Multinationals, Ethics, and Development in a Global Economy

Introduction: Globalization and the Rise of Multinationals

One of the key changes of the late twentieth century, certainly enhanced in the early twenty-first, is the set of economic, political, and cultural movements that broadly speaking move the various countries of the world closer together. This new paradigm combines multidisciplinary theories that show just how interconnected the world is — politically, socially, economically, and environmentally. After the Cold War, tensions between countries diminished and a number of trade agreements and economic incentives were ratified. This, combined with increased communication and technology via the Internet, effectively shrank the world. The rapid growth of the global economy profoundly affects modern economic development and stability, labor, and most particularly the way humans are able to interact with one another (Nye).

Based on different cultural paradigms, technical resources and maturity, and economic experience, the multinational economy is divergent, with expectations and behaviors that challenge business models and cultural norms. The global economy brings both practical and ethical issues to the forefront surrounding the host country, the developing corporation, and the cultures being affected. Globalism has also engendered the massive development of corporations registered or operating in more than one country — known as the multinational. This is nothing new historically: the British East India Company, founded in 1600, and the Dutch East India Company, founded in 1602, became the largest companies in the world for almost two centuries. However, the manner of doing business and the expectations of stakeholders have drastically changed in the post-Cold War era (Pitelis and Sugden 22–9).

Ethics, Morality, and Corporate Responsibility in International Business

Issues revolving around what the United States, Canadian, British, and Australian governments call "bribery" are, in some countries, simply part of doing business — yet they compel us to ask: is it moral, when trading in a foreign country, to participate in practices considered unethical at home in order to survive? Morality is typically the standard that a group holds about what is right and wrong, good and evil, permissible or unacceptable. The more trade barriers fall globally, the more developing countries are sometimes at risk from unethical behavior by multinationals. These issues tend to center on human rights, political affairs, environmental conservation, sustainability, and the manner in which corporations work with governments to either provide increased benefits for the populace or revert to an outdated, colonial psychology regarding resource management (Deming 34–9).

Because ethics and morality are so closely linked under the rubric of international business, most countries regard them as part of the social "requirement" of both national and international commerce. Multinationals, however, bear not only the responsibility to increase profits for their shareholders, but also to provide increased benefits for all stakeholders — including customers and the indigenous populations of the countries in which they operate (Cruver). Changes in the media, shifts in social attitudes, and above all changes in the perceived application of utilitarian ethics have caused many multinational companies to revise their views on their responsibility to the planet and to their stakeholders. While it remains difficult to assess situations, especially those arising during a crisis, through a purely logical framework, the modern business and social climate requires that more than profit and loss be factored into business decisions. There is also a clear expectation that modern multinationals will act in a positive, moral manner — setting the bar and the example for globalism (Savage and McElroy).

Modernization Theory and the Role of Multinationals

There is a widespread presumption that the modern world is a natural part of the evolution of culture — that newer is better. Multinationals are key drivers within this modernization model, since they make it possible to transfer knowledge and technology from the developed to the developing world. In fact, modernization theory is sometimes referred to as the developmental doctrine, a paradigm spurred on particularly after World War II when the United States formed its Cold War policy and recognized its obligations to the developing world — that is, unindustrialized or newly independent post-colonial nations. Modernization and the multinational corporation are often synonymous, since it is the multinational corporation that has the capacity to build, rebuild, and transform developing countries (Jensen 74–8).

Modernization can thus be an evolutionary movement of technological progress or a reaction to the past and a new template for the future. It must be understood as both a continuous and open-ended process — not a form of social change with a clear beginning, middle, and end, but rather a movement toward equilibrium on a constantly shifting scale. Historians tend to link modernization to the processes of urbanization and industrialization, as well as the spread of compulsory education throughout a population (Croucher 19–26). In this view, humans come together in cities for reasons of safety, job specialization, and opportunity, then move technologically forward until much of their society is mechanized, creating ample room for further specialization and adaptation through education.

In critical sociological theory, modernization is linked more to the cognitive process of rationalization. This framework holds that as modernization — especially technical sophistication — increases within a society, the role of the individual begins to take on far greater importance, eventually replacing the family, the extended family, and even the community as the fundamental agent of social change (Ehtridge and Handleman 408–12).

Conclusion: Multinationals as Partners in Development

There is no direct answer regarding whether multinationals are helpful or harmful to developing countries. Just as people are individuals, so are corporations. However, given a multinational corporation that adopts the principles of CSR, works within the developing country's culture and political system for the common good, and provides a framework in which both sides reach a win-win paradigm of modernization — encompassing education, training, goods and services, and improved quality of life — the developing country does benefit from the multinational.

The key lies in both the intrinsic culture of the multinational and the responsibility the corporation holds toward the developing country. The era of extracting resources without adequate planning and cooperation is over. The operative model for development is now one of shared responsibility and sustainable practices, training and educational programs for citizens, fair wages and benefits, and clear human goals that advance human rights (Quinlivan).

Works Cited

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