The Rebel Road…

I know you’ve come to kill me. Shoot, coward, you’re only going to kill a man. – Ernesto Che Guevara

The new world order – II

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According to C. K. Prahalad and Stuart L. Hart in their article, “The Fortune at the bottom of the Pyramid”, MNCs do produce in countries of their operation but technology, however, is not transferred. All the research is conducted in home countries and monopoly is maintained over new techniques. More importantly, in contrast to the exacerbating problem of unemployment in nearly all the Third World countries, which demands more labour-intensive industries, highly capital-intensive methods of production are employed that only worsen the unemployment problem.

Prakash Sethi explains in his book, Setting Global Standards: Guidelines for Creating Codes of Conduct in Multinational Corporations that pay structures offered by the MNCs create wide disparities within different urban income groups. This, therefore, attracts the top manpower and leaves the domestic market lacking in entrepreneurship. Through superior brand and advertising skills, it becomes a status issue to work with an MNC, a global arrangement, rather than a modest domestic one. Beside these urban inequalities, a severe impact emerges within rural-urban bias, as MNCs mostly work in the urban sector. As a result, rural sector is further lagged behind and gap only enlarges.

“If developing countries place too many restrictions on the MNCs or tax them too heavily, MNCs will leave such countries and look for greener pastures. Second, because some developing countries are so heavily indebted to international banks and foreign governments, they often cannot borrow additional money for development projects unless they follow very strict conditions imposed upon them by lenders. One condition requires developing countries’ governments to cut spending on social services, thereby saving money that can be used to repay national debts. Although this sounds logical, these spending cuts clearly harm very poor citizens who rely on the government services for the most basic necessities of life.”
—- Bradshaw and Wallace, 54.

The most crucial factor in robustly raising the volume of sales of MNCs’ products is huge allocation on advertising and marketing expenditures, and sophisticated techniques used to exhibit an elite orientation for these products. Resultantly, consumption patterns are changing and people are consuming less important products in trade off for more important products like food. This also leads to blind trail for Western styles and values and local styles and values seems outdated and unloving. But more importantly, with aggressive advertising and marketing strategies, MNCs seem to have increased the needs of the people. It creates a psychological pressure on people, even those who cannot afford, that they have the need for their products. This mental make-up makes people worse-off as it breeds extra demands but fixed resources. Consequently, frustration is generated in pursuing those “needs”.

“It is also necessary to whip up the population in support of foreign adventures. Usually the population is pacifist, just like they were during the First World War. The public sees no reason to get involved in foreign adventures, killing, and torture. So you have to whip them up. And to whip them up you have to frighten them.”

— Chomsky, 3

Cliff Kincaid explains in the article, “George Soros and the Press” that another way foreign direct investment is controlled in a local country is to invest in the capital market there, that is, private portfolio investment. But this leads to enormous shakiness. The money can be put in and out of an economy in a matter of few moments. Stock markets can collapse in minutes. Based on free market myth, 1990s saw a huge rise and fall in portfolio investment. The liveliest example is the Asian financial crisis in 1997. At the will of one individual, George Soros (widely held belief), many countries saw a very hard time. Heavy reliance on private portfolio investment is detrimental in the long-run, although it may provide a great support in the short-run as uncertainty has the power to ruin economies by brining destabilisation in different markets within an economy.

According to Anup Shah’s article, “The US and Foreign Aid Assistance”, other than these money-making sources of foreign financial flows there are public and private aids coming in from abroad. It is essentially a non-commercial and concessionary term resource. These measures are introduced expressly for the purposes of getting developing countries to open their markets. Therefore, it involves all kinds of resource transfers as well, like benefiting trade structures for a country. The official development assistance (ODA) from different countries is decreasing overtime in terms of percentage of total GDP. Only three countries are fulfilling the internationally recognised UN criteria of 0.7 percent ODA-GDP ratio. Among the industrialised countries, the US is disbursing 0.25 percent.

Where the purpose of ODA is to assist the developing countries, empirically given regional distribution of funds suggest a totally different story. South Asia with more than half of the poor population of the world receives $4 per person in aid; whereas the Middle East with income five times more than South Asia receives six times more aid in per capita terms. Poverty has nothing to do with the aid allotment to a country. Aid allocations to countries even vary with varying military budgets, amazingly proportionally with expenditure. Allotment of aid to LDCs with military expenditure more than 4 percent of GDP is double than those having less than 4 percent.

It is the political and strategic considerations that account for the amount and distribution of foreign aid. Donors are almost sole decision-makers of aid distribution. Almost always, politically and economically, it is in their self-interest to disseminate funds. The situation may be different when there is need for emergency funds or some other reason but eventually it comes back to self-interest.

In the 1940s, when the US started giving aid, the only motivation following the Marshal Plan was to stabilise the post-WW-II economies of Europe so that they can avoid the increasing influence of communism from the USSR. The same motive was later translated for the newly emerging Third World in the Cold War scenario. The empirical data is in support of the fact that most important geographical regions received more aid than geographically less significant areas. And whenever there was a change or the objectives were achieved, there was a clear shift in the aid patterns by major donors. For example, in 1960s, only to counter the threat of Fidel Castro in Cuba and the fear of communist takeovers in other Latin American countries, Alliance for Progress was launched. Aid is also an important tool in the hands of Western powers to support or undermine the governments of their own choice in the developing world.

This aid further gives diplomatic leverage to big powers at different forums. Aid disbursement is also dictated by purely economic motivations to create the space for private investment and explore potential markets in the developing countries. Theoretically, foreign aid is justified on the grounds that it serves to fill two-gaps, saving and investment gap and foreign exchange gap to expand manufacturing and industrial base of the recipient countries.

As is clearly obvious, the MNC is an entity that preys upon poverty, or to be more precise, the poor. It is an entity that is dedicated to the mindless pursuit of maximised profit at the cost of an exterior agent or consideration. It is a phenomenon that ensures world hegemony within the context of the world – a hegemony maintained by such measures as foreign aid control. It is through these measures that the MNCs get first world governments to exercise power over the governments of the developing countries in order to force ‘open’ markets. There is no justification for the extreme violation of human rights associated with the dynamics and workings of the MNCs in third world nations. There can be no such justification for such actions. It is also clear that the MNCs, as bearers of the rights of private property, are in clear contention with the good of the majority, i.e., the working class. The question now is that should such a verifiably oppressive entity be given free reign in society via liberal policies?



Written by redtribution

April 20, 2008 at 10:20 am

Posted in Uncategorized

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