April 1, 2009

EES Week 8: Taming Trans-Nationals

taming trans-national

By Michael Gibb


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When philosophers need data they sometimes conduct ‘thought experiments.' Here is one such thought experiment.
Imagine you are the (democratic and accountable) leader of an indigenous people or minority deprived either of a state of your own or international recognition of your state. In other words, imagine you are a member of the Unrepresented Nations and Peoples Organization (UNPO). Given the primary objective of ensuring your culture, language, customs, (etc.) survive under some degree of autonomy, would it be better to live in an area rich with natural resources or one entirely without?

If the answer is not obviously in favour of the resource-rich land, one concern might be the number of wars that have been fought over resources such as oil and diamonds. Living atop such coveted resources might introduce the standing threat of war, further compounding your already difficult living conditions. Assuming however that a combination of skilful diplomacy and non-violent activism has successfully overcome the threat of war, at least for some time, the resources are undoubtedly a tempting option.

I think there are some good questions to ask about what exactly is meant by ‘resources' in this context, as well as who gets to cast the deciding vote in cases of disagreement. Who, for example, is to say that the oil underground is a resource that should be extracted and shared, but that the land, scenery, or eco-system that sits on top of it is not? Value can be attached to the features of a land for many different reasons. Consequently, there may be different and competing ways of appreciating or respecting this value. When such conflicts arise, it is not clear in all cases that one party is correct in their evaluation and that all other parties are simply wrong. There is a substantive discussion to be had about how these values can best be reconciled and respected. However, such discussions require the participation of representatives from both perspectives. The frequent exclusion of, for example, indigenous groups from decisions about their land and resources is therefore not only a violation of their rights, but also fails to take seriously the complexity of identifying resources and their values.

Returning however to our thought experiment, resources such as rivers, coal, or oil successfully support vibrant local economies around the world. A viable local economy is clearly a pre-requisite for meaningful local autonomy, and so the argument in favour of taking the resources is short. However, creating a resource based local economy requires a great deal of investment, knowledge, and experience.

Resources must be found, holes must be drilled or mines constructed, and organisations must be put in place to run the extraction industry. In many developing states, including many that are home to UNPO members, these human and technological resources are absent. Without them, no resource-led development is possible.

Increased globalisation has however brought what is perhaps an obvious solution to this problem. Trans-National Corporations (TNCs), usually based in the developed world, have all the requisite skills and resources. For a share of the resources the TNC can assist in their extraction and production, creating both some profit for their investors (in return for taking some risk) and beginning the development of your local economy. In 2007 foreign direct investment of this kind totalling $53 billion reached Africa alone, a number that has been growing rapidly since the early 1990s.1 In Kurdistan-Iraq a process is underway to develop new oil fields with precisely this kind of foreign investment and assistance in exchange for a share of the eventual oil revenue.

Despite their apparent promise, TNCs have frequently brought disaster to the local communities in whose regions they invest. So disastrous in some cases that once paradoxical phrases such as ‘the curse of gold' (‘oil', ‘resources', etc.) have gained a foothold in academic parlance.

The Niger Delta is home to the Ogoni people, but also Africa's largest oil and gas industry, as developed by large TNCs such as Shell. Although the Nigerian government makes approximately $42 billion annually from its resources, the unemployment rate in Ogoniland is around 90%.2 Severe environmental degradation has also devastated once fertile land. From 1976 to 1991 oil spills numbered around 3,000 at an average of 600 barrels per spill.

Gas flaring, a practice widely recognised as the cause of both acid rain and respiratory problems, has been in effect 24 hours a day across the Delta, with some flares now having burnt continuously for 30 years.3 Since the early 1970s there have been complaints about Shell's slow an ineffectual response, leading eventually to the current climate of conflict and violence. Oil spills linked to poor maintenance have also destroyed fish-stocks in other hydrocarbon rich areas such as the enclave of Cabinda, and Human Rights Watch and UNPO have reported extensively on similar environmental destruction in Chile, West Papua, Malaysia, and Bougainville. TNC led logging, mining, and farming have frequently destroyed land that have supported local communities for centuries or displaced the local population by force and intimidation.

These experiences suggest at best that engagement with a TNC can be something of a gamble. It is not that such companies do not have the potential to contribute to the development of local economies, the argument above seems sound. Some broader considerations are however worth bearing in mind before turning to the more specific role of TNCs.

The combination of a weak government, a poor population, and valuable resources is a volatile mix. The prospect of wealth not only gives government officials considerable incentives for corruption and autocratic behaviour, but also gives opposition groups an added financial incentive to seek power by any means possible. As economists have also argued for some time, resource extraction in general provides a poor basis for broader economic growth, limiting its effectiveness as a vehicle for sustainable economic development.

Unsurprisingly then, not all problems can be blamed on TNCs. As the examples above suggest though, their business practices appear frequently to exacerbate rather than ameliorate these potential problems. Now it seems perfectly possible that a TNC could enter a community and behave just as a responsible local business would. What these experiences suggest however is that there are some features of TNCs that make them prone to fail in living up to this possibility. A few thoughts come to mind.

TNCs are generally very large businesses. Much larger than local competitors. With this size comes a number of advantages, first and foremost efficiency gains. This might enable a TNC to price more competitively than domestic businesses as they are able to negotiate lower prices with suppliers and enjoy the benefits of a more efficient operation. Leave aside the question of whether local business should be protected from such a threat in the initial stages of development, it is not clear that size alone should be a matter of concern. Lower prices for the local population and the possibility of transferring expertise and technology to local business are after all good things.

A TNC can however use its size to ends other than offering its consumers a better deal on their end-product. A TNC that makes a significant contribution to a government's GDP and tax revenue is often well placed to negotiate tax-breaks beyond anything local competitors could hope for. This is especially true where the TNC's resources are highly mobile and where there is a long queue of other states ready to welcome their investment. Still more perniciously, TNCs can, and have, used this same bargaining power to circumvent and exempt themselves from the political and legal safeguards meant to protect the land and communities they are investing in. TNCs often flout labour laws and environment protection acts with near impunity as governments vie for their continued patronage and investment.

Such corruption is widespread in the Niger Delta, but is common also elsewhere. In Chile, the government has been pressured by large companies to use anti-terror laws when charging indigenous Mapuche protesting the destruction and confiscation of their land, leading for example to military rather than civilian trials. In Malaysia, state officials have profited considerably from granting logging concessions to companies on land supposedly protected by law.4

In addition to a greater capacity to act irresponsibly and with impunity, the transnational structure of a TNC also means its decision-making bodies are far removed from the communities their decisions affect. I doubt there is a good reason why distance should affect the way we treat other people and communities, but there is no doubt that it does.

A better legal system is not the only reason the agricultural land of Western Europe is spared 24 hour gas-flaring. On an individual level we are more likely to aid those whom are closer than we are those far away, and it appears that in many ways a TNC is no different. Its primary loyalty is to its workforce, its shareholders, and its community - not the community it has invested in, though there are undoubtedly some exceptions. This distance between a TNC's decision-makers and the community they are investing in makes TNCs more likely to ignore the consequences of the irresponsible behaviour they are able to get away with.

These are simplistic observations, and the list is obviously far from exhaustive. I mention them however because they both suggest that there is nothing inherently objectionable about trans-national investment. Rather, they suggest that structural features allow irresponsible attitudes to develop and afford many TNCs the power to act on these attitudes with tremendous efficiency and impunity as domestic laws and domestic political will are often too weak to curtail their behaviour. The good news is however that these features can be remedied.

Before remedies however, I want to note that two questions are often confused at this point. In many cases it is difficult to establish whether a TNC is doing anything illegal. It is not its job to uphold and strengthen domestic law in the community where it invests, and there are well-known difficulties with making TNCs accountable to international law, at least for the time being. I think it is much simpler however to establish that TNCs are in these cases most certainly acting in a way that is wrong.

There is a long-standing problem in philosophical ethics about what there is to be said to the amoralist - the person who simply does not care for the concerns of justice, fairness, or ethics in general. Thrasymachus was one of the first to spot it when he challenged Socrates with the question of why he should be just5,but the problem has persisted.
It is not clear what can be said to someone standing thoroughly beyond the pull of morality. If the directors and shareholders of TNCs are asking Thrasymachus' question it is important to note that they are asking more than most and, that they are asking it from distinctly unsavoury ground.

I do not think this is the question they are asking however. I think they form part of the overwhelming majority who acknowledge the force of ethics but struggle to apply it consistently. If for example we are the kind of people that believe ethics matter across borders, the kind of people who believe for example that there are ethical principles relevant to the conduct of international wars and trade, then I think we see ethical considerations that should apply also to the conduct of TNCs. If we think ethics matter at all, and matter because they regulate the way which we treat and relate to other human beings (wherever they may live), it is difficult to see how any social or corporate arrangement could exempt a group of individuals from these concerns. It is no accident, I am sure, that the Preamble to the Universal Declaration of Human Rights makes it clear that its responsibilities apply to ‘every organ of society'.

Organisations such as UNPO can play an important role both in making this argument and remedying the structural shortcomings of TNC investment. Any grass-roots organisation can serve as a valuable resource to TNCs investing in communities that are not their own, first and foremost by assisting these companies in making and maintaining contact with the local population. TNCs cannot hope to invest responsibly and sustainably without consultation and communication with the local population, but it is important to recognise that this is not an easy task for a large international corporation. UNPO might consider supporting the work of a TNC's community relations officer, or where there work is inadequate, provide one of their own.

International organisations such as UNPO can also assist local populations ensure their political and human rights are not eroded. This can include facilitating communication with other groups and peoples engaged in similar struggles and supporting capacity building in the areas of non-violent protest and political lobbying, on both the domestic and international stages. Domestic laws and rights are often ignored because it is easy to do so, and UNPO can continue to play an important role in making sure all such violations are noted and reported. This alone might go a long way towards ensuring that TNCs are given concrete incentives to assess also the human and environmental impact of their practices.

Assisting the interaction between TNCs and local populations is I think also a particularly worthy task for UNPO because TNCs can offer something especially valuable to many UNPO members. Imagine again that you are the leader of a minority or people without a state of your own, but imagine also further that the state you find yourself living within does not support your right to autonomy but tries instead to oppress or forcibly assimilate you and your culture. Under such conditions national institutions are of little value and might even represent a considerable threat. A welcome alternative might therefore come in the way of trans-national organisations which operate independently of your state's institutions.

When monks recently took to the streets of Burma, and when shortly after protests engulfed also the streets of Tibet, more pictures, sounds, and written accounts breached their borders than would have been imaginable a decade or so ago. Mobile phones from Finland and Sweden and blogs on servers located half-way across the world were responsible for much of this information. States such as China have invested immense time and money in controlling the internet and its related information technology, but the tremendous trans-national dispersion of these technologiesm makes this almost an impossible task. International satellite and radio broadcasts, blogs, and mobile phone technology have become some of the most powerful tools of non-violent political activists everywhere, and much of their utility depends on the fact that they are operated by large TNCs able to resist the threats of would-be oppressors.

Of course TNCs have not always intentionally or even willingly or played this role in promoting freedom of information and expression across the world. In 2006 a Human Rights Watch report found evidence of extensive corporate complicity in China's censorship and surveillance operations.6 Their report claims that companies, including Google, Microsoft, Yahoo!, and Skype have all accepted Chinese censorship demands and even engaged in preemptive self-censorship as they seek a foothold in the growing Chinese market.

Of most concern however are claims that Yahoo! in 2006 provided the Chinese government with personal details of a number of its users resulting in the conviction and incarceration of
four prominent political dissidents.

UNPO should work with these companies to ensure such wilful complicity in the violation of human rights remains uncommon, and work with its members to ensure they are able to take full advantage of a private sector that is increasingly operating independently of the international state system that has traditionally isolated them. This should include in particular the many de facto states of the world. Abkhazia and Somaliland both suffer from the fact that the institutions they are struggling to establish are prevented from engaging and learning from other governmental and international institutions, both financial and political. Constrained by less diplomatic and political protocol, TNCs might however be able to interact directly with their governments, facilitating both important economic opportunities and also valuable political exposure and experience that can strengthen democratic and reform-oriented movements within these territories.

So to my imaginary local leader: resources can be a good thing, as can international assistance. They do however make exceptional demands on local leadership, as managing resources well is a challenge equal almost to having none at all.


*For references please see attached pdf



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