This essay will argue how despite the continual pretexts of international organizations such as World Trade Organization, World Bank, International Monetary Found in guaranteeing homogeneous levels of economic growth and human development, using the directives imposed on all the countries of the world, more and more have to deal with the spread of a gap between the developed states and a more drastic way among those developing states. In the latter, fundamental rights, such as the dignity of a just pay, access to water are still denied or struggling to be respected in relation to the irresponsible behaviour of the MNCs, leveraging those countries where regulations are weak or non-existent. In pointing out to the beginning that there is still a structure in the global economy to address some benefits to developed countries, the spread of inequality is highlighted and how it can affect developing countries more in the fight against extreme poverty. Subsequently, with the help of a case study in Vietnam, the irresponsibility of the multinationals of great fashion in the violation of workers’ rights will be shown, in conclusion, the exploitation of the environment in the case study of Coca Cola in India. The global economy is defined as a flow of goods, services, work forces (knowledges, investments) that move rapidly and intensively around the world, consequently to efficiency of new means of transport and communication (Jomo, Smith, El-Anis, Frarrands, 2001). This interconnection has been facilitated by a progressive deregulation of commercial barriers due to the creation of multilateral and bilateral agreements at the global level, under supervision of the World Trade Organization. As result the costs of trade have been drastically reduced.
The opening of the financial markets and the flow of investments has been another big factor that contributed to the changing size of the economy towards a more interconnected global, this is shown in the increase of direct investments between 1990 to 2015 sum from $205 million to $1,762 billion . The “key players” in this economy are considered the multinational companies, which hold a large part of global trade (how much). They have given a turning point to the physiognomy of world trade in the last 25 years. They were responsible for two widespread trends: international-outsourcing and fragmented production on several levels.
Assembly processes are not carried out in just one countries, but delocalized in “global value chains”, where product is assembled / built in several plants, through materials and components in different countries between branches of same partner or other independent. International companies set up abroad, where they can pour their goods into new markets, to make the purchase possible for local consumers. Especially in developing countries to maximize profits, where the cost of the labour is low. In tracing a definition of global economy, for some scholars such as structuralists, it has been evident that today’s economy is not a new phenomenon. It derives from the colonialism and capitalism of the modern age, in which power’s relations persist, hidden in the eyes of many (Wallerstein, 2000). The System-world theory of Wallerstein can be valid in understanding the mechanism of global economy. It presents a structure of pre-existing relations based on flows of goods, capitals and labour which is more intensified and expanded than before.
The distinction made between the colony and the motherland is replaced by a three-level hierarchical system based on division of labour; in which the centre is considered the developed world (US and Europe), where the political and economic jurisdiction is created to legitimize its position as a “Core” country. This one has financial capital, which allows it to develop technical knowledge and ability to establish new production processes. It has created organizations, such as WTO, IFM, WB in order to maintain their positions of advantage and dominance. (Jomo,2001; Nayar,2001; Khor,2001) Through legal instruments such as laws, patents etc.
this situation is justified. Consequently, it might be argued that structure of economy is legitimized as well as in the world. For instance, the introduction of intellectual property rights making it difficult for developing countries to benefit from knowledge in all areas of production, especially in the pharmaceutical sector where the procurement of medicines always has prices higher. Here we can see the paradox of the developed world. It wants a more deregulated world in commerce but at the same time it has created monopolies to make as many profits as possible. (Jomo, 2001).
As Khor says, the Global Trade Organization (WTO) that promotes free trade, has a great power of conditioning on the countries that are part of it, since they must receive the rules and apply them to their country, with a limited margin of freedom, otherwise there are penalties. It is evident how the neo-liberal thought in the years 1980-90 has been the driving force in the world economy, pursuing unconditional economic policies with equal objectives for all countries in the world. Critics of the WTO, MFI, highlight how unilateral decisions are made, with the aim of achieving the same objectives in a homogeneous way, without taking into consideration the peculiarities of individual States. Not everyone is able to respond positively to the policies imposed by these organizations, especially in developing countries, the role played by the state in avoiding negative impacts is necessary (Stiglitz, 2005). In trade’s round very often, the interests of LDCs are taken into account compared to the demands of developed countries (Aslam and Jomo). Stiglitz moves towards the same direction, taking into consideration the iniquity of all those commercial traits. The balance in most trade deals, see the Doha Round, has moved in favour of the developed countries.
The latter are reluctant to reduce customs taxes, for those products in which the least developed countries are more competitive, such as manufacturing and agriculture, where they have a greater specialization. Developing countries have had to adapt to the rules imposed by the WTO regarding customs tariffs, but the developed countries did not act in the same way. For instance, the question was raised when the United States gave subsidies to local cotton farmers. This has damaged the cotton’s trade of African countries as this have led to overproduction and then depreciation of cotton also in LDCs, making their markets much weaker.
The cotton market in Africa represent a big wealth income. Although the WTO hesitated many times to take a clear position and to make sure that all members respect rules.All these assumptions above, do not take into account the changes that the globalization has made. As Robinson (2011) affirms, criticizing the world system theory, the trans nationalization of production has broken the link between the center and the periphery, guaranteeing that the rivals are no longer the states but the multinationals that are foreshadowing as new influential economic agents.
So, the structure of the global economy has changed. It has been the emergence of developing countries such as China, Brazil and India, which increasingly not only at the economic level (increasing levels of GDP), but also politically make their voices heard in trade negotiations. Above all, Brazil and India have understood well to build a coalition of developing countries, in order to be more influential in discussions in the agri-food sector with the United States and the EU, always considered very exclusive. Increasingly, in the G20 the word waiting for these two countries is taken into consideration. It has been argued by neo-liberals that participation in the global market has represented an opportunity for developing countries to improve their living conditions. Economic growth can be a positive effect as a driving force for poverty reduction.
The WB data show, the percentage of people living with $ 1.90 a day has decreased 35% in 1990 to less than half in 2013 the general increase in income (Adams, 2002) (2001). The most significant data are recorded in Asia where there has been a notable reduction, In these countries, considered the most populous in the world, poverty has diminished. The remarkable economic growth of China and India since the end of the 20th century, makes them an excellent example of how globalization can undoubtedly have positive effects on taking into account their GDP. Stiglitz highlighted even though, how the role played by the state in this process of opening up to the market has been important in trying to regulate the imperfections of the financial market, in contrast with the liberalist idea. However, the study of the UNDC shows that despite extreme poverty levels are decreasing, inequality within countries is still high and diversified. This might be a danger to poverty in developing countries.
The report of the World Inequality 2018, show how income inequality is very high in East Asia. In India, inequality of income and wealth has increased since 1980 and shows that it has grown with the opening of the markets as following. Moreover, the Oxfam’s report, an international non-governmental organization, highlights the question of inequality, compared to the mink and the studies of the WB.
It highlighted how the problem of inequality within states are growing more and more despite the reduction in the percentage of people below the poverty line. The distances between the redicts increase and thus increases the social conflict, putting economic growth at risk. This is the result of precise political choices made by governments and international organizations. The gap between demand and the poor is due to the accumulation of wealth between elites. Inequality tends to endanger the results achieved so far. The development is therefore endangered by the inequality. According to Ostry, an IMF’s Researcher, the neoliberal recipes in making free financial flows may carry risks for the countries that receive them, and also together with policies to contain public spending, they can bring disadvantages and cause increase in inequality.
This policies should be manage properly especially in the developing countries where they are more prone to the failure market.In the absence of international directives that regulate working practices in the world, the MNCs have been able to deploy their authority and take advantage regarding the workers’ rights and the intense exploitation of natural resources. The need to introduce a Tripartite declaration of the principles of multinational companies in the years 1977 or the OECD Guidelines for Multinational Enterprises clarifies how some exploitative practices had been widespread in the world.
Therefore, it has been necessary to introduce institutions, laws that monitor the work carried out by the MNCs in the receiving countries, most of the times located in the developing countries. This declaration highlighted the need for greater cooperation between MNCs, governments and trade unions, in being able to guarantee positive impacts, such as activities that are in line with the needs of individual states, and in compliance with State laws, wages that should be in line with national levels. All activities require an analysis of the benefits of the social fabric of the host country, making the occupation stable over time and non-discriminatory (ILO, 2006). Also the role of governments has to ensure that it is more responsible for workers’ interest in businesses, that their citizens are able to benefit from the activities of multinational companies. Nonetheless, the creation of institutions promoting a dialogue between the MNCs, trade unions and governments. Although, the 2016 ILO report reveals, there is still a gap between what is written and what is facts.
There are lot of evidence, especially in the manufacturing sector of the big names, which represents one of the biggest slices on the world market. The request for greater transparency in the work practices have been increased as a result scandals and tragic events have occurred in recent years. The case erupted at the end of the nineties, followed by some inspections in one of the subcontracted factories of Nike in Vietnam, Tae Kwang Vina factory.
It has been revealed some serious violations of workers’ rights. Nike is not the direct owner of the factories, they belong to local entrepreneurs, only at the end of production Nike purchases the finished product. The report of the Transnational Resource and Action Center had verified that workplaces were in dire conditions with close contact to harmful substances, lack of sanitary conditions, lack of freedom to strike and association, violent behaviour and a very low monthly salaries of $40. The non-transparent and conflicting relationship of interests between governments and entrepreneurs is evident. Nike in Vietnam with its large number of employees and production influenced 4% of exports. After these audits, Nike paid more attention to the conditions of the workers. Despite, these practices continued in all developing countries, In 2013 the collapse of a manufacturing plant of big world brands in Bangladesh was a tragic event.
Even here the conditions of safety and workers’ rights had been not respected. However, in the light of these events, a more heated discussion of the responsibility of the large multinationals of the world has taken place. Corporate responsibility has become increasingly important, as even companies acknowledge how their image could be questioned. In 2016, the presence of institutions that evaluates transparency reports of famous brands has highlighted improvements in detecting the production practices adopted, so the transparency of practices has become increasingly central. The problem exists as a subtle element in the Fashion Transparency Index 2017, because the chain production systems of the subdivision of the work at several levels, does not allow to trace the responsibility of the MNCs.
Production at levels means that the big names subcontract production to local entrepreneurs, who are responsible for the responsibility of the multinationals in ensuring compliance with national laws at work. From another point of view, it is more evident that big brands try to hide themselves from accusation of exploitation and environment degradation. Despite this, the level of Transparency index has increased, from 2016 to 2017 by 32%.
Moreover, the multinationals are criticized for being responsible for the degradation exploitation of natural resources. One of the many obvious cases is that of Coca Cola in India from 2007. In the Indian meridional regions the problem of water supply has always been relevant, especially during the summer months, affected by great drought.
The levels of subterranean waters have decreased more and more over the years. This has caused serious problems for local farmers. These regions are already affected by several ongoing factors such as rain reduction, global increase in temperature and an increased demand for population growth sharing this region with Coca Cola is impossible.
Even more Coca Cola has exaggerated this trend because it is one of the biggest water extractors during the drought in summer extracting around 510.000 litres a day totalling 8% of extraction in that area. The India Resource Center states how this has caused serious damages to the local populations, as they has been dumped quantities of sewage continents and toxic substances in the surrounding territories. The right to water is considered an inviolable fundamental universal right. It is closely correlated with poverty levels. In general where access to water is limited or denied, the possibility of escaping from extreme poverty is low. Infectious mortality increases.
Where this right is not guaranteed, consequently other fundamental rights are denied, such as health care, education, etc. It obviously evidences the immorality of the behaviours perpetuated by the MNCs together with the corruption, negligence of the governments, the latter even more because called to do the interests of the citizens. This essay has argued how inequality between developing and developed countries is due to the presence of world institutions that do not make equal interests between states. It was shown in the first part that there is great pressure exerted by the US and the EU in the big rounds, which have been negotiated in the world to keep their privileges safe from developing countries, which instead have been forced to align themselves. This has shown with the introduction of intellectual property and agricultu The objectives of economic integration and human development are being endangered by the increasing inequality of wealth within countries. This is also endangering the goals of reducing poverty levels.
The application of IMF recipes can have counterproductive effects if not carefully managed. The multinationals continue to increase their profits to the detriment of the human rights of the developed weights, although there are more attention. In the same way for the environment and for natural resources. The authorities that have acquired multinationals have also been possible thanks to the behavior of governments, which have also sought to make profits, disregarding the well-being of citizens