Reference no: EM132229681

Debating the Good and Harm of Globalization Recently, a university sponsored a roundtable on the broader implications of international business. The participants were an anti-international business activist, a business executive with extensive international dealings, and a government trade official. Excerpts from the exchange present the diverse perspectives of globalization which different interest groups hold. Activist “One problem with international business is that it often ignores human rights and basic labor standards. Low-wage factories abroad create substandard working conditions. The activities of multinational companies not only result in job losses here at home, but also in low wages and exploited workers around the world. Just think of the sweatshops in Asia that make imported clothing. Think of the autoworkers in Mexico who live in horrible conditions and make only a few dollars a day. Also consider the poverty caused worldwide by the recent global financial and economic crisis.” Business Executive “Our country needs to participate in the global economy. Companies that export provide better-paying jobs, have more profits, pay higher taxes, and stimulate purchases from local suppliers. Foreign companies that invest here create new jobs, enhance local living standards, and pressure our firms to stay competitive in a challenging global marketplace. Exporters pay higher wages and provide better benefits than non-exporting firms do. Many companies need access to foreign markets because of the huge, upfront research and development costs they accumulate. One more pill is cheap; it’s the cost of research to find a cure for AIDS that is prohibitive. Pharmaceutical firms can’t do the necessary R&D unless they can amortize those costs over a huge, global marketplace. In the long run, uninterrupted international commerce is good.” Trade Official “The current administration believes in the value of free trade. The government strongly supported NAFTA, and this has already had a positive effect on the economy through increasing exports to Mexico, creating jobs, and leading to improved investment opportunities. Countries are forging ahead with international trade ties. Canada has completed a free trade agreement with Chile. Economic ties lead to cultural ties and more peaceful relations. Also, it is hard for our government to promote freedom and democracy around the world if we are not promoting free trade.” Activist “We cannot overlook the detrimental effects of globalization on the natural environment. The more we trade internationally, the more irreparable harm will be done to the environment. International business means more environmentally damaging development. Companies internationalize so they can become more efficient. But if countries have weak environmental standards, then factories will be built with minimal environmental standards.” Business Executive “If we trade internationally, then living standards will increase everywhere. As living standards rise, awareness of and care for the environment will also increase. International business is good for the world because it creates wealth. The more affluent the people, the more they will care about their environment and pass laws to protect it. We are also becoming more responsive to concerns over social responsibility and environmental degradation. We have shown that a good economy and a clean environment are not mutually exclusive. We can have it both ways: a clean planet and a better economic quality of life.” Trade Official “I think part of the solution is to negotiate trade agreements that take environmental factors into account. International trade that runs roughshod over legitimate environmental concerns is counterproductive and defeats the political agendas of most governments around the world. It is clear that international trade must take environmental concerns into account.” Activist “International trade interferes with the sovereignty of national governments. When Exxon Mobil is bigger than most countries in Europe, it is harder for governments to manage policies regarding taxes, monetary policy, social issues, and exchange rates. And who are we, trying to impose our own cultural standards on the world? When I travel in Asia or Latin America, I see McDonald’s all over the place. They see Western powers exploiting globalization, harming the economic, cultural, and environmental interests of the rest of the world. “Global corporations claim they spread modern technologies around the world. But technology is good only if you have access to it. In most of Africa, you have no on-ramp to the Internet. You need access to a computer, which is awfully difficult or impossible in countries where people make only a few dollars a day. When you’re paid such a low wage, how can you afford technology? How can you afford to see a doctor? Globalization is widening the gap between rich and poor. As inequality grows, people have less and less in common. Multinational companies exploit poor countries and expose their people to harmful competition. Infant industries in developing economies can’t make it when they’re confronted with the power of giant multinational firms.” Business Executive “Companies increasingly recognize the importance of being good global citizens. Motorola has profited from its business in China, but it also contributes to developing educational systems in that country. There are more literate people, especially literate women, in China than ever before. Japanese MNEs invest in the communities where they do business. Companies are not all evil; they do a lot of good for the world, too. Bill Gates is going to do more than any government to get people computers and get them hooked up on the Internet. He has created the world’s biggest fund to combat diseases of the poor. He and Warren Buffett are tackling many of these diseases. GlaxoSmithKline is working with the World Health Organization to find a cure for elephantiasis, a terrible disease that ravages people in Africa.” Trade Official “Globalization is complex and it’s hard to tease out what is bad and what is good. Globalization has made rapid progress; global poverty has declined. Social indicators for many poor countries show improvement over several decades. It’s true that income disparities have increased over the last 50 years while international trade has integrated the world economy. The world has experienced a generally rising tide in terms of people’s standard of living. People everywhere are better off than they were 50 years ago. There are some exceptions to this, especially during recessions, but it’s better to live in a world where 20 percent of the people are affluent and 80 percent are poor than a world in which nearly 100 percent of the people are poor, as was the case throughout most of history. There is a strong role for government in all this. Countries benefit from trade, but governments are responsible for protecting citizens from the negative or unintended consequences that trade may bring.” Activist “Governments have not done enough to regulate the excesses of capitalism. We saw this clearly in the global financial and economic crises, from which the world is still recovering.” Chapter 2 Case Questions Do you think globalization and MNE activity are creating problems for the world? What kinds of problems can you identify? What are the unintended consequences of international business? Summarize the arguments in favor of globalization that the business executive made. What is the role of technology in supporting company performance in a globalizing business environment? What are the roles of state and federal governments in dealing with globalization? What is government’s role in protecting citizens from the potential negative effects of foreign MNEs conducting business in your country? What kinds of government actions would you recommend? What is the role of education in (i) addressing the problems raised in the roundtable; (ii) creating societies in which people can deal effectively with public policy issues; and (iii) creating citizens who can compete effectively in the global marketplace?