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Case Study of MNC Pollution in the Third World:

A comprehensive look at the environmental impact that MNCs have in the developing world

Steven W. Pearce

4/20/2010

Environmental Degradation and Sustainable Capacity are issues facing the international communities. MNCs are in a unique position to formulate policies and procedures that will alleviate these problems facing humanity in order to make the world a better place for future generations. This is a liberal perspective on how MNCs affect the world and can help to bring mutual cooperation amongst nation-states within the international community.

Introduction
Research Methods
Globalization and the Developing World
The Rise of MNCs
Examples of Environmental and Resource Problems\
Proposed Solutions for Problems
Critiques of Proposed Solutions
Conclusion

Introduction
The World has changed since the end of WWII. After centuries of colonialism and international conflicts culminating in the two World Wars of the 20th Century, the global community got together in order to form non-governmental organizations (NGOs), as well as organizations such as the UN whose proposed goal was to alleviate future conflicts. A goal of the UN is to eradicate poverty and hunger. By creating a system which allows interdependence between various nation-states, the UN and the international community has worked diligently towards realizing this goal. While the percentage of people living in poverty has decreased, the amount of people living in poverty has increased due to the population explosion of the 20th Century.
As a result of the increase of interdependence amongst the World’s nation-states, we have seen the rise of Multi-National Corporations (MNCs). MNCs conduct business in two or more nation-states and quite often work within the local laws and standards of the country which they are currently conducting business in. In some countries such as Indonesia where bribes are a part of the culture and expected, MNCs will actually bribe local officials. In countries such as Denmark where bribes are not allowed, then MNCs will not bribe; so they actually work within the cultural expectations of the country in which they are in. This is not to say that all MNCs follow this practice, according to a survey by the UN, the number one reason that MNCs do not invest in given countries is due to the presence of corruption and bribery, which quite often the main source of the corruption is government officials.
With the rise of the MNCs there have been environmental consequences. In China, a vast majority of the population has to drink from heavily polluted water resulting in a very high rate of cancer amongst adults, as well as a high death rate amongst Chinese babies. The Niger Delta, which is a major source of water within Africa, has also become heavily polluted due to Shell Oil in Nigeria. There is also the problem of deforestation which further results in environmental degradation.
MNCs have a role to play in defining the rules and regulations in which these international actors have in fixing environmental issues and maintaining natural resource capacity which has been affected by globalization. By self-monitoring, reporting, and regulating themselves as well as working with the UN, the World Bank, and the IMF to set up standards necessary for resolving these problems in order to make the world a better place for future generations to reside in. This is a liberal approach at defining world problems and how MNCs can not only create problems but they can also be the fore-runners in making the world a better place by helping to create mutual cooperation amongst nation-states.
Research Methods
In conducting the research for this paper, I looked at academic journals, Google scholar, various articles, as well books. I looked at both sides of issues as well as contradictory assessments of how to resolve the problems of environmental degradation and sustainable capacity of natural resources. I noticed that some of the author’s journals written on this topic had preconceived biases and that these author’s seemed to write from an agenda. Because of this phenomenon, I looked for journals and articles with opposite viewpoints, as well as for journals that seemed to be more neutral on the subject matter. I also noticed that much of the information on the subject seemed to be dated and there was not really anything written within the last year or two. Most of the articles were from the early years of the Bush Jr. administration or the Bill Clinton years.
Globalization and the Developing World
Part of the plan that the UN has in fostering peace in the world is through the development of international trade. By having countries co-dependent upon each other this creates an environment which avoids hostility. If one country is providing the goods or services that another needs, which in turn creates jobs and benefits both countries; this makes for peaceful relations between the participating nation-states.
Due to the growth of globalization worldwide and a more liberal approach to international politics, MNCs have been able to go into developing nations and create jobs. A majority of jobs created in the developing world are manufacturing and service jobs from MNCs, 12 million jobs are created by MNCs in the developing world which is about 3% of the world’s workforce.
When manufacturing jobs are created, there also needs to be an infrastructure in the area of the company. Hospitals are needed in order to maintain a healthy workforce, also schools are needed as well as airports, freeways, railway systems, and water ports. All are essential in a developing or developed society. Quite often, countries do not have the financial means to build this infrastructure so MNCs use FDI in order to finance these necessities. In return the countries will quite often give free land as well as have very lax taxes or no taxes. The governments of the developing nation-states believe that this is essential in order to be able and create jobs for their populations. As a result of this, most developing nation-states do not have any environmental regulations on the practices of the MNCs or overlook the environmental violations of MNCs. This is not to say that all MNCs ignore the environment in a given nation-state, but there are a few who do, while there are others who work towards maintaining the environment.
As a result of the threat of global emissions due to the massive increase of carbon emissions in the air from manufacturing as well as massive driving, the World’s community partook in the Kyoto treaty of 1990. The goal of the Kyoto treaty was to cut 5.2% of carbon emissions by 2012. Also, another stated goal was to get carbon emissions down to 350 carbon parts per million by 2012, which was the 1974 levels. The levels in 2010 is currently 389 carbon parts per million. This was seen as a necessity in order to prevent a greenhouse affect which could virtually wipe out all life on Earth. There were 38 industrialized (Annex 1) countries which signed on. They promised to give developing nations the technology needed in order to help lower carbon emissions as well. However it is not just the responsibility of nation-states to sign and honor this treaty; MNCs need to as well. It is the MNCs which are engaged in manufacturing and using the land and resources for their profits. This makes the MNCs culpable and responsible for the environment, and need to do their part to protect it.
The Rise of MNCs
MNCs are power players in international politics. Since many MNCs are in a vast number of countries, and use cheap labor in one country to make goods in order to sell the goods in other countries, it has created a situation where many MNCs are wealthier than a majority of the World’s nation-states. The largest of these MNCs is Wal-Mart. Wal-Mart revolutionized the way that business is done and changed the standard business model. Before Wal-Mart, companies ordered from manufacturers and sold the product in their stores. Wal-Mart decided to start manufacturing a lot of their own products and paying other companies for the rights to put their product name on the products and goods that they sell. In doing this, it necessitated the need for manufacturers to lessen the cost of their products and to look for cheaper ways to manufacture their products; then created the demand to move their manufacturing plants into the developing world. Quite often, this has had a devastating effect on the environment and resources within the developing world, resulting in many naysayers against MNCs and globalization.
In many people’s eyes, MNCs are the sole cause of environmental degradation in the World. But according to the Global Environmental Management Initiative the opposite might be true. They say that:
“The overwhelming preponderance of the evidence today, however, supports exactly the opposite assessment: Leading MNCs consistently are positive forces for both economic development and environmental health and safety quality in the developing countries in which they operate.”
According to GEMI they are,” The Global Environmental Management Initiative (GEMI) is a nonprofit organization of leading companies dedicated to fostering environmental, health and safety excellence worldwide through the sharing of tools and information in order for business to help business achieve environmental excellence.” They are a NGO compromised of MNCs who are dedicated to promoting environmentally friendly practices for the betterment of Earth. So it seems that not only are there MNCs who do not care about the environment there are other MNCs which work together towards bettering the environment. These MNCs can hopefully serve as a role model for the rest of the MNCs and nation-states on how to grow economies and create jobs while protecting the environment. GEMI hired International Resource Group LTD (IRG) to research environmental impacts on by both MNCs and domestically owned companies and the preliminary results are eye opening; the MNCs have significantly more positive environmental, social, and economic impacts in the developing world.
Of course not everything is good for developing nations. There has been a lot of environmental damage to local environments causing riots and military interventions. Also, there have been a lot of resources lost such as the trees in Haiti which was virtually their only resource, leaving the Haitians unable to provide jobs and money for their population. This was a result of France giving loans to the Haitian government and when they were unable to pay the loan back, France claimed the Haitian forest as their own and mercilessly wiped out their forests. Let’s now take a look at problems caused by disregard for environment and exploitation of resources.
Examples of Environmental and Resource Problems
In Nigeria, MNCs have taken highly toxic waste from European tanneries and pharmaceutical companies. This is done by workers who wear no more than thongs and shorts, and take the barrels of polychlorinated biphenyls and dumping them in residential areas. This has caused high cancer rates in this region.
Also in Nigeria, Nigerian writer and human rights activist, Ken Saro-Wiwa, who is also a Nobel Prize nominee, was executed by the Nigerian government. He was protesting the exploitive practices of Shell and the environmental damage which was being cause.
The Niger Delta has had over 6.4 million liters of oil spilled into it over the last 30 years. This delta region has rainforests, mangrove habitats, and fragile wetlands. Babies who are fed milk supplements from areas with polluted water are 14 times more likely to die from diarrhea over an infant who is fed natural breast milk.
Exploitation of natural resources leads to other problems as well. Deforestation can lead to soil erosion and desertification, as well as the pollution of water supplies. This can cause the soil to know longer be able to grow food crops. Also according to John Perkins, this can lead to the loss of indigenous people’s homeland as forests are over logged and flooded. This can be seen in the Amazon Basin.
In China today approximately 700 million people-over half the population-consume drinking water contaminated with levels of animal and human excreta that exceed maximum permissible levels by as much as 86% in rural areas and 28% in urban areas. In a number of studies, pollutants released by township-village industrial enterprises (TVIE) have been linked to adverse health effects. In China, liver and stomach cancer deaths have doubled since the 1970s, and are now the leading causes of cancer mortality in rural China. China now has the highest liver cancer death rate in the world. When TVIEs in more polluted areas are examined, they show a general increase in cancer mortality.
So as we can see, not only is the environment affected if precautions are not kept; but the side-effects can be devastating if problems are not solved. Entire populations can and have been affected by changes in the environment. There are however MNCs leading the way to solve the crisis created by ignoring the affects to the Earth’s bio-system. Many MNCs are leading the way in working for remedies. This has led to new ways of conducting business in order to create a cleaner planet.
Proposed Solutions for Problems
In Hoodwinked, John Perkins says that since MNCs are driven by profit, that it is the purchasing choices of consumers who can help shape MNCs’ environmental policies. If consumers stopped supporting organizations that exploit resources and damage the environment, then the consumer hurts the MNC and will force them to change their practice. Consumers should instead reward “green” companies with their purchases.
Elizabeth Phillips believes that a system needs to be set up for corporate accountability. She believes that there needs to be a central body which can investigate and punish grievances for violating tenants that are set up for environmental protection. This would in turn create jobs for people who are hired to monitor and enforce rules.
Phillips also believes that there needs to be better access for the public to acquire information. This goes along the lines with Perkins suggestion for there to be more coordination and public boycotts of violating MNCs. Also, Phillips suggests that MNCs be required to file the same reports required by the parent company in their host countries. This would make sure that they are operating scrupulously. She also says that lists of subsidies, tax breaks, and other incentives need to be made public to the citizens of developing countries. If there are then any problems than reforms can be made in order to improve the situations within the host countries. Phillips also believes that communities can become empowered through international agreements halting developing countries from bidding against one another. Also, she believes in making clean production the standard.
Critiques of Proposed Solutions
One of the potential problems of having a central authority to monitor and control MNCs in developing nations is how it looks to the general populations. Many people will see this as another attempt of stripping sovereignty away in favor of a stronger and more central world government. Conspiracy theorists will say that this is further proof of a behind-the-scenes creation of a New World Order. Doom and Gloom people believing in this shadow agenda such as Alex Jones will use this opportunity in order to capitalize off of new DVDs trying to expose this unholy world government.
Phillips fails to take into consideration that the tax breaks and incentives are needed by developing nations to attract MNCs to come into their countries in the first place. The local populations do not care of there are tax breaks if they now have jobs. More often than not, these areas did not have public educations, hospitals, freeways, or other features of infrastructures that people in industrialized nations take for granted. Also, to take away competition for countries to be able to compete with one another for MNCs to invest in their country goes against the spirit of capitalism. I do believe however that there needs to be a higher court which can punish companies from paying at least the bare minimum wage which happens all the time in developing nations. Many workers in shoe factories in Indonesia are paid much less than the stated minimum wage. However, countries with MNCs are far less likely to have child laborers working than in countries without MNCs. So if MNCs are regulating child laborers than perhaps they can also be trust to self-regulate how they treat the environment.
Conclusion
Due to the need for world peace, security, and stability, globalization has taken hold around the world post-WWII. This has resulted in interdependence in trade and resources between different nation-states. MNCs have resulted due to this globalization making them major actors on the world stage.
In the process of developing nations trying to get out of poverty and creating jobs for their populations, they have allowed many MNCs to come in and have lax regulations in return for building the infrastructure in their nations. Some MNCs have been responsible towards the resources and environment while others have not. It is up to the consumer to not support the MNCs which try to preserve the environment and go green. Also, there needs to be some type of consistency in regards to environmental practices around the world. Just because a country in Africa might not have the same regulations in their country like we have here in the United States does not make it right for MNCs to take advantage; so established international rules and regulations need to be established to prevent this from happening. We all need to come together and work together in order to make this a better world, not only for ourselves but our progeny as well.

Works Cited
GEMI. "Fostering Environmental Prosperity: Multinationals in Developing Countries." GEMI. GEMI, n.d.
Perkins, John. Confessions of an Economic Hitman. New York City: PLUME, 2006.
—. Hoodwinked. New York City: Broadway, 2009.
Phillips, Elizabeth. "Responsibility of Multinational Corporations in Developing Countries." Model United Nations Far West, n.d.: 1-7.
Quinlivan, Gary. "Sustainable Development: The Role of Multinational Corporations."www.andrew.cmu.edu. http://www.andrew.cmu.edu/course/73-371/UN_article.doc (accessed April 15, 2010).
Wu, Changhua, Crescencia Maurer, Yi Wang, Shouzheng Xue, and Devra Lee Davis. "Water Pollution and Human Health in China." Environmental Health Perspectives, 1999: 251-256.
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