The big, bad multinationals are really the good guys of global investment

the role of large corporations

It was the vogue in the 1960s and 1970s to portray multinationals investing in developing countries as the evil agents of western imperialism. But the following decade many developing countries decided that they rather fancied the funds, jobs and know-how that came with foreign investment. In a sign of this change of heart, political correctniks renamed multinationals "transnational corporations" - not exactly cuddly, but at least it shed some of that old ideological baggage.

Now the M-word is back, reflecting the concern generated by the Mexican crisis three years ago and this year's Asian upheaval that too much investment by foreign capitalists is definitely a bad thing. The new rhetoric is a near-perfect echo of the Sixties version.

For example, the multinational monitors at Corporate Watch say: "The borders and regulatory agents of most governments are caving in to the New World Order of globalisation, allowing corporations to assume an ever more stateless quality, leaving them less and less accountable to any government anywhere."*

One of this school of thought's favourite factlets is that out of the world's 100 biggest economic entities, 51 are corporations and only 49 countries. But, appealing as it is to have found a scapegoat for the problems resulting from changes in the world economic landscape, it is worth looking beyond the rhetoric.

Take that fact first. It is based on a comparison of the annual sales of companies in the Fortune Global 500 with annual GDP for different countries. Skate over the fact that sales and national output are entirely different concepts, and you indeed find that General Motors has turnover in excess of the GDP of Tonga and a whole host of other countries.

This is just the same as saying that America is a much bigger economy than most others, so its big companies are big by world standards. Among the other big, bad multinationals are the supermarket chain Wal-Mart and the United States Postal Service.

It is just not a serious argument to present the US mail - remember Cliff in Cheers? - as an international economic predator. Some of the companies that really do exercise undue influence over elected governments, like Rupert Murdoch's News Corp, are relatively small and only just scrape into the top 500.

Besides, most companies influence their own government but not others, so it is the US government that feels the heat of GM's opposition to a higher energy tax, say.

This mis-perception matters because many campaigners are getting into a state about the Multilateral Agreement on Investment (MAI) being negotiated by the member governments of the Organisation for Economic Co-operation and Development (OECD).

For example, an Oxfam briefing says the MAI falls "far short of establishing a fair framework of rules governing international investment. The MAI is aimed at creating common legally binding rules to reduce government regulation and control of foreign investors..."

And the newly published annual State of the World 1998 from the Worldwatch Institute in Washington**, says: "If this agreement goes ahead as planned, it could constrain the ability of countries to put in place policies that would minimise the environmental damage and social disruption of foreign investment projects."

While it admits that the MAI will apply only to OECD members, it notes that it will be open to other countries to join, and claims it could become a model for a global agreement in the World Trade Organisation (WTO).

Curiously, business organisations have been rather fearful that the MAI will impose extra restrictions on their ability to invest overseas, using environmental standards as an excuse.

In fact, the point of the treaty is not to alter the standards and regulations of national governments to make them conform with an ultra-free market model, but rather to make sure governments apply the same rules to foreign as domestic companies. If it is signed in April, overseas investors will have to meet the same environmental and other standards, within national boundaries, as home investors.

According to an OECD expert: "This is not a carte blanche for multinationals to pollute the planet." Obviously, the agreement is designed to make foreign investment easier, and this means striking a balance between corporate and other interests. But the bottom line is that it will not happen in a form unacceptable to the member governments. It is intended more as something like an international shipping treaty or EU investment directive than a charter for rampant global capitalism.

Nor will it automatically apply to developing countries through the WTO, although it is true that investors will look more favourably on countries that have signed up.

The international trade watchdog does have a working party looking at the issue, but it has no authority to negotiate this kind of agreement. A world-wide MAI would require a new treaty that, again, satisfied all the signatories.

The campaigners' concern is overdone because they tend to read an ideological agenda, and one that runs counter to their own, into multinationals' actions. In fact, multinationals are the goodies on the international investment scene. Companies so big tend to be more socially and environmentally responsible than smaller companies, albeit with dishonourable exceptions.

When they invest directly in developing countries, they almost always offer better pay and conditions than local firms. (Of course, the wages are lower than they would have to pay at home, which is why unions protecting members' interests in the developed countries are prominent among the anti-MAI campaigners.)

Looking more broadly at the recent examples of turmoil in international finance, direct investors have hardly been involved. Direct investment accounted for 45 per cent of the near-$250bn total flow of finance across borders in 1996.

The instability has been driven by swift reversals in bank lending and portfolio investment in bonds and equities. If there is one aspect of overseas investment that requires extra regulation it is the short-term flows, not the longer-term direct investment.

This is anyway a big "if" because it assumes that capital flows are the cause of crises, whereas they are, at most, the catalyst. As events in Asia have demonstrated, the real causes lie in the structures of political and financial institutions rather than the existence of the financial markets.

* http://www.corpwatch.org/

** Published by Norton, 1998, $13.95.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
Voices
An easy-peel potato; Dave Hax has come up with an ingenious method in food preparation
voicesDave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
News
i100
Arts and Entertainment
Jay Z has placed a bet on streaming being the future for music and videos
music
Arts and Entertainment
Festival-goers soak up the atmosphere at Glastonbury
music
News
Japan's population is projected to fall dramatically in the next 50 years (Wikimedia)
news
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

Ashdown Group: Training Programme Manager - City, London

£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

Day In a Page

NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders
Heston Blumenthal to cook up a spice odyssey for British astronaut manning the International Space Station

UK's Major Tum to blast off on a spice odyssey

Nothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
John Harrison's 'longitude' clock sets new record - 300 years on

‘Longitude’ clock sets new record - 300 years on

Greenwich horologists celebrate as it keeps to within a second of real time over a 100-day test
Fears in the US of being outgunned in the vital propaganda wars by Russia, China - and even Isis - have prompted a rethink on overseas broadcasters

Let the propaganda wars begin - again

'Accurate, objective, comprehensive': that was Voice of America's creed, but now its masters want it to promote US policy, reports Rupert Cornwell
Why Japan's incredible long-distance runners will never win the London Marathon

Japan's incredible long-distance runners

Every year, Japanese long-distance runners post some of the world's fastest times – yet, come next weekend, not a single elite competitor from the country will be at the London Marathon
Why does Tom Drury remain the greatest writer you've never heard of?

Tom Drury: The quiet American

His debut was considered one of the finest novels of the past 50 years, and he is every bit the equal of his contemporaries, Jonathan Franzen, Dave Eggers and David Foster Wallace
You should judge a person by how they peel a potato

You should judge a person by how they peel a potato

Dave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
Beige is back: The drab car colours of the 1970s are proving popular again

Beige to the future

Flares and flounce are back on catwalks but a revival in ’70s car paintjobs was a stack-heeled step too far – until now
Bill Granger recipes: Our chef's dishes highlight the delicate essence of fresh cheeses

Bill Granger cooks with fresh cheeses

More delicate on the palate, milder, fresh cheeses can also be kinder to the waistline
Aston Villa vs Liverpool: 'This FA Cup run has been wonderful,' says veteran Shay Given

Shay Given: 'This FA Cup run has been wonderful'

The Villa keeper has been overlooked for a long time and has unhappy memories of the national stadium – but he is savouring his chance to play at Wembley
Timeless drama of Championship race in league of its own - Michael Calvin

Michael Calvin's Last Word

Timeless drama of Championship race in league of its own