December 26, 2004

Large companies always claim to be concerned about the wellbeing of their patrons. However, the reality is different from what we are led to believe

The meteoric rise in market economy practices has given impetus to many amazing phenomena. One outstanding entity is the multinational corporation (MNC) whose existence in our daily life is an undeniable reality. From a needle to a ship, wheat grain to the most assorted cuisine, the MNCs are making it happen.

MNCs claim to be the classical role models of neat and clean business dealings, transparent working norms with a conscientious breed of professionals and staff. To justify their claim, they devise strong advocacy mechanisms to create a favourable environment for their smooth functioning. And due to an overwhelming scale of business worldwide, these corporations have become larger and stronger than governments of many countries.

According to one research, the hundred largest MNCs control about 20 per cent of the global foreign assets. One giant computer hardware company even has assets that are more than the combined GNP of Poland and the Czech Republic! The numbers and sizes are increasing. According to a careful estimate, there are over 6000 MNCs that are virtually in control of all the major economic policies and financial decision making around the globe, including the US. A marginal difference remains in the performance of MNCs in the first and third world.

In the former, the societies are democratic; people are informed and organized and regulatory mechanisms are in place. In the latter, people are not able to counter the affects of MNCs as most of such countries are in the initial stages of crude capitalism. This is a situation where profit motives reign supreme for all the stakeholders, including governments.

Besides, the rise of MNCs and the corresponding expansion of consumerism has proved to be detrimental to the societies of developing countries like Pakistan in many ways.

MNCs produce a service and product line which is generally value added to a high degree. Thus it attaches a high price range to its output. Take the example of meat. In Pakistan, beef in conventional retailing is sold at Rs100 per kg. Value added packaged meat is sold at almost twice the price. Comparative advantages, if any, are yet to be seen.

Similarly the MNCs use hostile propaganda strategy to outweigh their lesser competitors. A common perception that has been developed is that openly sold milk is a cause of diseases. Packaged milk is then projected for its hygiene, better contents and quality. Despite being expensive, a sizable number of users have switched over to packaged milk. Milk vendors find it difficult to retain their clients and to compete with hugely superior competitors. In the process, MNCs are quickly devouring small scale businesses through ruthless buy outs.

In Pakistan a giant consumer corporation bought an indigenous ice cream manufacturing. Now it is after other small and medium scale concerns to achieve absolute monopoly. A food MNC bought a local milk business and absorbed it in its framework. Fast food giants are eclipsing the business of small scale snack bars and even street side vending outlets. Whereas the profits and returns from the former revolve around the global money markets, the gains from the latter are the means of subsistence to many lower middle income households. When deprived of the livelihood, they have no social security cushion to fall back upon.

MNCs are inventors of several new phenomena in the business sphere. Trading wars are a significant mention. The terminology reflects the state of desperation to acquire business and accrue profits by competing multinationals. And in this fight, even the states become victims of foul play.

The English speaking countries agreed in 1950s to develop a comprehensive monitoring setup against the rise of communism. Britain and US were the typical leaders in this eavesdropping venture. In 1991, the communist block fell apart. However, the surveillance network continued its operations to secretly monitor business related information. As a result, American MNCs won several international contracts in the domain of telecom and electronics. This led to a great deal of hue and cry among Europeans who lost several deals, but then such malpractices go unpunished in the game of power and profit.

Trading contracts for supply of essential food items including wheat to developing countries are fiercely fought amongst the MNCs. The reason is simple. The checks are much dilute in these countries who often are made to accept substandard and biologically low grade consignments which would never be accepted in the supplying country itself!

Many MNCs claim to be pioneers in research pertinent to the well-being of mankind. This is only marginally true. For instance, the green revolution technologies in agriculture were rated as a remarkable recipe for enhancing cropping sphere and yields. Seed, water supply, preventive measures such as pesticides and catalysts comprising chemical fertilizers were considered as signs and symbols of the agricultural revolution. Giant corporations emerged that specialized in the manufacture of fertilizers, artificially grafted seeds, pesticides and many additives. The market was huge — the whole developing world. Firms specializing in irrigation techniques, devised solutions for extending canal head works. These enterprises surely made huge profits. But there was a dark side to it all as well.

The losers were the societies where these attempts were initiated. Loss of fertility in soil due to continuing chemical action, waterlogging and salinity in crop lands and loss in nutritional value of the outputs were some key damages. No wonder that the intelligent and smart West has returned to the traditional organic formats of agriculture. Often the independent research became subservient to corporate agendas dictated by MNCs.

MNCs across the globe have also given rise to a culture of unscrupulous and shady business deals. The facade of such deals is in contrast to the actual objective behind the move. Mergers, opening of subsidiaries, bankruptcy declarations, biddings and even routine transactions are not spared from this growing menace. In some cases, the governments also become partner in crime. The sale of the largest private bank in Pakistan can be regarded as highway robbery, possibly the biggest in the country’s history. Its sale to a trading group at around Rs22 billion is considered a humourless joke by many. Even a man on the street can calculate that some of key assets and businesses of the bank would value several folds higher than this figure.

Similarly the award of construction contracts to certain Chinese multinationals is quite understandable. The anticipated cooperation in terms of strategic defence supplies expected from China gives her all the legitimacy to access Pakistani markets without following the norms.

Among the new set of terminologies evolving from MNC orders, ‘corporate social responsibility’ is a fancy fad. This refers to the spending done by multinationals in various kinds of social sector projects. However, the choice of spending is decided by the MNC itself obviously benefiting its own business sphere directly or indirectly.

Many computer manufacturing firms donate their products free of cost to schools. The apparent objective is to help the schools increase computer literacy. While this may be true to some extent the free donations promote the product ranges, enhance the corporate image of the said firms and stimulate utility of computers from very early stages.

MNCs in oil explorations support wildlife protection programmes and other environmental masquerades. The idea is to show to the world their concern about healthy environment. What is not shown is the unqualified damage caused to the areas where they undertake drilling operations.

Fast-food chains announce attractive deals for toddlers and children about free play equipment and learning toys. Obviously these ventures give exponential boost to their sales without any exaggeration.

MNCs and their affiliates have successfully created such images of lifestyles that profess consumerism to the hilt. The new consumer inventions are labelled as milestones in human progress. Such individuals who adopt these gadgets in their routine lives are displayed as role models.

A mobile phone manufacturer that markets instruments capable of transmitting images/photographs during communications termed it as a revolutionary device aimed to strengthen human relations. On the contrary, when these instruments were marketed, they caused cataclysm in many social circles due to expanded possibility of misuse. In university campuses, hooligan groups photographed female students with these devices. After digital manipulation, these images became tools for black mailing and harassment.

As a common factor, the MNCs would create a hype for falsified demand leading to extensive consumption of new products. Toiletries, beauty products, fashion and fabric ranges are some domains where such trends are common.

In Pakistan, automobiles are produced in alarming volumes without any inch of expansion of road space. Chronic traffic congestions and the myriad of related issues are emerging from this mindless approach. The performance of MNCs and their outputs is closely regulated by powerful consumer rights groups in the first world contexts. Amply protected by state laws and regulations, these groups watch the quality and ingredients of the products. In case of deficiencies leading to any loss or damage to consumer, a particular MNC has to face law suits often leading to heavy fines.

A world famous perfume manufacturing concern was sued by a consumer in Texas for not explicitly informing the users about the impact of its product range on aesthematic patients. The said consumer won the lawsuit resulting in a penalty of over $2 million paid by the MNC. However, same is not the case in developing countries.

Most of the MNCs go scot-free in developing countries where consumer rights legislation is either non-existing or weak. Lack of awareness on the part of consumers also creates favourable environment for MNCs. As a result, many environmentally hazardous technologies are dumped in such countries under the garb of technical assistance or technology transfer. Harmful and even banned products are easily introduced in such markets without any check. Millions of innocent people suffer from such unguarded practices.

Interestingly, many MNCs clamour to champion the cause of human rights across their routine operations. However, in several cases, MNCs connive with governments to strike deals with some of those regimes that are well known for human rights violations. For example, the US backed the Taliban regime until the late 1990s due to its interest in an oil pipeline deal brokered by a giant American MNC.

As a lobby, MNCs have now become so powerful that they hamper in the free flow of information to the common people. At one instance, a human rights group intended to flash messages against consumerism through well known electronic channels in North America. Its request was flatly turned down despite the fact that the said group had offered to pay the full cost of air time.

However, not everything is bad with MNCs. They have contributed many positive ventures in the form of cheap drugs, vaccines, common use products, goods and services. The reason of concern is their current leaning towards laissez-faire capitalism without checks and balances. This approach is sidelining the masses to a great extent. Besides, the nature of their operations has jeopardized the rational approach and behaviour of nation states. A responsible media, effective consumer rights groups, appropriate laws and regulations and an attempt of internal reforms within the MNCs can be one probable solution to the impending crises.

The MNC mush

Only a few days are left before the WTO regime is completely enforced and already a number of responses have been witnessed. The business community is eagerly awaiting the day which will greatly root out the barriers between different markets. Those trading houses that specialize in imports of goods of different kinds indeed have a very good time coming. Similar are the hopes of money market operators, currency dealers, stock and product merchants who anticipate a free flow of capital to inflate the volumes of their respective operations.

However, our policy-makers, government functionaries and bureaucracy are yet to warm up to the issue. In this respect, no one is surprised to find the government being lethargic.

Manufacturers and enterprise owners are all worried as protectionist polices will whither away. Competitiveness of many manufacturing concerns will be taken away by the massive trading operations in the offing from all important directions.

Agriculturalists will have to deal with many more nightmares since the rise of free market shall soon force the government to reduce the subsidies given to their sector. And above all, the common man is too bogged down in his strategies of daily survival to visualize anything even in the near future.

It is, however, a grave assumption that it will be the common man who will have to bear the brunt. Here the challenges of unemployment or under-employment due to potential reduction/closure of enterprises, reduction in normal subsidies and a cut-throat competition in job markets are also some of the factors that need to be taken into account. Besides, under a snowballing effect, big enterprises will be able to ruthlessly take over the smaller enterprises due to their infinite operational advantages. One significant category of such enterprises are the multinational corporations (MNCs). — Noman Ahmed

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