S. Prakash Sethi
This article focuses on the expanding role of multinational corporations (MNCs) in developing countries, within the context of globalization and free trade. It demonstrates that the current state of globalization does not conform to the conventional notion of free trade. Therefore, given the prevailing circumstances, MNCs have an unfair advantage in expropriating a greater share of gains from efficiency and productivity from international trade than would be possible if labor had greater mobility or more equitable bargaining power.
The article presents evidence that the arguments advanced by MNCs in defense of their position are factually incorrect and logically flawed. Next, the article examines the efforts made by MNCs to ameliorate some of the adverse conditions arising from their overseas manufacturing and sourcing operations. The findings show that most of these efforts are more rhetorical than substantive.
Finally, it outlines a framework that allows multinationals to undertake meaningful actions that would both minimize the adverse consequences of, and enhance the positive benefits emanating from their overseas operations. These actions must be independently verifiable and transparent if MNCs are to gain credibility and public trust. A failure to undertake meaningful reforms will retard or even reverse the process of globalization, thus depriving all concerned of globalization’s attendant benefits. Even more ominously, such a failure would seriously undermine democratic values and erode the very foundations of political and economic freedom in large parts of the world that sustain private enterprise, property rights, respect for individual freedom, and protection of human rights.