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POLB90 Lec 10.docx

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Political Science
Matthew Hoffmann

POLB90 Lecture 10 Tuesday, November 12, 2013 Multinational Corporations As Political Actors Criticism of the HIPC Initiative • Inappropriateness of macroeconomic criteria for eligibility o Countries have to maintain certain ratio of export and public expenditure. Difficult if the country depends on one specific commodity. o World crisis could drop; debt relief will not be forthcoming. • The actual debt reduction is very small • Only modest increases in social spending o Produce debt relief, will free up more gov’t $ on social programs. • Participation may not be substantial o WB and IMF grab on the idea of civil society participation o Try to incorporate into poverty reduction strategy programs. o Key criticism of civil society: don’t get to criticize the macroeconomic condition, civil society has no right to join the discussion. • Excludes many needy countries o Countries suffered from civil war are not included. • Fails to address root causes o Core problems that structural adjustment have. Poverty isolated from the larger problem. Tanzania, PRSP, 2011 • Conditions o Watch over the fiscal deficit  both WB and IMF o Enhance export drive  conditionality in WB and IMF, able to make payments on debt and aid poverty reduction o create and “enabling” business environment  promote domestic and foreign investment  improve infrastructure  Promote domestic and international investment in mining  Promote export processing zones ***worrisome, will talk more in details later on Multinational Corporations (MNCs) • Definition of MNC: An enterprise that is based in one country, but operates and has assets in more than one country. o Most actors are not transnational, understanding that MNC have a home base and able to lobby the home base that ensures protection of their interest. • Direct Foreign Investment: An investment made by a company, based in one country, in another country, that involves investment in physical facilities (plant, mining installations, offices, etc.) • Economic imperialism/ neo colonialism: The continued control exercised by outside forces over the economies and politics of the global south. International LobbyingActivities • UN Centre on Transnational Corporations • UN Food andAgriculture Organization (FAO) o MNC also lobby this organization • UN Conference on Trade and Development (UNCTAD) o Help developing countries with trade in order to improve living • GATT and WTO o MNC active in lobbying GATT and the formation of WTO • IMF and the World bank o MNV have important avenue in the international level, able to shape the outcome and impact indirectly of what happens in the global south What give MNCs their power? • Their control of the most important economic activity in the country o For country dependent upon mineral/petroleum exports o Leaders of global south countries are disinclined to anger the MNC, don’t want company not to invest. Handle MNC very carefully and make sure that its interests are looked after. o Many countries need the foreign exchange earnings to purchase inputs for their other economic activities, • Their importance in creating jobs o Believed to be true for export processing zones. o Leaders are afraid of losing elections, do things to make MNCs to leave. • Their enormous political clout with their home government o MNC are able to lobby their government when there are things they don’t like that are happening in the global south country they’re investing in • Their alliance with local elites o MNC appoint domestic elites to their board, involved and close to executives of large MNC o Through sale of licenses and patents, • E.g. domestic business purchases a patent from MNC, better business o MNC need intervention of domestic business interest in order to gain government contracts • E.g. Nigeria, if you’re foreign multinational, need government contract for extracting oil, must go through Nigerian business. Supportive of MN investment • Methods of intervention o Less direct involvement, more attempt to find ways to bring people and provide pelatives to have support of what they’re trying to do. Why did multinationals expand into the Global South? • Resources, market, cheap labour • 1890-1900: rapid technological change o Stimulates search for new markets and raw materials o Production of oil and ore. o Triggered more research and technological development and more new items coming on the market • Firms seek ways to minimize risk. o Try to get control of mas many production stages as you can o Want own marketing arm, control form beginning to end • Obtain own sources of raw materials o Finding out they need to expand outwards Early Examples • Foreign oil companies – Mexico o British Eagle Oil andAmerican Standard Oil • De Beers – SouthAfrica th o Establish at end of 19 century o Started off owning mines in SouthAfrica, 1902, own 90% of the world’s diamonds • American Fruit Companies – CentralAmerica and the Caribbean o Guatemala – the overthrow of JacaboArbenz, 1954 • Lobbied US government, CIAwas involved. • Land were redistributed to peasants were returned back to United Fruit Multinational Agribusiness • Increased role esp. from the 1970s • Rooted in the Green Revolution of the 1950s o Arose from the belief that there was problem esp. in Latin-AmericanAsia, in the agricultural sector. Was supposed to be a solution, tried to increase agricultural activity. WB funded research into seed packages, pesticides and fertilizers. Complete packages to increase agriculture. o Small farmers couldn’t afford these technological packaging (expensive), went under. Medium sized farmers, in debt. Couldn’t read well the complicated instructions, increasingly indebted and lost their land o Increasing polarization in the country side. Forced to enter the city. Accelerates rural migration and increases poverty and rural arrest. However, did increase agricultural product
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