The growth of Multinational Corporations is an ultra-modern method of neo-colonialism (colonialism practiced in a new form) under which the U.S.A. and other Western European countries dominate politics and economies of the developing countries.
Multi-national corporations are those corporations which originate from a common centre in the imperialist country but operate in different developing countries by merging in themselves certain firms of the, countries of operation also which are engaged in the same field.
In this way, capital in the developing countries is also getting concentrated in those multinational corporations which have their centre of origin in the imperialist countries.
It is on this account that certain analysts have observed that by this policy of wide-spread mergers within the country of, origin and across national frontiers, the “three hundred giant international \ corporations will dominate the economies of the principal non-communist. countries of the world by 1985.”
M.N. Report on Multinational Corporations. According to a report prepared by the U.N. Centre on Multinational Corporations, about 11,000 Multinationals have over 82,000 foreign subsidiaries and affiliates, of which 21,000 are located in developing countries.
Of the affiliates in developing countries, 36 per cent are of parent U.S. companies, 27 percent ‘ from U.K., 7 per cent from France, 6 per cent from West Germany and Japan, and 4 per cent from the Netherlands.
In eleven developing countries, of which six are in Latin America, there are more than 500; affiliates per country, while in more than 40 countries the number exceeds 100 per country.
The developing countries in the western hemisphere have 47 per cent of the affiliates, with 28 per cent in South and East Asia, 21 per cent in Africa and 5 per cent in West Asia.
Functioning of Multinationals Detrimental to Developing Countries. The functioning of these Multinational Corporations is detrimental to the interest of the Third World countries in a number of ways-
(1) Economies Exploitation:
These multinational corporations are establishing monopolies by exploiting the resources of the developing countries.
According to estimates of foreign experts, almost 40 per cent of the exports of the developing countries are made up of the products that are manufactured by these very firms.
As noted in the widely known reports by the U.N. experts, namely, Multinational Corporations in World Development, the monopolies, not content with their dominant role in the export of products from the extracting countries of the Young States “are in general playing an increasingly important part in the export of manufactures from developing countries.”
Pursuing a policy of neo-colonialism, the multinational corporations infringe upon the sovereignty of the Third World countries, seek to gain control over their natural resources, impose unequal agreements upon them and impede the development of their independent national economies.
These multinationals are in this way playing role in the developing countries that goes against their economic life and in the final analysis political independence of the country concerned.
They dominate economic life of the developing countries through investment of huge capital and manufacture of important goods. They get raw materials from the developing country, where they operate at cheaper rates but sell the goods manufactured from that very raw-material at a very high rate.
In this way, they exploit the developing countries under the excuse of developing different manufacturing units in the developing State itself. Their assets are growing at a fast rate.
Taking the case of India, the total assets of subsidiaries of 243 multinational corporations that operated in India in 1967-stood at nearly Rs. 8,967″7 million. But, the total assets of subsidiaries of 171 multinational corporations operating in India in 1976 have grown to Rs- 16,267 million.
In addition, it has been found that these multinational corporations spend major portion of their foreign exchange in importing raw materials from their parent concerns abroad at exceptionally high prices.
A study conducted by the Indian Institute of Public Administration revealed that the multi-national firms operating in India utilise almost Rs. 2,200 million of this country’s foreign exchange reserves annually.
Moreover, a major portion of the shares of these multi nationals is in the country of their origin. So, a large portion of the profit earned is remitted to the parent country.
It leads to virtual draining of the resources of the developing countries. Moreover, instances have come to light where certain multi-nationals have shown their headquarters located in countries with liberal tax laws.
“This enables them to evade taxes and remit funds to their parent concerns located elsewhere.”
In some of multinational corporations operating in India, they appoint their own Managing Directors at a “phenomenally high salary and other benefits” even in spite of the fact that they hold only 40 per cent of the share and the rest belonging to India.
These multinationals pay fat salaries to their employees. And, they are paid out of the huge profits earned by them from the developing country itself.
The rare rate of payment made to the labour helps in the development of what is called labour aristocracy.
In simple words, the workers in these firms get very big salaries as compared to the workers in other indigenous firms. This naturally makes them aristocrat. The aristocratic labour go against the interests of the workers in general.
They become elite among the labour. They become bourgeois (capitalist) among the labour. These workers in this way, help in spreading bourgeois mentality among other workers.
In this way, they destroy labour consciousness and labour movement. Gunder Frank says, “There are two major consequences of multinational enterprises.
Externally, these multinational enterprises have maintained and expanded the economic dependence of the underdeveloped nations. Internally they have led to the emergence of a new privileged group of people in these countries.”
The Multinationals concerned with food have succeeded in weaning the developing countries away from grain production so that they could make profitable grain exports to them.
On the land so released from food, the Multinationals themselves set up frontal vegetable growing business, earning big profits by exporting these items back to the West.
Mexico, which once grow a variety of local food grains, has been converted into an. exporter of fruits and vegetables.
The American Foods SK-re Company has set up a network for growing fruit and vegetables in Ghana, Egypt, Kenya, Zambia and Uganda. Multinationals have been exploiting the Third World countries in the field of pharmaceuticals.
This is particularly the in case of India. Such Multinationals have been propagating the use of non-essential drugs and making large profits through over-pricing. An expert committee insists that of the 43,600 drugs registered and sold in India, three-fourths are non-essential.
A survey conducted by the Indian Council of Medical Research points out that seven out of every ten purchases of antibiotics made in India are uncalled for.
Recently, there was a controversy over the multinationals marking and selling non-essential baby foods in India.
The products of multinationals are also mainly aimed at catering to the needs of a large section of the urban upper income-groups of society.
Their products include consumer goods which form a major part of the budget of an upper class Indian family. In this way, their utility to the common man is also questioned.
(2) Political Manipulations:
Their activities do not remain confined to the economic sphere alone. They indulge in political activities and manipulations also.
On the basis of the economic powers wielded by them, they try to influence the decision-making process of the country in which they operate.
These corporations have given rise to a big question mark whether political freedom will continue to exist when economic power is getting more and more concentrated in fewer and fewer hands.
They lobby for a particular interest. They finance individual members of a political party and parties themselves in elections.
These days, funds play a major role in elections. Any party that can manipulate funds, has better chances of victory. Naturally, they get political control of the developing countries also.
In this context we can quote the Lockheed scandal in which the top Government and political officials in Western European countries and Japan were involved in bribery.
On coming facts to light, the Japanese Prime Minister had to resign on account of the bribe he accepted for manipulating the purchases of aero planes.
Dr. V. Gauri Shanker in his research thesis entitled “Taming the Giants: Transnational Corporation which he wrote under the sacrifices of Jawaharlal Nehru University, makes starting disclosures.
He writes on the authority of LT.S. Investigating Agencies as to how Multinationals operating in India and Indonesia set apart secret funds for bribing officials and making political contributions.
Sometimes, the Multinationals acting as fronts, for their governments, have interfered in the internal affairs of the hast countries and caused political destabilization.
The role played by the American International Telephone and Telegraph in the ouster of Leftwing Aliened government in Chile is a notorious example.
3. Health Hazards:
The Multinational Corporations activities pertain to such dangerous industries as chemicals, fertilizers, petroleum, metals and heavy engineering.
In addition to the availability of raw materials, cheap labour and markets, the Multinationals find it easier to operate because of lax standards of safety and pollution control.
The Multinationals continue to push pesticides into the Third World in spite of persistent reports of poisoning.
According to the World Health Organisation, over five lack people became victims of pesticide poisoning every year in countries like India, Pakistan,Sri Lanka, Indonesia and the Philippines.
Oxfam, a British Charity Organisation asserts that in 1982 nearly ten thousand people died in Sri Lanka alone.
In February, 1984 a pipeline fire killed nearly 100 persons at Cubatao in Brazil. In November, an inferno in a gas depot claimed about 400 lines out side the skirts of Mexico city.
In December of the same year Bhopal witnessed the worst industrial disaster poisoning over 2,000 persons to death. Warren Anderson Chairman of the Union Carbide.
Corporation on his return to U.S.A., tried to dissolve the parent company of blame by harping on an American team drawing the attention of the Indian management in June, 1982 to operational deficiencies at the Bhopal pesticide plant.
It shows that neither the parent nor the Indian management of Union Carbide at Bhopal wanted to interrupt production and lose profits.
Further, the Multinationals continue to make in India drugs which are banned in western countries.
Anti-diarrheal drugs like form and mexa form have a base in which can damage the optic nerves. There are 50 other drugs worth base available in the Indian Market.
Utility of Multinationals to Developing Countries.
None can deny the role played by the Multinational Corporations in the economic exploitation and political manipulation of the developing countries where they resort to political bribery through offering illicit payments to Government and public officials.
Still the Multinationals have a positive role to play in the development of new nations.
Mr. Hidayatullah, the Vice-President of India, has stressed the importance of Multinationals in a developing country on various reasons. And we cannot deny that they provide the technical know-how badly needed by the developing countries.
India still needs know-how in many fields where foreign collaboration would be welcome. A lot of the technology for some key sectors of Indian industry has been provided by Multinationals.
The technology for the chain of gas based fertilizer plants being planned on the basis of supplies from Bombay High is coming from Multinationals.
Mr. Desai, the former Prime Minister of India, declared that he was not against Multinationals or giants, but was against those giants which wanted to make other dwarfs. Independence should be mutual and to the benefit of giver and the recipient.
In addition to providing know-how, they provide investment capital also. They provide investment which would otherwise be impossible to raise within the country.
For a poor country like India, it is beneficial to allow multinationals to operate so that they bring foreign investments subject, however, to the conditions laid down in the Foreign Exchange Regulation Act.
India is preparing a list of industries that are banned and open to the Multinationals to operate.
Thirdly, they offer competition. Without competition proper development is impossible. Referring to this aspect, the Vice-President of India remarked that Indian made cars do not compete with their foreign counterparts because there is no competition.
The multinationals are not allowed to manufacture cars. This is what has led to complacency on the part of our indigenous car manufacturers that has resulted in poor quality.
It is with the introduction of Maruti Car prepared in collaboration with Suzuki, a Multinational, that has compelled other car manufacturers in India to improve their models considerably.
Befooling the People. Our politicians befool the people on the question of multinationals by telling that they are against the national interests but at the same time allowing them to operate.
P.K. Sanyal, the Managing Director of BASF, the Gertpan Multinational, said, “This is not a new experience, multinationals have got used to platform speeches by politicians.
We also realise that many observations of politicians are meant for the gallery, because they also know what is good for the country. Unfortunately, once again virulent propaganda has been let loose, as if the multinationals are the cause of all evils in the country.”
Sanyal went on to say, “It is unfair to generalise about multinationals just as there are good and bad human beings, there are good and bad multinationals.”
They should not be clubbed together. Only those who carry on their business in a monopolistic way, “for example in minerals or scarce metals can abuse their power. But those in highly competitive fields, like chemicals, cannot afford to do so.”
Multinationals, managed by highly qualified professionals and backed by the latest in research and technology, do a lot of good and very little harm to a large country like India. Sanyal said, “There are many gains.
I will mention only two. Multinationals spend huge amounts on research directed towards the overall improvement of life and economic conditions.
India can be a beneficiary of the research only through association with multinationals; Secondly, it is well recognised that multinationals adopt modern and scientific methods which help stream-line costs and ensure the best professional management.”
India loses crops worth Rs. 5,000 crores every year due to weeds, plant diseases and insect pests. The chemicals against the damaging agents are produced by the multinationals.
The life-saving drugs for the use of human-beings are also prepared by multinationals such as Pfizer, Hoechst, Glaxo, BDH etc.
It cannot be denied that operation of Multinationals has both the negative and positive points to offer.
It is for a developing country like India to see that the benefits offered by them must be extracted while at the same time minimizing the chances of economic exploitation and political manipulations on their part.
The lessons learnt in 1984 make it vital that the Multinationals should not be allowed to function except under a strict environmental controls and health and safety regulations.