Actors in International Business George Cairns BUSM1222 – International Management Week 6
Aims of session
This session introduces:
Trans-national institutions of IB – World Bank, International Monetary Fund (IMF), World Trade Organization (WTO) etc.
Economic integration agreements – ASEAN, MERCOSUR, EU, etc.
Multinational enterprises (MNEs) – Nike, Wal-Mart, etc.
Non-governmental agencies (NGOs) – War on Want, Oxfam, Amnesty International, etc.
Aims of session
… and the concepts that underpin their emergence, interaction and impact:
Imperialism, colonialism, post-colonialism
Free trade, open markets, ‘competitive advantage’
Neo-liberalism and the Washington Consensus
Power, hegemony and militarism
The World Bank
“ The World Bank is a vital source of financial and technical assistance to developing countries around the world. We are not a bank in the common sense. We are made up of two unique development institutions owned by 185 member countries—the International Bank for Reconstruction and Development ( IBRD ) and the International Development Association (IDA) .
Each institution plays a different but collaborative role to advance the vision of an inclusive and sustainable globalization. The IBRD focuses on middle income and creditworthy poor countries, while IDA focuses on the poorest countries in the world. Together we provide low-interest loans, interest-free credits and grants to developing countries for a wide array of purposes that include investments in education, health, public administration, infrastructure, financial and private sector development, agriculture, and environmental and natural resource management.”
“ The International Monetary Fund (IMF) is an organization of 185 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.”
World Trade Organization
“ The World Trade Organization (WTO) is the only global international organization dealing with the rules of trade between nations. At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations and ratified in their parliaments. The goal is to help producers of goods and services, exporters, and importers conduct their business.”
“ The WTO provides a forum for negotiating agreements aimed at reducing obstacles to international trade and ensuring a level playing field for all… (It) provides a legal and institutional framework for the implementation and monitoring of these agreements, as well as for settling disputes…
Over the past 60 years, the WTO… and its predecessor organization the GATT have helped to create a strong and prosperous international trading system… contributing to unprecedented global economic growth... (It) has 153 members, of which 117 are developing countries or separate customs territories.”
“ The International Labour Organization (ILO) is devoted to advancing opportunities for women and men to obtain decent and productive work in conditions of freedom, equity, security and human dignity. Its main aims are to promote rights at work, encourage decent employment opportunities, enhance social protection and strengthen dialogue in handling work-related issues.
In promoting social justice and internationally recognized human and labour rights, the organization continues to pursue its founding mission that labour peace is essential to prosperity. Today, the ILO helps advance the creation of decent jobs and the kinds of economic and working conditions that give working people and business people a stake in lasting peace, prosperity and progress.”
“ The ownership and management chain surrounding any ship can embrace many countries and ships spend their economic life moving between different jurisdictions, often far from the country of registry. There is, therefore, a need for international standards to regulate shipping - which can be adopted and accepted by all. The first maritime treaties date back to the 19th century. Later, the Titanic disaster of 1912 spawned the first international safety of life at sea - SOLAS - convention, still the most important treaty addressing maritime safety.” http:// www.imo.org /
The International Maritime Organization (IMO) acknowledges that it “has plenty of teeth but some of them don't bite”, whilst Greenpeace considers it as “largely beholden to the shipping and oil industries”.
Relationships: Institutions, Countries, Companies Bangladesh has an “impressive record of economic growth and social development”, but this “has been achieved despite apparent weak governance. Bangladesh often ranks near the bottom in cross-country comparisons relating to governance” (World Bank). This is nowhere more apparent than in ship breaking, where responsibility falls between several government departments, and where labour, conservation and health and safety laws are not enforced http:// www.shipbreakingbd.info /
Neo-liberalism and the ‘Washington Consensus’
The doctrine that values free trade and open markets with minimal state intervention in the functioning of the market
Transfer from state to private ownership
Widely associated with Thatcher/Reagan
Promoted through rhetoric and media to achieve individual buy-in
Enforced through military intervention and revolution
See David Harvey, ‘ A Brief History of Neoliberalism ’, Oxford University Press, 2007.
Neo-liberalism and the ‘Washington Consensus’
The ‘Washington Consensus’:
‘ John Williamson originally coined the phrase in 1990 “to refer to the lowest common denominator of policy advice being addressed by the Washington-based institutions to Latin American countries as of 1989.” These policies were:
A redirection of public expenditure priorities toward fields offering both high economic returns and the potential to improve income distribution, such as primary health care, primary education, and infrastructure
Tax reform (to lower marginal rates and broaden the tax base)
Interest rate liberalization
A competitive exchange rate
Liberalization of inflows of foreign direct investment
Deregulation (to abolish barriers to entry and exit)
Some of the most vociferous of today's critics of what they call the Washington Consensus, most prominently Joe Stiglitz... do not object so much to the agenda laid out above as to the neoliberalism that they interpret the term as implying. I of course never intended my term to imply policies like capital account liberalization...monetarism, supply-side economics, or a minimal state (getting the state out of welfare provision and income redistribution), which I think of as the quintessentially neoliberal ideas ’
Free trade area (FTA) – e.g. North American Free Trade Agreement (NAFTA)
Customs union – no current example
Common market – e.g. MERCOSUR
Economic union – European Union (EU) comes closest
European Union :
What is the European Union?
A unique economic and political partnership between 27 democratic European countries.
What are its aims?
Peace, prosperity and freedom for its 498 million citizens — in a fairer, safer world.
What results so far?
Frontier-free travel and trade, the euro (the single European currency), safer food and a greener environment, better living standards in poorer regions, joint action on crime and terror, cheaper phone calls, millions of opportunities to study abroad … and much more besides.
How does it work?
To make these things happen, EU countries set up bodies to run the EU and adopt its legislation. The main ones are:
the European Parliament (representing the people of Europe);
the Council of the European Union (representing national governments);
the European Commission (representing the common EU interest).
The growth of the MNE
The Honourable East India Company (1600-1858):
Established trading rights with the Mughal Empire
Acquired exclusive rights to tea, silk, dyes, etc.
Held rights to mint currency, acquire territory, establish military, exercise legal rights, make war and peace
Administrative authority over the British Indian Empire
The growth of the MNE
From largely European, North American and Japanese: e.g. Phillips, Coca-Cola, Sony, etc.
To Chinese and Indian: e.g. Lenovo, Tata Motors , etc.
From largely resource/product based: e.g. oil, minerals, consumer goods, etc.
To services and finance: banking, investment funds, insurance, etc.
Why do firms internationalise?
To increase market and profitability:
Opening new outlets for existing products/services
In response to competitive pressures:
Declining home market or more competition
To become more efficient and effective:
Exploiting lower cost locations
How do firms internationalise?
Export and import: basic form with no real overseas presence
Licensing/franchising: exploiting brand name and reputation
alliances: forms of link up with foreign firms
Merger and acquisition: combining existing entities across nations
The impact of the MNE
Provides new employment, products, technologies, services, etc.
Is more efficient and effective than local firms
Porter’s 1985) ‘competitive advantage’
Exploits low cost labour and resources
Concentrates high-value return on investment and reinforces socio-economic fragmentation
The dark side of the MNE
“ The Pentagon has asked the Justice Department to investigate the Halliburton oil services group's activities in post-war Iraq - a step which can only increase the pressure on the company formerly run by Vice President Dick Cheney.
The senior Democrat on a congressional committee probing the awarding of Iraqi contracts has released documents showing that Halliburton made faulty estimates on a $2.7bn (£1.5bn) contract to provide services for US troops in the Gulf, and that company executives admitted as much.”
“ In 1997 the new Labour government - despite wanting to add an "ethical dimension" to foreign policy decisions - continued to honour Hawk contracts signed by the previous administration.
When ministers did finally call a halt to deliveries in 1999 - amid an upsurge of violence in East Timor - three of the jets were already en-route to the Far East and, embarrassingly, could not be legally recalled.
Less than a year later, the UK stopped supplying spare parts for Zimbabwe's fleet of Hawks. The aircraft had been sold to Robert Mugabe's regime in the mid-1980s - just after his forces had killed as many as 20,000 opponents in Matabeleland.”
NGOs working against poverty
War on Want
“ Garment workers pay a high price to produce cheap clothes for the UK high street. Factories in Bangladesh produce clothes for retailers like Primark, Asda, or Tesco, and garment workers working there struggle to survive on extremely low pay, suffering poor working conditions, arduous hours and a complete lack of trade union representation in the factories.
We reported on this in our acclaimed Fashion Victims report in 2006. Two years on, UK retailers have still not improved the conditions in their supplier factories . In fact, given the damaging effects of the global food crisis , workers are now in an even worse position than they were before.”
See also: http://www.emeraldinsight.com/Insight/viewContentItem.do;jsessionid =625DF0164F28C5A271F9F1BDD32CCDFB?contentType= Article&contentId =1603616
NGOs as multinational enterprises
“ Established in 1977, Sea Shepherd Conservation Society (SSCS) is an international non-profit, marine wildlife conservation organization. Our mission is to end the destruction of habitat and slaughter of wildlife in the world's oceans in order to conserve and protect ecosystems and species. Sea Shepherd uses innovative direct-action tactics to investigate, document, and take action when necessary to expose and confront illegal activities on the high seas. By safeguarding the biodiversity of our delicately-balanced ocean ecosystems, Sea Shepherd works to ensure their survival for future generations .”
NGOs as multinational enterprises
“ Introducing The Sea Shepherd Visa Platinum Card
Support Sea Shepherd with every purchase:
0% Introductory APR on purchases and balance transfers for 6 months. After this period, a low variable APR will apply.
$50 donation by the bank when you first use the card plus ongoing contributions.
No annual fee and no additional cost to you.
Enhanced Visa Platinum benefits, including 24/7 Emergency Customer Service and 100% Fraud Protection, Purchase security, Warranty Manager and much more.
Funds raised from the credit card program help us keep our vessels at sea defending and protecting ocean wildlife. Your support is vital to saving lives. Sea Shepherd thanks you for applying for your favorite card and using it often! .”
https:// www.cardpartner.com /app/sea-shepherd
Global economy, poverty and inequality
Milanovic (2005) points to the:
‘ Africanization’ of poverty, and the
‘ Westernization’ of wealth
Ritzer (1995) speaks of ‘McDonaldization’
Nayyar (1997:28) points to the ‘rules of the game’, whereby:
“ national borders should not matter for trade flows and capital flows but should be clearly demarcated for technology flows and labor flows. It follows that the developing countries would provide access to their markets without corresponding access to technology and would accept capital mobility without a corresponding provision of labor mobility.”
A framework for questioning the activities of actors in IB
‘ Flyvbjerg (2001: 60) offers a way of approaching inquiry into social phenomena in accordance with phronēsis by first asking four seemingly simple questions:
Where are we going?
Is this development desirable?
What, if anything, should we do about it?
Who gains and who loses, and by which mechanisms of power?’