 56-66, Business Source Complete, EBSCOhost, viewed 19 March 2014. Kolk, A, & Lenfant, F 2010, MNC Reporting on CSR and Conflict in Central Africa, Journal Of Business Ethics, 93, pp. 241-255, Business Source Complete, EBSCOhost, viewed 19 March 2014. Liang, Z, & Xue, L 2013, The Evolution Of China’S IPR System And Its Impact On The Innovative Performance Of Mncs And Local Firms In China, n.p.: Oxford University Press, Oxford Scholarship Online, EBSCOhost, viewed 19 March 2014. Najafi-Tavani, Z, Giroud, A, & Andersson, U 2014, The interplay of networking activities and internal knowledge actions for subsidiary influence within MNCs, Journal Of World Business, 49, 1, pp. 122-131, Business Source Complete, EBSCOhost, viewed 19 March 2014. Peng, G, & Beamish, P 2014, MNC subsidiary size and expatriate control: Resource-dependence and learning perspectives,Journal Of World Business, 49, 1, pp. 51-62, Business Source Complete, EBSCOhost, viewed 19 March 2014. Qu, R 2012, The Impact of Integration and Responsiveness on MNC Subsidiaries’ Market Orientation, Journal Of Global Marketing, 25, 3, pp. 127-140, Business Source Complete, EBSCOhost, viewed 19 March 2014. Retief, F 2013, The impact of competition vs cooperation between subsidiaries within a multinational corporation, OAIster, EBSCOhost, viewed 19 March 2014. Shetty, S 2014, Impact of firm performance, multi-nationality, and innovation in MNCS, Dissertation Abstracts International Section A, 74, 7-A(E), PsycINFO, EBSCOhost, viewed 19 March 2014. Read More